Which exchange rate does my bank use for a foreign payment?

A content writer in Jaipur invoices in dollars and is surprised the rupee credit is lower than the rate shown online that morning. The difference is the bank's exchange spread, and it follows rules set by the banks' own association.

Which rate do Indian banks apply to an inward remittance?

Indian banks apply the TT buying rate unless you have agreed another rate. FEDAI Rule 4.4 says the exchange rate for converting a foreign currency inward remittance "shall be TT buying rate or the contracted rate as the case may be".¹ "TT" stands for telegraphic transfer, meaning money received electronically, and "buying" is from the bank's side: it buys your foreign currency.

Where can you see the rate?

You can see the rate on your bank's published card rate sheet. FEDAI's general guidelines ask banks to display card rates for foreign currencies prominently on their website or at their branches, and to declare the threshold amounts up to which they are committed to apply card rates, and how often and when they publish them.¹ The rate on your credit advice is the one that applied when your account was credited.

Can you get a different rate?

Yes. FEDAI Rule 4.4 allows a contracted rate in place of the card rate.¹ Exporters with larger or regular receipts often ask the bank's treasury desk for a quote before converting, or book a forward contract to fix a future rate; see what is a forward contract.

Does the bank convert every payment immediately?

Not necessarily. FEDAI Rule 4.3 says a bank may convert a remittance into rupees immediately up to an amount set by its own uniform policy, if it has all the information needed and no contrary instruction; above that amount, the remittance is held in foreign currency or converted with the beneficiary's consent.¹ If you want to keep the currency, an Exchange Earners' Foreign Currency (EEFC) account lets a resident hold up to 100% of foreign exchange earnings.² See can I keep USD in India.

How do you work out what the conversion cost you?

Compare the rate on your credit advice with the mid-market rate at the same time; the gap, multiplied by the amount, is the cost of conversion before any fees. See what is the mid-market rate, what is the TT buying rate and the international payment fee calculator.