Currency Conversion for GIFT City Investments

A common worry we hear in our Belong WhatsApp community: "Do I need to convert my dirhams to rupees before investing in GIFT City?"

No. And that's the whole point.

GIFT City IFSC was designed so NRIs can invest in India without touching the rupee. Every transaction inside GIFT City happens in foreign currency. USD, EUR, GBP, AED, CAD, AUD, SGD, HKD. Not a single rupee changes hands.

But the answer gets nuanced depending on where your money sits right now. That's where most blogs stop. We won't.

Why GIFT City Doesn't Need Rupees

Under FEMA, the RBI treats GIFT City as "foreign territory" for financial purposes (Source: RBI circular, 2015). Banks operating there run International Banking Units that only deal in foreign currency.

INR transactions are not permitted inside the IFSC, except for minor administrative expenses.

This is what makes GIFT City fundamentally different from traditional NRI investments in India.

When you buy a mutual fund through an NRE account, your money converts to rupees. When you open an NRE FD, it's denominated in rupees.

When you sell and repatriate, it converts back to dollars.

GIFT City skips all of that. Your USD goes in as USD. It earns returns in USD. It comes back as USD.

👉 Tip:Compare GIFT City FD rates with NRE and FCNR options across banks. The difference becomes clear once you factor in currency protection.

Which Funding Routes Need Conversion (And Which Don't)

This is where it gets practical. Your funding source determines whether you face any forex cost at all.

The pattern is simple. If your money is already in foreign currency, no conversion needed. If it's in rupees, the bank converts it and charges a forex markup hidden inside the exchange rate.

👉 Tip: If you're earning in AED or USD, send it directly to GIFT City from your overseas bank. That's the zero-conversion, zero-markup route. Read our guide on how to open a GIFT City account to get started.

The Hidden Cost NRIs Miss with NRE Transfers

Say you have ₹25 lakh in your NRE account and want to move it to a GIFT City USD FD. Your bank converts INR to USD at their rate.

Not the RBI reference rate. Their rate, with a spread of 0.5% to 3% baked in (Source: RBI forex guidelines, bank rate comparison portals).

On ₹25 lakh, a 1.5% markup means you lose roughly $440 before your money reaches GIFT City. On ₹50 lakh, that's nearly $880.

This forex cost is invisible. Your bank statement won't show a separate "fee" line. It just gives you fewer dollars per rupee.

Contrast that with sending $30,000 directly from Emirates NBD to your GIFT City IBU. The only cost? A flat SWIFT fee of AED 50–100 and a possible $15–25 correspondent bank charge.

👉 Tip: For large transfers from NRE accounts (₹25 lakh+), call your bank's forex desk and negotiate the exchange rate. Most banks have room to improve the rate for high-value remittances.

What About AED? Do You Need to Convert to USD First?

GIFT City IBUs accept deposits in AED directly. ICICI Bank GIFT City, for instance, accepts accounts in USD, GBP, EUR, CAD, AED, AUD, SGD, and HKD (Source: ICICI Bank GIFT City FAQs).

But most GIFT City products, including FDs, mutual funds, and AIFs, are priced in USD. If you send AED, the IBU converts it to USD internally at their rate.

You have two choices. Send AED and let the GIFT City bank handle conversion. Or convert AED to USD at your UAE bank first, then send USD directly.

For amounts under $5,000, the difference is negligible. For larger sums, converting at your UAE bank first usually saves a few basis points.

FCNR: The Zero-Conversion Shortcut

If you hold an FCNR deposit in USD, GBP, or EUR, this is the cleanest route. When it matures, transfer the proceeds directly to your GIFT City IBU via SWIFT. No conversion. No markup. Just a flat SWIFT fee.

This makes maturing FCNR deposits ideal for GIFT City investments.

Currency Protection: The Bigger Picture

Avoiding conversion isn't just about saving on fees. It's about protecting your wealth from rupee depreciation.

Over the past decade, the rupee has depreciated roughly 3–4% annually against the dollar (Source: RBI exchange rate data).

An NRE FD earning 7% in rupees delivers around 3–4% in dollar terms after depreciation. A GIFT City USD FD earning 5% delivers exactly 5%. No erosion.

For UAE-based NRIs earning in AED (pegged to USD), this currency match means your returns are real, not inflated by a weakening rupee. Combined with tax-free treatment under Section 10(4E) and India-UAE DTAA benefits, your effective return from GIFT City often beats an NRE FD with a nominally higher rate.

👉 Tip: Track live rates on Belong's GIFT Nifty tracker and use our mutual funds explorer to compare USD-denominated fund options before investing.

The Bottom Line

If your money is in foreign currency, GIFT City needs zero conversion. If it's in rupees, conversion happens but carries a hidden cost worth negotiating.

The smartest route for UAE NRIs: send AED or USD directly from your overseas bank. For existing Indian savings, time your transfers when exchange rates favour you.

Thousands of NRIs have moved to tax-free GIFT City investments through Belong. Download the app to compare rates and join our WhatsApp community for guidance.