Everything You Must Know About Sending Money Abroad

Confused about making an international money transfer? Don’t worry! You aren’t alone. With various services, security concerns, and unclear fees, international money transfers seem very complicated – but foreign money transfers can be super-easy if you choose the right service provider!

Here is a comprehensive guide to help you find out everything about International Money Transfers. It details the different options to Transfer money internationally, and then explain what to look out for in terms of security, costs, ease of use, speed, and more.

What are the different ways?

There are two different ways in which you can transfer money abroad. We have explained the two ways for foreign money transfers to give you a clear idea about how your money reaches the recipient:

Foreign Currency Demand Draft

Foreign Currency Demand Draft are physical paper drafts which can be carried physically to an international destination or mailed/couriered to the beneficiary abroad. These drafts can also be encashed at a correspondent foreign bank with which the issuing bank has an agreement. 

How Long is a Demand Draft’s validity?

As per the RBI guidelines, a demand draft’s validity is for 3 months from the date of issue. After the third month, the demand draft validity has to be revalidated upon written request to the issuing bank. You can revalidate a demand draft only once in a year. After a year, it is cancelled by the bank and a new DD is issued after paying the fees associated with the process.

Wire Transfer

Wire transfers are money transfers that take place between two banks. In wire transfer, the money from the sender is directly transferred to the beneficiary’s bank account abroad. Wire transfers are known as the most convenient way to send money internationally. This method is probably the most secure and hassle-free way to send money abroad. Online wire transfers have gained popularity. This is because online wire transfers are very safe and convenient too.

International Money Transfer from India – Various kids on the block?
Banks

Using banks to transfer money internationally is a safe method. With the increase in the use of technology, you can now make an international money transfer transaction online and also by visiting the branch. Even though banks are a secure and convenient way of doing your forign money transfer, their charges are high and a majority of them expect a branch visit for physical verification. Typically, the paperwork involved is also quite extensive resulting in a very poor user experience.

FinTech companies

The online services provided by financial technology – or ‘FinTech’ – companies differ. Some offer low exchange rates while others don’t charge a transfer fee. The time in which the money is delivered may also vary. Regardless of their USP, they offer the ease, convenience, and security that no other channel of transfer does.

To combat the fees charged by Indian banks, these services use technology to cut down costs and pass the money saved back to the customers in the form of fewer fees. The process to transfer money internationally through fintech companies is simple – register on the website, conduct a digital KYC and get the remitter verified. Once verified, the user would enter the bank details of the beneficiary and proceed to make an international money transfer online at their convenience. 

Also, Fintech companies are transparent with their fees making it easy for you to find out how much the international money transfer online would cost you in advance. These companies typically work in collaboration with RBI approved AD-I license holding banks and hence have an ideal mix of the convenience and agility of a new-age company and the security and reliability of the bank. 

In the COVID-19 times, these services have picked up a lot of prominence due to the contactless and paperless nature of their transactions. Due to the efficient technology process established by these companies the exchange rates provided are also very competitive.

Money changers

Money exchangers that have an AD-II license are authorized by the Reserve Bank of India for carrying out money changing activities like currency exchange and money transfer abroad. Transferring money abroad through a money exchanger can be very expensive. AD-II license holder entities are eligible for remitting payments which fall under ‘Current Account’ transactions and are typically transactions such as college fees payments, maintenance of close relatives abroad, medical expenses etc. Business related transactions typically categorised as ‘Capital Account’ transactions are routed by the money changers through an AD-I license holding bank.

Reserve Bank of India (RBI) Rules to Send Money Abroad from India

The RBI is the Indian central bank and the authority relating to financial affairs, including international money transfer transactions. The rules for foreign exchange that apply to individual residents are listed under Foreign Exchange Management Act (FEMA) in the “Liberalized Remittance Scheme (LRS)”. So if you are planning to send money abroad from India, then you must be aware of the following RBI guidelines:

Maximum Transfer Limit

According to RBI’s LRS policy, Indians can send up to $2,50,000 abroad per person per financial year. The maximum limit can be used through multiple transactions or in a one-time transaction.

Producing a PAN card was not necessary earlier for transactions up to USD 25,000. However, in April 2018, the rule was amended and now, producing a PAN card is mandatory for all international money transfer transactions regardless of the amount. 

Note: The LRS scheme does not apply to partnership firms, corporates, trusts, etc.

RBI approved Institutions For Money Transfer Abroad

The only institutions approved by RBI for transferring money abroad are:

1. Banks 

2. Money changers that have AD-II category license 

RBI requirements for Money Transfer Abroad

To send money abroad from India, RBI insists on the submission of KYC documents and knowing the purpose of the transfer. You cannot send money abroad from India if these 2 two conditions are not met.

