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Auto Loans are different when compared to conventional Loans as the loan is provided on the basis of the vehicle purchased. Incase of non payment, the vehicle will be possessed by the Bank or the Finance Provider and sold to recover the loan outstanding.

To give an overview as to how Auto Loan works, a customer who intends to buy a new or a used card visits any of the car dealers and selects a vehicle. He then requests the Bank or the Finance provider to provide him a loan to buy the vehicle and he will pay the loan amount along with interest as per agreed terms as an EMI which can last as long as 60 months.

Some people think or rather assume when a Bank says that the first installment will begin after 45 days that their would be no interest charged for that 45 days. Instead, the interest for the initial 45 days which was not charged by the Bank will be added to the customer last installment their by increasing the amount of the last installment. Customers are confused and frustrated sometimes that the Bank representative did not tell them about this and they assumed that their would be no interest charged before the start of the first EMI.

Repayments of Auto Loan can be made via post dated cheques provided to the Bank or an account can be opened with the Bank and instructions to debit that account every month can be provided to the Bank by the customer to avoid the hassle of making sure that the amount of cheque is available in the account from where the cheque is issued.

Rate of interest charged on an Auto Loan differs from Bank and Bank and it is advisable for customers to visit a couple of Banks before finalizing on the Bank from which they want their vehicle to be financed. Also if a cheque is returned due to insufficient funds charges are levied by the cheque issuing Bank as well as the Bank providing auto loan. Details of charges are mentioned by Banks on their website and also available at their branches when the loan documentation is being completed.

Word of caution: Do not sign a blank loan application and always request the agent to fill in the financial details before you sign the documents to avoid any issues in future.

Auto Loan

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A shipping guarantee as the name suggests and like other guarantees provided by Banks is a guarantee issued by the Bank to guarantee payment to the shipping company incase the customer fails to pay.

Banks usually do not deal in the physical goods but deal in the documents as Banks do not have control or the resources to physically check the description and the actual goods. In this kind of guarantee, customers can take possession of goods before the original bill of lading reaches the shipping company. Bank agrees to pay the shipping company incase of loss i.e if the customer fails to make payment for the shipment, Bank agrees to pay the shipping charges to the shipping company.

These are generally issued against cash margin and rarely are unsecured unless the customer has a really good relation with the Bank with a clean Credit History. The amount of guarantee to be issued is deposited by the customer in his account along with required charges and the guarantee is issued in favor of the shipping company.

Details of charges levied by Banks will be made available by majority of Banks on their website and is also available in their branches wherein the customer would be required to visit in order to complete the documentary requirements. Once the issuance of guarantee is approved by the Bank (all requests submitted to the Bank are subject to Banks approval), the charges are debited to customers account along with the guarantee amount which will be placed separately in a margin account and guarantee in original will be issued to customer.

Guarantee can be issued as an ongoing guarantee which can be used for future shipments or can be issued with an expiry date wherein the guarantee and the confirmation provided by Banks to pay the required amount stands null and void once the guarantee expires.

Shipping Guarantee

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Banks generally offer various Accounts that suit the customer's requirement. A few of them are listed below for ease of reference and to find out the different types of accounts.

1. Current Account or Checking Account
2. Savings Account
3. Call Deposit Account
4. Fixed Deposit Account
5. Recurring Deposit Account

All these types of account are opened as per the requirement of the customer and the features of the account vary from account to account.

For instance, a current account or a checking account will provide a cheque book along with the various additional services offered by the Bank towards its customers. Some Banks offer free debit card, Internet Banking, Mobile Banking, SMS alerts as well as periodic statements as additional benefits provided if an account is opened with them.

Every account will be described in detail in the coming blogs and this is just an introduction to the various account products offered by the Bank. Opening an account is the primary function of a Bank and it offers various other financial services apart from opening a Bank account such as providing loans and overdrafts to its customers, providing financial information as well as recommending investment options to interested customers.

