What is the difference between telegraphic transfer and SWIFT?

You may have heard the terms SWIFT and telegraphic transfer from investment bankers and traders. However, you may not be aware of what these are and how the two differ. So, before listing out the differences between the two lets understand what SWIFT and telegraphic transfer mean.

What are SWIFT and Telegraphic Transfer?

Swift stands for Society for Worldwide Interbank Financial Telecommunication. This is a service offered to banks and other financial institutions all over the world. Through Swift these institutions can freely and securely send transaction information from one place to the other. It is essential to note that SWIFT is not a method of transferring the money itself, but the information regarding the funds.
Telegraphic Transfer or TT is a method through which interbank funds exchange takes place. Prior to the introduction of the telegraphic transfer, banks had to send a direct Telex message to the destination bank in case of fund transfers.

Differences between SWIFT and telegraphic transfer

• SWIFT is not a fund transfer system. It merely lets institutions send electronic information regarding transactions. Telegraphic transfer, however, facilitated the transfer of funds from one bank or institution to the other.

• SWIFT is an electronic process which does not require wireless connections between the two institutions. Therefore, it works similarly as mobile phones do. TT, on the other hand, required telegraphic wires and the use of Telex to function. Both the beneficiary bank and the sender institution needed to have the telex system handy.

• SWIFT is a handy tool at present, and most traders use it in case of transfers and transactions. This messaging service came into existence after the 1990s. Prior to 1990 however, banks relied on the Telex system, which involved telegraphic transfers. Therefore, telegraphic transfers have almost ceased these days, with more and more banks opting for simpler transfer methods.

• SWIFT is far more secure than the older telegraphic transfers. During the TT days, there was a higher risk to the institution's money than there is now after the introduction of the SWIFT procedure. This process does not transfer the funds, but instead sends the payment orders that must be settled.

SWIFT has quickly replaced the older Telex system and in just 25 years, most banks have stopped the telegraphic transfer of money. Simpler forms of transfer have taken its place, which are both more convenient and safer.

Redesignate your account to NRO account when leaving India

Are you thinking of relocating to a foreign country and becoming an NRI? Have you transformed your savings account to an NRO account? If you have not done it yet, you should.

What is an NRO account?

A Non-Residential Ordinary account or NRO is a savings account for people who are Indian nationals, currently categorised as a non-residential Indian. In such an account, you can keep money in the Indian and foreign denomination.  

Here are some reasons and features why you should switch out your accounts before leaving India.

1. NRIs are not allowed to keep normal savings account

You are designated as a non-residential Indian if you stay abroad for more than 182 days in a fiscal year. In such a case, you are not allowed to operate a savings account in India. So, it is best to change your savings account into an NRO savings account.

2. Making payments in India

If you are an NRI and operate and NRO account, you can easily make payments in India from your current place of residence. This feature is useful in case you have EMIs to pay back in India or other financial responsibilities to take care of. An NRO account will ensure that you can freely make these payments without having to transfer funds, which would act as an extra burden on you.

3. Essential in case of income source in India

You may have moved to a foreign country, but you may still have a source of income inside India. This can be a monthly rent or income from a business establishment. These funds can only be saved through an NRO account. This again saves a lot of hassle and lets you keep all of your earnings without needing to lose some of it in transfers.

While NRO accounts are quite advantageous if you have an income source in India, the same is not that beneficial for all. In fact, people who do not have any income or savings in their Indian accounts, they can transform their savings account into an NRE account. An NRE account only allows you to deposit foreign denomination.

There are several other financial matters, which you should handle prior to changing your status to NRI. These changes will make the transition process much simpler for you to handle.

After your status has been updated to NRI, remember that any savings in your NRO account will likely be taxed as per the standard. However, foreign currency kept in an NRE account cannot e taxed in India.

NRI Account: Which is the best?

“Which account should I open?” is the first question that crosses the mind of a NRI who wants to open an account in any of the Indian banks. There are specifically two kinds of accounts that NRIs can opt for in India – NRO (Non-Resident Ordinary) and NRE (Non-Resident External).

Both these accounts provide different features and facilities. The choice of opening either of these strictly depends on your need/purpose. All prominent banks across India offer the facility to open both these accounts as per your requirement.
A few prime differences between an NRE and NRO account are:

Mode of deposit – The initial difference between NRE and NRO account lies in the mode of deposit. You can only deposit foreign currency in an NRE account while only Indian rupees can be can be deposited in an NRO account.

