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What do you do if you want to send money, be it within India or
from/to a foreign country? Apart from banks and post offices, you can approach
global payment service providers, such as MoneyGram and Western Union. You can
also choose whether you want to transfer it online or offline. Given the
plethora of options, it's easy to get confused. ET Wealth offers a guide to
point you in the right direction.
1. How to transfer
The online options
include e-transfers and power transfers (a Web-based wire transfer that
eliminates errors associated with a normal wire transfer), while the most
common offline modes are cheques and bank drafts. While there is no single option
that can be considered best, you should opt for a reputed player with
established systems in place so that you can be assured of a safe transfer.
While opting for
offline options, be sure to ask your bank to list its correspondent banks. This
becomes especially important if you are remitting money from abroad. Take a
look at the foreign banks your financial institution has partnered with to make
the money transfer smooth. For instance, Federal Bank has tied up with the Arab
National Bank of Saudi Arabia and Doha Bank of Qatar. In addition, several
Private Exchange Houses (PEHs) have come up in the Gulf region to facilitate
remittances to India, and several Indian banks have signed up rupee drawing
arrangements with them.
On the other hand,
when it comes to sending money abroad, not all online options fit the bill due
to RBI guidelines. For instance, the Money Transfer Service Scheme (MTSS) is
limited to inward personal remittances (to India).
2. Speed of disbursement
If you are in a hurry
to transfer money, your only viable option is an online one, such as wire
transfer and the National Electronic Funds Transfer (NEFT) system. This
typically takes 24-96 hours, but can also take place in real time. For
instance, you can instantly move money through 'direct transfer to bank
accounts'. This is operated through an arrangement with overseas correspondent
banks or via the automated clearing house facility in countries such as the US.
Of course, the offline
options take time. If a cheque is issued in a foreign currency, there can be a
delay of 7-15 days before the holder can encash it as the bank needs to verify
the deposit. Remittances made through money orders can take from three to 30
days, while transfers made through debit/credit cards are quicker, taking 1-4
days. Keep in mind that most banks and financial institutions do not remit
money on public holidays.
3. Coverage offered
Not all money transfer
options are available at every location. While you can avail of the offline
route at all bank branches, the online ones are mostly limited to urban areas.
If you are remitting money from abroad, you will also have to check if the
currency you want to transfer is covered by the bank; the US dollar, euro and
pound sterling are generally remitted by all banks. However, remember that not
all banks allow you to route money through foreign currency cheques. A handy
option for non-resident Indians is the Foreign Currency (Non-Resident) Account
(Banks) Scheme. The currency in which the account is denominated covers all
freely convertible foreign currencies like the Australian dollar, Bahrain
dinar, deutsche mark, euros, HK dollar, Japanese yen, Kuwaiti dinar, pounds
sterling and the US dollar. This can be held jointly with relatives in India.
4. Cost of service
Before you choose a
mode of transfer, consider the damage to your wallet. It's an accepted fact
that there is an inverse relationship between the speed of transfer and the
associated cost. According to an RBI survey, SWIFT (an international wire
transfer system) is costlier vis-a-vis drafts and cheques. While the cost of
sending up to $500 from the US to India through SWIFT is less than 1-5% of the
funds transferred, the comparative rates for demand drafts/cheques is just 2%
of the remitted amount. Money transfer services like Western Union charge a
higher commission, nearly 25-30% more than banks.
This is because they
offer more specialised services—neither the sender nor receiver needs to own a
bank account, for one—and have a better reach. However, they don't generally
offer a competitive exchange rate, so rate shopping is a must before picking
any option. Also check for hidden charges such as service tax.
5. Convenience
It's not just the
speed and cost, but also convenience of transfer for both you and the recipient,
that matter. If either party is not comfortable using the Internet option, an
offline route would be better. Another factor is the amount to be transferred.
While there is no ceiling on demand drafts (cash purchases are not permitted
for over Rs 50,000), a cap of Rs 5 lakh has been imposed by some banks on NEFT
transactions, and $2,500 (Rs 1.35 lakh) is the maximum limit under the MTSS
scheme. Also make sure you ask the service provider about its refund policy and
your rights in case the money is not received within the specified period.
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