Remittance tips to consider if you are planning to send money overseas

September 1, 2020 1:30 PM

Remittance is a costly affair and currency conversion can cost you a bomb if you don’t give enough emphasis on the currency rates and the kind of charges involved.

 Remittance, abroad, currency rates, rbi, LRS, investing in shares, mutual funds, debt instrumentsIndian residents are allowed to remit money abroad for investing in shares, mutual funds, debt instruments etc.

By Sudarshan Motwani

Overseas direct investments have gathered considerable momentum over the last decade and specially, now, when the markets have slumped at home, investors are flocking to invest abroad. Defined as capital account transactions under the RBI’s Liberalised Remittance Scheme (LRS), Indian residents are allowed to remit money across the border for making investments overseas, which includes investing in shares, mutual funds, debt instruments etc or in real estate up to USD 2,50,000 per financial year.

However, remittance is a costly affair and currency conversion can cost you a bomb if you don’t give enough emphasis on the currency rates and the kind of charges involved. Here are a few factors that you should keep in mind before remitting money abroad.

Choosing the right mode of transfer

It is very important to compare different money transfer services as it can help you find the best exchange rate, lowest transfer fees, and most reliable service. As far as capital account transactions are concerned, the RBI permits only commercial banks in India to carry out these transactions while some categories of money changers are allowed to undertake restricted transactions related to private remittances.

While checking out rates with various banks, one must also check the rates offered by websites that offer online remittances for both private as well as capital account transfers using network of banks they are tied up. Banks offer these companies a wholesale rates and thus these companies can offer customers not just better online experience using technology, but also much better rates to an individual customer than what they may be able to negotiate with their banks directly. So, instead of wasting your time and energy on comparison between different banks, you can simply trust a marketplace that will give you a hassle-free experience.

Finding out the best rate

The money transfer service providers keep a markup fee on the foreign currency that you want to transfer. The markup fee can vary between 0.5% and up to 3% between different service providers. Walk-in to any bank and you can easily find out that their “card rate” is extremely hefty & has mark-up anything between 1.5% and 4%. Try an online marketplace that will carry out your transactions through their banking partners, but at a much lower rate since their model is such that they get preferential and wholesale rate from their partner banks that they can pass on to their customers.

Scout for Minimal Bank Commission

The money transfer fee differs between various service providers from Rs 750 to Rs 2000. Transferring money abroad online via a marketplace provides convenience at reduced fees and guarantees rapid transfer of money which is certainly more viable. You’ll be surprised to find out that an online marketplace can waive off the bank commission completely.

Online and paperless process

If you are sending money abroad via a bank, you will have to visit a bank branch and complete all the formalities offline which is a tedious process. However, the process of capital account transactions through an online platform is fairly easy. The process is completely online and nearly paperless. This comes out as a massive relief and becomes even more so important due to the current COVID-19 situation.

Locking forex rates

You need to watch out for fluctuating rates. The forex market never sleeps, and the rates keep on changing every second. Keep a close eye on the rates and choose to lock the rates when they are the best so that you don’t remit when the rates are the highest. Depending on the money transfer platform you’ve chosen, you usually can lock in your rates for 3 days and upto 1 year.

Checking the transfer time

This is something you should definitely check before remitting your money abroad especially when you are in a hurry to transfer the funds abroad. Please note money transfers don’t take place on weekends i.e. on Saturdays and Sundays, and on public holidays. Don’t forget to ask your provider about the procedures or alternative options in case your funds are not transmitted promptly by the specified date or time.

Avoid multiple small transfers

Due to the bank commission and GST slabs applicable on currency conversion, it is advisable that you send money in single tranche rather than multiple transfers of smaller amounts. It will prove to be more cost-effective for you.

(The author is Founder and CEO,

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