Foreign Remittances

1.1.   What is Foreign Remittance?

1.1.1.      Foreign remittance can be defined as ‘the purchase and sale of freely convertible foreign currencies as admissible under Exchange Control Regulations of the country’. Remittance is the act of transmitting money to a distant location to fulfil an obligation. Foreign Remittances are of two types, the Foreign Outward Remittance & Foreign Inward Remittance.

1.1.1.1.            Foreign Outward Remittance : The sender uses a bank or foreign exchange company to send money to foreign country.

1.1.1.2.            Foreign Inward Remittance: Similarly when the funds send by a person into his parent country where he resides such remittances are known as Foreign Inward Remittance.

1.2.   How does Foreign Inward Remittance takes place?

Foreign Remittances are transfer of funds involving exchange of one currency into another. Remittance can be

·         Inward – By way of Wire Transfer, Cheques, DDs coming from Migrant Workers, NRIs, PIOs

·         Outward – By way of Wire Transfer, DDs for Personal / Business Remittances by residents,

v  In respect of IWR, India retains the top position for over a decade now.

v  Remittances contribute to economic growth and to the livelihood of the needy people

Methods of Remittance

·         TT (SWIFT )

·         Foreign Currency DDs / Cheques

·         Rupee DDs issued under Rupee Drawing Arrangements (RDA)

·         e - Remittance

·         Union Express

·         FC / FCTC

SWIFT: (Society for worldwide Interbank financial telecommunications)

·         SWIFT – is a non profit making co-operative society, came in to existence in May 1973 with 239 member banks – head quarter in Brussels, Belgium

·         It is meant for exclusive use of financial telecommunication by banks and FIs with amazing speed, data accuracy, and total safety

·         As of now, around 25000 FIs are connected through SWIFT

Centralization of Foreign Cheques for Collection

To speed up the process of collection of Foreign currency Chqs / FDDs / TCs, Union bank has established CCC at Overseas br, Mumbai & Overseas Br, Ernakulam

Operational Guidelines:

·         All branches (A, B & C) to obtain application in triplicate from customers depositing foreign currency cheques / FDDs – one copy to be returned to customer as acknowledgement

·         Only customers having account with the branch to be entertained (except TCs)

·         Instrument to be endorsed as “Payees account credited / will be credited on realization”

·         The originating branch to confirm the aspects like KYC, and FCRA.

·         Photocopy of instruments, both front and reverse should be retained at the branch

·         The originating branch will control the instrument manually with FBC / FBP No. and will give the name of the branch on the instruments.

·         Foreign Currency Cheque Deposit Slip  cum application sent to CCC (Centralised Collection Centre – Mumbai / Ernakulam) for all operational and RBI reporting activities.

·         Branches will forward the instruments along with cheque deposit slip on currency wise and destination wise basis to CCC on daily basis by Courier / Speed Post

·         CCC will send cheques to different banks for collection.

·         Cheques may be sent under cash letter basis / collect and credit basis to correspondent bank / drawee bank as per the need.

·         High value cheques above USD 10,000 will be handled only on final collection basis (Guaranteed Final Payment Mode) and not on cash letter basis.

·         Requests for credits before the cool off period of 15 days can be entertained on the specific request of the originating Branch

Special Provisions for USD Chqs (Cir lr. 6051 dt 13.02.09):

·         For Cheques / FDD up to USD 500/-

·         Instant credit on sighting in Nostro a/c without cooling period

·         Conditions: Individuals / SB – minimum 6 months operation

·         Branch to confirm / report on covering schedule for instant credit

• Cheques / FDD above USD 500 /-

·         Credit to a/c after cooling period as below

·         Cheques drawn in Newyork                            : 7 days

·         Cheques drawn in other centers of USA       : 15 days

·         cheques drawn on banks in other countries: On realisation from Nostro bk

Note: Value dated credit (date of credit to Nostro a/c) will be given to all SB a/c holders for personal transactions only

·         Entries relating to collection items will be picked up by CCC on 7^th / 15^th day from the value date in case of USD instruments payable in USA, and

·         CCC will debit POB Account Treasury Br. and will credit the customer’s account net of charges, through intersol

·         For cheques drawn in other currencies, credit will be given by CCC on actual realisation / receiving credit to Nostro a/c of the correspondent Bk. 

Purchase Items

• Where the cheque is to be purchased, the branch will forward the instrument with their FBP no. to CCC.

·         The CCC will obtain the rate and credit the Rupee equivalent to party’s account through intersol, to the debit of office (FBP) account.

·         Upon sighting the credit in nostro, the CCC will debit POB a/c Treasury Br.for the original amount of the cheque at controlled / purchased rate and credit the FBP controlled at originating branch through intersol.

·         The contra entry relating to collection or purchase at CBS branch will be reversed by CCC

·         Short Realization if any will be recovered from the party through intersol at TT selling rate

·         In case of insufficient balance in the account or the account being a loan account, POB will be raised on the branch for the same

1.2.1.      POB on the Treasury Branch in such cases will be for the net amount ( FBP Amount – POB on “C” branch for short realization)

  Inward Remittances - Regulatory Requirement:

·         Generally no restrictions on inward Remittance. except that it should be received through authorized banking channel (Exception - FCRA 2010)

·         NRIs Can send Remittances to their / resident a/cs – No limit

   

Bringing Forex during personal visits – Declaration (CDF):

·         For foreign currency exceeding USD 5,000/- and FC/FCTC exceeding USD 10,000/- or equivalent during visit to India, CDF (currency declaration Form) to be produced.

·         Residents receiving Foreign currency / TCs as gift / services rendered can retain up to USD 2,000/- (overall) and to surrender over and above the limit to AD within a period of 180 days

·         Residents can also park these funds in RFC(D) a/c

Provisions of FCRA – 2010

·         No foreign contribution shall be accepted by any candidate for election, correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered news paper, judges, govt. servants, members of any legislature, office bearers of political parties

·         Organizations of political nature, not being a political party, require prior permission of Central Govt. 

·         Contributions from Indian citizens abroad (NRIs) will not be treated as Foreign Source and do not attract provisions of FCRA

·         Contributions by non-resident foreign citizens of Indian, or non Indian, origin do attract provisions of FCRA even though the money comes from their NRO / NRE / FCNR accounts in India

·         Credit to registered account with Central Government only

·         All associations engaged in welfare activities in economic, educational, religious, social, charitable fields  receiving Foreign Contributions have to get themselves registered with Ministry of Home Affairs

·         Application in Form FC-8 giving details of bank and account number

·         Home Ministry grants registration and marks a copy to bank

·         Unregistered association to take prior permission from Home Ministry before accepting foreign contribution (Application in Form FC-1A). Copy of permission marked to bank.

·         Not more than one account for receiving foreign contribution

·         Banks to furnish Half Yearly Returns ( March and September) furnishing details of Foreign Contribution credited to registered accounts.

·         All branches to submit the said statement in prescribed format before 30^th April / 31^st October to IBD, CO, Mumbai, and confirm this to their ROs.