Where should I exchange INR to USD, in India or US?

Question

I am Indian, permanent resident of the US.

Years ago, I had loaned some money to my father in India and he now wants to pay it back to me. The amount is worth $300,000 and I am thinking of the best way to get the money back, in regards to transfer fee and exchange rate.

Because it is a big chunk of money, I guess flat transfer fee would be definitely better than percentage-based fee. I am also thinking of exchange rate, so thought international banks (such as citibank) would be a better bank to use than non-international ones. Is it true that my father and I get better exchange rate if he uses citibank than his local bank and my local bank?

If using citibank, my father and I need to create a new account but if that is the best option, it is not a big deal. However, since I have BoA account and my father uses local Indian banks, if using citibank is not considerably better than others, I would not create new account in citibank. Considering the situation, I want to hear from you with more experiences.

Also, I would like to know which is the better option between two following options;
1. having my father send me money in USD in India and I get USD here. In that case, my father would have to pay exchange fees, I think.
2. having my father send me money in INR in India and I exchange INR to USD in the US. In this case, exchange fees would be on me, I think.

I would like to know which option will reduce the total transfer fee (neither my father nor I would mind to pay the fees. We are thinking of reducing the total cost.)

Thank you!

Answer 1

If you're exchanging cash, then the rule of thumb is generally that it's better to buy currency in the country that issues the currency. In your case that would mean buy INR in India and buy USD in the U.S. The rationale is that supply of foreign currency is generally smaller, so you get a little better price if you're holding the foreign currency. There are, of course, exceptions, like if you're going to a country with little foreign trade. (That wouldn't seem to apply to the U.S. or India.)

If you are doing an electronic transfer through a bank, however, I doubt that it matters which end initiates the transfer. You're going to get their wholesale exchange rate plus fees. It seems more likely to matter what fees are charged, and that may vary more by bank than by country.

Answer 2

India is better as the exchange rate conversion will be better. In the US, banks or exchange rate converters do not hold much INR and likely to quote a much worse rate.

Best way is to open HSBC premier accounts in both US and India and use their global transfers as in premier accounts the conversion rates are usually decent. HSBC Premier also has good tools to link two accounts, so the process would be transparent. Best conversion rates are given by Middle East banks or FX converters due to the large number of Indians working there, but I suspect opening a bank account in Dubai might not be feasible.

Answer 3

Is it true that my father and I get better exchange rate if he uses citibank than his local bank and my local bank?

No. The rates vary from Bank to Bank and some days some bank may give a better rate and there is no Golden rule that One Bank will always give better rate. For the amount specified, your father needs to walk into his Bank, preferably the branch that deals with Forex or the Main Branch in the city. A better rate would be given. So any leading Bank like HDFC, ICICI, SBI, SBH, Axis will be similar.

Please note a CA certificate is required to make such remittance outside of India.

having my father send me money in USD in India and I get USD here. In that case, my father would have to pay exchange fees

Yes this is the only option. You have to convert INR to USD in India.

having my father send me money in INR in India and I exchange INR to USD in the US. In this case, exchange fees would be on me

INR cannot be sent to US electronically. It will automatically get converted to USD. There is no bank in US that holds an INR account for you to convert amount into USD.