Inward remittance: Meaning and step by step guide

In today’s global world, it’s pretty common for people to move abroad to live and work. Many expats working overseas want to send money home from time to time - known as making remittances - to family and loved ones.

The remittance industry is big business - and India is one of the countries which receives the most money from abroad - thanks to the large number of Indian citizens who choose to live and work overseas and remit money back home as a foreign inward remittance.

If you’re expecting to receive a remittance payment from abroad, your sender will have several options, including sending money via the traditional banking system with a demand draft (DD), as a telegraphic transfer (T/T) or by using a specialist money transfer service. Both you and the person arranging the remittance will need to know a little about the process in general, but also the specific regulations such as the Foreign Exchange Management Act (FEMA), which apply to inward remittances to India.

Here’s our handy guide to all you need to know about making and receiving foreign inward remittances to India.

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Now, back to what you came here to read.

What is an inward remittance? Is it different than a foreign inward remittance?

The term inward remittance can simply imply that money was transferred into an account either domestically or internationally. When you hear the term foreign inward remittance, then this is referring to money sent into an account by someone from abroad.1 Some remittances into India are governed by the Foreign Exchange Management Act - or FEMA for short.

You might also hear about something called a Foreign Inward Remittance Certificate - shortened to FIRC.2 This is a document issued by banks as proof of a transfer of funds from overseas to India. It’s used as evidence of money flowing in and out of the country and helps make sure that funds come from legitimate sources, and don’t have links to crime or terrorism. Find out all you need to know about the requirements for the process of getting a FIRC.

Inward remittance RBI guidelines

The Reserve Bank of India (RBI) has rules which govern the flow of money in and out of India, both in the form of personal remittances and business transactions. When it comes to inward remittances, the RBI suggests 2 different routes which are available, known as the Rupee Drawing Arrangement (RDA) and the Money Transfer Service Scheme (MTSS).3

The 2 routes are slightly different from the perspective of process, and also have slightly different rules. Under the RDA route, banks in India can work with accredited financial institutions abroad to allow cross-border transfers directly into individual personal bank accounts in India. There’s no cap to the amount of money that can be transferred in this way for personal transactions - although there’s a limit applied to business transfers.3

MTSS remittances are arranged through reputable money transfer services outside of India, who work with authorised agents within India to facilitate remittances for personal purposes. This route can’t be used for trade or charity donations, for example.3

MTSS remittances are capped at USD2,500 per transfer, and a maximum of 30 transfers a calendar year can be received by a single recipient.3

What are the fees for an inward remittance?

Depending on how the remittance is structured, you as the recipient might have a fee to pay in order to access the money, on top of any charges already paid by the person sending the remittance. This charge will be deducted from the amount that was sent before it reaches your bank account.

Unfortunately, as you’ll see from the table below, banks often can’t specify exactly what charges will be deducted from remittances if they’re sent using the SWIFT payment system. That’s because SWIFT payments are routed via a number of correspondent banks before reaching the recipient. Each correspondent bank can take a fee for their service, depending on the arrangement they have with the sending and receiving bank.

As well as fees, it’s worth looking at the exchange rate used on foreign inward remittances. It’s quite common for banks to add a markup to the real exchange rate - sometimes known as a currency spread. This means you don’t get as much in your account at the end of the transfer - but we will talk more about the importance of exchange rates in a moment.

Here’s what some major Indian banks say about their fees for receiving foreign inward remittances:

Bank or Money Transfer Service	Fee applied
Transferwise	Transfers are sent out via a local banking partner so no fee would be charged to the recipient to receive the transfer.
Axis Bank	The fee applied varies depending on the account type - expect to pay Rs250 for a resident account, and Rs300 for a current account + exchange rate markup.5 Axis Bank also specifies that other banks in the payment chain may add their own charges on top of this.
SBI	SBI Express Worldwide RS250 foreign currency conversion charge, plus a service fee + exchange rate markup SBI Wire transfers/SWIFT transfers:Up to Rs100,000 - fee of 0.14% of the transfer value or up to Rs35 + exchange rate markup (whichever is higher) 6Rs100,000 - Rs1,000,000 - fee of Rs140, + 0.07 of the amount over Rs100,000 + exchange rate markup 6Above Rs1,000,000 - fee of Rs770 + 0.014% of transfer value up to a maximum of Rs7,000 + exchange rate markup 6
DBS	Fees range from Rs25 - Rs200, depending on account type + exchange rate markup DBS also note that there may be other charges depending on the type of transfer used 7

