India Foreign Exchange Market

India Foreign Exchange Market Size and Trends:

The India foreign exchange market size was valued at USD 30.7 Billion in 2024. Looking forward, IMARC Group estimates the market to reach USD 65.8 Billion by 2033, exhibiting a CAGR of 8.8% from 2025-2033. The market is primarily driven by a significant rise in remittances from Non-Resident Indians (NRIs), strengthening foreign exchange reserves, increasing Foreign Portfolio Investment (FPI) inflows, stimulating investor confidence, and robust growth in services exports, particularly in IT and business services, are also supporting the market expansion.

The India foreign exchange market outlook is majorly influenced by global economic factors, including trade flows, geopolitical developments, and commodity prices. The Economic Survey 2023-24 reveals that India's Foreign Exchange Reserves (FER) increased by USD 68 Billion in FY24, the largest rise among major reserve-holding nations. The Indian Rupee remained stable, trading between INR 82 and INR 83.5/USD, buoyed by higher Foreign Portfolio Investment (FPI) inflows. India's foreign assets grew to USD 1,028.3 Billion, reflecting a rise in reserve assets and overseas investments. Furthermore, trade balances, including exports and imports, directly impact currency demand, with surpluses augmenting the Rupee and deficits weakening it, thereby propelling the India foreign exchange market growth. Apart from this, constant fluctuations in global oil prices affect the Rupee, as India is a major oil importer, which is impelling the market. Moreover, rising geopolitical tensions and shifts in global monetary policy are also impacting forex demand and exchange rates.

In addition to this, strategic monetary policy decisions by the Reserve Bank of India (RBI) are also playing a pivotal role in positively contributing to the India foreign exchange market growth. Similarly, interest rate adjustments and interventions by the RBI can either stabilize or introduce volatility to the Rupee. Foreign direct investment (FDI) inflows and portfolio investments are also significantly affecting currency markets. Furthermore, the decision of foreign investors to invest or divest in Indian assets is also creating demand for the Rupee. As of December 12, 2024, India has reached USD 1 Trillion in FDI since April 2000, with USD 42.1 Billion inflows in the first half of FY24, marking a 26% increase. From April 2014 to September 2024, India received USD 709.84 Billion, making up 68.69% of total FDI over the last 24 years. Besides this, fluctuating inflation rates and domestic growth, swaying currency value, are providing an impetus to the market.

India Foreign Exchange Market Trends:

Growth in Non-Resident Indian (NRI) Remittances

A prominent trend in the market is the continued rise in remittances from Non-Resident Indians (NRIs), reflecting growing confidence in the Indian economy. According to the Reserve Bank of India, NRI deposits increased significantly, reaching USD 7.8 Billion from April to August 2024, compared to USD 3.7 Billion in the same period in 2023. Total outstanding NRI deposits reached USD 153 Billion by the end of August 2024. As the world’s largest recipient of remittances, India benefits from these inflows, which not only contribute to the growth of foreign exchange reserves but also support the domestic economy. The influx of foreign currency helps mitigate external shocks, providing stability to the currency markets and expanding India foreign exchange market share. The rising trend in NRI deposits signals strong trust in India's economic fundamentals and market resilience.

Rising Foreign Portfolio Investment (FPI) Inflows

Foreign Portfolio Investments (FPIs) have become a key factor in market, significantly influencing the demand for the Indian Rupee. With India’s robust economic growth, favorable business conditions, and increased investor confidence, the country has attracted substantial FPI inflows. According to the Economic Survey 2023-24, published on July 22, 2024, FPIs amounted to USD 44.1 Billion in FY24, marking a noteworthy rise. These inflows have helped stabilize capital flows, facilitating the financing of India’s current account deficit (CAD), which narrowed to USD 23.2 Billion. The survey also highlighted the impressive growth in services exports and remittances, reaching USD 106.6 Billion. As India continues to bolster its position as a global investment hub, FPIs are expected to remain a crucial driver of demand for the Rupee, enhancing market stability and strengthening India’s foreign exchange reserves.

Strengthening of India’s Trade and Services Exports

The country’s growing exports, especially in services, have played a key role in transforming the India foreign exchange market trends. Strong performance in sectors like IT, software, and business services augmented foreign currency supply, helping to reduce the trade deficit and enhance market stability. Software and IT services, in particular, remain major drivers of foreign exchange inflows. According to an industry report on 22 October 2024, India's services exports rose from USD 204.76 Billion in 2018-2019 (38.28% of total exports) to USD 341.25 Billion in 2023-2024 (43.93%). With a compound annual growth rate (CAGR) of 10.76%, services exports are expected to continue growing, reaching 45.78% of total exports in the first half of 2024-2025. This upward trend, along with the region’s growing position in global value chains, is expanding India foreign exchange market demand.

