Introduction to

Remittances

Definitions:
Remittances are transfers of money by foreign
workers to their home countries.
Remittances are the traditional financial
support for families back in their home
countries.
This phenomenon is generated by a movement
of labor across borders that constitutes an
international labor market in which people move
north by millions and money moves south by
billions.

Origin/History of Remittance:

In the 19th century, the English usage of the

word usually referred to money sent from
England - the opposite direction to today's
usual usage of the term. A remittance man
was an exile living on money sent from
home. Within Victorian British culture, this
often meant the black sheep of an upper or
middle class family who was sent away
(from the UK to the Empire), and paid to
stay away.

Features of Remittance:
Almost unnoticed for decades

Average remittance is small in

size

Senders typically reside outside

the formal financial system

Government Officials Now

Jumping into the Game

Urging banks to enter the market

Raising compliance hurdles

Advantages of Remittance:
During disasters or emergencies, remittances
can be a vital source of income for people
whose other forms of livelihood may have
been destroyed by conflict or natural disaster.

According to the Overseas Development

Institute, this is being increasingly
recognised as important by aid actors who
are considering better ways of supporting
people in emergency responses

Challenges:
Bank Challenges

Small value, high volume international

payments.

Existing bank infrastructure such as SWIFT

is not practical and too inefficient.

Relatively high compliance requirements.

Remittance customers are accustomed to

and expect personal attention.

All result in high per transaction costs.

Challenges: (Contd:)
Technology Challenges:

Revenue -- Roughly 1% of transfer value

Technology becomes important to

reduce costs and fulfill compliance
requirements.

Remember that remittance senders do

not usually use payment cards or ATMs.

Tellers are necessary as the point of

entry.

Technology again important to reduce

remittance processing time for tellers.

Channels:
Most of the remittances happen by
the conventional channel of agents
(Western Union, Moneygram).

However, with the increasing

relevance and reach of the Internet,
online money transfer has gained
momentum over the years.

Flow of Remittance:

Remittance in India:
A majority of the remittances from the US
have been directed to Asian countries like
India (approx. 26 billion USD), Philippines
(approx. 14 billion USD) and China (approx.
23 billion USD).
India enjoys the status of receiving the
highest remittances in the world. With an
increasing number of Non Resident Indians
(NRIs) living overseas, either for work or
having settled there, flows into the country
have certainly grown dramatically in the past
few years.

The figures have gone up touching US$ 23

billion in 2006, up from US$2 billion a
year in the late 1980s. Interestingly, a large
chunk of this money is flowing into the
Indias promising property market.

After Foreign Direct Investments (FDI),

remittances have emerged as the largest
external capital source for developing
nations like India. Amount of NRI
remittances have been exceeding FDI
inflows in India for the last few years.

Facilities in India to Remit the

Money:
Banks are now going all out to woo the NRIs.
Some of them have also gone to the extent of
launching remittance products with foreign tieups.

Most banks have seen a 7-8 per cent surge in

NRI deposits because of the initiatives and
because India has now become a more attractive
destination for its expatriates to invest in.

With the help of Money Exchange Service

Providers, you can send money directly
into any bank account; track your status
and make PayPal transfers.

Most of these service providers offer,

24x7 Customer Support and Mobile Alerts
for your convenience.

Also, overseas remittance services have

been overtaken by online remittances.

Top remittance
Remittances
Country
(2003-2004)
India
$21.7 billion
China
$21.3 billion
Mexico
$18.1 billion
France
$12 billion
$12 billion
Philipines
Pakistan
$3.9 billion
Bangladesh $3.4 billion

recipient countries:
Remittances Remittances
(2006-2007)
(2007-2008)
$26.9 billion
$22.52 billion
$24.7 billion
$23.97 billion

$5.493 billion
$ 5.97 billion

$6.50 billion

Guidelines for Remittance in India:

Remittance Facilities to NRIs is
subject To RBI Approval

With RBI changed stand on overseas

remittances limits for NRIs and lifting
the 10 year lock-in together with
better facilities, sending or remitting
money to India for investment
purpose is not difficult anymore.

The limit for overseas remittance has now

been lifted for good. It has been doubled
from $25,000 at present to $50,000 per fiscal
year. NRIs can use the amount for both the
current or capital account transactions

NRIs can now cash out on the property they

acquire in India and have also been offered
an incentive to make investments in Indian
real estate. According to the latest guidelines
released by RBI, Indians living abroad are
allowed to remit the money from the sale of
immovable property

As per the prevailing guidelines,

NRIs and PIOs can remit the money
up to $1 million per year for valid
use out of the balances in their nonresident ordinary (NRO) accounts.

Thank you.