Please note that:

• The focus is on remittances under LRS, mostly for education expenses
• These are retail remittances
• For comparison, AT the time of writing this blog post, XE showed a rate of Rs 83.92 for $1. This is close to Inter Bank Rate (IBR)

When it comes to paying for international education, outward remittances under the Liberalised Remittance Scheme (LRS) are a key concern for many parents and students. As someone who has been navigating these waters for my daughter’s education, I’ve learned a few things that might help others optimize their remittance process. In this post, I’ll break down the various ways to send money abroad for student fees, focusing primarily on retail transactions, not business-related remittances.

1. Paying Fees via University Partners (Convera and Others)

Most universities partner with financial service providers like Convera to facilitate fee payments. While this might seem like the most convenient option, the exchange rates they offer are notoriously bad. In fact, the FX margins can be much higher than you would get through other channels.

Another downside? The process is not entirely online in most cases. You usually have to fill out a form and physically take it to the bank. This adds to the hassle, especially when you are comparing other, more streamlined methods.

2. Transfer via Your Bank

A more direct way to remit student fees is through your own bank. Request the university to provide their bank account details, and then you can initiate an international SWIFT transfer from your bank account.

Many banks offer the convenience of online transfers, but here’s the catch: the exchange rate can differ greatly depending on how you execute the transfer. This is something you should negotiate with the branch.

• Offline (Branch Transfer): Some banks offer better rates when you go offline. For example, in my case, ICICI Bank charges a 40-50 paise margin over the IBR (Interbank Rate) if I visit a branch and do the transaction in person.
• Online Transfers: However, if you do it online, their FX margin jumps significantly higher, as you can see in the screenshot below. SBI, on the other hand, charges a flat 40 paise margin whether you transfer online or offline, which makes them more consistent.
• FX-Retail Platform: You can also book a deal using RBI’s FX-Retail platform and then provide the deal ID to your bank for the transfer. However, in my experience, this method can be a bit of a headache. The user experience is not ideal, and private banks often don’t offer competitive rates via FX-Retail.

SBI and ICICI exchange rates (online)

3. Forex Players (Thomas Cook, BookMyForex, etc.)

Several forex service providers, such as Thomas Cook and BookMyForex.com, offer remittance services for student fees. These platforms are often seen as an alternative to banks, but you need to watch out for fluctuating FX margins.

• BookMyForex is currently offering zero FX margins on student fee transfers, making them an attractive option.
• Thomas Cook, however, tends to have high FX margins, which can quickly eat into your remittance amount.

BookMyForex and Thomas Cook exchange rates

While these services change their offers frequently, I personally haven’t found enough incentive to switch from my bank (Option 2) to these services.

4. Other Methods to Consider

Here are a couple of additional methods that might be worth exploring, though they come with their own set of pros and cons:

• International Debit/Credit Cards: Some parents prefer to load an international debit card or credit card with funds and allow their child to pay the fees directly from abroad. While this can work, the FX margin on card transactions is often much higher compared to bank transfers or even forex services. Additionally, there could be foreign transaction fees on top of the FX margin, making this an expensive option for large transfers like tuition fees.
• Remittance Apps (Wise, PayPal, etc.): While Wise (formerly TransferWise) and PayPal are great for sending smaller amounts, they may not be ideal for large transactions like student fees. The reason? High fees and limits on the amount you can send per transaction. They are useful for small, quick payments, but not necessarily for high-value transactions like university tuition.

5. Comparing Costs: Focus on FX Margins, Not Just Fees

For the purposes of this comparison, I’ve primarily focused on FX margins, as this is the most important factor when remitting larger amounts. However, keep in mind that most banks and remittance platforms also levy additional charges such as LRS charges, SWIFT fees, and commissions. These can vary from bank to bank and may include hidden costs that can add up.

For smaller transactions, these charges might seem disproportionately high, so it’s important to keep an eye on them. But for larger transactions like student fees, FX margins are where you should focus your attention, as even a small difference in the exchange rate can translate into thousands of rupees saved or lost.

