Sunday, July 27, 2008

Sail through easily - Money & You (The Sunday ET)

ASHISH Arora’s son, who recently joined a college in the United States, called up late one night requesting him to send money to his account to meet emergency expenses. Next morning, Arora rushed to the nearest bank which provides transfer services, only to be handed a few forms and asked for documents that he hadn’t even thought of carrying. To make sure that next time you don’t make the same mistake, SundayET lists out steps which you can follow to sail through the outward and inwards remittances process.

APPROACH THE RIGHT PLACE
Outward remittances or the process of sending money abroad is governed by many regulations. In India, outward remittances are made mainly through banks. At the outset, you need to remember that you just cannot trust any individual or a financial firm with the responsibility of sending your money. Experts recommend that you should always try to choose a bank with an international footprint, which will make your job easier.

CHOOSE MODE OF TRANSFER
The next step is to choose the mode of transfer. One option is to get a Foreign Currency Demand Draft (FCDD). This draft will be denominated in foreign currency and should be drawn in favour of the recipient/ beneficiary. The beneficiary does not necessarily need to have an account with the same bank. The other option is to send money via wire transfer. Do not be puzzled if the bank official uses the word SWIFT instead of wire transfer. “A wire transfer could be done via SWIFT (Society for Worldwide Interbank Financial Telecommunications), which is a secure and standardised system by which banks are able to correspond with each other. While the charges for a wire transfer are higher, it scores over FCCD in terms of time as the transfer can be made within 24 hours,” says Sudip Bandyopadhyay, CEO, Reliance Money. A demand draft, on the other hand, needs to be sent abroad physically and takes time to get cleared.

THINGS TO BE DONE
You primarily need to fill a remittance request form where the purpose behind sending the money needs to be indicated clearly. If the amount you are sending is large, you may also have to indicate the source of money. You are also required to fill Form A2 and be in possession of a certificate from a chartered accountant. “There is a limit to the amount that can be sent. RBI has placed an annual cap of $200,000 per person per year,” says Girish Nayak, head (NRI services), ICICI Bank. While the forex rate is mentioned to the customer before the transaction, you should cross-check the same with the forex rate card of the bank. “While you may have sent the money keeping a certain exchange rate in mind, the actual exchange rate applicable will be the one on the day when the beneficiary receives the money,” informs Bandyopadhyay.

CHECK THE REGULATIONS
Remittances for the purpose of gambling, margin trading and so on are not allowed by the RBI. “Hence, if your remittance is not for a common purpose like education or family maintenance, check if it is allowed under the FEMA,” warns Nayak. Experts caution that you should be wary of the regulations of the country to which you are sending your money to. Otherwise, you can get yourself in trouble and get caught under an AML (anti-money laundering) filter or any such filter. This can risk the chance of your transaction being blocked or reported to the regulator.

GO ONLINE
In case of inward remittances (sending money to India), in addition to bank channels and wires, foreign currency cheques can be issued which can be taken to a branch in India for collection. Rupee cheques are also issued in the Gulf countries. Of late, many people are using the online money transfer service offered by banks. Now banks even offer a shorter turnaround time of one day for sending money to India. This is in contrast to the general turnaround time of three to five days. If you are looking for a really time-efficient method, you can rely on money transfer agencies which can reduce the time lag to about five minutes.

PROOF OF IDENTITY
If you are collecting the money in cash, you need to carry a proof of identity and proof of residence such as your passport, voter’s ID or driving licence. A money transfer system generally gives the sender a code, which needs to be passed on to the recipient before he gets the money. “Charges such as administrative costs, transfer fees and agent commission are taken care by the sender and depend on the amount transferred, the mode of transfer and the country,” explains a Western Union official in India.

CHECK OUT
You must keep in mind that money transfer systems generally have a limit to the amount that you can send per transaction and a certain number of transactions are only permitted in a year. There are also limitations set by the country from where you are sending the money from. “Moreover, if the money is being sent for investment purposes, you need to make sure that these are in line with the norms governing NRI investments,” says Nayak. “If the payment is not received by the receiver with 45 days from the date of sending money, the transaction will not be conducted and the money will be refunded to the sender after deducting the administrative cost,” warns Chandok.

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