To conclude, Banks are a part of the overall Financial system and in today's world very limited financial transactions can take place without the involvement of Banks and few systems through which money is transferred illegally between places is termed as illegal in many parts of the world.

Types of Bank Accounts

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Loans can be dated back to the age after the barter system when goods and services were offered in exchange of some other goods or services.

In modern times, various types of Loans are offered by many Banks and Financial Institutions. Loans that are offered by these financial institutions are majorly provided for the below mentioned categories.

1. Personal Loan
2. Commercial Loan
3. Gold Loan
4. Agricultural Loan
5. Student Loan
6. Educational Loan
7. Mortgage Loan

Any individual or an organisation interested in availing any of the above mentioned Loans have to necessarily fit in the predefined criteria or eligibility criteria set by these Banks and Financial Institutions.

Different Banks have different amount of limit set for every loan or Credit Card or any other form of Credit that can be offered by them and they also have to consider the Debt Burden Ratio (DBR) prescribed by the Central Bank of that region.

Introduction to Loans

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Hi All,

In continuation to my earlier blog about company formation in relation to banks today i will write about partnership companies.

Again as the name suggests, partnership means 2 or more people coming together to form a company wherein profits and losses will be shared accordingly. Partners may be individuals, companies, schools etc. Partnership may exists or people may come together to increase their income and would also create a legacy for their future generations. Also when 2 or more people come together they enjoy economies of scale and also can leverage each others time and resources.

In Banking terms, a Bank is only concerned about the agreement wherein the partners mutually agree to the terms as to who will open and operate the company account and also will be able to borrow in the name of the company if required. Generally a partnership agreement is in place when their are more than 2 individuals or entities involved. A partnership agreement is not made when they are only 2 people in the company and they agree to share the profits and losses arising out of the business and trust each other. In such a case, the Bank would request both the partners to sign on the account opening documents and would decide as to who will operate the account and borrow money incase required. In most of the companies wherein partners trust each other, the account will be operated by both individuals singly (with their single signature). But if the trust factor is less between the partners, the signing instructions are placed as jointly wherein any instruction provided to the Bank has to be signed by both the partners.

Their are many advantages for a partnership company as mentioned above but the major disadvantage would be that one partner might not be responsible enough in handling the responsibilities and the other would do everything but the profit would be shared equally. Also when profits of the firm increases, one might become greedy and would want more profit share or would want to take over the company completely.

Lastly, from a Bank's point of view a partnership deed or an agreement is enough to ascertain who would operate the account and in the absence of an agreement all partners would be required to sign the required documents to start the account. This is considered a normal company account by the Bank and all channels through which customer can operate the account are provided.

Partnership Company

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In this article, we will understand a bit about the various types of company accounts or rather differentiation on the way the company is formed.

The first and the foremost way through which a company is formed is a Sole Establishment or in legal terms Sole Proprietorship. This means that the company is owned by a single individual and is the whole and sole owner of the company.

This is the most simplest of companies as no other person is involved in the decision making process and moreover for a Bank account opening process will be really simple. This is because of the fact that the documents of the company are limited to the trade license of the company and a letter issued by the trade license issuing authority confirming the ownership and share holding of the company.

A sole proprietorship is the oldest forms of companies wherein people do not trust on any one else or wants to keep the ownership rights and decision making powers with himself. In such companies their is no difference between the company and the owner in legal terms as the complete profit earned by the company is his and if their is any loss, he may have to use his personal assets as well to make good the loss.

Their are many advantages and disadvantages of opening a sole proprietor company. Advantages being he is responsible for his own decisions and is not answerable to anyone else apart from himself and his family for any profit or loss arising out of that decision. A major disadvantage of such companies is unlimited liability wherein all assets belonging to the company or the individual are attached with the companies liabilities and if due to any unforseen circumstances, the company goes into losses, these will be utilized to make good the losses of his creditors.

