Every year, millions of individuals and organisations in India do business with foreign entities bringing in foreign currency. Whether technological services, export of goods, stock market investment opportunities, education, or tourism, the country thrives on businesses run at a global level. Not to mention, millions of households are supported by money sent by their NRI bread earners.
All this is made possible through the easy movement of money across borders, also known as an inward remittance. If you are also wondering how to receive international money transfers in India safely and efficiently, this article is for you. Let’s begin by understanding what inward remittance is and how it works.
What is Inward Remittance?
The term ‘remittance’ means the action of sending money as payment or as a gift to someone. Therefore, the term inward remittance means receiving money from a sender as a payment or as a gift.
This term is not used for within-country transactions for ease of financial service categorisation. Instead, money received from international sources is considered an inward remittance.
The Reserve Bank of India (RBI) regulates this process and authorises banks and service providers to partner with international financial institutions to offer this service. Any individual or entity can receive a maximum of 30 inward remittances in a calendar year, and a single transaction can’t be more than that of USD 2500.
How Does It Work?
There are three main channels used for inward remittance, which are:
- International Financial System platform of Universal Post Union for postal channel
- Rupee Drawing Arrangement (RDA)
- Money Transfer Service Scheme (MTSS)
To receive inward remittance once or multiple times, you need to set up an account with a bank or a financial service provider that supports inward remittance from your source country. You can also choose the service provider based on the channel of your choice, i.e. postal, RDA or MTSS.
Along with your account application, you need to submit Form A2 and the purpose for inward remittance. Once your account is set up, you can share your account details with the sender to safely receive inward remittance. These details can include:
- Your IBAN (International Bank Account Number) or intermediary account number
- Your bank SWIFT/BIC code
- The reason for transfer such as payment or a gift
- Transfer amount and exchange currency
- Payor for the fees and charges for inward remittance transactions
Factors Affecting Inward Remittance
Now that you know what inward remittance is and how it works let’s understand the factors that affect the effectiveness of this process. Typically, an inward remittance transaction can be completed within 1-5 days, depending on the method and service provider. The following factors have an impact on the overall cost, speed, and efficiency of inward remittance:
- Source and Destination Country: The available money transfer channels between two countries can be different and affected by time zones and international finance laws. This can affect the taxation attracted by the remittance, the amount permissible, and how fast the transaction can be completed.
- Method used: Offline channels like the postal services for bank drafts and cheques and wire transfers are slower than digital transfers. All channels also have inherent costs, efficiency, and safety that impact your inward remittance experience.
- Currency Coverage: Not all remittance service providers cover all the available currencies. While most banks maintain the service for the top 10-20 currencies, digital financial service providers can do it for 100+ currencies. Thus, your choice of service provider must ensure that your required currencies for inward remittance are all covered.
- Service providers can charge outgoing transfer fees at source and incoming transfer fees to your inward remittance account. This fee can add to the total transaction cost and is usually higher for faster or more popular channels.
- Exchange rate markups and overheads: Some remittance service providers also charge a markup on the current currency exchange rate and have overhead costs built into the total cost. This could make an efficient and secure channel relatively expensive for multiple transactions.
In conclusion, inward remittance through various methods allows Indian citizens, companies, and foreign nationals based in India to receive money from abroad. By choosing the most effective method and reliable service provider for inward remittance, you can reduce your transaction costs and complete transactions faster. Kuvera is one such service provider who makes inward remittance a seamless activity for you.
Partnered with ‘Wise’, Kuvera’s unique inward remittance platform is eight times cheaper than banks and offers mid-market exchange rates for each transaction. Kuvera’s inward remittance services are fast and reliable with no hidden fees and a digitally integrated platform. The platform also supports stock investment, mutual funds trading, insurance, and a host of other features that can be used seamlessly and remittance services.