When Does Investing in USD NOT Make Sense for NRIs

A colleague from our Belong WhatsApp community recently shared something that stung. He had moved ₹40 lakhs from his NRE FD into a USD deposit.

His logic was simple: "Dollar is always safer."

The NRE FD was paying him 7% annually. His USD deposit? Around 4%. Over three years, that gap cost him roughly ₹3.6 lakhs. The rupee barely moved during that window.

His story isn't unusual. We hear versions of it every week. NRIs in the UAE, the UK, and the US share similar experiences. The belief that USD is always smarter runs deep. Sometimes it's true. But sometimes, it quietly eats into your returns.

This article covers the specific scenarios where USD doesn't serve you well. Not because the dollar is bad. But because your life plan and the math might point elsewhere.

Compare real-time FD rates across NRE, NRO, FCNR, and GIFT City deposits. Use Belong's NRI FD comparison tool to check the numbers yourself.

The Real Cost of Choosing USD Over INR

Let's set the stage with actual numbers from late 2025.

NRE FD (INR): 6.5% to 7%, tax-free in India, but carries INR fluctuation risk.

FCNR FD (USD): 3.5% to 4.5%, tax-free in India, no currency risk.

GIFT City USD FD: 4% to 4.6%, tax-free under IFSCA, no currency risk.

NRO FD (INR): 6.5% to 7.25%, subject to 30% TDS, carries INR fluctuation risk.

Sources: SBI NRE FD rates, Dec 2025; BankBazaar, Oct 2025; GIFT City bank rate sheets, Oct to Dec 2025

The gap between an NRE FD and a USD deposit is 2 to 3 percentage points per year. On ₹50 lakhs, that's ₹1 lakh to ₹1.5 lakhs you leave on the table annually.

That gap only makes sense if the rupee falls enough to cover it. The rupee has lost about 3% to 5% per year against the dollar over 30 years (Outlook Money). But "historically" doesn't mean "always." Some years the rupee barely moved or even strengthened.

👉 Tip: The break-even point is roughly 2.5% to 3% annual rupee depreciation. If you expect less depreciation than that, the INR deposit wins on pure returns.

Scenario 1: You're Planning to Move Back to India

This is where USD deposits most often work against you.

If you plan to return to India in 3 to 5 years, your future expenses will be in rupees. Rent, groceries, school fees, medical bills. All in INR.

Holding savings in USD means you'll convert back to rupees eventually. That conversion introduces timing risk. If the rupee strengthens around your return date, your dollars buy fewer rupees.

Here's what makes this worse. Returning NRIs qualify for RNOR status for up to three years. RNOR stands for Resident but Not Ordinarily Resident. During this period, overseas income is not taxed in India. That's a powerful window to repatriate into INR assets.

Instead of USD deposits earning 4%, returning NRIs could earn 6.5% to 7%. Tax-free NRE FDs work well during the years before return. Then you convert those to resident FDs seamlessly.

A Dubai-based IT professional we advised had ₹80 lakhs split equally between USD and INR. We showed him the INR portion would likely outperform by ₹4 to ₹5 lakhs over 3 years. That assumed modest rupee stability. He shifted 70% to INR and kept 30% in USD as backup.

👉 Tip: If your return timeline is under 5 years, lean towards INR for money you'll spend in India. Keep 20% to 30% in USD for unforeseen global needs.

Scenario 2: The Interest Rate Gap Is Too Wide

This is pure arithmetic. And it trips up many NRIs.

In 2025, a 1-year NRE FD at IndusInd Bank pays around 7% (source: BankBazaar, Oct 2025). A 1-year GIFT City USD FD pays around 4% to 4.6% (source: GIFT City bank rate sheets, Dec 2025).

That's a spread of roughly 2.5 to 3 percentage points.

For the USD deposit to match the INR return, the rupee must fall by at least 2.5% to 3%. Some years it does. Others, it doesn't.

Between 2023 and early 2025, the rupee stayed in the 83 to 85 range. An NRI who chose USD over INR earned less during that period. And had nothing to show for the "currency protection."

The MSCI India index delivered 9.5% in rupee terms over 10 years. But only 5.4% in dollar terms (Outlook Money). That 4.1% gap shows the cost of currency conversion. For FDs, similar math applies.

