Indians paid nearly £970 million in the form of fees hidden in inflated exchange rates while making remittances in 2020. This is more than a third (36%) of the total fees of £2.63 billion that Indians paid for sending money across their country’s borders.
The fees reflect a lack of transparency and high charges applied by banks on remittances. Banks have been reducing the fees on foreign remittances and their income under this head fell from £ 1.50 billion in 2016 to £1.21 billion in 2019. However, they have protected themselves by recovering £442 million through exchange mark-up in 2020, which was up from £250.5 million in 2016.
These figures were from independent research carried out by Capital Economics in August 2021, which aimed to estimate the scale of foreign exchange transaction fees in India. The study was released by Wise, the technology company that was founded with the objective of reducing cross-border remittance costs.
Overseas workers sending money into India are also losing money. Over the past five years, money lost to exchange rate margins on inward remittances has grown from £420 million to £790 million. Meanwhile, fees paid to transaction costs have grown from £1.02 billion in 2016 to £1.4 billion in 2020.
“A significant portion of these fees paid on remittances to India come from people in Gulf countries where most are employed in blue-collared jobs to support their families back home in India,” a statement issued by Wise said. Of the share of total fees paid on inward remittances to India in 2020, Saudi Arabia ranked first at 24%, followed by the US (18%), the UK (15%), Qatar (8%), Canada (6%), Oman (5%), UAE (5%), Kuwait (5%), and Australia (4%).
