cross border remittances

8/2/2019 Cross Border Remittances

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Cross Border Remittances

Supriyo Bhattacharjee

AGM

College of Agricultural Banking(CAB)


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Remittances as a paymentsystem issue

Remittance services are part of thebroader retail payment systems -both domestic and cross-border

Remittances are cross-border retailpayments with particular accessrequirements (on both the demand

and supply sides)

An efficient domestic paymentsystem infrastructure is key to

reduce costs of remittance services,


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Remittances as a paymentsystem issue

An efficient domestic paymentsystem infrastructure is key toreduce costs of remittance services,

especially in receiving countries

Payment system oversight can helpto enhance transparency andimprove efficiency in the retailpayment sector


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Other drivers

Remittances are part of anindividuals access to financialservices

A good remittance product improvesvalue to the user in the short termand access to other financial

products in the long term A good remittance product increases

competition and could movetransactions to the formal sector


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Characteristics of CrossBorder Remittances

Typically by migrant workers to theirfamilies. Especially from developedto developing countries

Person-to person, low value i.e. notcommercial or wholesale

Recurrent but typically made byindividual transfers (e.g. not bystanding order)

Typically credit transfers


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Channels of Remittances

Bulk of inward remittances throughbanking channel

Other schemes :

Money Transfer Service Scheme (MTSS)

Rupee Drawing Arrangements (RDA)

Indo-Nepal Remittance Facility scheme


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Money Transfer Service Scheme(MTSS)

Quick and easy way of transferringpersonal remittances from abroad tobeneficiaries in India

Only personal remittances such as

remittances towards familymaintenance and remittancesfavouring foreign tourists visitingIndia are permissible


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Money Transfer Service Scheme(MTSS)

The Indian agent has to be an

Authorised Dealer,

Full Fledged Money Changer registered Non-Banking Financial

Company

IATA approved Travel agents ( havingmin. net worth of Rs.25 lakhs )

Specific RBI approval to enter into


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Money Transfer ServiceScheme (MTSS)

The agent is allowed to open aspecial rupee account with an ADthrough which all the remittances

disbursed under the scheme, are tobe routed

The Indian agent pays the

beneficiaries first, on instructionsfrom the overseas principal

He is reimbursed the amount and his

commission, by the overseas


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Criteria for selection ofOverseas Principal

The principal should be a registeredentity licensed by the CentralBank/Government or any other

regulatory authority for carrying onMoney Transfer Activities

Should be registered with the

trade/Industry bodies. Should have a good rating from one

of the reputed credit rating agencies.

Should submit confidential reports


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Collateral

Collateral equivalent to 3 days'average drawings or USD 50,000whichever is higher, may be kept by

the overseas principal with thedesignated bank in India.

The minimum amount of USD 50,000shall be kept as a foreign currencydeposit while the balance amount

may be kept in the form of a Bank


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Other conditions

Donations/contributions to charitableinstitutions/Trusts shall not beremitted through this arrangement

A cap of USD 2500 has been placedon individual transaction under thescheme.

Amounts up to Rs.50,000/- may be


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Other conditions

Only 12 remittances can be receivedby a single individual during a year.

In exceptional circumstances, wherethe beneficiary is a foreign tourist,higher amounts may be disbursed incash. Full record of such transactionsshould be kept on record for scrutinyby the auditors/inspector.


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COVERAGE

At end-April 2008, there were 26Indian agents and 11 OverseasPrincipals under the MTSS


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Rupee DrawingArrangements (RDA)

Under the RDAs Scheme, Category-IADs are permitted by the ReserveBank to open vostro accounts of

Exchange Houses of the Gulfcountries, Hong Kong and Singapore

The purpose is to channelise cross-border inward remittances into India


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Types of RDAs

DAs fall into three categories, viz.,

Designated Depository Agency (DDA),

non-DDA Speed Remittances.

