What Is FX Markup?

Every currency conversion has a reference rate and a rate you actually get. The reference rate is usually the mid-market rate, the midpoint between buy and sell prices in the interbank market. The rate you get is lower when you are selling foreign currency. The gap is the FX markup. It is rarely shown as a fee line. It sits inside the rate, so a payment can look free of charges while the exchange rate carries the cost. To see it, compare the rate on your bank advice with a mid-market reference for the same date and time, then express the gap as a percentage. Small percentages add up when you are paid every month.

For example, say the mid-market rate is Rs 84.00 per USD and your credit advice shows Rs 83.20. On USD 1,000 you receive Rs 83,200 instead of Rs 84,000, a gap of Rs 800, which is a markup of about 0.95 per cent. These figures are hypothetical.

• Income: The markup reduces the rupees you receive on every conversion. The cost is part of the rate and may not appear as a separate charge on the advice.
• Bank compliance: The rate used must still follow the FEMA export rules on realisation. See the Export and Import Regulations, 2026 and your bank's terms for how converted amounts are recorded.
• Hedging: Forward rates also include the bank's margin. Under paragraph 2.4(v) of RBI's Master Direction on Risk Management and Inter-Bank Dealings, a dealer offering a derivative to a retail user gives the mid-market mark or bid and ask price before the contract.
• Income tax and GST: Ask your tax adviser which rate to use when you book the invoice and the receipt. The amount credited and the booked amount can differ because of the rate used.

FX markup works by pricing the conversion away from the mid-market rate. The bank or provider quotes you a rate, and the difference from the reference rate is its margin.

1. The buyer pays in foreign currency and the funds reach your AD bank or provider.
2. The bank applies its own rate for buying that currency, often a card rate or a TT buying rate.
3. The rate sits below the mid-market rate by the bank's margin.
4. The rupee amount credited equals the foreign amount times the applied rate.
5. The gap between the mid-market amount and the credited amount is the cost of the markup.
6. The credit advice shows the rate used, which lets you calculate the markup afterwards.

You check FX markup by comparing the rate on your credit advice with a mid-market reference rate for the same date, then converting the gap into rupees and a percentage. The figures below are hypothetical.

1. Note the foreign amount received and the rupee amount credited, for example USD 2,000 and Rs 165,200.
2. Divide the rupees by the dollars to get the rate applied, here Rs 82.60.
3. Find a mid-market rate for the same date and time, for example Rs 84.00. The FBIL reference rate methodology explains how one published benchmark is built.
4. Subtract to get the gap per dollar, here Rs 1.40.
5. Divide the gap by the mid-market rate, here 1.40 / 84.00, which is about 1.67 per cent.
6. Multiply the gap by the amount to get the cost, here Rs 2,800 on USD 2,000.
7. Repeat across a few payments or providers and compare. See FX markup on export payments.

• No fee means no cost: A payment with no listed fee can still carry a markup inside the exchange rate.
• Mid-market is guaranteed: The mid-market rate is a reference. It is rarely the rate a retail customer is offered, and different sources show slightly different values.
• Fixed percentage: Markups differ by bank, currency, amount and time of day, so one quote does not represent all providers.
• Only for banks: Any party that converts currency for you, including non-bank providers, can build a margin into the rate.

• Mid-market rate: The midpoint between buy and sell prices, used as a reference for comparing quotes.
• TT buying rate: The rate a bank applies when it buys foreign currency by telegraphic transfer.
• Card rate: The standard rate a bank publishes for retail conversions.
• Forward contract: An agreement to convert at a fixed rate on a future date, priced with a margin.
• Currency hedging: Steps taken to limit the effect of exchange rate moves on future receipts.

Every rule and definition on this page is linked to its official source, checked on the dates below.

1. RBI Master Direction - Risk Management and Inter-Bank Dealings (updated as on 1 October 2026), Part A, Section I, paragraph 2.4(v) (mid-market mark for retail users) (checked 9 Oct 2026)
2. FBIL Reference Rate, Methodology Document (Version 2, 15 January 2019), Paras 1, 4.1 to 4.3 (checked 9 Oct 2026)
3. Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, Notification FEMA 23(R)/2026-RB, amended up to 22 September 2026, Regulations 4(2) and 5(1) (checked 9 Oct 2026)