Important aspects to keep in mind while making cross-border outward remittances



Cross-border outward remittance means the transfer of funds in the form of foreign exchange by a person or entity resident in India to a beneficiary (person or entity) outside India. The purpose of remittance can be broadly classified in three types:

Trade related – such as Import payments, service payments, freight payments, etc.
Investments related – such as Overseas Direct Investment (ODI) payments towards shares purchase/ sale, etc.
Personal remittances – such as maintenance to families abroad, remittance towards education, medical, etc.

In FY22, India’s outward remittances rose by 54.6% to hit an all-time high of $19.61 billion, with travel and education remittances accounting for the largest share of spending during the period as COVID-19 restrictions eased across the globe.
Outward remittances can be easily executed through online banking by using the SWIFT code of the receiving bank, detailing the purpose of remittance and the name and account of the beneficiary. As such, choosing the right banking partner enables individuals and entities to ensure a safe and efficient way of sending money abroad, be it for trade or non-trade purposes.

While initiating any cross border outward remittance, some important aspects to be kept in mind are:

1.
Prevailing regulations and purpose of remittance:
Cross border remittances is a highly regulated area and the regulations relating to management of foreign exchange is defined in FEMA, 1999. The remittances needs to be made as permissible under FEMA and for the purposes allowed. Remittances towards purposes falling under prohibited category are not allowed to be made and those falling under restricted category only with the prior approval from RBI. Remittances by resident individuals are defined under RBI’s Liberalised Remittance Scheme (LRS). The LRS allows Indian residents to send money abroad without any special permissions, provided they fall under the purposes and conditions approved by the regulator.

Further, the remittance to non-FATF (Financial Action Task Force) and sanctioned countries are prohibited.
2. Documentation and overseas beneficiary details: Every cross border remittance would have a different purpose and the documents required to make the remittance will depend upon such purposes. For example – for making payments towards imports documents like commercial invoice, bill of entry, transport documents (bill of lading/ airway bill) would be required. For making personal remittances under the LRS, while the same is made basis self-declaration, the remitter must have a valid PAN and the remitters account with the bank should be more than one year old. The remitter also needs to have the full details of the beneficiary like name, address, beneficiary bank name, beneficiary bank address, beneficiary bank SWIFT code and beneficiary account number. As a precaution, the remitter should verify these details with the beneficiary if the remittance is being made for the first time.
3. Limits on cross-border remittances: While there is no limit on the amount for receiving inward remittances from abroad, outward remittances are having limits and again it depends on the purpose for which it is being remitted. For trade payments, there are upper limits, beyond which banks can ask for additional documents and/ or even seek RBI approval before initiating the remittance. For personal remittances under LRS, the upper limit us USD per financial year
4. Knowledge of exchange rate and charges: There are various types of charges involved in cross border remittance and one must understand these charges to know the exact cost of remittance and arrange the funds accordingly in their bank account. Some of these charges are banks commission, GST on foreign currency conversion, SWIFT charges, intermediary bank (correspondent bank) that would be incurred to remit the funds abroad. Also the prevailing exchange rate of the foreign currency would be an important factor in determining the total outlay of funds.
5. Selecting the right bank for initiating the remittance: Cross border remittances can be initiated by Authorised Dealers (AD) Banks like ICICI Bank and AD Category 2 institutions like FFMC, etc.
Choosing a bank with a strong international footing like
ICICI Bank ensures a secure and simple way to send money abroad. Some of the benefits of ICICI Bank outward remittances services are:

Facility to initiate trade related cross border remittances through digital platform – Trade Online and InstaBiz Mobile App
Simplified documentation
Minimal charges, wide network of correspondent banks and global presence
Defined turnaround time with capability to process transactions round-the-clock
Ability to handle complex transactions with proper guidance for all regulatory and statutory guidelines
Initiate cross border outward remittances for all types of payments like – import payments (advance or direct bill or bank to bank collection bill), service payments like commission, fees, royalty, etc. Software import payment both physical & online. Personal remittances under LRS and many more.
Track your remittance via SWIFT GPI facility
Get debit advice and SWIFT copy in registered email ID within the defined TAT.

6. Post remittance formalities: Post remittance ensure that the SWIFT copy is obtained from the bank and shared with the overseas beneficiary for easy tracking of the funds. Certain payments like advance against imports have a time-limit to submit the proof of import i.e. bill of entry which should be complied with.
So, choosing the right banking partner is crucial for the best outward remittance experience. A bank that has an extensive network and a strong international footing like ICICI Bank will be able to help individuals and entities send money abroad faster and more efficiently in addition to other value-added services.
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