India Foreign Exchange Industry Segmentation:

IMARC Group provides an analysis of the key trends in each segment of the India foreign exchange market, along with forecasts at the country and regional levels from 2025-2033. The market has been categorized based on counterparty and type.

Analysis by Counterparty:

• Reporting Dealers
• Other Financial Institutions
• Non-financial Customers

Reporting dealers are significant intermediaries in the India foreign exchange market. They act as facilitators for currency trading, liquidity, and price discovery. Such institutions as major commercial and investment banks play a crucial role in executing high-volume trades and ensuring market stability. The growing globalization of trade and investment is pushing this segment upwards, as more businesses use forex trading to hedge and manage currency risk. Reporting dealers are also embracing advanced technologies like algorithmic trading and electronic platforms, which speed up transactions and increase transparency. In addition, the Reserve Bank of India's efforts to liberalize forex regulations and promote financial inclusion are encouraging participation from reporting dealers, thus expanding the market as a whole.

Other financial institutions such as mutual funds, hedge funds, and insurance companies have come to occupy crucial positions in the market. They are significant forex traders primarily due to their quest for diversification of the portfolio and management of risk exposures especially in this time of world economic uncertainty. This increased use of derivatives such as futures and options are allowing such organizations to mitigate risks in foreign currencies. Advancements in fintech and data analytics have also empowered the financial institutions to optimize their trading strategies and improve decision-making processes. The integration of India's financial markets with the global economy along with the rise in foreign institutional investments is adding further momentum to other financial institutions to participate in the forex market.

Non-financial customers are composed of corporations, exporters, importers, and individual traders who contribute greatly to the expansion of the foreign exchange market. Non-financial clients use forex primarily for the purpose of currency risk management and exchange rate exposure as well as risks. Cross-border trade and investment grew so fast that demand increased rapidly among non-financial clients for foreign exchange services. Government policies like the Make in India initiative and positive trade policies are enhancing export growth, thereby increasing the demand for forex transactions. Also, the increased adoption of digital platforms and mobile applications for forex trading is attracting a larger customer base. The above factors coupled with increasing awareness about currency hedging tools are encouraging market participation among non-financial customers.

Analysis by Type:

• Currency Swap
• Outright Forward and FX Swaps
• FX Options

Currency swaps hold significant importance in the market, providing a strategic tool for managing long-term currency risk. These financial agreements, which involve the exchange of principal and interest payments in different currencies, are particularly valuable for corporations and financial institutions with cross-border operations. The rising globalization of trade and investment is driving demand for currency swaps, as entities seek to stabilize cash flows and mitigate exposure to exchange rate fluctuations. Additionally, the Reserve Bank of India’s efforts to expand swap agreements with other central banks are enhancing liquidity and market confidence. The increasing use of currency swaps by governments and institutions for debt management and economic stability further contributes to their growing relevance in India’s forex market.

Outright forwards and FX swaps are critical tools in the foreign exchange market, addressing both long-term and short-term currency risk management needs. Outright forwards allow businesses to secure exchange rates for future transactions, helping exporters and importers manage cross-border deals amid volatile currency markets. This demand is fueled by the growing volume of international trade and increasing SME participation in global commerce. FX swaps, involving the simultaneous purchase and sale of currencies with different settlement dates, provide flexibility for managing short-term liquidity and funding requirements. Banks and financial institutions widely adopt FX swaps to mitigate immediate currency risks. Advancements in trading platforms and digital solutions are streamlining both instruments, enhancing efficiency and fostering growth in India’s forex market.

FX options are gaining prominence in the market as versatile instruments for managing currency risk. These contracts, which provide the right but not the obligation to buy or sell currencies at predetermined rates, are particularly attractive in volatile market conditions. The growing demand for FX options is fueled by the increasing participation of institutional investors and corporations seeking to hedge against unpredictable exchange rate movements. The expanding use of algorithmic trading and advanced analytics is enabling market participants to optimize their strategies using FX options. Furthermore, rising awareness about the flexibility and cost-effectiveness of these instruments is attracting a broader range of users, creating a positive India foreign exchange market outlook.

Regional Analysis:

• South India
• North India
• West & Central India
• East India

South India plays a significant role in the market, driven by its robust IT and export industries. Cities like Bengaluru, Chennai, and Hyderabad host a flourishing IT services sector, contributing significantly to forex inflows through software exports. The region’s strong presence in textile, automobile, and pharmaceutical exports further boosts demand for foreign exchange services. Ports such as Chennai and Cochin act as major hubs for international trade, facilitating foreign currency transactions. Additionally, the growing startup ecosystem in South India is increasing cross-border financial activities, requiring efficient forex management. The Reserve Bank of India’s regional offices and financial institutions in the region are also enhancing forex accessibility, supporting the increasing demand for hedging and currency risk management tools.

