Presented by:
The Hedonist(83015) Asheesh Ranjan Jha
(83026) Lokesh S Chauhan
(83035) Bharat Ostwal
(83037) Rahul Sood
Process of Remittance
Overview
Definitions to important terms SWIFT and MT’s CHIPS Charges Domestic Clearing Bilateral Settlement Applying Online Transaction through correspondent bank Case SWIFT messages and payment requests Payment involving two correspondent banks
Some Useful Definitions:
Nostro Account: A banking term to describe an account one bank holds with a bank in a foreign country, usually in the currency of that foreign country.
“Our account with them”
Vostro (Loro) Account: The counterpart to nostro account; vostro (Latin, 'yours') describes the record of an account held by a bank as correspondent on behalf of an overseas bank.
“Their account with us”
International Bank Account Number (IBAN)
GB 29 BOFS 8020 0100 1234 56
30 Characters max/ country specific
Check digits
Basic Bank Account Number
NationalSort Code
Bank Code Customer A/c No.
G B 2 9
Country code
(Bank of Scotland)
Developed by the European Committee for Banking Standards to improve the efficiency of cross-border payments with regard to speed, quality and cost
Bilateral Key Exchange (BKE): It is an arrangement between FI’s/Banks which is mandatory for exchange of SWIFT instructions amongst member institutions.
Bank Identifier Code (BIC):A unique address that identifies precisely the financial institutions involved in international financial transactions.
A BIC consists of 8 or 11 characters comprising the following
Bank Code, Country Code, Location Code and Branch Codee.g. ABNA NL 2A
DEUT DE FF500
SWIFT(Society for Worldwide Interbank Financial Telecommunication):
It is a worldwide financial messaging network where messages are securely and reliably exchanged between banks and other financial institutions
SWIFT is solely a carrier of messages.
Why SWIFT ? Secure
Well Connected
Inexpensive
Fast
Trouble Free
Message Type(MT):
A specific type of Standards message that is expressed in the SWIFT proprietary syntax and is identified by a unique 3-digit number. e.g. MT100, MT101, MT202…
Series Category
MT 100 Customer Transfer
MT 200 Financial Transfer
MT 300 Treasury Transactions
MT 400 Documentary Collection Transactions
MT 500 Securities Transactions/ Depository Services
MT 600 Precious Metals and Syndication Transactions
MT 700 Documentary Credits and Guarantee Transactions
MT 900 Statement Reports, such as daily statements, debit and credit
CHIPS(Clearing House Interbank Payment System
Participant Community
• 47 Financial Institutions
• 20 Countries
Average Daily Volume (2008):
• 365 thousand Payments
• $2.01 Trillion
• 2008 Annual Totals:
• $ 508.75 Trillion• 91.99 million payments
Average Dollar Amount per payment:
• $5.6 million
CHIPS Statistics
www.chips.org
Charges
OUR / BEN / SHA
`Payer(X)
Payer’s Bank
Beneficiary(Y)
Beneficiary’s Bank
Central Bank
ClearingInstitution
Information
Funds
Domestic Clearing ( Settlement Through Central Bank)
Bilateral Settlement
Payer (X)
Payer’s Bank
Beneficiary (Y)
Beneficiary’s Bank
Country A Country B
A in Delhi approaches ICICI bank and he wants to transfer Rs. 1 lakh into the account of B in Michigan. B wants the money in USD.
A(Delhi)
B(Michigan)
ICICI Bank, ND
JPM Chase, Michigan
Rs. 1,00,000 = USD 2032.52*
+ Charges(1347/- or .25 %)
USD 2032.52
* 1 USD = INR 49.20 [Market rate - 48.9650]
Payer (X)
Payer’s Bank
Beneficiary (Y)
Beneficiary’s Bank
Central Bank
Information
Funds
Correspondent Bank
LocalClearing
Institution
Cross Border Transfer through a Correspondent Bank
Country A Country B
Mourant and Co. Limited, Jersey has an account with ABN AMRO Jersey. The Mourant and Company limited ordered its bank to make a payment of 3,554,897 EUR to its account with Royal Bank of Scotland, Jersey. The currency for Jersey is Sterling Pound(GBP).
Case 2
Payment involving two corresponding banks
If USD were to be sent to a country where it wasn’t the prime currency e.g USD transfer between HDFC bank and ICICI bank in India
HDFC, India
ICICI, India
HSBC, NY
JPMC, NY
CHIPS Fed Reserve
Another Cross Border Payment Case
Mr. John Smith, a Diamond Trader in New Delhi holds an INR A/c with HSBC, New Delhi and he wants to make a payment of INR 50,000,000 to his business partner Mr. Marc in London. Mr. Marc holds an account with Bank of Tokyo, London and asks for the money in USD and with the condition that he wont bear the transaction charges.
Assumption: 1 USD = INR 50
Payment to Mr. Marc
BOTK US NY
HSBC US NY
BOTK JP PY
BOTK GB 2L
HSBC IN NDUSA
UK
India
Japan
CHIPSMT 101
MT 202
MT 202
MT 202
Federal Reserve
NY
MT 101
MT 202
Bank Charges
Ordering BankBeneficiary
Bank Currency Amount Charges
ABNAJESH RBOSJESX EUR 35,54,897.00 11.79 GBP
BCITITMM BCITUS33 USD 12,49,341.32 9.72 USD
RBOSGB2L BNPAFRPP EUR 27.32 Nil
ICICGB2L ICICINBB USD 15,949.29 Nil
UBSWCHZH80A ABNANL2A EUR 1,958.47 17.7 EUR
CITIINND CITIUS33 USD 1,50,00,370.00 Nil
CHASUS33 RBOSFRPP EUR 68,710.00 3.36 EUR
ABNANL2A BOTKJPPY GBP 30,94,724.00 41.3 GBP
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