July 9, 2024
10
Mins read

International Wire Transfers Explained

In today's interconnected world, transferring money across borders has become a necessity for many. Whether you are sending funds to your children studying abroad, paying for international services, or managing overseas transactions while traveling, you may need to understand the ins and outs of wire transfers. So, let's understand the meaning of wire transfers, the process involved, and some essential tips for handling international wire transfers smoothly.

What is a Wire Transfer?

A wire transfer is a method of transferring money electronically from one bank account to another, either domestically or internationally. It is a secure and efficient way to send money across the globe, allowing individuals and businesses to move funds quickly and safely. The term "wire transfer" comes from the early days of telegraph-based money transfers. A wire transfer got its name because, way back when, people literally used wires to send money between banks. They'd send messages through these wires to tell the banks to move money from one person's account to another, even if they were far away. It's called a wire transfer because it started with those physical wires, like sending messages but today it refers to a wide range of electronic transfer methods.

Bank

The Wire Transfer Process

The process of completing a wire transfer involves several steps. Here's a breakdown to help you understand how it works:

1. Initiating the Transfer

To start a wire transfer, you need to visit your bank or use their online banking platform. There are codes which ensure that the money is sent to the correct financial institution and account. You'll be required to provide details such as:

  • Your bank account number 
  • The name of the recipient 
  • The recipient’s bank name and address 
  • The recipient bank’s SWIFT code or IBAN
  • The recipient’s bank account number

2. Verification and Fees

Once you've provided the necessary details, your bank will verify the information and confirm the availability of funds in your account. Banks typically charge a fee for processing wire transfers. Such fees can vary based on factors like the amount being transferred, the destination country, and the speed of the transfer based on the financial institution.

3. Processing the Transfer

After verification, the bank processes the transfer. For international wire transfers, the money is sent through a network of intermediary banks, which may charge additional fees. This process can take a few hours to several business days, depending on the countries involved and the banking systems in place.

4. Receiving the Funds

Once the transfer reaches the recipient's bank, the funds are deposited into their account. The recipient may need to pay a receiving fee, depending on their bank's policies. It's essential to keep in touch with the recipient to confirm that the funds have been successfully received.

Piggy Bank under Umbrella

Charges you may expect

1. Transfer Fees

These transfer charges vary between banks and can depend on factors such as the destination country and the amount being transferred. It's advisable to check with your specific bank for their current transfer charges and any additional fees that may apply.

  • Outgoing Transfer Fee:

   - This is a fixed fee charged by your bank for sending money internationally. In SBI, it ranges from Rs 500 to Rs 1000 for outward remittances.

  • Incoming Transfer Fee:

   - This fee is charged by the receiving bank for processing incoming international transfers. In India, many banks such as SBI, DBB, PNB & IDFC do not charge for any inward remittance.

2. SWIFT Charges:

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the network used for most international wire transfers. Banks typically charge a fee for using the SWIFT network to facilitate the transfer. SWIFT charges can vary between banks and are usually disclosed as part of the total transfer fee. These charges generally range from Rs 500 to Rs 1,500 or more, depending on the bank and the destination of the transfer.

3. Tax Collected at Source (TCS):

 TCS is a tax levied by the Indian government on certain specified transactions, including foreign remittances exceeding specified limits. TCS is collected by the bank at the time of initiating the transfer and deposited with the government.

TCS Rates Table

New TCS Rates Effective from 1 October 2023

S. No. Type of Remittance Abroad New TCS rate (w.e.f. 1 October 2023)
1 For the purpose of education, if the amount being remitted is from a loan obtained from any specified institution Threshold limit - NIL up to Rs. 7 lakh. 0.5% of the amount or the aggregate amount over Rs. 7 lakh per financial year
2 For the purpose of education, other than (1) above (or) for the purpose of medical treatment. Threshold limit - NIL up to Rs. 7 lakh 5% of the amount or the aggregate amount over Rs. 7 lakh per financial year
3 Any other purpose under LRS Threshold limit - NIL up to Rs. 7 lakh 20% of the amount or the aggregate amount over Rs. 7 lakh per financial year
4 Overseas tour packages 5% up to Rs. 7 lakh 20% of the amount or the aggregate amount over Rs. 7 lakh per financial year
5 Resident Individual falling under "Specified Person" category/Non- PAN case/Inoperative PAN case Double the normal rate of TCS or 5%, whichever is higher. However, TCS rate shall not exceed 20%

These charges and taxes are important to consider when planning international transactions to ensure transparency and compliance with regulatory requirements. It's advisable to check with your bank for specific details on SWIFT charges and TCS rates applicable to your transactions.