Purposes of Remittance Banned Transactions Under LRS

• International money transfers for the purchase of lottery, banned magazines, tickets/sweepstakes, etc., or other items restricted under schedule 2 of foreign exchange management rule 2000 are forbidden under LRS.
• International money transfer for trading in foreign exchange, purchase of FCCB issued by Indian companies in overseas secondary markets are prohibited under LRS.
• Capital account transfers, to countries known as “non-cooperative countries and territories” by the FATF (Financial Action Task Force), are limited under LRS.
• International money transfers to entities, which are identified as terrorists or have the risk of committing acts of terrorism, are also prohibited under the LRS scheme.

RBI approved Money Transfer Methods

The RBI approves the following methods to send money abroad from India

• Wire Transfer/Telegraphic Transfer
• Demand Draft

Required Beneficiary Account Details

The following Beneficiary details are required to process the international money transfer transaction:

• Account holder’s name
• Account holder’s address
• Account number
• Bank Name
• Bank Address

SWIFT code (international bank code that identifies particular banks globally) is mandatory for all countries.

Understanding the costs of an International Money Transfer 

It is important to understand what you are paying for and how much you are paying while sending money abroad. Two main charges are usually involved: 

Exchange rates

In simple words, exchange rates determine how much of a currency other currency can buy. For example, how many Indian rupees can buy a certain amount of US dollars will determine the USDINR rate.

Quite similar to how the supply and demand determines the stock price, the currency rates are determined by the buyers and sellers in the market. Along with the retail participants, the other primary participants are central banks, multinational companies, industries, investment banks etc. This process determines the IBR or Inter-bank rate.

Some retail brokers add a mark-up on top of the IBR or current market exchange rates to provide a rate to clients. It’s important to make sure your International money transfer facilitator is offering near-real-time market exchange rates. Be aware of providers who offer ‘fee-free’ services – as they most likely charge in the form of inflated exchange rates.  

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Transfer Fees

Foreign exchange companies have operating costs similar to other businesses – fixed costs such as rent, various licenses to renew, employees to pay – and variable costs such as the one paid to the intermediary banks for completing the transaction – and so they add fees to pay up these costs. 

However, often international money transfer facilitators don’t inform you upfront about these costs. Before you start your transfer procedure, make sure your provider makes these fees upfront and transparent so that you know what you are paying, and what your recipient will get.

In terms of costs, the key questions that you must know the answer to are: 

• Am I paying a near-real-time exchange rate?
• Am I clear about the fees I am paying?
• Am I clear on the amount I am sending, and the amount the recipient will receive?

Other things to consider

There are a few things that you need to consider while you transfer money internationally:

Time 

While we’re used to seeing money move quickly between bank accounts within India, it can take more time to transfer money abroad. The process can take somewhere between a few minutes to five-plus business days depending on your provider. Also, if you have transferred the money over a bank holiday or weekend, it can affect the time the transfer takes.  

Ease and access

There is a perception that transferring money abroad is difficult, but with the fintech apps, it has become very simple like making a payment to someone in your home country. For example, with moneyHOP, simply download the app, register, get verified, and you can be sending money abroad in minutes.

Finding out the best rate

Most international money transfer providers have a markup fee on what you want to transfer. The markup fee can vary between different service providers. You can walk-in to a bank and find out their “card rate” which is extremely hefty & has a mark-up between 2%-4%. 

Avoid multiple small transfers

Due to the commission and GST slabs that are applicable on a currency conversion, it is advised that you transfer money in a single tranche rather than multiple smaller amounts transfers. This will prove to be more cost-effective for you.

Locking forex rates

The forex market never stops and the rates change every second. So, you must keep a watch on the fluctuating rates and lock the rates when they are the lowest. This way you won’t have to remit when the rates are high. The lock-in period may differ depending on the international money transfer platform you’ve chosen. Usually, one can lock-in the rates for 3 days by paying a certain amount in advance.

Send money abroad easily with moneyHOP

moneyHOP is designed to remit money in a paperless, presenceless and convenient manner while sitting in the comfort of your homes. Send money abroad with ease and confidence – offering low cost and speed of a FinTech, and the peace of mind and security by being backed by a global bank. moneyHOP offers real-time exchange rates and provides a full breakdown of the costs.

With HOP, all of this information is available upfront so that you have a clear understanding of the total cost of your international money transfer online.

Once you’ve set up your HOP account, just enter the amount you would like to send, the recipient’s bank details, and currency. When this is done, HOP shows you the exchange rate and fees before confirming your transaction. Also, if you have any doubts, our support executives are available 24*7 to help you via call, chat, or WhatsApp.