Here's what many NRIs miss. The interest rate gap already prices in expected depreciation. When Indian banks offer 7% and US rates sit at 4%, markets expect roughly 3% rupee depreciation. If it falls less, INR wins. If it falls more, USD wins.

The question isn't USD or INR permanently. It's about reading the current cycle.

👉 Tip: Use Belong's FD rates tool to compare NRE and USD FD gaps in real time. If the spread exceeds 2.5%, INR usually wins short-term.

Scenario 3: Your Financial Goals Are India-Centric

Think about what your money is actually for.

Saving for your child's education at an Indian university? Buying property in Mumbai or Bangalore? Building a retirement corpus for life in India? Supporting parents with monthly expenses? Your money needs to end up as rupees.

Every USD to INR conversion costs a spread. Banks and forex providers charge 0.5% to 2% per conversion (Belong's transfer guide). Two round-trip conversions can eat 2% to 4% of your capital.

An NRI in Abu Dhabi asked us recently. "Should I keep my property down-payment in a USD FD?" He was buying a flat in Pune in 18 months. The answer was straightforward.

His goal was in rupees. USD added conversion risk and cost for no reason. An NRE FD at 6.6% for 18 months was simpler and cheaper.

The same logic applies to retirement planning for UAE NRIs. If you'll retire in India, your corpus needs to generate rupee income. Building it in USD and converting later adds unpredictability.

👉 Tip: Match the currency of your savings to your goal's currency. USD for USD goals. INR for INR goals. It's that simple.

Scenario 4: You're Already Overexposed to the Dollar

This is the one almost nobody talks about.

If you live in the UAE, your salary is in AED. The AED is pegged to the dollar at 3.6725 per USD. Set by the UAE Central Bank since 1997. Your rent, groceries, and daily expenses are effectively in USD.

Now think about this. Your income is in USD (via AED). Your savings are in USD (via AED). If your investments are also in USD, your entire financial life sits in one currency.

That's not diversification. That's concentration risk.

Some forecasts for 2026 project a weaker dollar. Bank of America expects the rupee to strengthen to roughly 86 per dollar by end of 2026 (Reuters via NAGA). If that happens, every USD asset you hold loses rupee value.

Allocating a portion to INR investments in India gives you genuine currency diversification. Not because the rupee is stronger. But because 100% in one currency is always risky.

NRIs in the UAE often feel "safe" in USD because the peg feels stable. But the peg's stability doesn't protect the dollar's global purchasing power.

👉 Tip: As a UAE NRI, consider keeping 40% to 60% of investable surplus in INR assets. It's not a bet against the dollar. It's a hedge against overconcentration.

Scenario 5: Short-Term Parking That Becomes Long-Term Loss

This scenario plays out slowly and quietly.

An NRI deposits $20,000 in a USD savings account "temporarily." The plan: invest it within a few months. But life gets busy. The money sits for two years, earning 2% to 3%.

An NRE FD would have earned 6.5% to 7% during the same period. On $20,000 (roughly ₹17 lakhs), that gap is ₹1.2 to ₹1.5 lakhs in lost interest.

The problem isn't the USD itself. It's inertia. Money in USD accounts tends to stay put. Converting feels like a hassle. NRIs wait for "a better rate" or keep "thinking about it."

This is one of the costliest financial mistakes NRIs make. Not dramatic. Just a slow, steady erosion from indecision.

Even within USD, a savings account and FD differ sharply. If you're holding USD, lock it into a GIFT City USD FD at 4% to 4.6%. Don't let it idle at 2%.

👉 Tip: Set a personal rule. Any money uninvested for over 90 days goes into a fixed deposit. Inertia is the most expensive financial advisor.

Scenario 6: Indian Equity Offers Better Long-Term Growth

Fixed deposits protect capital. They don't build wealth the way equity can.

Indian equity markets have delivered roughly 12% to 15% CAGR long-term. That's based on Nifty 50 historical data. Even after 3% to 5% annual rupee depreciation, the dollar-adjusted return has been 7% to 10% CAGR over 10-year windows.

Compare that to a USD FD paying 4% to 4.6%.

If your horizon is 7 years or longer, sitting entirely in USD FDs has a massive opportunity cost. You're choosing guaranteed 4% over historically proven 10%+ (in INR terms).

