Remittance in Banking: Meaning, Types & How It Works

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If you have a bank account, chances are you’ve either sent or received money, whether within India or from overseas. This process is known as remittance. Remittances aren’t just a way to support family members — they also play an important role in India’s foreign exchange reserves. In this article, we’ll explain what bank remittance means, explore its different types, and break down how it works.

What is remittance?

Remittance, or to remit, simply means transferring money from one person to another. This is common when someone wants to send money back home to support their family in India. A remittance ensures that funds are transferred securely and reach the recipient quickly through trusted banking channels.

How Does Remittance Work?

Banks ensure that remittance money transfers both within India and internationally is a smooth and secure process for account holders. Whether it’s outward or inward remittance, banks ensure that the transactions comply with RBI and FEMA guidelines. 

Here’s a brief overview on how DBS Treasures Remittance works:

Step 1: Log in to DBS Digibank app or our Internet banking platform.

Step 2: Enter or choose the beneficiary’s details which includes

• Name and bank account number
• IFSC code (for domestic transfers)
• SWIFT code and address (for international remittances). Beneficiary bank codes are now dynamically validated via a live SWIFT API, ensuring up-to-date information and fewer

Step 3: DBS Treasures verifies the sender’s credentials and ensures the transaction aligns with RBI, FEMA, and LRS (Liberalised Remittance Scheme) regulations. A 24-hour cooling off period applies on IB after adding a new payee for enhanced security.

Step 4: Once the transaction is verified the fund transfer is initiated through secured channels. If you are sending money abroad, you can benefit from tiered FX pricing. Higher transaction amounts qualify for more preferential exchange rates, helping you save more on currency conversion.

Step 5: Once processed, the beneficiary will receive the funds on the same day. You will receive real-time updates via SMS, email, or app notifications. End-to-end tracking is also available, which is especially helpful for international transfers.

What is Remittance Advice?

Commonly used for B2B remittances, a remittance advice is a type of notification sent by sender to confirm that the transfer has been made. This message includes details of remittance such as amount, date, and reason for transfers. Aside from businesses, individuals living abroad may also use remittance advice when sending money to India for things like rent or education.

Types of Remittances

There are a variety of remittance services offered by bank that enable you to transfer and receive money for various purposes. Here’s an overview of the main types of remittance:

• Inward Remittance: As an NRI, when you send money from abroad to India, you are using inward remittance services from bank. This transfer is processed through secure and regulated channels such as SWIFT, RDA, or other foreign remittance channels.
• Outward Remittance: This remittance service is used when money is sent from your bank account in India to a beneficiary abroad. This is processed under RBI’s Liberalised Remittance Scheme (LRS) for purposes such as overseas education, travel, or family support.
• Cash Deposit Remittance: In this mode the sender deposits physical cash to their bank branch, which is then credited to the recipient’s account. Cash remittance services are not generally provided banks directly.

To receive funds smoothly, consider opening a DBS Treasures NRI Savings Account and enjoy easy access, preferential rates, and expert support.

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Benefits Of Remittances

For individuals studying or working abroad, remittance becomes an integral part of financial support for families. Here are some key benefits of international remittance for individuals:

• Financial Security: With quick and dependable inward and outward remittance options, families and investors can access funds when needed, enhancing their financial peace of mind.
• Same Day Transfers - Most DBS Treasures remittances are processed on the same day, allowing recipients to access funds quickly and without delays. This is especially helpful for urgent or time-sensitive needs.
• Ease of Use:  DBS Treasures Remittance services offer easy to use remittance platform for both mobile and web. The new integrated journey means you don’t need to switch platforms when transferring funds.
• Affordable Transfers: DBS Treasures Remit services eliminate bank charges and offers tiered forex rates, giving better value for higher transaction amounts and helping you save more on large transfers.
• Worldwide Access: Transfer money to over 200 countries, with beneficiary bank codes dynamically validated via a live SWIFT API to reduce errors and ensure faster, more accurate remittances.

Opening a Premium Savings Account with DBS Treasures also offers added benefits such as higher transaction limits, priority service, and enhanced digital access for seamless fund management.

Common Channels for Sending Remittances

When transferring money, both domestic and foreign remittances are processed through secure and efficient payment systems catering to different purposes:

Domestic Remittances

For sending money within India, the common payment systems used by banks for fund transfers are:

• IMPS (Immediate Payment Service): This service is used for urgent payments, this payment service work around the clock.
• NEFT (National Electronic Funds Transfer): This payment system processes transactions in batches throughout the day, suitable for scheduled payments.
• RTGS (Real-Time Gross Settlement): This payment service is designed for high-value transactions, this service ensures real-time settlement for large sum transfers.

