This is also called as foreign currency exchange or money exchange. It is the process of changing one currency into another through a financial institution, bank or an agent. The converting agency earns either through adjusting or commission. This is the most preferred method of getting local currency in cash, by travellers in any foreign country. There are other methods like travellers cheque and/ or loading the foreign currency into a pre-paid card, which travellers use these days.
While exchanging the currency, two terms need to be understood, buying re and selling rate. Buying rate is the rate at which the bank buys the currency from the customer. Selling rate is the rate at which the bank sells the currency to the customer. Selling rate is always higher than the buying rate. The rates quoted by the bank/ financial institution/ agent is close to the spot rate of the day, however, the exchange adjusts the rate further so that there is a profit on the transaction.
While initiating a currency exchange, you will have to find agency which can give you the best rate in the market. While buying from the institution, which is giving you the most foreign currency for the same amount of domestic currency should be selected and while selling, choose the one which is giving you maximum domestic currency, in lieu of the foreign currency. Word of caution, do not fall prey to unauthorised agents selling/ buying foreign currencies, always buy/ see through authorised channels.
In India, if the total value of selling the foreign currency is less than Rs. 50,000/-, the transaction can be done over the counter and the transaction is done in cash. For values more than Rs. 50,000/- you need to initiate the process through banking channels i.e, account transfer/ cheque.