International Money Transfer

In the previous post, we learnt about the Internal Money Transfer

Let’s explore Modes of International Money Transfer

The transfer of funds from one country to another country can be termed as international money transfer or foreign remittance. It can be both Outward or Inward remittance and can be executed through bank issued Demand Draft, Personal Cheque, Wire Transfer or Online Transfer, Letter of Credit.

The different modes of foreign remittances are

Demand Drafts – A bank draft or demand draft is an order from one branch of a bank to another branch of the same bank or the correspondent bank to pay a specified sum of money to the person named therein or to his order. A person who wants to send money can buy a draft by paying the required amount to a bank and send to another who can encash it in his place. Banks issue drafts for a nominal commission. The purchaser of the draft need not to be a customer or account holder of the bank. A bank draft is a negotiable instrument and has all the attributes of a bill of exchange, such as an instrument in writing, containing an unconditional order, signed by banker.

Wire Transfer - A wire transfer is most often used to transfer funds from one bank or financial institution to another. No physical money is transferred between banks or financial institutions when conducting a wire transfer. Instead, information is passed between banking institutions about the recipient, the bank receiving account number and the amount transferred. To send money to a bank abroad using your Savings Account, you can make use of SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is a quick and efficient online wire transfer option. However, the bank that you will be wiring the money to should be able to facilitate this transaction. Mail transfer and Telegraphic Transfer are the former variants of wire transfer which have now used seldom by the banks.

Letter of Credit - A letter of credit is a document generally used by exporters for receiving payment against the delivery of the goods in foreign country. The correspondent bank of the importer issues the letter of credit and guarantees the payment. In case the buyer is unable to pay the amount, bank will cover the same. The bank that writes the letter of credit can act on behalf of the customer and confirm that each of the delivery conditions is met before the release of the payment to the exporter. It contains all the delivery and payment conditions agreed between both the parties and the correspondent banks.