North India’s foreign exchange market importance is rooted in its strong industrial base and flourishing tourism sector. The Delhi NCR region serves as a financial and corporate hub, attracting substantial foreign direct investment (FDI). Manufacturing industries in Haryana, Punjab, and Uttarakhand, producing goods for global markets, drive the region's forex activities. The tourism sector, particularly in Rajasthan, Uttar Pradesh, and Himachal Pradesh, contributes significantly to forex inflows through foreign tourist spending. Educational institutions in North India also attract international students, strengthening the demand for forex services. Government initiatives to promote industrial growth and international trade in this region, combined with increasing use of technology in forex operations, are further fueling the market's growth in North India.

West and Central India are crucial to the foreign exchange market, with Mumbai as the financial capital and a major hub for forex trading. Mumbai houses the Reserve Bank of India and leading financial institutions, facilitating high-volume forex transactions. Gujarat’s ports and industrial hubs are pivotal in international trade, driving demand for foreign currency. Pune’s IT and automobile industries, along with Goa’s thriving tourism sector, significantly contribute to forex inflows. In Central India, states like Madhya Pradesh are emerging as key players with growing export-oriented industries. The increasing presence of multinational companies and expanding trade corridors in this region, combined with advancements in financial technologies, are driving the demand for efficient forex services in West and Central India.

East India’s role in the Indian market is driven by its rich natural resources and strategic location as a gateway to Southeast Asia. States like West Bengal and Odisha have flourishing export industries in steel, tea, and jute, contributing to forex inflows. Kolkata serves as a major commercial and financial hub in the region, supporting cross-border trade activities. Northeast India’s trade ties with neighboring countries like Bhutan, Nepal, and Bangladesh also boost regional forex transactions. The government’s focus on developing trade infrastructure, including ports and logistics, is enhancing the region’s participation in the forex market. Additionally, the growing integration of digital platforms in rural and semi-urban areas of East India is improving forex accessibility and supporting market growth.

Competitive Landscape:

The India foreign exchange market is highly competitive, featuring major banks which lead with extensive networks and customized services. Fintech companies are driving innovation with digital platforms and mobile applications, enhancing accessibility and convenience. For instance, on July 30, 2024, Thomas Cook India partnered with NPCI to launch the RuPay AED Forex Card, offering travel vouchers, free ATM withdrawals, complimentary insurance, and discounts for UAE travelers, reflecting its focus on innovation and growth. Strategic collaborations between banks and tech firms are integrating AI and blockchain technologies to ensure secure, efficient transactions. Regulatory reforms increased foreign investments, and the growing participation of SMEs further intensify competition and foster market expansion.

The report provides a comprehensive analysis of the competitive landscape in the India foreign exchange market with detailed profiles of all major companies.

Latest News and Developments:

• December 10, 2024: BookMyForex.com launched the "Lowest Rate Guarantee" and "Crazy Cashback Sale," offering customers up to INR 7,500 cashback and competitive rates on forex cards, currency notes, and money transfers. Leveraging real-time data, zero-markup cards, and same-day delivery, the company addresses the growing demand for forex services, targeting threefold growth amid rising outbound travel trends.
• April 1, 2024: Zinnia Corporate Holdings finalized its acquisition of Ebix’s North American Life and Annuity Assets. The deal strengthens Zinnia’s position in life and annuity technology, adding over 770 team members across India and the U.S. Ebix, which operates a robust forex network in India through 82 branches, 62 kiosks at major airports, and partnerships with 1200 corporates, enhances its global insurance and financial services presence.
• May 28, 2024: Infosys announced a collaboration with Commerzbank and Murex on a successful go-live of a unified trading platform. This consolidation integrates FX, derivatives, equity, and commodities into Murex’s MX.3 platform, simplifying operations, reducing costs, and enhancing efficiency. Infosys played a pivotal role in development, integration, migration, and support, enabling Commerzbank to streamline processes, improve time to market, and adapt swiftly to market changes.
• July 2, 2024: ICICI Bank introduced the Student Sapphiro Forex Card, tailored for students studying abroad. Offering benefits worth INR 15,000, it includes no cross-currency markup, lounge access, insurance up to INR 5 lakh, and digital reloading by parents. Powered by Visa, the card supports 15 currencies, ensuring seamless transactions for tuition, travel, and daily expenses globally.

India Foreign Exchange Market Report Scope:

Key Benefits for Stakeholders:

• IMARC’s report offers a comprehensive quantitative analysis of various market segments, historical and current market trends, market forecasts, and dynamics of the India foreign exchange market from 2019-2033.
• The research study provides the latest information on the market drivers, challenges, and opportunities in the India foreign exchange market.
• Porter's Five Forces analysis assists stakeholders in assessing the impact of new entrants, competitive rivalry, supplier power, buyer power, and the threat of substitution. It helps stakeholders to analyze the level of competition within the India foreign exchange industry and its attractiveness.
• Competitive landscape allows stakeholders to understand their competitive environment and provides an insight into the current positions of key players in the market.