Separate vostro accounts in Indian

rupees are required to be opened bythe Exchange Houses for each ofthese arrangements

No cash payments are made under


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Designated DepositoryAgency (DDA)

The Exchange house issues rupeedrafts to the beneficiary

At the end of each day, the Exchangehouse arrives at the total drawingsand deposits their daily collectionson the next working day in the DDAaccount


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The DDA account is a designatedaccount opened in the name of thedrawee bank by the Exchange House

with a bank acceptable to the draweebank at a centre mutually agreedupon

Auditors are appointed by the bankto ensure that daily drawings aredeposited by the Exchange House in

the DDA account on the next working


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Designated DepositoryAgency

The funds so deposited aretransferred to the nostro account ofthe bank within the float period

Interest earned on the funds till thedate of transfer to the nostro accountaccrues to the Exchange House

No collateral security is to be placedby the Exchange House under thiskind of arrangement in the normal

course.


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By April 2008, 39 banks and 69Exchange Houses were having tie-ups under RDA.

Out of the 69 Exchange Houses, 66were incorporated in Gulf countries,one in Hong Kong and two inSingapore


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Speed Remittance

the Exchange House sendsinstructions electronically to the bankwith complete details of the

beneficiary

Funds their rupee account throughthe banks nostro account well inadvance before issuing paymentinstructions


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Speed Remittance

No payments are made unless clearfunds are available in the account

A collateral deposit equivalent to 15

days drawings is prescribed foroperation of this arrangement.


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REMITTANCE SCHEMES


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Indo-Nepal RemittanceFacility scheme

Cross-border one-way remittancefacility scheme facilitating remittancefrom India to Nepal

Remitter can transfer funds up to INR50,000 from any of the NEFTbranches to Nepal

The beneficiary would receive funds


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Remitter need not have an accountwith the bank

Even a walk-in customer can deposit

cash up to Rs.50,000 and remit it tothe beneficiary


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Credit goes to Beneficiarys bankaccount in Nepal

If the beneficiary resides in area notserviced by a bank branch, Nepal SBILtd. has tied up with a moneytransfer company in Nepal whowould make arrangements fordelivery of cash to the beneficiary.


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Documents/Identification tobe produced by Remitter

If the remitting customer ismaintaining an account there is nofurther need for additional

identification

Otherwise, the remitter has toproduce proof of identificationdocument like Passport /PAN / DrivingLicense Tele hone Bill certificate of


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Transaction flow Remittances can be originated from

any of the NEFT enabled branches inIndia (Transaction code: 51)

The transactions would flow to thedesignated branch of State Bank ofIndia

The branch will consolidate all suchremittance information receivedduring the day

At the end of the day the remittanceinformation would et assed on to


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Transaction flow

Nepal SBI would make arrangementsfor either

credit to the bank account or

disburse the funds to the beneficiarythrough their authorised money transferagent.

If the beneficiarys account detailsare available, Nepal SBI would makearrangements for credit of the

account.


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Transaction flow In other cases , Beneficiary has to get in

touch with the outlet of the Money Transferagency, after getting the Unique TransactionReference (UTR) number from the remitter

Has to produce details of the remitter and aphoto identity document, (generallycitizenship certificate) to prove his / her

identity

If the beneficiary does not approach the

money transfer agency even up to one


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Charges Originating bank Maximum Rs 5/-

per transaction aligned with NEFT

State Bank of India Rs 20/- pertransaction. SBI would share thisRs.20/- with NSBL at Rs.10 each.NSBL would not charge any

additional amount for crediting thebeneficiary, if he maintains anaccount with it.


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Other conditions

Any remitter is allowed to remitmaximum of 12 remittances in a yearunder this Scheme

In case the funds are not delivered tothe beneficiary :

The amount of remittance will flow backto the originating branch through NEFT

the bank to communicate to theremitter about the return of the


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Other conditions

In case of cash remittance :

Remitter has to produce some evidenceas a proof of remittance like the

counterfoil of the remittance applicationform and receive it

In case of remittance from account : credit will flow to the concerned

account.


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THANK YOU