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Citibank NRI (Non-Resident Indian) is offering 9.50% on a 1 year CD. The catch is if you are investing with U.S. dollars it would be converted into Indian Rupees. I know the deal sounded too good to be true, but I am planning on meeting with a local representative of Citibank NRI Services in New York City. I wanted your opinions on this, only downside I see is if the value of the rupee falls more than 9.50% I would go negative (excluding foreign income tax). I may regenerate the money back into the United States in the near future. Is there any questions I should ask this representative, I am still having my doubts.

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Is the representative's name Madoff?

Obvious question: is this covered by the FDIC or NCUA?

I think in one year the INR was down 20% against the USD.
So last year if you put in $100, it would be Rs. 4000 (1 USD = Rs 40)
Add 1 year interest and total is Rs 4380.
If you convert it back this year, you get back $90 (1 USD = Rs 49).

Rates are on the bottom, they lowered the rate again now it is 8.50%, it was 10.00% two months ago.

https://www.online.citibank.co.in/portal/newgen/seo/banking/citibanking/termdeposits.htm#L6


It is not covered by the FDIC, but its Indian equivalent; Deposit Insurance and Credit Guarantee Cooperation for 1 lakh (about 2,000 USD). Which is very small compared to the actual amount I am willing to invest.

The difference between that rate and the rate you would get in USD reflects the expectations about exchange rate movements. Google "interest rate parity" for more detail. There is no free lunch.

HumDoHamaraDo said: I think in one year the INR was down 20% against the USD.
So last year if you put in $100, it would be Rs. 4000 (1 USD = Rs 40)
Add 1 year interest and total is Rs 4380.
If you convert it back this year, you get back $90 (1 USD = Rs 49).



That is why I am counting on the dollar to stay stable for the next year against the Indian Rupee. Indian Rupee in the past few months has been fluctuating a few percentage points against the dollar. Either way it is a speculative investment even if it is a CD when it is invested in a foreign market.

vital15 said: The difference between that rate and the rate you would get in USD reflects the expectations about exchange rate movements. Google "interest rate parity" for more detail. There is no free lunch.

Thanks for the information, thank you to everyone else. I guess those that are living in India would truly benefit from this deal.

LawrenceofArabia said: blah blah blah

is the movie Lawrence of Arabia good? I never saw it because it came out 20 years before I was born but I keep hearing people talking about it and it got a 98% on Rotten Tomatoes.

I also suggest you learn what currency swaps and interest rate swaps are and the risk bases you are taking on. I didn't run the numbers, but 9.5% actually doesn't sound like a very good deal.

tripleB said: LawrenceofArabia said: blah blah blah

is the movie Lawrence of Arabia good? I never saw it because it came out 20 years before I was born but I keep hearing people talking about it and it got a 98% on Rotten Tomatoes.


I am 24 years old but I saw the movie recently and it is pretty good. But to each their own, so give it a try.

Did you get a chance to see if PSU banks offering similar rates. I am not worried about Citibank India going out of business, as it is working under strict RBI rules. Still, would go with PSU banks.

BiomedGeek said: I also suggest you learn what currency swaps and interest rate swaps are and the risk bases you are taking on. I didn't run the numbers, but 9.5% actually doesn't sound like a very good deal.
I would agree. It probably would be a good deal if you are not interested in converting your money back into dollars, so yes, it would be good for Indians who send money to India w/o needing to convert it back.

bharatiya said: BiomedGeek said: I also suggest you learn what currency swaps and interest rate swaps are and the risk bases you are taking on. I didn't run the numbers, but 9.5% actually doesn't sound like a very good deal.
I would agree. It probably would be a good deal if you are not interested in converting your money back into dollars, so yes, it would be good for Indians who send money to India w/o needing to convert it back.

Agree. Good for Indians if they want to convert at current exchange rate. And they will have a option to get it back for any emergency.

Based on the interest rate,I think this is an NRO a/c instead NRE a/c. This means that there is a TDS of 30% on the interest amount and the money cannot be readily transfered back to USD

biplab said: Based on the interest rate,I think this is an NRO a/c instead NRE a/c. This means that there is a TDS of 30% on the interest amount and the money cannot be readily transfered back to USD Yup - TDS of 30% and only the interest (left over after TDS) can be converted to USD.

It is NRO not NRE.

LawrenceofArabia said: Citibank NRI (Non-Resident Indian) is offering 9.50% on a 1 year CD. The catch is if you are investing with U.S. dollars it would be converted into Indian Rupees. I know the deal sounded too good to be true, but I am planning on meeting with a local representative of Citibank NRI Services in New York City. I wanted your opinions on this, only downside I see is if the value of the rupee falls more than 9.50% I would go negative (excluding foreign income tax). I may regenerate the money back into the United States in the near future. Is there any questions I should ask this representative, I am still having my doubts.

It will be hard for you to convert the money back to $$ and getting them to US, check conversion rate and fees.

there are no much difficulty to convert it back. there are not much fees .. only thing is no oneknow convertion rate. it gets converted back with prevealing dollar selling rate in india. as banks are selling dollars to us.

of course this is assuming money is in nre acocunt. if money is lying in nro account then there are many more rules of india income tax returns proof etc before converting back to dollars. i don't know this 9.5% acocunt is nro or nre.



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