Chapter 7: Remittances

I cannot give you the formula for success, but I can give you the formula for failure--

which is: Try to please everybody.Herbert Bayard Swope

Learning Objectives

At the end of this chapter learners should be able to:• Classify the various types of remittances• Explain the usage of each remittance account• Elaborate the process of applying for

remittance account• Distinguish the feature of each remittance

account.

Remittances

• A sum of money sent in payment for something.

• A transfer of funds done in the banking system.

Cashier’s Order

Demand Draft

Telegraphic Transfer Mail Transfer

Cashier’s Order

• Also known as a Banker’s Cheque. • A form of cheque drawn (issued by) on a bank

therefore normally does not have default in payment.

• Used when payment by personal cheque is not accepted or payment in cash is not advisable.

• Drawn and payable by the issuing Bank (branch) itself.

Cashier’s Order

• Documents needed are:– Name and address of customer/ applicant. An

identification card is also required to be produced to the bank officer;

– Name and address of beneficiary (who will receive the funds);

– Application date;– Amount involved;– To mention whether the transfer is by cash, cheque

or debiting the applicant’s account.

Example of Cashier’s Order

Demand Draft (DD)

• Cashier’s Order is used for remitting funds in the same area but DD is used to remit funds to beneficiary who is at a different area/ town/ country i.e. the bank being addressed is required to pay on DD the beneficiary specified on the draft.

Types of DD

Local DD

Foreign DD

Local DD

• Drawn in Malaysian Ringgit and payable in Malaysia.

• Drawing bank/ issuer has to inform the drawee bank that it has issued the DD and also make arrangements to transfer the funds to the drawee bank.

• Maturity of DD is six months.

Types of Local DD

• DD is drawn by an issuing bank/ drawing bank.

Outward DD

• DD issued by other bank and received by a drawee bank.

Inward DD

Foreign DD

• DD in a foreign currency. • It is necessary to mention the

amount and currency involved and also the selling rate.

Outward Foreign

DD• DD issued by other bank and

received by a drawee bank.Inward Foreign

DD

Telegraphic Transfer

• A transfer of funds electronically using cable, telex, fax, telephone transmission and through Society of Worldwide Interbank Financial Telecommunication (SWIFT).

• The transfer does not use any signature, thus Test Key (authentication system) is needed.

• Can be used domestically or internationally.

Types of TT

TT

Inward TT

Outward TT

Outward TT

• Can be for in or out of a country. • Local outward TT can be made in Malaysian Ringgit

but overseas transfers can be done in Malaysian Ringgit or foreign currencies.

• Costs involved are: Amount to be remitted, cost of inland exchange for local TT and transmission charges.

• If the TT is done in a foreign currency, the Malaysian Ringgit equivalent will be calculated at prevailing selling rate.

Inward TT

• Can be from in or out of the country, either from other local branches, local agents or from overseas branches or overseas agents.

• To remit the funds, the bank has to contact the beneficiary.

• If the inward TT is in foreign currency, the Malaysian Ringgit equivalent is calculated at the buying rate.

Mail Transfer

• Similar to TT. • The difference is that the message is sent

through mail rather than specifically.

Other Remittances: Standing Instructions

• An instruction given by a customer to a bank to remit regular interval of payment or transfer of funds to a beneficiary.

• The amount involved is the same. • E.g. payments for loans, insurance premium, monthly gift to

parents or children pocket money. • A form is needed to be filled up with the information related to

the name and address of beneficiary, amount involved, payment interval, date of payment and from which account the remittance is to be made.

• The bank will execute the standing instruction by remitting payment by cashier’s order, DD or TT or mail transfer or by crediting the beneficiary account.

Sample of Remittance Form

ANY QUESTIONSEnd of Chapter 7