What is Twin Currency Plan?

A sound investment plan exclusively for NRIs. As an investor in ICICINRE fixed deposits under the twin currency plan, you will now have the choice to choose the maturity currency at a later date. This essentially means that there is a significant 'gain' opportunity if the foreign currency appreciates against the rupee at a later date. On the other hand, if the rupee appreciates, you have the choice to get the maturity proceeds in rupees. In other words, it's you who wins always with money!

TCP - The method

Let us see this through an illustration. For example, you are interested in a high yield on 100,000 USD for a 3-year term.

Process 1

Take USD from you and convert it into INR. Let us presume the TT buying rate as of 3/01/2003 is Rs. 47.85 to a USD. Thus on 3/01/2003 - USD 100,000 = Rs. 4,785,000

Process 2

We book a NRE FD for 3 years @ 6.50% p.a. for Rs. 3/01/2003

Process 3

At a later date before maturity let us say 3/01/2005 As on 3/01/2005, 1USD = Rs. 51.40 1 year Forward premium rate is Rs. 1.85 . More on Forward Premium/Contract Hence, the forward rate works out to Rs. 53.25 Let us assume that the expected USD / INR rate as on 3/01/2006 (maturity date) is Rs. 53.95 In this scenario, it makes sense for you to book a forward contract and get the maturity proceeds in USD. The bank gives you the choice to do so. Now, you exercise your choice to get the maturity proceeds in USD and the bank acts accordingly. The bank books a forward contract.

Process 4

NRE FD maturity value is Rs. 5,806,155 As per Forward contract Rs. 5,806,155 = USD 108,036 (Rs. 5,806,155 / Rs. 53.25) It means more dollars for the same investment. The yield on the term deposit in USD terms equals 3.01%.

Process 5

Had you not had the choice to get the maturity proceeds and the expected USD / INR rate as on 3/01/2006 would be Rs. 53.95 as expected), the client would have received only USD 107,621 (Rs. 5,806,155 / Rs. 53.95). The yield on the term deposit in USD would be only 2.54%

To open TCP