The difference in taxation – An NRE account in India is tax-free. On the other hand, the credit balance, as well as the interest earned in a NRO account, falls both under the specific income tax bracket which is 30% as per the Income Tax Act 1961, as well as wealth and gift taxes as applicable.

Joint account holding – NRE accounts can jointly be held with another NRI, but you cannot hold one with a non-resident Indian. An NRO account can be held both with an Indian resident as well as an NRI as Section 6 of the Companies Act 1956 states.
Deposition of rupee fund generated in India – Earnings of an Indian like rent, salary, dividends etc. is strictly allowed to be deposited only in an NRO account. An NRE account does not permit the deposition of such income.

An NRE account is a rupee-denominated. You can only make a deposit in the can only be made through inward transfer of funds. Deposits are compulsorily made through foreign currencies, which get converted into Indian rupee during the deposition process. The rate of interest to be paid is determined by the bank itself.

In case of an NRO account, NRIs are free to convert their existing savings account into an NRO one, with just their status being changed from a resident to a non-resident.

If the bulk of your net income is accumulated in India and you wish to take care of it in the country itself, you can always choose to apply for an NRO account. Nonetheless, an NRE account is the best option when it comes to transferring foreign income to India and evading any kind of tax liabilities for the same.

Are you aware of these features about offshore banking?

Offshore banking refers to operating an account outside the operator’s country of residence. So, if you have a bank account in Switzerland while staying in India, it will be referred to as an offshore bank account. Generally, these offshore accounts offer greater privileges such as tax benefits and more savings. This is why several people prefer offshore banking to an account in their own country.
Here is a look at some of the features that are prevalent in case of a good offshore bank account.

Multiple currency savings

Some offshore banks allow you to operate separate accounts for different currencies. For instance, you may have an income source in Australian Dollar and another in US Dollar, you can operate two accounts to save these currencies. This saves you from converting the currencies and losing some of the money in the process. These accounts also offer you the ability to change the currencies whenever required or whenever the exchange rates seem preferable.

Accessing the account

Accessing an offshore bank account is much more difficult than a domestic one. This is because you actually have to be physically present at such a bank to access your account. Most offshore banks are quite squeamish about security protocols and do not allow for simple netbanking or online transfers. This can be quite a hassle for many clients.

To avoid this, try to find an international bank with a global presence. This will ensure that you can access your account from ATMs no matter where you are in the world.

Lack of trading

Most offshore banks lack the trading features available in other banking sectors. This is because a large majority of clients of these offshore accounts does not engage in trading or stocks. So if you are a trader, try looking for an offshore bank, which offers the tools needed to perform stock trading.

Free money transfers

Some offshore banking firms allow customers to transfer funds from the account without paying any additional fees. This can be quite useful in case you have a relative or a business abroad and need to transfer funds frequently for the same. However, not all offshore banks offer the same benefit to account holders.

Wealth management services

Not everyone has the means to open an offshore account. Those that do are comparatively wealthy and deposit large sums of money inside the account. So, a team of experts and management staff at the bank should aid you in reaching your financial goals. Ensure that you pick such a bank when trying to keep money offshore.

If you are looking to open an offshore account, ensure that you keep these features in mind.

What are the factors you will need to consider when sending money to India?

Sending money overseas always requires a good bit of know-how and research. If you are an Indian looking to wire money back home from a foreign country, you too need to be aware of quite a few things. This will help you determine the best method of transfer, so that you can send the maximum amount without having to clear exorbitant sums first.

Here are a few factors that you should keep in mind if you are sending money to India from a foreign country.

Exchange rates

Exchange rates are constantly fluctuating, which can greatly affect your money transfer. For instance, consider that you are residing in the United States and want to initiate a money transfer to India from there. On the day that you decide to transfer the funds, one US dollar may be worth Rs. 65, while the very next day, the exchange rate can change to Rs. 67 per US dollar. This means that if you transfer the funds on the second day, you will end up transferring more money than you would if you had initiated the transfer on the first day.

Transfer fees

Checking the foreign exchange rates alone will not suffice in you getting the best transfer deal. In case you are sending money to India, you need to keep an eye on the transfer fees posted by your bank. Each bank offers different transfer fee options, some high and some low. Check with your bank on this matter and try to get the lowest transfer fee possible.