Conclusion

Here’s a summary of FX rates from all the screenshots above:

Paying student fees abroad under LRS can be done through several avenues, but understanding the hidden costs, exchange rate margins, and processes involved is key to making the most cost-effective decision. While banks provide convenience and better FX margins (especially when done offline), options like BookMyForex offer attractive rates with zero FX margins for now. However, it’s crucial to evaluate all charges and pick the method that suits your individual needs best.

Regardless of the method you use, you can and should always negotiate exchange rates with service providers. For example, most private banks will offer as low as a 10p margin over the IBR even though their card rates are Rs 1.5—Rs 2 over the IBR.

If you’re dealing with remittances yourself and have found other methods that work well, feel free to share them. I’d love to hear what has worked best for others!

The Purchase: In July 2024, I decided to purchase a pair of trousers from Bewakoof.com, an online retailer known for its trendy apparel. To make the purchase, I used a GYFTR voucher that I had bought using my HDFC Infinia credit card. Contrary to being a discount coupon, this was a fully paid voucher, essentially equivalent to cash.

The Problem: Upon receiving the trousers, I realized they were too large. Relying on Bewakoof.com’s return policy, I promptly initiated a return request on 25-July 2024, just two days after the purchase. The company accepted the return without hesitation, suggesting a smooth resolution ahead. However, the real issue arose when it came to the refund.

The Refund Ordeal: Bewakoof.com’s response was baffling. They refused to refund my money, stating that the voucher was non-refundable. This was perplexing because the voucher, although paid for like any regular purchase, was being treated differently from direct credit card transactions. Their stance effectively meant they kept both the returned trousers and my money, a scenario I had not anticipated.

My Actions: Determined to seek justice, I took several steps:

1. Direct Communication: I reached out to Bewakoof.com multiple times, seeking clarification and urging them to process the refund.
2. Social Media: I shared my ordeal on social platforms, hoping to gain the company’s attention through public visibility.
3. Consumer Forum: Eventually, I escalated the issue to eDaakhil, an official consumer grievance forum, detailing my experience and seeking intervention.

The Bigger Picture: This incident highlights significant concerns about the transparency and fairness of online marketplaces, especially regarding their handling of returns and refunds. Consumers often find themselves at a disadvantage when the terms of transactions turn unexpectedly.

Advice to Readers:

• Read Return Policies Carefully: Always understand the terms, especially when using vouchers or special payment methods.
• Document Everything: Keep records of all transactions, communications, and actions in case you need to escalate the matter.
• Know Your Rights: Familiarize yourself with consumer rights and available grievance redressal mechanisms.

Conclusion: My experience with Bewakoof.com was more than just an inconvenience—it was a lesson in consumer vigilance. As I continue to seek resolution, I hope this post will arm you with the knowledge and strategies to better navigate your online shopping experiences.

Feel free to share this post and contribute your thoughts or similar experiences in the comments below.

I see several questions about remittances to and from India. As a professional, I’ve been receiving inward remittances for a very long time. As for outward remittances, I’ve been sending my daughter’s college fees since last year and have been exploring the most cost-effective ways to do so. Therefore, I figured I’ll write what I’ve learned, hoping this will help many others.

This is a two-part series, with inward remittances covered in part 1 and outward remittances in part 2.

For the purpose of this post, Inward remittances are for business income, so they usually go into a current account, whereas outward remittances in this case are LRS (Liberalised Remittance Scheme) remittances from my savings account. Also, my experience has been in USD only but i think this should work for other major currencies too. Keep these disclaimers in mind while reading.

Understanding Inward Remittances for Professionals

For many professionals, inward remittances typically land in a current account. However, using an EEFC (Exchange Earners’ Foreign Currency) account can be advantageous, allowing you to hold the remittance in foreign currency (say USD) and decide when to convert based on favorable exchange rates. The Reserve Bank of India (RBI) permits you to retain the foreign currency until the last day of the next month, giving you flexibility in managing your funds. So if you have EEFC account, you get remittance in foreign currency (say, USD), you park USD in EEFC and then when you convert, the converted INR goes to your current account.

Cost Considerations in Inward Remittances

Understanding the costs associated with inward remittances is essential to maximize your earnings. The main costs include the FX margin and transaction costs (includes conversion cost, intermediary cost, govt GST etc).

