Russians are offered to invest in Indian currency: is it possible to make money

Domestic banks have already opened deposits in rupees

The domestic banking sector is expanding its work with the currencies of Russia’s new foreign trading partners. The dollar-euro pair, which until recently was considered the main means of replenishing the savings of the ordinary population, will soon be replaced by deposits in the yuan-rupee pair. Some banks have already opened deposits in Indian money.

You won’t be able to earn much on exotic funds: the rates for them are at the minimum level. However, foreign banknotes, which few of our compatriots held in their hands, still have potential: trade with Beijing and New Delhi is growing, which increases the attractiveness of their finances.

The opportunity to invest in Chinese yuan in domestic banking structures appeared last year. Interest on deposits turned out to be low: depending on the amount and term of investments, income varied from 0.01% to 1.5%. Some financial institutions have begun to offer their customers to spend extra money on the purchase of Indian rupees.

So far, in contrast to the yuan deposits that have already become widespread on the Russian market, the opening of deposits in rupees should be regarded as single transactions. The specifics of the Indian currency makes it difficult to freely convert it into dollars or euros. In addition, the rupee exchange rate is not very stable, which makes such investments extremely risky.

And yet, theoretically, the rupee is a promising currency for domestic savers. As Indian Foreign Minister Subramaniam Jaishankar recently stated, from April 2022 to February 2023, trade between the two countries reached a record $45 billion. This made it possible to exceed the USD 30 billion target of bilateral trade, which Vladimir Putin and Indian Prime Minister Narendra Modi agreed to achieve by 2025.

“The transition to national currencies in mutual trade is a forced measure, which is unlikely to bring a net positive effect to both the Russian and Indian economies,” says TeleTrade analyst Alexei Fedorov. – But in the new realities, there are still no other alternatives. Moscow needs to intensify trade relations with New Delhi and integrate deeper into the Asian financial market, which is showing one of the highest growth rates in the world.”

New Delhi has increased its purchases of Russian oil to the maximum: since December last year, our country has been exporting to Indian consumers at least 1.2 million barrels of “black gold” per day, which is more than 30 times higher than previous sales. True, raw material deliveries are carried out with significant discounts, which reduce the export earnings of our federal budget.

At the same time, the liquidity of the rupee is extremely limited. You can buy Indian currency in many countries of the world, but the reverse operation is possible only on the internal exchanges of India or in foreign authorized banks (there are less than a dozen of them in Russia so far). In turn, the conversion of rupees in large volumes requires the strict permission of the regulatory authorities of New Delhi. Not surprisingly, under such conditions, many international companies lose interest in Indian money and require local counterparties to settle in dollars or euros.

Interest rates on investments in dollars and euros are three times higher than the income from the purchase of Indian currency: for them you can get from 8% to 10% profit. At the same time, the amount of investments in “Americans” or “Europeans” often starts from one million rubles, and the terms for receiving “dividends” reach up to 3 years.

The minimum duration of investment in rupees, as local bankers say, is limited to six months, and the deposit amount may not exceed 10 thousand rubles. After the expiration of the transaction, the profit of a private investor can be at the level of 3% per annum.

Now the rupee is unlikely to be useful to ordinary investors, says Vladimir Chernov, an analyst at Freedom Finance Global. The Indian currency is still of interest to companies involved in the import of goods from this South Asian state. From India to Russia comes food, medicines, components for cars, equipment, as well as textiles.

“Since the beginning of this year, the rupee has risen in price against the ruble by almost 44%, while the dollar and yuan have added only 16-17%. The Indian economy is developing at a rapid pace, which means that in the long term we can expect an increase in the quotes of its money. Gradually, keeping rupees in Russia’s reserves becomes safer than savings in dollars and euros, – the expert predicts, – therefore, over time, ordinary investors may become interested in this currency to diversify their savings.