International Remittances

When it comes to foreign remittances, banks commonly use these secure global payment systems:

• SWIFT (Society for Worldwide Interbank Financial Telecommunications): The most widely used payment network used for processing international remittance transactions across over 200 countries.
• Wire Transfers: This is used for networks like SWIFT and other countries-based payment networks such as SWIFT, BRICS Pay, CIPS, SEPA.

Key Uses of Remittance

Some of the common uses of remittance for individuals in day-to-day personal finances are:

• Family Assistance: Remitting money to help family members who are far away, e.g., for school, healthcare costs, or everyday necessities.
• Payment for Goods and Services: Settlement of bills or the purchase of goods and services from local or foreign suppliers.
• Business Transactions: Facilitating foreign trade by paying international business partners, foreign suppliers, or service providers.
• Investments: Foreign investment in property or business done through outward remittance channels.
• Bill Payments: Payment of bills such as utility bills, rent, or other periodic bills for oneself or others, domestic or foreign.
• Donations and Gifts: Remitting money in the form of gifts or donations to individuals or organizations, both foreign and domestic.

Factors Affecting Remittance Transfers

A few things could impact the efficiency and processing of your foreign remittance: 

• Transfer Method: The method you use will determine how much time it takes to process and what other fees will be incurred. It can be through a bank transfer, wire service, or even digital wallets.
• Regulations: Regulatory issues like KYC (Know Your Customer) compliance standards, AML (Anti-Money Laundering) restrictions, and regulations specific to individual countries may cause delays with certain transactions.
• Currency Exchange: The constantly changing exchange rates alongside the supply of the target currency directly impacts how much is finally received and transferred.
• Operating Hours: The time zones in conjunction with the operational hours of banks from both the sender’s country and recipient's country might result in a delay in the crediting of funds.

What is the difference between bank transfer and remit?

While the terms bank transfer and remittance are often used interchangeably, they differ in purpose, process, and scope. Here's a quick comparison to clarify the distinction:

How to Send or Receive Remittance Safely

To ensure you send and receive remittance transfer securely, consider following these tips:

• Always choose established providers that are licensed and have a good reputation to ensure your money is handled securely. Services such as DBS Treasures Remittance ensures 100% credit to recipients to over 200 countries.
• Verify the recipient’s name, account number, and bank information to avoid defaults in remittance.
• Keep all records of your international remittances in case you need to track the transfer.

Documents Required for Remittance

Here’s a document checklist to ensure a successful remittance payment:

• Valid ID proof (PAN card, passport, Aadhaar).
• Form A2 declaration (for outward remittance).
• Proof of purpose (e.g., admission letter, medical bills, invoices).
• Beneficiary’s bank details (account number, SWIFT/BIC).
• PAN cards copy (mandatory in India).
• Foreign Inward Remittance Certificate (for recipients).

Additional Documents Required

• Recent bank statement (sometimes required).
• Additional proof for large transfers (source of funds).
• Purpose code as per regulatory guidelines.

Challenges in Remittance

If you are transferring funds regularly, it’s important to choose a remittance service that is reliable, there are few common challenges that individuals face during remittance such as:

• High Transaction Costs: Some remittance channels charge high fees for fund transfers, making it expensive to send money.
• Slow Processing Times: Slow processing times can affect especially when the remittance is for an urgent purpose.
• Currency Exchange Issues: Fluctuation in exchange rates can affect the value of your remittance transfers.
• Security Risks: If your remittance transfers is through unsecured channels, it leaves your bank account vulnerable to hacking, fraud and data breaches.
• Regulatory Compliance: If the remittance service is not compliant with regulations for international fund transfers, it could lead to delays or unsuccessful transfers.

DBS Treasures Remittance services is a preferred method for sending money to abroad, offering convenient and secure way to transfer funds.

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Conclusion

Sending or receiving remittances safely requires choosing trusted providers and following security best practices. DBS Treasures Remit offers a convenient, secure, and cost-effective solution with paperless transfers, zero fees to many countries, and competitive exchange rates. It’s an excellent choice for hassle-free international money transfers, ensuring your funds reach their destination quickly and safely.