Many young professionals move to cities in search of jobs, leaving parents in their hometown. Once they find a job, they usually send a part of their earnings home to help their parents. Outlook Money takes a look at the various options available to send money home, and the expenses involved. While the channels of sending money home remain the same—banks and post offices—the modes of transfer have increased over the years.
Core banking facilities
Thanks to core banking, you can now deposit money directly into your parents’ accounts from your city. Core banking allows you to operate your account and use other banking facilities from any branch of the same bank, irrespective of the location of your account. Braja Sundar Rath, 34, a Hyderabad-based IT professional, sends money to his parents in Gunupur, Orissa. Earlier, he used to send money through a demand draft (DD). “Using a DD had its own problems,” says Rath.
When the bank branch where his parents have an account was brought under core banking, he started depositing money directly into their account. “The money gets credited to the account immediately and at zero cost,” says Rath.
Making the money reach your home (Graphic)
Open a joint account
The problem comes when branches don’t have the core banking facility. In such a case, you can either open a new account for your parents in a branch that has the facility, or you could open a joint account with one of your parents and give them a debit card to operate it. You should, however, remember that with a new account, the quarterly average balance has to be maintained. In private sector banks, this amount could be as high as Rs10,000. For public sector banks it is around Rs1,000.
A little help from friends
If you find it difficult to maintain the quarterly average balance or if your parents don’t want to operate a new account, you could also deposit the money in the account of a friend who is based in your hometown.
Alwin Horo, 24, an ITeS professional who lives in the NCR, tried depositing money from Gurgaon into his parents’ account, in Ranchi. “I stood in the queue for more than two hours. When my turn came, I was told that the time for depositing money in outstation accounts was over,” says Horo. Luckily, Horo has a Ranchi-based friend whose bank account is connected through core banking. Now, Horo deposits around Rs6,000 a month in his friend’s account for his parents. But, do keep in mind that this may increase your friend’s tax liability.
Online transfers save you the time and effort of visiting the bank to deposit money. At present, around 80 financial institutions in India offer this facility. To transfer funds online, you need to opt for the net banking facility and register yourself for the third-party fund transfer facility. This facility enables you to transfer funds instantly. However, the time taken to credit the account will depend upon the time taken by the payee’s bank to process the payment.
Furthermore, you can transfer funds from your account to any other branch that offers this facility. Also, any transfer request made on a non-working day also gets presented to the Reserve Bank of India the very next working day. The best part, though, is that this facility is offered free of cost.
This was the good old way of sending money home. This option will still hold good if the branch with which your parents bank is not covered by core banking, and you aren’t as lucky as Horo.
But, there are certain disadvantages of going the DD way. Firstly, it is the cost. For example, you will have to pay up to Rs60 to make a DD for up to Rs5,000. Some banks do not charge for this facility if you have an account with them. Secondly, you’ll have to send the DD through courier or speed post, which is added cost. Also, once the draft is submitted, it takes a minimum of three working days for the funds to be transferred. Moreover, you also lose time standing in queues to get the draft made. Many banks have a dial-a-draft facility where you can call the bank and it will deliver the draft to you. This option is more expensive, and you will have to use your credit card to avail this facility.
Instant Money Order (iMO)
If you don’t have the time to get a DD made or to deposit money in your parents’ bank account, do an instant money order (iMO). With iMOs, you can transfer funds instantly to more than 600 post offices across India. You can find the list of post offices at India Post’s website www.indiapost.gov.in. You can transfer Rs1,000-50,000 from a designated iMO post office. The charges depend on the amount to be transferred. For example, transferring up to Rs5,000 costs Rs150; Rs300 for amounts between Rs45,001 and Rs50,000. In order to transfer money, you have to fill a “To Remit Payment” (TRP-1) form and submit it with the money. You will get a printed receipt with a computer generated confidential 16-digit iMO number.
Give this number to your parents. Your parents have to give this number at any designated iMO post office counter, fill up and submit a “To Make Payment” (TMP-1) form along with an identification proof. Payments below Rs20,000 have to be made in cash, and anything above, by cheque.
Your parents can also take the money from their post office savings account in the same iMO office.
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