Another important advantage of having a sole proprietor company is that the company is not treated as a separate legal entity and hence the owner need not file a separate tax return for the income earned out of his business. His income and the company income is treated as one and the same and hence taxation is levied only on the individual capacity of the owner.

Finally, a sole proprietor does not have the option to leverage on other peoples time and has to invest a lot of time and has to work with complete dedication. He will never have a dedicated work timing as customers may come anytime and he will be obliged to serve them as every business that comes is important to him and his family. 

Types of companies- Sole Proprietor

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Hi folks, you might be thinking that Banks or financial institutions are the service providers who offer credit cards and their is no need to learn about service providers.

In today's article, let me tell you that Banks offer credit and debit cards to customers but the actual service providers that enable these cards to be used worldwide are 3.

1) Visa Incorporation
2) Master Card
3) American Express

You may have seen their logos on all the debit or credit cards that one holds. The logos depict that the card can be used any of the merchant outlet that accepts payments via visa or master card. Both visa and Master Card does not issue cards or provide credit to customers, rather to provide Banks and Financial organisations with a payment gateway that allows their customers to use the cards.

You may have noticed that i have not spoken anything about American Express till now and only discussed about Visa and Master. I did that on purpose as Visa and Master card offers or rather sells their network to various Banks and Financial Institutions but American Express network is the only network that offers their Credit Cards. American Express cards are only accepted at the terminal which has a tieup or relation with American Express. This is done to ensure that the money made out of every transaction are kept by American Express and not shared.

visa and Master share the revenue generated from every transaction with the Bank involved in the credit card. These gateways or the funds transfer facilitated by Visa and Master Card plays a major role in the global financial system as you may see that a Card issued in United States works in India or Japan or anywhere the network is available. The global financial system pertaining to credit and debit cards would not have flourished to the extent it has now if these payment gateways were not available.

Every transaction that happens at any of the Visa or Master terminal, the merchant is charged a percentage of the transaction value and the revenue is then shared between the Bank and the payment gateway provider which may be Visa or Master card.

So next time you use your card to purchase something at a grocery store or visit any ATM outside your county, remember that it is possible only due to these payment gateways

Card Card service providers

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Another type of savings account offered by Banks is a special kind of savings account which provides a much higher interest than savings account but has few clauses attached to it wherein funds are not accessible as easily as they are accessible in a savings account.

The basic idea of such accounts are that they are operated using Internet Banking or Mobile Banking and teller transactions or basic branch transactions are restricted. Another restriction that is levied for such accounts is the number of transactions that a customer can perform on this account in a month to earn the high rate of interest. Once the customer exceeds the number of transactions, interest rate will drastically drop and reaches next to zero wherein customer earn nothing.

A special savings account is provided with a debit card but no cheque book as money can be withdrawn from such accounts using ATM. Again the restriction on debit transactions apply, for eg; if the number of withdrawals allowed by the Bank are 3 and the customer withdraws from the ATM 4 times, the interest rate drops.

Internet Banking services and mobile banking services are offered to such accounts and the customer can perform all the required banking transactions using these services. If a customer wants to withdraw cash from such accounts using teller counters or branches, they can do so at a charge and the Bank may waive such charges if the amount to be withdrawn is higher than the daily withdrawal limit of a Debit card.

Before i proceed further, let me tell you that a debit card or a credit card has a withdrawal limit again to protect the customers interest that incase if the debit card and pin falls in wrong hands, customers loss will be minimized as the person will not be able to withdraw beyond that amount in one day, further they are transaction limits and ATM limits also in place for security purposes.

So, if the amount that the customer wishes to withdraw is more than the amount he/she can withdraw using their Debit Cards, the Bank may waive the applicable charges based on customer profile and the need of the customer.

No charges are levied by the Bank for non maintenance of minimum balance in such accounts as interest is paid on the amount kept in the account by the customer which again has a maximum cap or amount on which interest is paid. If a customer keeps an amount higher than the amount capped by the Bank on which it will pay interest, Bank will not pay any interest on that amount.

