The fees reflect a lack of transparency and high fees charged by banks on remittances. Banks have reduced fees on remittances abroad and their income from this has increased from Rs 15,017 crore in 2016 to Rs 12,142 crore in 2019. However, they protected themselves by recovering Rs 4,422 crore thanks to the exchange rate increase in 2020, which was against Rs 2.505 crore in 2016.
These figures came from independent research conducted by Capital Economics in August 2021, which aimed to estimate the magnitude of foreign exchange transaction fees in India. The study was published by Wise, the tech company founded with the aim of lowering the costs of cross-border remittances.
Foreign workers who send money to India also lose money. Over the past five years, money lost to foreign exchange margins on inbound remittances has grown from Rs 4,200 crore to Rs 7,900 crore. Meanwhile, the fees paid for transaction costs have increased from Rs 10,200 crore in 2016 to Rs 14,000 crore in 2020.
“A significant portion of these fees paid on remittances to India come from people in the Gulf countries where most are employed in blue collar jobs to support their families in India,†said a statement released by Wise. On the share of total fees paid on inbound remittances to India in 2020, Saudi Arabia ranked first with 24%, followed by the United States (18%), the United Kingdom ( 15%), Qatar (8%), Canada (6%). , Oman (5%), United Arab Emirates (5%), Kuwait (5%) and Australia (4%).
“While technology and the internet have alleviated some of the problems with the convenience and speed of foreign money transfers, the age-old practice of hiding fees in the exchange rate causes people to spend too much on hidden fees in foreign currency. foreigners – money that rightfully should stay in their pockets, â€said Wise India Country Director Rashmi Satpute. Indian consumers spending abroad paid 1,441 crore rupees as transaction fees, of which 1,303 crore rupees were hidden fees in the form of an exchange markup.
