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64 billion or about 35. In addition to the simple accessibility of credit in the UAE, one of the main benefits is that interest in the UAE is lower than that of Indian banking.
Given the effects of several elements, some of which include exchange rate fluctuations, the issue is how advantageous it is for a NRI to choose a loan in the UAE and to make investments in India. In spite of cheaper and simpler credit in the UAE than India, economic experts believe that it is simpler said than done.
says if it is taken out as part of the rate cut, personal lending in India has interest levels in the 16 to 18 percent band, while in the UAE it ranges from 5 to 6 percent. "Private credit in the UAE is significantly less expensive than in India.
From a financial point of view, it makes a great deal of financial sense to borrow in the UAE and not in India. In the UAE, a loan in dollars means that there is no foreign exchange exposure for borrowing. At the same time, Indian borrowing leads to continued hedge of the exposure and foreign exchange costs," he said.
Valecha says an NRI can profit from a higher credit value and higher foreign exchanger advantages if they decide to take out a loan in the UAE and move it to India. It would be better for an NRI wishing to obtain credit for use in the UAE itself to choose credit in the UAE, as they would receive better interest margins and would not have to pay any fees for foreign currencies.
NBD, stated that the clear benefit lies in easy access to credit and lower interest rate levels. "Theoretically, it would make good economic sense to borrow in the UAE at lower interest and to invest in India in higher returning asset. Uncovered borrowings or personal credit are usually not inexpensive and secure borrowings must be provided securitiesecurity.
Here it is hard to provide plants located in India as collateral. You can make better returns in India, but you can loose if the value of your investment decreases against you. A further consideration is the tax situation in India. Whilst the overall yield may be high, the overall yield excluding tax may not be high enough to justify taking out loans in the UAE and investments in India.
Markaz, a Kuwait-based bank investing bank, said in a declaration that a higher return on bank deposit in India than in the UAE together with the lower rates of credit provided by the UAE bank could be a profitable options on writing for UAE borrowers and Indian investors.
However, in practice the foreign exchange risks come into the picture as fluctuations in foreign currencies could potentially compensate for the profits generated by fluctuations in interest levels. "Briefly, there is no free luncheon provided by the possible interest Rate differentials between the UAE and India," the explanation said, comparing with the UAE banking community, as the admission conditions for expatriates are stricter than for residents.
Interest rates provided by Indian bankers are generally higher for Indian bankers than for people living nearby, which is a less overriding reason to take out loans from Indian bankers as such. Several Indian financial institutions also have limitations, such as a compulsory domiciled competitor or a security when requesting a loan," Markaz noted.
Usman Riaz, Senior Investment Advisor, Leo Capital Advisors, says interest on personal loan interest is lower in the UAE at around 5-6 percent, while in India it is around 12-18 percent. Whereas interest on mortgages in the UAE is lower, between 3.75 and 6 percent - cutting interest rate - while interest rate fixes are even lower - between 2-3 percent.
For India, the margin is 9-12 percent. He also warns an NRI of a rise in rupees as they borrow from the UAE and invest in India. "In the UAE, the benefits of choosing a loan are lower interest costs, lower handling fees and a faster loan making procedure. Benefits for choosing a loan in India is the authorization of the loan becomes simpler to obtain since it is a local loan with recommendations and instead of immovable assets.
At the other end, the drawbacks are high interest costs, delays in approving the loan - due to the slowness of the trial or review," he added.