Every Bank has such zero balance savings accounts with different names, ask your Banker for such account and enjoy a higher rate of interest on your money with the features of a savings account.

Special Savings account

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Hi folks, today we will learn about the various channels offered by Banks to make sure that customers only visit their branches to deposit or withdraw cash.

One of such facility is Internet Banking wherein Banks offer all kinds of services such as requesting for a reference letter, checking available balance and ledger balance, transferring funds between one account to account between the same Bank and also between other Banks. Remittance can be made across countries as well using Internet Banking and the beneficiary details have to be entered or rather saved once.

Let me explain you the difference between available balance and ledger balance shown on any Internet Banking page. Available balance is generally displayed when the customer clicks to check his account balances overall or rather the first page of Internet Banking and when the customer checks the transactional history for his account, all transactions are displayed wherein any transactions that are not yet posted or cleared are also displayed as balance.

If a customer does not understand the basic difference between available and ledger balance, he might assume the ledger balance as available balance and issue cheques. Their is a possibility that cheques might be returned due to insufficient funds as a hold might exist on the account or other cheques deposited in the account might not be cleared.

To add further to the things that can be done using Internet Banking is requesting cheque book, taking a copy of the account or credit card statements, requesting for various services on the credit card or debit card. Also customers can check their loan outstanding, their credit card outstanding, their investment details, insurance details, paying bills and so on. The list goes on wherein numerous banking transactions can be done using internet banking.

The simplicity with which Internet Banking works has made it prone to fraudsters who try to get the user ID and password of customers and then remit the available funds in customers account to their account. Always remember, a Bank will never ask its customer to click on a link to enter their user ID and password or to share their identity. If you see anything unusual on the Banks website their is a possibility that you are on a different site or a dummy site.

Always be very careful while using Internet Banking, never share your passwords or write it down. Try to keep a password easy for you to remember but difficult for others to guess. Banks invest a lot of money to keep their customers money and their reputation safe but still fraudsters keep trying and jump on the slightest chance available. Finally, never login to your internet banking account from an unknown or non protected PC to protect your own interest as Bank will not indemnify the customer if fraudster is able to get your user ID and password.

Internet Banking

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Cash Back is a feature offered by various Banks to make sure that existing customers are retained and also to get new customers.

Cash Back as the name suggests is cash given back to the customers on any purchase made using their cards. Cash Back is generally offered on Debit and Credit Cards both. The amount of cash back that can be earned will possibly be higher on a Credit Card than on Debit Cards as Banks generally do not earn much on Debit Cards as compared to Credit Cards.

Before going any further let me give a brief explanation on Debit and Credit Cards. A debit card is a card issued by the Bank on its account to allow customers to withdraw cash from ATM's as per their need and also can be swiped on merchant terminals to purchase goods. The basic difference between a debit card and a credit card is that a debit card works only when money is available in your account wherein credit card is the money provided by the Bank to utilize and spend which does not belong to the customer but he/she is supposed to pay the outstanding before the due date to avoid interest or charges levied on the card.

I prefer using a Debit Card as I am aware of how much do i have in my Bank account and how much can i spend wherein incase of a Credit Card, customers generally tend to spend more than their repayment capacity and falls into a debt trap from where very few make it out. Spending more than the repayment capacity can happen as Banks provide a limit of 6-7 times a persons income/salary and if the customer utilizes the complete limit then he will find it really difficult to repay as his income would not even be enough to pay the interest levied on the credit card outstanding.

Coming back to the topic of cash back, customers who use their cards wisely earn cash back and also redeem them before they expire. All Banks set an expiry date for cash back earned as they do not want customers to redeem these. If every customer redeems the cash back earned, Bank would loose a lot of money by paying cash back and hence Banks generally do not inform the customers that their cash back is about to expire. Once the cash back expires, statement is sent to customers informing them about the expired cash back which will never be reinstated.

