International money transfer has changed dramatically over the years. Foreign remittance is crucial nowadays because of the increasing number of expatriates the world over. As professionals working abroad send money to India, they also contribute to the country’s GDP.
Today, people can send money to India from the USA in no time. Money transfer services like RemitMoney allow foreign remittance without any headaches.
What is foreign remittance?
Remittance means sending someone any form of payment. Foreign remittance means sending money to someone in some other country. Remittances can be personal or business. Personal remittance is money sent back home for any need in the family, while business remittance is money sent abroad to vendors for goods and services purchased.
Remittances can also be inward or outward. Outward remittance is money sent by a person or an organization to a person or an organization in another country. Inward remittance is the receipt of money sent via outward remittance.
Here’s an example: A trader in India is paying his supplier in Vietnam. The Indian trader is doing outward remittance. The Vietnamese trader receiving money is inward remittance.
Methods of foreign remittance
Today, there are many easy ways of sending money internationally. Let us have a look at the various ways of transferring money. This will give us a better idea of how Foreign Remittances are made.
Wire transfer (SWIFT)
Wire transfers are also called transfers using the SWIFT network. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. It is one of the fastest and safest media for foreign remittance. To send money to India, you need to provide your local bank with the SWIFT number of your bank in India. They will remit the required amount within a couple of working days. The cost associated with SWIFT transfers is not standardized. It varies from bank to bank.
Banks in various countries have tie-ups with each other. You have to identify the correspondent bank of your local bank in India. Once you give them the transfer request, they’ll transfer the money. The processing depends on the location and the institution.
Online money transfer providers
Online money transfer agencies provide platforms for quick transfers of large amounts at better exchange rates. An online platform like Axis RemitMoney enables the sender to remit money across various locations online.
Foreign currency cheques
Transferring foreign currency cheques is a very safe option. The sender draws the local cheque and sends it to India by courier. The cheque is then deposited into the bank by the beneficiary, along with a letter of indemnity and deposit slip. The entire process takes around 20 days. Hence, this is a convenient method, albeit time-consuming.
Foreign exchange broker
Foreign exchange (forex) companies offer various methods of money transfer. Services like free transfers, online money transfers, better exchange rates, 24-hour support, and online tools make them an attractive option. You can transfer the money to your broker’s account, which then sends it abroad for you.
But the rates offered by forex companies vary. Forex providers buy their currency from the private inter-bank market and sell it after adding a profit margin.
Exchange rate strategies
Setting a long-term exchange rate
If you plan to transfer large amounts of money over a period of time in the future, you can set a long-term exchange rate. If you enter such a contract with your broker, then the current market rate is locked in for up to two years.
Setting minimum and maximum exchange rates
Setting a lower and a higher limit of exchange rates is another way of maximizing exchange value. This means you are not willing to trade or send your money below a certain rate.
Finally, do your homework.
The money you receive after the exchange is largely affected by the exchange rates, particularly in case of large transfers. Political, social, economic, and environmental changes can also affect exchange rates. So timing the transfer is extremely important. Besides, you need also to consider the fees charged by the service provider. So, do your research before going ahead with the money transfer.