About three lakh students travel abroad each year for higher education and on an average, an undergraduate degree in a good American university can cost upwards of USD 50,000 or Rs33.5 lakhs a year. Students often face problems due to less or no information about the remittance policies of India and how to manage their finances. Foreign remittances for tuition, boarding and lodging and other overheads are vital to a seamless experience while studying abroad.
Remittances from India can only be processed by banks or certain moneychangers who possess an Authorized Dealers (AD) -II license. The total amount of remittances in a financial year must not exceed USD 2,50,000 for educational purposes. When the parent of a student wants to send money to their children, it is sent under a RBI approved category called ‘maintenance of close relatives’. Parents need to produce only a proof of identity and residence apart from a PAN card. In case the funds are being transferred directly to the university, they can be sent under the ‘education’ category that requires the student to submit the air ticket, education visa, passport and PAN card (an I-20 form is also needed for American universities). Payments for remittances must come from a savings bank account and can be transferred via NEFT/ RTGS or cheque (subject to clearance).
You can send a remittance via India's top banks in just a few minutes. Most people choose to do an electronic bank-to-bank wire transfer through SWIFT (Society for Worldwide Interbank Financial Telecommunication) transfer, but this also happens to be the most expensive option. Apart from the exchange rates, there are several types of fees associated with these transfers that are levied by the sending bank in India, the receiving bank abroad and in certain cases some banks in the middle. A more economical alternative, if you're also travelling abroad, is to carry a foreign currency demand draft that eliminates any receiving charges.
There are service providers who offer remittances and other forex products at wholesale rates, which are more economical than dealing directly with your own bank. These sites even let you freeze the rates that you see online or set an alert to get notified when the rates become better.
A relatively new alternative to transferring money abroad using traditional bank remittance products is to use a forex card, which can also be carried abroad. Forex cards are visa/ mastercard powered cards that can be used just like international credit or debit cards. These cards, when bought through a forex marketplace, come with zero overhead charges. One can avoid both bank sending charges and receiving charges using a forex card. Additionally, the exchange rates on these cards are much better than what is available on traditional remittance products, especially when bought online.
Using the right forex product and service provider, one could save the end customer an average of 5 per cent over a traditional bank transfer, which over the course of a 4-year college term could translate to well over USD 10,000.
(The writer is Sudarshan Motwani, CEO and founder, BookMyForex).
