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Exchange rates play an important factor in international fund transfers
Transferring money from one country to another is an oft-utilised service in today’s globalised banking scenario. Earlier, the only mode of transfer was through the issuance of cheques and drafts. Then, post offices through money orders helped in transferring money. Over the past couple of decades, more sophisticated and efficient systems of money remittance facilities have been introduced to transfer funds to and from India.
Wire transfer refers to the electronic funds of transfer across the world from one entity to another. There are two forms of money transfers - inward remittances, which allow transfer of funds from an entity in a foreign country into India, and outward remittances, which refer to the transfer of funds from India to an entity in a foreign country.
While both inward as well as outward remittances should comply with regulatory requirements, sending money out of India is under greater scrutiny by the government. It is therefore recommended to always follow the guidelines and requirements in this regard, in order to avoid awkward situations.
A wire transfer is usually done from one bank to another bank. It can also be done by depositing cash at the designated office, which is then converted to transferrable funds and transferred to the receiver.
There are different methods of wire transfer. Let’s look at some of the most popular means of wire transfer:
Bank Wire Transfer
This is the most popular mode of wire transfer. Accordingly, the party that wishes to transfer funds approaches his local bank and gives the order to transfer a certain amount to the entity in India. Details such as the currency of transfer, name of correspondent bank, the international bank account number and the SWIFT Code are given. These details help in identifying where the money should be remitted.
The bank sending the funds then sends a message to the receiving bank or a correspondent bank through a secure system. The settlement instructions are also included. Thereafter the transfer of funds takes place between the two banks, ultimately resulting in credit to the recipient’s account. This mode of wire transfer is the fastest and most secure system of transferring funds internationally.
Several banks in India offer this service and they operate by having a correspondent bank through which money is transferred. This usually takes 1-2 working days. Banks also specify the currencies in which they operate, which needs to be verified beforehand. Banks collect a fee for this service, which is required to be paid by the sender. This mode of transfer works well if you have given the right instructions in your wire transfer form. An incorrect instruction can not only result in delay, but is also risky.
The SWIFT code is a critical part of the wire transfer instruction. SWIFT (Society for Worldwide Interbank Financial Telecommunication), is a network to send and receive information about international financial transactions. SWIFT code is a unique identification code, which is in a standard format of the Bank Identifier Codes (BIC) and is used to exchange messages between banks, especially in the case of international wire transfers.
Global Payment Service Providers
Another mode of transferring funds internationally is through global payment service providers like Western Union and Moneygram. They have a wide network of agents across the globe in various locations. Accordingly, you can transfer funds either online or through the agent.
To send the money through the service provider’s agent, you will need to provide your identification, the receiver’s location details and pay the cash after filling the form. Remember to save the receipt provided. The receiver can collect the funds from any of the service provider’s agents in his location, by filling in the form with the details and providing his identification card. This is the most suitable mode of transfer if the recipient does not have a bank account.
Although the sender and receiver do not directly use wire transfer, the payment service providers use wire transfer to send and receive the funds.
There are other third party applications like Paypal or Payza and agencies like OutRemit which allow transfer of funds. However, the use of such modes is limited to specific receivers.
Transferring funds through a bank wire transfer entails payment of fees and charges to the intermediaries involved. A bank wire transfer using the SWIFT code is more expensive as compared to the traditional mode of transfer using cheques and drafts. On the other hand, using global payment service providers can be more expensive that a bank wire transfer due to the benefits offered such as better reach and ability to transfer and receive funds without a bank account.
Exchange rates play an important factor in international fund transfers. Therefore, you must research on the medium that offers you not just the convenience and speed of transfer, but also a competitive exchange rate.
Illustration: Uttam Ghosh/Rediff.com
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