Mon, 26 Mar 2018 by Praveen Kotian

Remittance simply means payment of money from one point or entity to the other. History indicates that when it became difficult for the head of the family to earn basic livelihood at a place where he was born, he had to leave his hometown and explore other more developed locations where he could find work, earn money, save a bit for the family and send the savings home periodically. This private savings of worker is spent in his home on basic necessities. This process of money-transfer is called remittance.

We have been witnessing this phenomenon in India since migrant labour first started re-locating to nearby developed towns/ cities and 'remit' money home. Over a period of time this primitive form of migration got evolved into migration of families, migration of extended families as well as migration from less developed cities to metros and finally migration abroad.  

It has since long become a complex economical subject. So much so that organizations are being built around these services of remitting money. Newer & newer products are being designed to render this process simpler for the stakeholders. As a matter of fact,economies of certain countries are having a direct bearing on the remittances received.

The level of remittances received in certain countries is astronomically high, to the extent that the remittances are quantified in terms of percentage of GDP of these countries.

The core parameters of this process of remitting money, however are very basic and revolve around:

Time taken to deliver the money to the intended recipient

The safety factor, the assurance that money would reach in the hands of the recipient in a secured way.

The ease with which money could be remitted, that is the paperwork involved. The lesser and simpler the paperwork or smoother the mechanism (without compromising the safety), the better.

Fees for rendering this service. Obviously lesser the commission charged by the service-provider, the preferable he is from the point of view of sender and/or recipient.

During the initial stages Post Offices, money orders were holding monopoly in sending remittances. Thereafter& even today Banks are playing a stellar role in remitting money. There are formal & informal couriers handling remittances effectively.

The Banking products have got transformed in their nature and speed and complexity of mechanism. Starting from age-old Demand drafts, banks now offer ATM cards, facilities like online money transfer (subject to availability of internet), NEFT (National Electronic Funds Transfer), RTGS (Real Time Gross Settlement) to name a popular few.

There are international organizations like PayPal, Western Union, Remitguru etc. offering services in International as well as domestic sector with a relevant fee for their services. The Fees structure depends upon the location of recipient, quantum of money to be remitted and the speed with which the transfer takes place. In respect of international transfers, even the exchange rates among various currencies are accounted for.

Remittances thus serve as a basic lifeline for survival & development of modern work-force & even countries where human capital is a major factor governing their economy.

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