The right approach is an asset allocation strategy that balances safety and growth. Here's a practical split for a 35-year-old UAE NRI.

Explore options through Belong's GIFT City mutual fund tool.

👉 Tip: Don't compare a USD FD with Indian equity directly. They serve different purposes. But if all your long-term money sits in USD FDs, you're sacrificing significant growth.

Scenario 7: You're Paying Double Conversion Costs

This one burns quietly and repeatedly.

Here's a common flow for UAE NRIs. Earn in AED. Convert to USD (effectively, via the peg). Convert USD to INR for an NRE deposit. Later, convert INR back to USD/AED.

Each conversion has a cost. The exchange rate markup and fees range from 0.3% (competitive apps) to 2% (bank wire transfers).

Compare that to a direct AED to INR transfer into an NRE account. One conversion. One fee.

Routing money through USD instruments unnecessarily means paying twice. On ₹50 lakhs, even 1% extra conversion cost is ₹50,000. Do that yearly and it compounds into a real drag.

The exception: when you genuinely need money in USD. A US mortgage, a child's university fees in America, or expenses in a dollar economy. The currency of your liability should match your asset.

But if you earn in AED and your goals are in India, the extra USD hop adds cost. No value.

👉 Tip: Map your money flow end to end. If the source is AED and the destination is INR, skip the USD stop. Use direct AED to INR transfer channels for the lowest cost.

What Most Blogs Miss: The Psychological Comfort Trap

Here's something we've noticed over 12 years of advising NRIs.

The preference for USD isn't always rational. It's emotional. The dollar "feels" safer. It's the world's reserve currency. It's what you earn in. It's what colleagues talk about.

But feelings and financial returns don't always align.

Holding USD can cause NRIs to accept lower returns indefinitely. It can stop you from exploring Indian options you're unfamiliar with. It can make you miss compounding in higher-yielding INR instruments.

We call this the "status quo bias." You keep doing what you've been doing. Changing feels risky, even when the numbers say otherwise.

Separate your emotions from your money. Use a simple decision framework for safe investments based on three questions.

Question 1: Where will I spend this money? India or abroad?

Question 2: When will I need it? Under 3 years, 3 to 7 years, or 7+ years?

Question 3: What return do I need to meet my goal?

If the answers point to INR goals and timelines beyond 3 years, USD deposits alone won't get you there.

So When DOES USD Make Sense?

This article would be incomplete without stating when USD is right.

You plan to stay abroad permanently. Your retirement will be in a dollar-pegged or dollar economy.

Your goals are dollar-denominated. US education costs, international travel funds, or a home in a dollar-linked country.

You expect sharp rupee depreciation. Above 3% to 4% annually, due to rising crude prices or widening trade deficits.

You want a currency hedge. A 20% to 30% USD allocation is sensible diversification. Even if most goals are in India.

You're investing through GIFT City. USD FDs there offer tax-free returns under IFSCA. Rates reach up to 4.6% at select banks. Repatriation is fully supported. GIFT City products like alternative investment funds also give dollar exposure to Indian growth.

Track market movements with the GIFT Nifty tracker. It helps inform your INR vs. USD allocation in real time.

The point isn't that USD is bad. The point is that defaulting to USD without thinking costs you lakhs.

A Simple Decision Checklist for NRIs

Before you park your next deposit, run through this.

The Belong View

We don't believe USD is better than INR or the other way around. We believe in matching your currency to your goals.

We built our platform for NRIs who want access to both worlds. Tax-free USD FDs through GIFT City banks. Mutual funds for long-term INR wealth building. And tools to compare everything side by side.

The worst financial decision isn't choosing the wrong currency. It's not choosing at all. It's letting money sit idle because options feel overwhelming.

Many NRIs in our WhatsApp community discuss these questions every week. When to convert, where to invest, how to balance INR and USD. If you're deciding alone, you don't have to.

Download the Belong app to compare FD rates and explore GIFT City products. Join our WhatsApp community for clarity from NRIs who've faced the same decisions.

Disclaimer: This article is for informational purposes only. It does not constitute financial advice. Decisions should be based on individual goals, risk tolerance, and professional consultation. Interest rates are indicative and subject to change. Verify current rates with the issuing bank.