USD to INR Conversion: Why the Rate You See Is Not the Rate You Get

Google shows you that 1 USD = 84 INR (approximately). You go to your bank to wire $1,000 to India and receive 81,500 INR instead of the expected 84,000 INR. You just lost $30 to the spread, and another $25-45 in wire fees. Understanding why requires understanding how exchange rates actually work. The mid-market rate vs. the quoted rate The rate you see on Google, XE, or any financial news site is the mid-market rate (also called the interbank rate). It is the midpoint between the buy and sell prices that banks trade at with each other. No bank will sell you currency at this rate because there is no margin for them. When you buy INR with USD, you get the "sell" rate, which is always worse than the mid-market rate. When you sell INR for USD, you get the "buy" rate, which is also worse than the mid-market rate. The difference between these two rates is the spread, and it is how currency exchange services make money. A typical bank spread for USD/INR is 2-3%. On a $5,000 transfer, that is