I borrowed a large sum of money from a relative. The money got sent to my account in Sterling and then transferred from Sterling to shekels. (They preferred it should be transferred through my account as opposed to their own.) When I repay the loan, the relative would prefer shekels. How much should I repay, the amount of shekels according to the current exchange rate based on the amount of Sterling originally transferred, or the amount of shekels we originally received based on that original exchange rate? Thank you.
If nothing was made up in advance, the loan is a Sterling loan and not a shekel loan.
Therefore, if you pay back in shekels you would have to pay back according to the exchange rate at the time of repayment.
Because of the possible ribbis pitfall of a Sterling loan in Israel, it is preferable to arrange in advance that the loan is given in shekels. This means that when you receive the money in Sterling you are in fact an envoy for the creditor to change the money into shekels, and only then does the loan commence.
In this case, the repayment is made in shekels based on the amount of shekels received at the time of exchange.