Indian Overseas Bank Forex Rates Explained | How to Save on Transfers

The Indian Overseas Bank (IOB) has been authorized by the Reserve Bank of India (RBI) to buy and sell foreign currency. But if you've ever compared the bank rates with what you see online, you would've noticed they don't always match. This is because Indian Overseas Bank, as well as other authorized banks, add a markup and extra charges on top of the interbank rates to cover their costs.

So, before you carry out overseas transactions with the Indian Overseas Bank, read this article to understand their forex rates and explore alternatives to save on your transfers.

Indian Overseas Bank uses different exchange rates depending on whether you're sending money, receiving it, or dealing with trade-related bills. Here's a simple breakdown:

1. TT buying rate (TTB)

This is the Indian Overseas Bank's forex rates for converting foreign currency into Indian rupees. It applies when money is coming into India. For example, if a family member sends you money from overseas, the IOB exchange rate applied will likely be the TTB rate. It's also used in cases like inward remittances, proceeds from export bills, converting foreign currency deposits into INR, etc.

2. TT selling rate (TTS)

This IOB forex rate applies when money is going out of India. For example, if you're sending INR to a foreign account, the TTS will be used. In fact, this rate is also used in the case of outward remittances in foreign currency, refunds of inward transfers, etc.

3. Bill buying rate

Indian Overseas Bank uses the bill buying rate when it purchases or discounts export bills. The bank pays you in rupees immediately, but the actual foreign exchange is received later once the bill is realized.

4. Bill selling rate

Another type of exchange rate that IOB uses is the bill selling rate. It is used when the bank needs to convert Indian rupees into foreign currency to settle import-related payments. This usually happens when a business in India has purchased goods or services from abroad and now needs to pay the overseas supplier.

Besides these exchange rates, Indian Overseas Bank also offers a multicurrency forex card. The forex card rate depends on the currency and service.

When you make an international payment or receive money through the Indian Overseas Bank, the cost isn't just about the exchange rate. You'll also pay different remittance service charges, margins, and card-related fees.

1. Exchange rate charges

The Indian Overseas Bank's forex card rate and remittance rates differ for buying and selling foreign currency. Here are the forex rates offered by IOB for different currencies.

Note: The rates for JPY and LKR are for 100 units each.

2. IOB multicurrency prepaid travel card fees

If you're using an Indian Overseas Bank forex card for travel, purchases, or withdrawals abroad, you'll also pay certain fees.

3. Cash withdrawal fees

When withdrawing cash abroad using your IOB card, fees depend on the withdrawal amount and currency.

Real-time forex rates are important because they show you the actual current value of one currency against another. They are especially helpful if you are dealing with clients or vendors overseas. Why? Because even a small change in the exchange rate can affect your profits and expenses.

Tracking live rates can help you:

• Decide the right time to send or receive foreign payments.
• Plan pricing and contracts accordingly.
• Reduce risks from sudden currency fluctuations.

The exchange rate you see online is known as the mid-market or interbank rate. It is the rate banks use when trading with each other. But when you exchange money through the Indian Overseas Bank, the rate is usually higher. That's because IOB, like other banks, adds a markup to cover its costs and risks and to make a profit.

There are several reasons behind this difference:

• Operating expenses: Banks include their administrative and infrastructure costs in the final rate.
• Currency risk: Changes in exchange rates can lead to losses, so IOB builds a margin to stay protected.
• Inflation and volatility: In countries or currencies with unpredictable values, a higher margin helps offset risk.
• Business priorities: Since currency exchange isn't IOB's main service, it has less room to offer competitive pricing.

Let's look at an example to understand the effective rate. Say India only trades with three countries - Japan, the UK, and Canada. This means the Indian rupee would be exchanged mainly with the Japanese yen, the British pound, and the Canadian dollar.

Now, suppose:

• 60% of trade is with Japan
• 30% with the UK
• 10% with Canada

Here, the yen has the most weightage. This means, if its value changes, it'll have a much bigger impact than a change in the Canadian dollar. But sometimes, even if one currency moves a lot, the overall basket doesn't change much. This usually happens when the other currencies move in the opposite direction to balance it out. This weighted approach helps banks and businesses understand how combined currency fluctuations affect the rupee's value in global trade.

When you use the Indian Overseas Bank for international transfers, the rates often include a markup, and hidden fees can increase costs. Xflow, on the other hand, gives you more control and transparency for your forex transactions.

Here's why Xflow can be a better choice:

• You see live exchange rates, so you can convert money at the best possible moment.
• Costs are clear and predictable, unlike traditional bank markups.
• Money moves quickly, helping maintain smooth cash flow.
• Documentation and reporting, including FIRA compliance, are taken care of automatically.
• Xflow offers guidance from specialists familiar with Indian IT exports and international payments.

Before using the Indian Overseas Bank for international payments, you must understand how its forex rates work. But while IOB offers reliable services, the costs can quickly pile up due to hidden charges and less favorable rates. Xflow eliminates this hassle. It offers real-time rates, faster settlements, and automated compliance - all without any hidden fees. Xflow makes global payments simpler and more cost-effective.

Ready to save more on every transfer? Sign up with Xflow today!