Process of Remittance

Process of
Presented by:
The Hedonist
(83015) Asheesh Ranjan Jha
(83026) Lokesh S Chauhan
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)
Developed by the European Committee for Banking Standards

to improve the efficiency of cross-border payments with regard
to speed, quality and cost
G B 2 9 30 Characters max/ country specific
Country
Check Basic Bank Account Number
code
digits
GB 29 BOFS 8020 0100 1234 56

Bank Code National Customer A/c No.
(Bank of Scotland) Sort Code
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 BICconsists of 8 or 11 characters comprising the following
Bank Code, Country Code, Location Code and Branch Code
e.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
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…
CHIPS(Clearing House Interbank Payment
System
CHIPS Statistics
Ø Participant Community
• 47 Financial Institutions
• 20 Countries
Ø Average Daily Volume (2008):

• 365 thousand Payments
• $2.01 Trillion
• 2008 Annual Totals:
• $ 508.75 Trillion
• 91.99 million payments www.chips.org
Ø Average Dollar Amount per payment:

• $5.6 million
Charges
OUR / BEN / SHA

Domestic Clearing ( Settlement Through
Central Bank)
Information
Central Bank Funds
Clearing
Payer’s Bank Beneficiary’s Bank
Institution
Payer(X)
` Beneficiary(Y)
Bilateral Settlement
Payer’s Bank Beneficiary’s Bank
Payer (X) Beneficiary (Y)
Country A Country B
A in Delhi approaches ICICIbank and he wants to transfer Rs. 1
lakh into the account of B in Michigan. B wants the money in
USD.
B(Michigan)
JPM Chase,
Michigan
USD 2032.52
ICICI Bank, ND
Rs. 1,00,000 = USD 2032.52*

+ Charges(1347/- or .25 %)
A(Delhi)
* 1 USD = INR49.20 [Market rate - 48.9650]
Cross Border Transfer through a
Correspondent Bank
Information
Funds
Central Bank
Local
Correspondent Clearing Beneficiary’s Bank
Payer’s Bank
Bank Institution
Payer (X) Beneficiary (Y)
Country A Country B
Case 2
Mourantand 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).
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
ICICI, India JPMC, NY
CHIPS Fed Reserve
HDFC, India HSBC, NY

Another Cross Border Payment Case
Mr. John Smith, a Diamond Trader in New Delhi

holds an INRA/c with HSBC, New Delhi and he wants
to make a payment of INR50,000,000 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
MT 101 UK
BOTK GB 2L
BOTK US NY MT 202
MT 202
MT 202
Federal
Reserve CHIPS BOTK JP PY
NY
MT 101
Japan
HSBC US NY
India
USA MT 202 HSBC IN ND
Bank Charges

Process of Remittance

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Process of

Nostro Account: A banking term to describe an

Vostro (Loro) Account: The counterpart to nostro

Developed by the European Committee for Banking Standards

G B 2 9 30 Characters max/ country specific

GB 29 BOFS 8020 0100 1234 56

Bank Identifier Code (BIC):

SWIFT is solely a carrier of

A specific type of Standards message that is expressed

Ø Average Daily Volume (2008):

Ø Average Dollar Amount per payment:

OUR / BEN / SHA

Payer’s Bank Beneficiary’s Bank

Payer (X) Beneficiary (Y)

Rs. 1,00,000 = USD 2032.52*

Payer (X) Beneficiary (Y)

ICICI, India JPMC, NY

CHIPS Fed Reserve

HDFC, India HSBC, NY

Mr. John Smith, a Diamond Trader in New Delhi

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