Every purchase made by the customer using the Banks card earns him a cash back but their is always a limit at the maximum amount that can be availed by customers as cash back. A humble request to all is to regularly monitor their debit and credit card statements and to make sure that they redeem the cash back as soon as it reaches the minimum limit set for redeeming the same.

Cash Back on Credit and Debit Cards

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A Credit Card Cheque is a feature offered by Banks to its Credit Card Customers. As the name suggests, a managers cheque is issued in favor of a third party as per the customer request. For instance a customer may want to pay his childrens school fees but generally Credit Card payment is not allowed by schools forcing parents to pay cash or a cheque.

In such a situation, a Credit Card Cheque helps wherein the Credit Card is debited with the amount to be paid and a Managers cheque is issued in favor of the school. This will be help the customer as he may not be in a position to pay cash or might be in a difficult financial situation wherein this will act as a savior and allow the customer to pay the fees. A Credit Card Cheque can also be used to pay Rent or insurance premium or making a payment for buying a car.

Some customers use this feature for their own benefit wherein they request the Bank to issue a Credit Card Cheque in favor of their friend or relative and later ask them to deposit it in their account and withdraw cash from their. (The only negative aspect or risk involved is that customer's friend or relative might change his mind and refuse to withdraw and provide cash to customer). This generally does not happen but may happen so choose the name of the person very carefully.

The interest levied by the Bank on a Credit Card Cheque is higher than the retail transactions but lower than a cash withdrawal. As mentioned in my earlier blog, withdrawing cash from a Credit Card is the worst thing an individual can do as Banks do not clear the cash outstanding until the complete credit card is settled and interest is levied from the date of withdrawal till the complete outstanding is paid, also interest is compounded which makes the interest outstanding really really high. To avoid such a situation, a credit card cheque can be taken and interest can be paid as per the rate agreed with the Bank.

Also, a processing fee is levied  by Banks to make more money from customers and a cancellation charge is also levied incase customer changes his mind to cancel the cheque once it is issued. Details of charges that will be levied by the Bank are mentioned at the time of availing any product and are also available on the Banks website for easy reference.

Terms and conditions pertaining to any product are also available on the Banks website which are subject to change with or without any notice to customer. Finally, instead of withdrawing cash it is advisable to utilize such products offered by your Banks only incase of financial emergencies and these products should not be used to fulfill one's wants.

Credit Card Cheque

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Hi Folks, its been long again since I wrote my last article. I promise I would be more regular with my blogs going forward. :)

Todays article is about Trust Receipts or Trust Receipt Loans offered by Banks as part of their Trade Finance products. A Trust Receipt is like a loan offered based on trust and previous history of the customer as these are unsecured loans wherein a customer receives documents but does not have the money to pay.

In such situations Bank agrees to provide a short term loan which does not generally extends beyond 90 days and the customer is able to clear the documents and the goods associated with those documents. In a trade transaction, the terms of the deal are decided between the buyer and seller and the Bank is not a party to the transaction but if the customer is unable to fulfill his commitment towards the seller and is unable to get the goods cleared from customs, he approaches the Bank to get the documents cleared and thereby clearing his goods.

The customer makes payment on or before the due date of the loan. Generally   customers who use the trust receipt facility has an account with the Bank which is debited on due date to clear the outstanding. Incase the account is not funded by the customer or the customer forgets to fund the account, charges will be levied in addition to the interest levied on the amount provided to the customer as Trust Receipt.

Amount of interest that will be levied to customers account is determined at the time of agreeing to the transaction and availing trust receipt facility. Some customers avail this facility due to shortage of cash and some customers avail this facility to avoid making payment from their own funds;instead prefers to use the Banks money to make more than the money paid to the Bank as interest.

As mentioned in my earlier articles, every transaction make by the customer is deemed as a request by the Bank which may be approved or rejected, same is the case with trust receipts wherein customer profile is checked by the Bank thoroughly before extending this product as this is a highly unsecured product wherein the Bank will tend to loose the complete document value incase payment is not received on due date.

