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By Rajkamal Rao
Go back to Finance: Core Banking in India
Update, Sep 3, 2014: Public sector banks such as State Bank of India and Union Bank of India have suspended their Global Remit services indefinitely. A banking source tells us that the US Department of the Treasury imposed strict requirements on global banks to better control and monitor US dollar remittances as part of the Dodd-Frank law. These new requirements meant that Indian institutions had to upgrade their infrastructure and controls, something that the public sector banks have not been able to do. As of now, just a few banks and private money transfer companies have complied with the new restrictions and are operational. Remit2India and Zoom.com are examples of such companies.
Most Indian banks offer an inward remittance service. This is usually a web based application that allows returnees to send foreign currency to their Indian bank accounts - all with a few clicks. For example, the SBI Global Remit website says that money transfers are facilitated through a secure channel and can be tracked through every stage of the transaction.
Returnees are already familiar with how to set up linkages to external bank accounts from their bank accounts when both accounts are based abroad. For example, a depositor who has an account with Bank of America can easily set up an external linkage with his account with Citibank. Once the links are established, funds can be transferred from the depositor’s Bank of America account to the depositor’s Citibank account. Returnees may recall that this set up is all performed online. As part of the validation process, Citibank would make a small deposit and withdrawal (usually of value under $1) - and alert the depositor to confirm these transactions by logging into his Bank of America account. After the exact amounts of the transaction are keyed in to the Citibank validation site, the two accounts are forever linked.
Setting up global remit accounts with an Indian bank works in the exact same manner. The India bank will make a trial deposit and withdrawal with the returnee’s western bank account. Once these transactions are confirmed, a secure link is established between the western and Indian bank account. The returnee simply logs in to the India bank site and directs it to transfer the desired amount electronically from the western bank account. The fee for such a transfer is minimal if not free. The amount is deposited into the India bank account approximately 5 business days after the transaction is initiated.
There are caveats. First, this online money transfer service is meant for individual remittances only. Second, most banks limit transfers to $10,000 each calendar month. Finally, global remittances don’t always get you the best exchange rate. A major Indian bank charges a foreign exchange commission fee of 0.3% plus a flat fee of INR 85 for each lakh of rupees transferred. So, for a 5 lakh INR transaction, the fees would amount to INR 1,925. And the foreign exchange rate is not attractive to begin with.
Go back to Finance: Core Banking in India
Update, Sep 3, 2014: Public sector banks such as State Bank of India and Union Bank of India have suspended their Global Remit services indefinitely. A banking source tells us that the US Department of the Treasury imposed strict requirements on global banks to better control and monitor US dollar remittances as part of the Dodd-Frank law. These new requirements meant that Indian institutions had to upgrade their infrastructure and controls, something that the public sector banks have not been able to do. As of now, just a few banks and private money transfer companies have complied with the new restrictions and are operational. Remit2India and Zoom.com are examples of such companies.
Most Indian banks offer an inward remittance service. This is usually a web based application that allows returnees to send foreign currency to their Indian bank accounts - all with a few clicks. For example, the SBI Global Remit website says that money transfers are facilitated through a secure channel and can be tracked through every stage of the transaction.
Returnees are already familiar with how to set up linkages to external bank accounts from their bank accounts when both accounts are based abroad. For example, a depositor who has an account with Bank of America can easily set up an external linkage with his account with Citibank. Once the links are established, funds can be transferred from the depositor’s Bank of America account to the depositor’s Citibank account. Returnees may recall that this set up is all performed online. As part of the validation process, Citibank would make a small deposit and withdrawal (usually of value under $1) - and alert the depositor to confirm these transactions by logging into his Bank of America account. After the exact amounts of the transaction are keyed in to the Citibank validation site, the two accounts are forever linked.
Setting up global remit accounts with an Indian bank works in the exact same manner. The India bank will make a trial deposit and withdrawal with the returnee’s western bank account. Once these transactions are confirmed, a secure link is established between the western and Indian bank account. The returnee simply logs in to the India bank site and directs it to transfer the desired amount electronically from the western bank account. The fee for such a transfer is minimal if not free. The amount is deposited into the India bank account approximately 5 business days after the transaction is initiated.
There are caveats. First, this online money transfer service is meant for individual remittances only. Second, most banks limit transfers to $10,000 each calendar month. Finally, global remittances don’t always get you the best exchange rate. A major Indian bank charges a foreign exchange commission fee of 0.3% plus a flat fee of INR 85 for each lakh of rupees transferred. So, for a 5 lakh INR transaction, the fees would amount to INR 1,925. And the foreign exchange rate is not attractive to begin with.
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