Have you ever dreamt of trading on the New York Stock Exchange? Or how about investing in a mutual fund in Australia?

Investing in the global markets is now a reality, ever since the Reserve Bank of India announced last week that resident Indians can now remit up to $25,000 per calender year for any purpose without prior approval.

So how will this help you? Simply put, investing in global markets or international investment tools like mutual funds and fixed deposits will help diversify risks.

"Earlier resident Indians were restricting their asset allocation to largely India-based products. Now risk can be diversified by geography or currency," says Amit Sah, marketing director, retail bank - global consumer group, Citibank India.

First off the block are three banks -- Citibank, ICICI and Bank of Baroda -- which have launched their vanilla deposit products, while HSBC will be announcing its products shortly.

Inevitably, the first schemes are probably aimed at testing the water. And be warned that they are high-risk currency plays.

Interest rates in India are higher than in most developed countries so the only way to make money is if the rupee depreciates against the currency you've invested in.

Citibank's Foreign Currency Deposit product will be held at its Singapore branch and the bank is currently offering deposits in four currencies --the US dollar, Euro, UK pound and the Australian dollar.

The minimum investment is $1,000 (or equivalent) with incremental deposits in units of $1,000 (or equivalent) up to the maximum of $ 25,000.

The scheme is available to any resident Indian. However, corporates, partnership firms, trusts and those under the Hindu Undivided Family cannot invest through this route.

The first step is to open an account with Citibank and order an outward remittance of the amount to be invested.

The tenure offered ranges from one month to five years but Citibank is currently offering a special interest rate for two month deposits made before March 1, 2004 for account holders.

Under this, the bank is offering 6.25 per cent on the Australian dollar, 4.75 per cent on pounds sterling, 3 per cent on Euro deposits and 2 per cent on the US dollar.

If you chose a shorter or a longer deposit period the special offer rates do not apply. The interest rate then, for say a one-month US dollar deposit currently is 0.5 per cent and 2.25 per cent for three years.

ICICI Bank's international deposits are also through its Singapore branch. Besides the US dollar, pound sterling, euro and Australian dollar, ICICI Bank is also offering deposits in Swiss francs.

Says Bhargav Dasgupta, senior general manager & head - international banking group, ICICI Bank, "A customer can hold his money in a currency based on his view on the movement of that currency against the Indian rupee."

While ICICI Bank also offers a tenure ranging from one month to five years, the minimum investible amount is the equivalent of $2,500.

The bank is offering a special rate for three-month deposits which is valid till February 29, and is five basis points higher than the rates offered by Citibank.

For instance, the interest rate on a three-month Australian dollar deposit is 6.3 per cent. However, for a shorter tenure of one month the interest rate will be 5.27 per cent on the Australian dollar.

You don't need to open an ICICI Bank account to send money abroad. All you have to do is instruct your bank to remit the amount and it will be credited to ICICI's Singapore branch by wire transfer.

Bank of Baroda's foreign currency deposit product comes with a minimum investible amount of $10,000.

The special introductory offer is 100 basis points over three months' LIBOR (the London Interbank Offered Rate Index is an average of the interest rates that major international banks charge each other to borrow US dollars in the London money market) for a six months deposit tenure. This offer is valid till March 31.

Since the deposit has to be made in a calender year, after maturity you have the option of either re-investing the money in a deposit or bringing the money back.

In the latter case, your return in Indian rupees will be determined on the value of the foreign currency at the time of maturity. Both Citibank and BOB products have no cover against foreign exchange risks.

However, ICICI is offering a safety net. The bank is offering a hedging facility so that customers can open a forward contract at the time of opening the account. The forward contract allows investors to fix the conversion rate at the time of maturity.

For instance, if the euro-rupee exchange rate is Rs 58.072 today, a depositor could base his view on the belief that the 11 per cent appreciation seen in this currency since November last year will continue.

He could book a forward contract pegged at Rs 59 for his deposit maturing two months hence. If at maturity the conversion rate is Rs 58.5, he would gain as the bank will have to pay him the conversion rate booked at 59.

However, if the conversion rate at maturity shoots up to 60, then he loses since the bank will convert the deposit back into rupees at 59.

The deposits are the first step and eventually banks will be offering capital guaranteed products. Meanwhile, investors are open to the risks that global markets present.

If for instance, you have made a deposit in US dollars and the rupee appreciates in value, you will lose if you convert the money back to rupees at maturity. You will, however, gain if the rupee depreciates.

So if you invest $1,000 (Rs 45,270) for two months in the Citibank account, then the interest rate works out to 0.33 per cent of the annualised two per cent or $3.33. Two months later you will get $1,003.33 or Rs 45,420.7491.

Assuming the rupee depreciates by 50 paise, your return will translate to Rs 45,922.4141. But if the rupee appreciates by 50 paise, your return will be Rs 44,919.0841.

"Your chances depend entirely on the volatility of the markets and the view you take of it," says Dasgupta.

On the whole, it is better to take a shorter term view of the currency you are choosing to invest in, since in the long run it is difficult to predict currency fluctuation.