Stay tuned for more on various Banking products............................

Trust Receipts

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Similar to Commercial Loans provided to companies based on the company financial documents provided to the Bank, a Personal Commercial Loan is provided to a Company based on an individual credit and account history.

This does not mean that the Bank does not review the company documents and the company financials since its inception but it means that the Loan is granted on an individual name and is not provided on the company name. The above mentioned information may not mean anything to some people who does not know Banking or the laws governing Bank accounts and Loans. For a Bank a company is a separate legal entity and its owner is another individual legal entity.

If a Loan is provided to a company, the owner is indirectly responsible for repayment as he has signed the documents confirming payment of EMI's on time, however if the documents are signed by Power of Attorneys who are paid employees of the company who are fired after sometime, the attorneys or the legal representatives will not be held responsible for payment but the company will be liable to repay the Loan outstanding.

But incase the loan is provided on an individual name and on his individual capacity but based on the company documents, creditors and customers, the individual under whose name the Loan is provided is solely responsible for repayment and the company is not directly liable for repayment.

The amount of loan provided for such kinds of Loans is less than commercial loans and the charges and interest have to be clarified with the Bank before completing the documentary requirements as the Bank will only agree to what is written on the Loan application and it is highly recommended that the documents are filled in before they are signed.

Personal Commercial Loan

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Its been a while since i wrote an article and i blame that to my busy schedule, nevertheless this article will give you information about Balance Transfer facility offered on Credit Cards.

Balance Transfer as the name suggests is transferring your Credit Card outstanding from one Bank to another, this happens via a managers cheque or a wire transfer from the Bank who is intending to take on the liability.

For Eg: If a person X has 3 cards; one from Citi Bank, Standard Chartered Bank and one from Barclays and he intends to have only one Credit Card outstanding (provided he has not utilized his card limit fully on all cards), he approaches Citi Bank and requests them to issue a Balance Transfer from his Credit Card to Standard Chartered and Barclays each. The Bank accepts his requests and issues him the cheque or sends the money to his cards in the respective Banks as per his instructions.

Once the money reaches Standard Chartered and Barclays, his credit card outstanding will be reduced to the extend of money transferred from Citi and his liability will increase with Citi to the extent of cheques/wire transfers issued.

The basis question would be why would a person transfer his balance between banks when he can clear the outstanding individually with all Banks. The answer to this would be; Banks sometimes provides an offer to provide Balance Transfer free of any interest for 3 months at a nominal processing fee. By availing this offer customer can enjoy "0" percent interest on his balance transfer credit card outstanding for 3 months and if he is able to clear the outstanding in the given period no interest will be levied by the Bank.

Further products offered by the Bank in terms of Credit Cards and Loans will be shared with you in my coming blogs, stay tuned................. 

Balance Transfer on Credit Cards

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Further to the previous article about Credit Cards wherein basis information was shared about Credit Cards and the way they work. In this article you will the reason why Banks are called Credit Card sharks.

A credit Card is something that the Bank does not want its customers to pay on time, this is how the Bank makes loads of cash/profit. If every credit card customer utilizes the limit provided to him and pays before the due date, the Bank will not be able to continue the product for long as the Bank will be earning nothing and the fixed cost and the variable costs involved in running the product will be very high.

As not all customers will pay the complete outstanding, the people who pay are called "transactors" in Banking terminology. The people who do not pay and let the interest added to their outstanding are called "revolvers" since they keep revolving their credit card outstanding by paying minimum amount to avoid late payment charges.

Some Banks have hidden charges for these products wherein may product features and rates and not provided to customer upfront but the customer comes to know about the these charges once he receives the statement. If he checks with the Bank, he will be informed that these are covered in the terms and conditions which he signed for (a lengthy booklet in the minimum font possible).

Once the customer gets into the habbit of revolving his outstanding, he will be charged late payment charges if he does not pay on time, he will be charged interest on the total outstanding from the date of purchase. If the credit card goes over limit due to the charges levied by Banks, customers will be charged over limit fees as well.