Pay attention to exchange rates

One of the most important things, influencing how much you’ll end up with at the end of an inward remittance, is the exchange rate applied by the bank or money transfer service carrying out the transfer.

Banks and money transfer services can mark up the exchange rate, to make sure they make a profit. To check the deal you’re getting is fair, compare the rate on offer with the real, mid-market exchange rate - that you might find if you googled your currency pairing.

If you don’t think you’re getting a good deal from your bank, then try an alternative provider, like Transferwise. Wise only ever use the mid-market rate - the same one you’d find on Google - so the person sending the remittance knows they’re getting the best rate out there and you, as the recipient, get more in your pocket, too.

How do I receive an inward remittance?

If you want to receive an inward remittance, you’ll need to get the sender to set up the payment through their local bank, or with a specialist provider such as Wise.

Although traditional banks are familiar, they often don’t offer a great deal when it comes to international money transfers. That’s why it pays to check out the alternative routes available for making an inward remittance to India. Wise, for example, uses smart new technology to bypass the high fees levied by traditional banks for international transfers, which could mean that you end up with more in your pocket.

Information you’ll need to provide to the sender/remitter

If you’re expecting a remittance payment, you’ll have to give the sender some information to make sure the money arrives safely in your account. Each bank will have their own requirements - but you can expect to be asked for the following:

• Your personal details including full name and address
• Your bank name, address and account number
• The correct SWIFT code for your bank
• The purpose of the remittance
• Correspondent bank details - if these are needed you can find them online on your bank’s website or by contacting your bank directly

Because there are variations in the requirements, it’s worth asking the sender to check the exact information required by their bank before you start the transaction.

Looking for more information on remittances?

If you’ve recently moved overseas, and are looking for the most cost-effective, and safe way to send money back home, then it pays to do your research. By understanding a bit more about the remittance process and the options you have available to you, you can make sure you’re getting a fair deal

Here are some resources to help get you started:

• Overview of the World Remittance Industry
• Remittance
• Foreign Remittance (and US tax implications)
• Outward Remittance
• Remittance Address
• Remittance Advice
• FIRC (Foreign Inward Remittance Certificates)
• FEMA & RBI guidelines on remittances
• LRS (Liberalised Remittance Scheme)
• How to make an outward remittance from India

You have a number of options if you want to make a foreign inward remittance to India. Of course, you can use a traditional bank to make the payment via a wire transfer or telegraphic transfer - but you might find that you’re better off using a specialist service like Wise. Whichever route you choose, make sure you check out the exchange rate used, as well as any fees and charges, to make sure as much of your money as possible makes it to your recipient.

Sources:

1. https://www.quora.com/What-is-inward-remittance-when-and-why-is-it-used-Is-a-certificate-or-document-issued-for-past-inward-remittances (May 17 2018)
2. https://www.icicibank.com/business-banking/faq/trade-service/foreign-inward-remittance-certificate.page (May 17 2018)
3. https://rbi.org.in/scripts/FAQView.aspx?Id=112 (May 17 2018)
4. http://www.unionbankofindia.co.in/pdf/HKB_18_ManpowerPolicy%20InwardRemittances.pdf (May 17 2018)
5. https://www.axisbank.com/docs/default-source/default-document-library/schedule-of-chargeseaee9db9be576bf08df9ff00000b8c1c.pdf?sfvrsn=abb9f655_0 (May 17 2018)
6. https://www.onlinesbi.com/nri/remittances/sbinri_rem_us.html (May 17 2018)
7. https://www.dbs.com/in/personal/non-resident-deposits/accounts/remittance-services (May 17 2018)

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