Watch out for mark-up on the exchange rate when remitting money

Go with a player that states both the exchange rate and the transaction fee transparently

In November 2022 (the latest month for which data from the Reserve Bank of India is available), individuals transmitted $1.92 billion abroad. This amounts to a scorching growth rate of 38.4 per cent compounded annually over the past decade.

“Currently, remittance for student education forms the largest chunk, followed by transfers for maintenance and gifting,” says TC Guruprasad, managing director, EbixCash World Money, and board member, EbixCash.

The pace of transfer tends to accelerate between January and March. “This is the period when admissions into many foreign universities take place,” says Sudarshan Motwani, founder and chief executive officer, BookMyForex.

Keep an eye on cost

With pricing structures of many players being quite opaque, it is not easy to see how much you are being charged. Comparing costs across players can also be a challenge. Try to select a player that provides transparent information on the exchange rate and the transaction fee it will charge you.

“The exchange rate is where there is a hidden cost in foreign currency transfers. On Google, you can see the mid-market exchange rate. This is the midpoint between the buy and sell rates on the global currency markets. The mid-market rate is considered the most fair and real exchange rate,” says Rashmi Satpute, country manager, Wise India.

Many players in India don’t use this rate. “You will often find that a margin has been added to the exchange rate. This translates into a hidden fee,” says Satpute. She adds that at Wise they offer the mid-market rate as the exchange rate (without a mark-up) and levy a transparent fee above it. She says the average price for sending money abroad through Wise is 0.6 per cent.

Check the total cost of transferring money abroad and not just an individual element. “One way to check it is to enquire how much you need to pay in India for X amount to reach the recipient’s bank account. You can then calculate the total cost in percentage terms,” says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisers.

Factor in speed

Speed should be another key criterion, especially if you have a deadline to meet. Some players promise instant transfer. Wise, for instance, claims that 50 per cent of its transfers globally are instantaneous (within 20 seconds). Most players guarantee a transfer within 24-48 hours from the time you transfer the money to them. Motwani says customers should be diligent in transferring the money to the service provider at the earliest so that the onward transfer can also take place speedily.

Trust and convenience

Banks score on trust. It is also convenient to send money through one with which you already have a relationship (no fresh KYC required). Many will offer a relationship manager to hand hold you through the process. However, banks generally tend to be expensive.

If you decide to use a non-bank player, go with one with a long track record. “Track record in terms of strictures from the regulator or any law-enforcing authority should also be taken into consideration,” says Guruprasad.

The transfer process has nowadays become simple and entirely digital (for many players). The KYC usually involves providing documents like Aadhaar, PAN and/or driving licence. “Supporting documents like university admission letter and copy of visa also need to be provided before funds can be remitted abroad,” says Guruprasad.

Some players allow customers to lock in the exchange rate. “By paying a 2 per cent refundable advance, customers can freeze the exchange rate with us,” says Motwani.

 

Points to remember

Estimate properly the amount you need to send. If possible, send a little extra. In some cases, some amount is deducted at the recipient’s end also. This too needs to be factored in. “If you send a limited amount and it falls short, you will have to carry out multiple transactions, which will prove expensive,” says Dhawan.

Sticking to the same player forever is not advisable. “Players’ costs can change, so repeat the cost-comparison exercise at regular intervals,” says Dhawan.