I will be discussing more about the products offered under Credit Cards in my next article but want to advice everyone who uses a Credit Card to use it smartly and to avoid making delayed payments as few people tried their complete life to clear the Credit Card outstanding but were unable to do so as the interest keeps on piling.

Information about Credit Cards-2

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A very popular product offered by all Banks is Credit Cards. As the name suggests, it is a facility offered by Banks as a card. The limit offered to customers is based on their salaries or business income and Bank charges interest on the outstanding amount incase the complete outstanding is not paid on or before the due date.

Credit Cards are very popular across the globe as customers like to spend the money which they do not own and some customer get into the habit of not paying the complete outstanding on the credit card on or before due date. Once the payment is not received by the Bank on the due date, interest is charged to customers and is added to the existing outstanding from the date of purchase. For instance if a customers statement date is first of every month and he made a purchase on 2nd of that month, he will not be required to pay that amount till the amount reflects on his outstanding statements. This means that the statement generated on the 1st of next month will reflect this transaction and he will have to pay approximately on the 15th of the second month.

The customers who understand this logic gets an interest free period of upto 45 days from the date of purchase as in the example cited above, the transaction was done after the statement date and payment was made on the due date.

Many features are offered under Credit Cards such as Instant Money, Credit Card Cheque, Balance Transfer etc.

A word of caution for new Credit Card customers is to never withdraw cash using their Credit Card as Banks start charging a very amount of interest from day one and this transaction will not be settled by the Bank till the complete outstanding is settled. So if a person does a cash withdrawal and later does some retail transactions, payment made towards the cash (assumed by the customer) is actually allocated to retail transactions and cash stands outstanding and interest is charged till the complete credit card outstanding is settled.

Introduction to Credit Cards

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As mentioned in my earlier article, for an outward remittance a request is submitted by the customer and the same is processed by the Bank based on its discretion.

An Inward Remittance works the other way round wherein funds are received by the customer and the Bank informs the customer about the credit in his account by way of SMS or regular statements. An Inward remittance also goes through the various checks in place at the Bank for sanctioned entity or country and also for restricted countries famous for money laundering. If an inward remittance does not get approved at the Bank, the same is returned after deducting the Banks charges to the remitter and informs its customer accordingly.

An Inward remittances may also not be accepted or rather credited to the customers account is the name of the beneficiary or the account number does not exactly match the name and account number of the customer. In this case the customer is informed about the discrepancy and is requested to inform the remitter to send an amendment request correcting the information required so that the payment can be processed and credited to his account.

The customer will then contact his remitter and inform him to send an amendment to the payment and also requests him to send a copy of the amendment swift to avoid payment being returned back. Banks generally return these kind of discrepant payments in 5 working days if the amendment via authenticated swift is not received. Since all the instructions for sending and receiving a remittance are sent via swift messages it is generally instant but in some cases the payment is returned back even if the beneficiary provides a swift copy confirming an amendment is sent as the Bank has not received the authenticated message confirming the corrected details.

Charges are levied by Banks for sending as well as receiving payments except in case of wealth management customers who are provided preferential pricing and also preferential exchange rates. Details of charges are published on the Banks website and can be referred before sending a remittance to know the approximate charges levied by the Bank for sending a particular remittance. 

Remittances- Inward

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Remittances are generally of 2 kinds, Inward remittances and Outward remittances.

Remittance requests submitted by customers are processed by the Bank without taking any risk or responsibility on the amount being received by the final beneficiary. This kind of remittances are called outward remittances. Customers submit their requests to the Bank through the various channels offered by Banks which are Branches, Internet Banking, Mobile Banking and etc.

