RemittancesThe process of sending money to remove an obligation. Types of remittances: 1. Inland 2. Foreign 3. Inward 4. Outward
Remittance continue… To effect remittance customer will submit required remittance form. The customer account will be debited to the customer will deposit the required amount plus bank charges to effect remittance. Remittances are accepted for those places where the bank has its own branches or for those other banks with whom the issuing bank has agreements in term of remittance.
Remittance continue… Remittance should clearly state 1. The place of drawing. 2. Name of payee. 3. Payee’s account number. The issuing band should 1. Inform promptly the drawee branch about instrument/drawing. 2. Provide necessary safeguard to the instrument for example writing amount through protectographic machine in the face of instrument. 3. Utilization of quickest channel.
Foreign remittances: Foreign remittance means a payment made to a person in foreign country. Foreign remittances are required to be approved by the exchange control department of SBP. There are some dealers authorized by SBP who can sanction foreign remittances for specific purposes and for specific amouts. Remittances that do not fall under the authority of dealers then they must be approved by foreign exchange control department. The usual types of remittances and the chapter of foreign exchange control manual pertaining to them are as follows. i) Travel Allocation chapter 18 ii) Private Remittances chapter 17
How Pakistani Banks facilitate payments abroad? Pakistani Banks maintain account with Banks in the principle financial centers of the world. Deciding on which correspondent the drawing will be made based on the reference to the list of correspondents and their agency agreements. If bank does not account in the country to which the payment is sent the reimbursement to the drawee bank is provided according to the terms of agency agreement.
Remittances in currencies not quoted by the banks in Pakistan Normally remittances are affected for those currencies the rates for which are quoted by banks. In case of other currencies provisional deposit sufficient to cover the expected cost is obtained and held in sundry deposit accounts.
Different modes of remittances Modes of remittances are instruments used to send money. They are; 1. Draft 2. Mail transfer (MT) 3. Telegraphic transfer (TT) 4. SWIFT 5. Electronic fund transfer.
DraftsDraft is a mean of payment.In issuing a draft, a bank issue a check on its own branch or on acorrespondent to settle a payment.The payer will hand over that check (draft) to the payee.The payee will present the check in the drawing bank for collection offund.
DisadvantagesThe remitter account is debited at the time of issuance of draft while itspayment may take time.Inconvenience associated with draft when it is lost. It take much time toissue a duplicate draft.
Payment of draft before receipt of advice The drawee bank should be careful in making payment to the presenter of draft before receiving relative instruction from issuing bank. In case of payment before receipt of advice, the payments will be made by the authority of very senior officer of the bank and he will must be satisfied by the identity and respectability of the presenter and by the genuineness of the signatures.
Mail transferBank-to-bank transfer of funds.Such instrument are sent by mail and it take few days to reach itsdestination.MT advice include; 1) Full name of Beneficiary. 2) Beneficiary’s postal address. 3) Name of remitter.If the bank issuing MT has no account with the drawee bankreimbursement will be provided as per term of the agencyarrangements.
Mail transfer continue…Mt advice should also indicate that payments are remitted throughsuch and such banks.Mail transfer that are received should be entered into mail transferregister after the signatures are verified by authorized officer.On receipt of MT the beneficiary account will be credited or apayment order will be issued in name of beneficiary.
Telegraphic transferTelegraphic transfer refers to transferring funds overseas through cablemessage.Coded message is thoroughly checked before dispatching the telegrams.Telegrams should be decoded carefully and foreign currency amountsshould be recorded in foreign telegraphic transfer payable registerauthenticated by officials with full signatures.Beneficiary account will be credited or payment order should be issuedin favor of payee.
SWIFTAcronym for “Society for worldwide interbank financialtelecommunication”.It is a network that enables financial institutions worldwide to send andreceive information about financial transaction in a secure, standardizedand reliable environment.It is mean of remittances, bank transfer and ever documentary credit.Easy to reconcile.Speed, efficiency, accuracy and security.
Electronic fund transferTransfer of funds through computer-based system, for examplewithdrawals from ATM machine.Electronic fund transfer Act defines, "the term electronic fund transfermeans any transfer of funds other than a transaction originated by acheck, draft or similar instrument.Automated exchange messages.
Inward remittancesInward remittance means purchase of foreign exchange in whatever formand including MT, TT, draft, travelers checks, drafts under travelers letters ofcredit, bills of exchang4e, currency notes and coins and debit to banks non-resident rupee account.
Outward remittancesOutward remittance means sale of foreign exchange in any form includingTT, MT, drafts, travelers checks, travelers letter of credit, foreign currencynotes and coins and credit to bank’s non-resident rupee accounts.
Recommendations regarding Modes of remittances Exchange control manual recommends that where remittances can be effected by MT and TT the issuance of draft should be avoided. If it is inconvenient for customer then demand draft crossed “payess account only” may be issued. Advice of draft should be promptly dispatched. In case of payment of large amount a cable message should be sent to the issuing branch if the draft advice is still not received.
Cancelation of outward remittancesIn case of cancelation the outward remittance is reported as inwardremittance. The return in which the reversal is reported should besupported by the letter giving the following particulars.a. The date of the return in which the outward remittance was reported.b. The name and address of the applicant.c. The amount of the sale as effected originally.d. The amount cancelled.e. Reasons for cancelation.
Cancelation of inward remittancesIn this case authorized dealers must report the cancelation of inwardremittance as an outward remittance on form ‘M’. The return in whichthe reversal of transaction is reported should be supported by a lettergiving the following particulars.a. The date of return in which the inward remittance was reported.b. The name and address of the beneficiary.c. The amount of the purchase as effected originally.d. The amount cancelled.e. Reason for cancelation.