Foreign Remittances - Assignment Point
Foreign Remittances
Subject: Banking | Topics:

 FOREIGN REMITTANCES SECTION

(INWARD & OUTWARD)

Foreign remittance, in simple terms, means money remitted in foreign currency. More precisely, it is termed as remittances in foreign currency that are received in & made out abroad. Conceptual Issues International remittances are defined as the portion of migrant workers’ earnings sent back from the country of employment to the country of origin (ILO, 2000). Remittance can also be sent in kind. Transfers that take place in kind is quite difficult to measure.

 Remittances can be individual and it can also be collective. When, individuals send remittance to his/her household or kith and kin that can be termed as individual remittance. When a group of migrants, their associations or professional bodies oblige resource together and send for collective or community programs that can be termed as collective remittance. Individual remittances are mostly geared towards the family whereas collective remittances are generally used for community development.

Transfer of remittances takes place through different methods. 46% of the total volume of remittance has been channeled through official sources, around 40% through hundi, 4.61% through friends and relatives, and about 8 percent of the total was hand carried by migrant workers themselves when they visited.

                   TYPES:-

Two types of Foreign remittance:-

1.      Foreign Inward Remittance

2.      Foreign Outward Remittance

Wage Earners Remittance Inflows (Monthly)

Year/Month

Remittances

In million US dollar

In million Taka

2008-2009
   April

781.71

53609.70

   March

808.72

55445.80

   February

689.26

47269.50

   January

710.74

48742.50

   December

635.34

43571.60

   November

617.39

42383.80

   October

559.05

38406.70

   September

590.67

40579.00

   August

470.95

32307.20

   July

567.11

38926.40

2007-2008
   June

516.38

35599.40

   May

557.02

38495.70

   April

543.74

37485.40

   March

537.29

37040.80

   February

500.32

34532.10

   January

462.55

32235.10

   December

555.08

38555.90

   November

598.73

41857.20

   October

377.34

25315.70

   September

466.00

30310.20

   August

471.22

32806.30

   July

412.80

28751.50

2006-2007
   June

429.13

29888.90

   May

487.24

33829.00

  Source : Foreign Exchange Policy Department, Bangladesh Bank

From the trend analysis of wage earners remittance inflow we can see that the remittance is increasing day by day. In the month of July(FY’2006-07) the remittance inflow was 412.80 million dollar where as in the month of July(FY’2007-08) the inflow was 567.11 million dollar.

Wage Earners Remittance Inflows (Yearly)

Year/Month

Remittances

In million US dollar

In million Taka

  2007-08*

6430.94

441242.20

2006-07

5998.47

412985.29

2005-06

4802.41

322756.80

2004-05

3848.29

236469.70

2003-04

3371.97

198698.00

2002-03

3061.97

177288.20

2001-02

2501.13

143770.30

2000-01

1882.10

101700.10

1999-2000

1949.32

98070.30

1998-1999

1705.74

81977.80

1997-98

1525.43

69346.00

1996-97

1475.42

63000.40

1995-96

1217.06

49704.00

1994-95

1197.63

48144.70

1993-94

1088.72

43549.00

1992-93

944.57

36970.40

1991-92

849.66

32414.50

1990-91

763.91

27256.20

*: data up to month of April of financial year 2007-2008.
  Source : Foreign Exchange Policy Department, Bangladesh Bank

 

Foreign Inward Remittance 3.1 FOREIGN INWARD REMITTANCE

DEFINITION:

The remittance of freely convertible foreign currencies which we are receiving from abroad against which the Authorized Dealers making payment in local currency to the beneficiaries may be termed as Foreign Inward Remittance.

MODE OF INWARD REMITTANCES (Also Outward Remittance):

The following are the mode of Inward/Outward Remittances.

      i)          TT        =         Telegraphic Transfer.

      ii)         MT      =         Mail Transfer.

      iii)        FD       =         Foreign Drafts.

      iv)        PO       =         Payment Order.

      v)         TC       =         Travelers’ Cheque.

      vi)        EFT     =         Electronic Fund Transfer

vii)              FCN     =         Foreign Currency Notes.

viii)            OLR      =        on line Remittances.

 A remitter abroad simply has to approach a bank branch there with certain amount to be deposited beneficiary in Bangladesh either in foreign currency or in equivalent Taka currency. The Branch so approached abroad usually should have agency arrangement with the paying banks in Bangladesh. However, in the absence of any such agency arrangement, remittance may also be made by transferring cover value of the remittance to the paying bank’s account abroad by the remitting bank.

SOURCE OF INWARD REMITTANCE:-

i)                    Expatriate Bangladeshis.

ii)                  Exporters.

iii)                Visitors.

PURPOSE OF REMITTANCE:

In short, remittances are being sent from abroad for the following purposes:-

  Family maintenance

  Indenting Commission

  Recruiting Agents Commission

  Realization of Export Proceeds

  Donation

  Gift

  Export broker’s Commission etc.

PURCHASE OF DRAFTS & CHEQUES:

Authorized Dealer may purchase Drafts & Cheques which are not drawn on AB Bank at the request of the beneficiary.

COLLECTION PROCEDURES:

  To make entry in foreign bills Collection Register

  To prepare forwarding schedule.

  To prepare vouchers on realization.

PAYMENT OF FOREIGN CURRENCY NOTES:

 Authorized branches of the bank are to make payment of F.C. notes in equivalent Taka currency at the prevailing rate (T.T. Clean buying rate).

Generally, three foreign currencies namely U.S. Dollar, Pound Sterling and Euro are being bought and sold along with two other currencies like K.S.A. Riyal & Kuwaiti Dinar.

 FOREIGN OUTWARD REMITTANCE

DEFINITION:

The remittances in foreign currency which are being made from our country to abroad is known as foreign outward remittance.

PURPOSE OF OUTWORD REMITTANCE:-

  To settle Import Payment.

  To meet Travel Expenses/Medical Expenses/Educational Expenses etc.

Foreign Remittances

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