Currency

Key Considerations

Sending money internationally involves additional complexities compared to domestic transfers. Here are some important factors to consider:

1. Exchange Rates

Exchange rates play a significant role in international wire transfers. The value of the currency being sent will be converted based on the prevailing exchange rate at the time of the transfer. It's crucial to check the exchange rate offered by your bank or forex provider to ensure you get the best deal. Even a small difference in rates can have a significant impact on the amount received.

2. Transfer Fees

International wire transfers often involve multiple fees, including sending fees, intermediary bank fees, and receiving fees. To avoid surprises, inquire about all potential charges before initiating the transfer. Some banks and forex providers offer fee transparency, allowing you to know the total cost upfront. For your convenience, we have researched several banks. Below are some banks along with their transaction charges for wire transfers:

Bank Information                                                                                                                                                                                                                                            
Bank NameEntityTransaction Charges (approx)Additional ChargesWho is it for?
HDFCPrivate BankFor transfer up to $500 INR500/transaction & above at INR1000/transactionSWIFT fees, GSTAvailable for HDFC Bank customers who are resident individuals only
Axis BankPrivate BankStarting from Rs 1000 for Savings bank a/c holdersSWIFT fees, GSTSame as above, for Axis bank account holders only
Kotak BankPrivate BankRs. 1250 for as Kotak Bank processing feesSWIFT fees, GSTSame as above, for Kotak bank account holders only
ICICI BankPrivate BankStarts from INR 1000SWIFT fees, GSTSame as above, for ICICI bank account holders
Supreme ForexRBI Authorized AD-IIINR 250SWIFT fees, GSTResident individuals with proper KYC documents

Please note: At this point, we are offering remittances abroad only for the purpose of education, as per RBI Guidelines, after due verification and KYC.

3. Transfer Speed

The time it takes for an international wire transfer to complete can vary. Factors such as the destination country, the number of intermediary banks involved, and the time of day the transfer is initiated can all affect the speed. If time is of the essence, consider using expedited transfer options, which may come with higher fees.

4. Regulatory Requirements

Different countries have varying regulatory requirements for international money transfers. Ensure you comply with all necessary regulations and provide accurate information to avoid delays or issues. Some countries may require additional documentation, such as proof of the transfer's purpose or the recipient's identification.

In India, for example, as per RBI, In alignment with the relevant recommendations of the Financial Action Task Force (FATF), Know Your Customer (KYC) procedures should be implemented. For domestic wire transfers of Rs 50,000 and above, where the originator is not an account holder of the ordering RE, the transfer must include both originator and beneficiary information, as required for cross-border wire transfers. The term ‘Ordering RE’ refers to the institution that initiates the wire transfer and transfers the funds on behalf of the originator.

Time & Money

Advantages of using Wire Transfer

International wireless transmission offers many advantages such as speed and reliability in moving large quantities of goods across borders. They are usually processed quickly, usually within a few business days, making them suitable for immediate commercialization. Additionally, telecommunications is simple and can be launched through most banking institutions worldwide, making it available everywhere.

Disadvantages of using Wire Transfer 

Though they offer reliability, they come with sort of many consequences. First, fees for international telecommunications can be substantial, including sender and receiver fees, which can vary depending on exchange rates and banking at the expense of mediation. Then, the process can be subject to error, such as incorrect redemption information resulting in delays or potential loss of revenue. Bank transfer may not be a good choice when it comes to urgency of money transfer. Choosing an international wire transfer requires careful consideration of fees, timing and security to ensure it best meets your financial needs.

Calculating Money Transfer

Tips

For secure and efficient international wire transfers, always double-check recipient details like account numbers and SWIFT/BIC codes to avoid errors. Use trusted banks or forex providers known for secure transactions. Keep records of transfers, including receipts and communication, for tracking and proof. Plan ahead by initiating transfers early to meet deadlines, or set up automated payments for recurring transfers, ensuring timely delivery and minimizing stress. These practices safeguard against errors, delays, and ensure your funds reach their destination securely and on time. There are countries where you may take your INR currency, here is the list of top countries

Conclusion

Understanding wire transfers, their meaning, and the process involved is crucial for anyone dealing with international money transfers. By following the tips outlined above and using trusted banks and forex exchange providers, you can ensure your funds are transferred securely and efficiently. Whether you're sending money for personal reasons, business transactions, or educational expenses, being informed about the nuances of wire transfers can save you time, money, and potential headaches.

As a forex exchange provider, we offer competitive exchange rates, low fees, and expert guidance to help you navigate the complexities of international wire transfers. Contact us today to learn more about our services and how we can assist you with your money transfer needs.

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