5 False Assumptions NRIs Make About USD Safety

Here's a fear no NRI says out loud: "What if something happens to my dollar savings?"

You earn in dirhams. You think in dollars. You've been told the dollar is the world's safest currency.

So when someone suggests a USD fixed deposit in GIFT City, it feels automatically safe. Dollar plus fixed deposit equals bulletproof. Right?

Not exactly. At Belong, we've worked with thousands of NRIs who made investment decisions based on assumptions about the dollar that sounded right but weren't fully true.

The dollar is strong. It's reliable. But "safe" means different things in different contexts.

And confusing perceived safety with actual safety leads to mistakes that compound over years.

Here are five assumptions about USD safety we see regularly, and what the reality looks like.

Assumption 1: "My Money Is in Dollars, So There's Zero Risk"

NRIs equate "USD" with "risk-free." The dollar is the world's reserve currency.

It's stable compared to the rupee. But stable doesn't mean static.

Inflation erodes dollar purchasing power too. US inflation averaged 2.6% annually over the last 20 years (Source: US Bureau of Labor Statistics).

A USD FD paying 5% minus 2.6% inflation gives a real return of roughly 2.4%. Compare that to a GIFT City mutual fund delivering 10% in dollar terms.

After inflation, the real return is 7.4%. The FD felt safer. The fund preserved more purchasing power.

The dollar protects from rupee depreciation. It does not protect from dollar inflation.

👉 Tip: Even within the "safe" bucket, aim for returns that beat US inflation. Compare current GIFT City FD rates to ensure your money is working.

Assumption 2: "GIFT City FDs Are Like US Bank Deposits"

NRIs from the US especially make this assumption. They're used to FDIC insurance covering deposits up to $250,000. They assume GIFT City FDs have similar protection.

They don't. GIFT City deposits are not covered by DICGC (India's deposit insurance up to ₹5 lakh) or by FDIC (Source: ICICI Bank GIFT City T\&Cs). IFSCA doesn't currently include deposit insurance for IBU deposits.

Does this mean they're unsafe? No. The safety comes from bank credit quality.

The IBUs are operated by SBI, HDFC, ICICI, and Axis, India's most systemically important banks, all RBI-regulated domestically.

UAE bank deposits have government protection up to AED 350,000. GIFT City FDs rely on bank creditworthiness alone. Know the difference.

👉 Tip: Treat GIFT City FDs like bonds from India's strongest banks, not government-insured deposits. Spread across two or three GIFT City banks. Read our safe investment guide.

Assumption 3: "The Dollar Never Weakens"

NRIs in the UAE think of the dollar as permanently strong because the dirham is pegged at AED 3.6725/USD.

In their daily experience, dollar and dirham move together.

But the dollar fluctuates against other currencies. Between 2020 and 2021, the US Dollar Index (DXY) fell roughly 10% (Source: Federal Reserve Economic Data).

If you plan to retire in India, a strengthening rupee (rare but possible in short bursts) means your USD savings buy fewer rupees at conversion.

If you move to the UK, a weakening dollar buys fewer pounds.

The smarter approach is currency diversification. Keep some in USD through GIFT City.

Keep some in NRE rupee FDs. GIFT City banks offer accounts in GBP, EUR, and AED too.

👉 Tip: Match currency to future spending. Retiring in India? You need rupees eventually. Staying in UAE? Dollars work. Unsure? Split the allocation. Read our asset allocation guide.

Assumption 4: "USD FDs Lock In Safety for the Full Tenure"

An NRI books a 1-year GIFT City USD FD at 5%. They assume the rate is guaranteed for 12 months and their money is locked safely until maturity.

The rate is indeed locked. But the "safety" has two hidden gaps.

Premature withdrawal penalties apply.

If you need the money before maturity, GIFT City banks charge penalties that vary significantly. Axis Bank charges 0.15% below the applicable rate.

ICICI Bank charges 0.50%, and the payout amount can be less than your principal for very short holding periods (Source: ICICI Bank GIFT City T\&Cs).

Some banks offer non-callable deposits at higher rates with zero early exit option.

Reinvestment risk at maturity is real.

Your FD matures. The bank auto-renews at the prevailing rate, which may be lower.

The US Federal Reserve held rates at 3.50-3.75% in January 2026 (Source: Federal Reserve), with markets expecting 1-2 cuts in 2026 (Source: J.P. Morgan, Feb 2026).

A deposit booked at 5% today might renew at 4% or lower in a year.

The FD rate was "safe" for 12 months. But your long-term return depends on what happens at renewal.

NRIs who assume they'll keep earning 5% indefinitely are pricing in certainty that doesn't exist.

The solution: ladder your deposits. Split into 3-month, 6-month, and 1-year FDs. As each matures, reinvest at prevailing rates.

This smooths out rate fluctuations and gives you regular liquidity access. Track rate movements through GIFT Nifty and Belong's FD comparison tool.

Assumption 5: "If It's in USD, I Don't Need to Worry About Tax"

This might be the most expensive assumption on this list. NRIs assume that because GIFT City FD interest is tax-free in India under Section 10(4B) of the Income Tax Act, it's tax-free everywhere.

For UAE NRIs, this is true. The UAE has no personal income tax. So GIFT City FD returns are genuinely tax-free from both ends.

For UK NRIs, it's not. HMRC taxes worldwide income. Your 5% GIFT City FD interest is taxable at your UK marginal rate (20-45%).

A 5% gross return becomes 3% net for a 40% taxpayer. The dollar didn't make it safe from tax. Your country of residence did, or didn't.

For US NRIs, the picture is worse. The IRS taxes worldwide income.

GIFT City mutual funds may be classified as PFICs (Passive Foreign Investment Companies), triggering punitive tax treatment and annual Form 8621 filing.

A "tax-free" Indian investment becomes a tax headache in the US.

The currency of the investment doesn't determine the tax treatment. Your tax residency does.

And that changes whenever you move countries, which NRIs do more often than most.

👉 Tip: Before investing in any USD asset, confirm the tax treatment in your country of residence, not just India. UAE NRIs have the cleanest outcome. UK and US NRIs need professional advice. Read our guide on tax on NRI investments and DTAA benefits.

Safety Is Not a Currency. It's a Structure.

The dollar is a strong currency. It's not a safety guarantee.

Real safety comes from understanding what's insured and what isn't, what's taxed and where, what happens at maturity, and how inflation eats into "safe" returns.

Thousands of NRIs discuss these questions in our WhatsApp community.

They share which banks they chose, how they structured deposits, and what surprised them. Join before you invest.

The Belong app gives you tools for informed decisions. Compare FD rates across GIFT City banks.

Explore mutual funds and AIFs. Track GIFT Nifty. Because safety isn't about picking the right currency. It's about understanding the full picture.

Disclaimer: For informational purposes only. Not financial, tax or legal advice. Consult qualified advisors before investing. Tax laws and interest rates subject to change. Information current as of February 2026.