Various Intermediary Banks are involved in the process of sending this remittance as the Bank may or may not have a direct relationship with the Beneficiary Bank. For eg: A remittance is to be sent to China from UAE in USD. The sending Bank from UAE will send the remittances through its correspondent Bank which inturn will search a Correspondent Bank which has a relationship with the Beneficiary Bank and the payment will be transferred to the Beneficiary Bank and in turn to the Beneficiary. This complete process generally takes 3-5 working days depending on the countries involved in sending the remittance and also the agreement between Banks.

A very important thing to notice when a remittance is sent in a foreign currency is the value date offered for that particular remittance. The value date is generally 1 day after the remittance is sent but may be different incase the Beneficiary or the Intermediary Bank has holidays during those days. For eg: an amount might be debited from the customers account on 2nd of a month but the value date provided by the Bank may be 6th due to intervening holidays. This means that the amount will not be received by the beneficiary till the 6th or 7th of that particular month.

As is a case for all requests submitted to the Bank, a remittance request may be rejected by the Bank due to compliance reasons or sanctions levied against that entity or country and also may reject a request without giving any reason what so ever and the Bank reserves the right to do so.

Information about inward remittances will be provided in the coming article.

Remittances- Outward

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Remittances- Outward

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This is the last article about Wealth Management wherein in the previous articles I have mentioned about the various segments in a wealth management division and also that a relationship manager is assigned to each account for personalized attention to customers and also to provide a one point contact to customers for all their banking needs.

Also, customers are offered investment and insurance products based on their needs and are provided priority services in terms of charges, cheque book delivery and also preferential currency exchange rates. The relationship manager along with the support team provides the services required to customers on a priority basis. For eg: if a normal transfer within the Bank takes 1 day for a branch banking customer, it is processed in 2-3 hours for a priority customer.

Further preferential rates are offered in terms of forex, buying and selling rates are provided based on the overall relationship maintained by customers (in depth information about a relationship has been provided in my earlier post). The rate offered is based on the average balances maintained by clients as the best rate is offered to customers who have the maximum number of transactions in foreign currency. Investment options and also child's future protection plan are provided to customers on a need basis and the investment details are provided to customers over a recorded call by majority of the Banks to ensure that the investment and insurance details are provided correctly by the relationship manager.

To avoid mis-selling which is prevalent in cases of insurance and investments and these are 3 party products and the Bank is not responsible for any future loss as the product is owned by an insurance company and these are only referred to its customers by Banks. A word of caution while signing any investment or insurance related product is to read the policy terms and conditions in detail (which is generally lengthy) as the information provided by Relationship Managers about the returns from a particular product may not be true.

Wealth Management-3

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Another kind of trade finance facility offered by Banks is cheque discounting facility. Under this facility post dated cheques received by customers from his customer can be discounted and will be paid by the Bank before the actual due date of the cheque.

You might that why would a Bank discount a post dated cheque when payment of this cheque is not guaranteed on due date. The Bank discounts the cheque at a charge and this is debited on the day the cheque is discounted and paid to the customer.

Bank takes the risk of that cheque till due date and presents it for payment on the date mentioned on the cheque. Generally, these kind of cheques gets cleared and the Bank receives its money but in some cases the cheque is returned due to insufficient funds. In such a scenario, Bank contacts its customer and requests them to pay the amount of the cheque since it was returned unpaid due to insufficient funds and he can contact his party and try and get the funds or take the dispute forward legally.

Charges charged under this facility are mentioned on the Bank's website and are also informed to customer when the customer requests for such facilities. Also, cheque discounting facility is not offered to all customers but is provided to few customers who are trust worthy in the eyes of the Bank and has maintained good relations with the Bank.

Also, Banks provide LC discounting facility, details about LC (Letter of Credit) were provided in my previous blog and LC is issued by Banks confirming payment. Both cheque discounting facility and LC discounting facility is subject to Banks approval as is the case for any request submitted to the Bank.

This kind of facilities are requested by customers who are in need of urgent working capital and do not want to wait till the payment date.

cheque discounting facility

NEXT Another kind of trade finance facility offered by Banks is cheque discounting facility. Under this facility post dated cheques r...

cheque discounting facility

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