Research

There are literally hundreds of options today when it comes to fund transfer. However, you need to conduct a research on your own to determine the best option for you. Some of the agency offers speedy transfer, while others allow you to transfer at lower fees.

Urgent transfers cost more

If you are looking to transfer the funds in a day or two, you would need to spend quite a bit on the transaction fees. However, if you can wait for 4-5 days for the transfer to get processed, then you may get away with a much lower transfer fee. So, try to delay the transfer itself if there is not an urgent need for the same.

Keep these pointers in mind for money transfers to India and you will likely be able to get the best deal for the same. Remember to keep the transfer details handy in order to check with the beneficiary whether they received the same amount or not.

Rural Finance: Current updates set for 2018

India is primarily an agricultural country. Most of the trade and income of the country depends on the produce that it sells to other nations. Therefore, India needs to have a strong financial presence in its rural areas, where agriculture takes place. This is why the government is taking steps to increase rural finance and improve the economic condition of the families living in these lands.

Currently, a number of schemes have been put in place to improve the rural finance. You should be aware of what these schemes are and how they can affect the entire country in the long run.

Digital India

The Digital India initiative was launched back in 2015, but its effects are being felt even now. Through this scheme, the government is trying to spread education and literacy by introducing the internet into even the remotest corners of the country. Most rural regions did not have internet connectivity before this plan was introduced, but since then thousands of farmers have been educated about the importance of the internet.

This program may not sound too important for the rural finance growth, but with the help of the internet, agriculture can improve vastly and increase the productivity of the country.

Unnat Bharat Abhiyan

One of the greatest obstacles in the way of financial growth across rural India is the absence of proper educational facilities there. Under the proposed Unnat Bharat Abhiyan, the IITs and NITs will come together and establish institutions in villages and other rural areas to increase the quality of education of India’s farmers. This is vital for the upliftment of the rural regions in India.

However, this scheme is yet to be made official. Hopefully, the same will come into effect with the 2018-19 budget.

Beti Bachao, Beti Padhao yojna

Most young girls in rural India are not educated properly and married off at a young age. However, with this initiative, the government will propagate the education of the girl child. When these girls grow up, they can contribute to the rural economy and in turn the Indian economy as a whole.

Easier Loans

The government is also planning to make the money lending procedure simple and affordable in villages and other rural areas. These loans will be managed by the government banks and will be given according to the income of the family in question. This will decrease the burden of paying huge interests in case of loans from microfinance and local moneylenders.

If you reside in the rural regions, keep your eyes on this year’s budget, to know more about the schemes and finance policies being introduced. This will help you assess how the Indian government is trying to propagate rural growth.

Why online payment services will be a popular option in the coming years?

Online payment services have been in vogue in the western countries for quite a few years now. However, it has recently started gaining traction in our country. Our government has been pushing for a digital and cashless economy ever since he has come to power. So, just over a period of 2-3 years, a number of payment services have come up that allows individuals to conduct business in a transparent and fluid manner. There is no doubt as such that online payment will become an indispensable part of our lives in the coming years.

The reasons why these services will be a popular option in the near future are:

• You can make payments easily and in a hassle-free manner. Whatever service you are paying for, you are able to do so from the comfort of your home and at any time of your convenience. You do not need to rush to a shop or to anyone to complete the transaction.

• Online payments are generally more secure than receiving or sending money via cheques or by demand drafts. The person who is liable to get paid gets his/her payment instantly and he/she do not have to face the inconvenience of going to a bank and getting the cheque encashed.

•  It is very convenient to set up an online payment service based on a debit/credit card system. A person can set it up by following a few easy steps and start sending or receiving money almost immediately. Service providers are also compet
ing with each other to offer affordable plans with almost negligible setup costs and equally low transaction rates.

• When a person runs a business that requires his/her customers to make payments at regular intervals, it will be prudent on his part to opt for online payment service. He/she will not have to go to the customers to collect the payments and also to remind them of their upcoming payments. So an online portal lets the person collect his/her dues electronically without facing any hassles as such.

• The availability of an online payment system at any shop or any other place increases the credibility of the place. A person who is buying anything or any service may not carry enough cash to make the payment. Hence, it is important to keep the online option open.

• Big corporations, as well as individual entrepreneurs, have understood the importance of displaying their products or services online. This will enable them to reach a wide range of customers and find a market for their products. Customers who otherwise could not have visited the store to purchase the services or product can now do so by making online payments.