• FX Margin: This is the margin over the interbank rate (IBR) that banks or financial institutions apply when converting your USD to INR. For instance, if the IBR is 83 INR/USD, and your bank applies an FX margin of 2%, the rate you receive would be approximately 81.34 INR/USD. This is the most important cost that needs to be reduced.
• Transaction Costs: Some of them, like intermediary costs, correspondent bank costs are outside your control. But others are and can be negotiated.

Option 1: Banks

Most banks publish a card rate for their exchange rates, which is essentially the IBR plus a margin. Typically, this margin can be as high as 2-3%, translating to about Rs 2 per dollar. However, it’s crucial to negotiate with your bank to reduce this margin. For many current accounts, banks may lower the margin to about 5-10 paise over the IBR, significantly reducing your costs.

Here’s an example of ICICI Bank’s card rate. Notice that the rate is 81.87 to a dollar. For comparison, i have also attached XE’s rate for comparison. XE rate is closest to IBR. The difference between the two is 83.72-81.87 = Rs 1.85 or more than 2%.

How the Process Works:

• Booking a Deal: You log into your bank’s platform to book a deal, which essentially fixes the exchange rate.
• Providing Deal ID: Once the deal is booked, you provide the deal ID to the bank.
• Conversion: The bank then converts your USD to INR at the booked deal price.

For example, if you book a deal at a 10 paise margin over the IBR of 83, you would get an exchange rate of 82.90 INR/USD. You can also book a deal using RBI’s FX-Retail platform, which allows you to add your banks and book deals directly. However, in my experience, most private banks want you to use their own platforms and may not offer competitive rates via FX-Retail. Public sector banks, on the other hand, are more accommodating with FX-Retail bookings.

Negotiation Tips:

• Emphasize the volume of your transactions as a leverage point.
• Highlight your long-term relationship with the bank.
• Compare offers from different banks to get the best deal.

Transaction costs can vary but may not significantly impact you depending on the volume of your transactions. Nevertheless, it’s worth negotiating these costs as well to further optimize your remittances.

As an example, the screenshot below shows a negotiated rate with ICICI for inward remittances. The rate is 83.625, which is +10p over IBR

Option 2: Online Money Transfer Services

Services like Payoneer, TransferWise (now Wise), and PayPal offer convenient alternatives for inward remittances.

• Process:
  • Sign up and verify your account.
  • Provide your banking details.
  • Receive payments directly into your account.
• Advantages:
  • Flexibility to receive proceeds in any of your accounts, not tied to a single bank account.
• Disadvantages:
  • Potential limits on transaction amounts.
  • High costs

Option 3: Emerging Alternatives

New services like Skydo and xFlow are gaining traction as innovative solutions for inward remittances.

• Pros:
  • Competitive rates and lower costs.
  • User-friendly platforms.
  • Potential for integration with other financial tools.
  • Flexibility to receive proceeds in any of your accounts, not tied to a single bank account.
• Cons:
  • Limited track record compared to established players.
  • Availability might be restricted based on regions.
  • Some limitations, e.g., on maximium invoice value
• Cost Considerations:
  • Skydo: Zero FX margin but charges a flat fee of $19 for remittances under $2000 or $29 for remittances over $2000.
  • xFlow: Charges a 1% FX margin.

Choosing the Right Option

When selecting the best method for inward remittances, consider factors such as speed, cost, convenience, and security. Comparing different options will help you identify the one that best suits your needs. For instance, high-volume transactions might benefit from the lower FX margins negotiated with banks, while occasional transfers could be more cost-effective through online services.

Examples

I have attached screenshots for different options. Below i have summarized the rates so you know the differences. These will help you understand the variations and choose the best option for your needs. All these rates are taken on 30-July-2024, around 1 PM.

Tips for a Smooth Remittance Process

• Double-check all details to avoid errors.
• Time your transfers when exchange rates are favorable.
• Stay informed about potential pitfalls and how to avoid them.

Conclusion

Maximizing your inward remittances involves understanding the various options, negotiating costs, and being proactive in managing your remittances. By choosing the right method and staying informed, you can optimize the value of your international earnings. If you have any questions or need further assistance, feel free to reach out. Happy remitting!