If you have ever sent money abroad, you’d have definitely been subject to high fees on the transfer from your bank. But have you wondered why banks charge such high fees on international transactions?
Banks charge these fees to cover the costs of processing the transaction, such as staffing overheads, ensuring compliance with regulations, and converting currencies. Also, in this article, we’ll take a look at the common fees applicable to international remittances along with tips on reducing them. Let’s begin!
Why are bank fees for wire transfers so high?
- In India, sending money abroad under the Liberalised Remittance Scheme (LRS) involves a lot of paperwork, so banks follow a fixed exchange rate, called the ‘card-rate’, set by their Treasury every business day before 10 AM, which is valid till 4 PM. Since exchange rates slightly change throughout the day, the rate a sender sees in the morning may be different by noon. If the new rate is lower, the sender might expect to get the lower rate, leading to disputes. To avoid this and protect their margin, banks fix this card rate, ensuring stability against market fluctuations.
- Bank card rates include a built-in thick margin, called the ‘exchange markup’ (typically 2%–5%) over the Inter-bank rate, allowing banks to earn better revenue, which means the exchange rate you get is higher than the ones you see on Google.
When you check exchange rates on Google, you usually see the ‘Mid-market rate’ or ‘Inter-Bank Rate (IBR)’. It is the real rate shared by financial markets, which is the average point between the buy and sell rate, which is not a transaction-related rate.
- This ‘exchange markup’ also helps them manage risks from exchange rate fluctuations and ensures the institution does not incur a loss when doing the transfer.
- They add the margin and transfer fees to cover overhead costs, operational risks, and regulatory requirements.
All charges applicable on international money transfers (Wire Transfers)
- Currency conversion fees
Banks often charge hidden currency conversion fees instead of listing them separately. This is why some banks waive international wire fees when sending money abroad. They make money by offering an unfavourable exchange rate. These rates are usually range from 2% to 5% above the mid-market rate. - Sending bank charges
Banks charge a service fee for initiating international transfers to cover processing costs and operational expenses. These fees may be a fixed amount or a percentage of the transfer. The service fee varies depending on the bank, transfer method, and destination. - Intermediary bank charges
An intermediary bank also known as a correspondent bank helps transfer money between two banks that do not have a direct financial relationship. This third-party (intermediary) bank receives funds from the sender’s bank and forwards them to the beneficiary’s bank, usually charging USD 15-30 (~Rs. 1,300-2,600) for this service.
Also read: Intermediary Bank Charge Fully Explained
- GST
Goods and Services Tax (GST) is applicable to international money transfers from India. This varies based on the transfer amount. For transfers up to ₹1 lakh, the GST ranges from a minimum of ₹45 to a maximum of ₹180. For amounts between ₹1 lakh and ₹10 lakh, the GST varies from ₹180 to ₹990. For transfers exceeding ₹10 lakh, the GST can range from ₹990 to ₹60,000.
- TCS
Tax Collected at Source (TCS) is applicable on remittance transactions. This tax can be adjusted against your tax liability when filing ITR. If you have to pay zero ITR then it’ll be refunded to you in full by the government.
To know more about TCS, read our article below;
Also Read: TCS on Money Transfer Abroad from India – Simple Guide
How much do Indian banks charge for international money transfers?
| Charge | Cost |
| Currency Conversion Fee | 2% to 5% (Ex: Rs 1.5 to Rs 5 margin per USD transferred) |
| Sending Bank Charges | Rs 350 to Rs 2500 |
| GST | Starts from Rs 45 (depends on transaction volume) Refer Article: How much GST on foreign exchange transactions |
| Intermediary Bank Fee | USD 15-30 (i.e., Rs 1,300-2,600) |
| TCS | It depends on your purpose and volume of money transfer |
Comparison table of international money transfer fees in Indian banks:
| Banks | Outward remittance fee |
| HDFC | Up to USD 500: ₹500 + 18% GST Above USD 500: ₹1000 + 18% GST |
| AXIS | Savings/Prime Accounts: ₹1000 + 18% GST Priority Accounts: ₹500 + 18% GST Burgundy/Burgundy Private Accounts: ₹100 + 18% GST |
| ICICI | Branch Transfer (all currencies other than USD in USA): ₹1000 + 18% GST Branch Transfer (USD): ₹1500 + 18% GST Online Transfer (all currencies other than USD ): ₹750 + 18% GST Online Transfer (USD) ₹1000 + 18% GST |
| SBI | Exchange Rate: 1-3% Markup over interbank rate Service Fee: ₹299 – ₹550 + 18% GST Intermediary Bank Fee: ₹1000 – ₹2500 + 18% GST |
| DBS | Up to ₹1,60,000: ₹1000 Above ₹1,60,000: No charges |
| HSBC | 0.3% of the amount sent (Min. ₹100, Max. ₹1500) Wire Transfer Charge: ₹200 Additional Charge (OUR Option): ₹1200 + GST |
Tips to save money on international money transfers
- Research exchange rates and compare different services
Don’t settle for the first rate you see! Research and compare for the best deal. Different providers offer varying rates, so aim for one close to the mid-market rate to avoid extra charges. - Negotiate with your bank for better rates
When you’re using your bank for international transfers, don’t just accept the first rate they offer. Banks often have flexibility, especially for customers doing larger transactions. Ask if they can offer a more competitive rate on your international money transfers you may get a better deal while transferring funds. - Use online transfer services
When looking for a convenient and cost-effective way to send money, online transfer services can be a great option. They allow you to send funds quickly and easily.
You can use ExtravelMoney.com, a trusted platform with over 6,000 RBI-authorised partnered exchange houses, to send money from India to countries around the world.
- 5% more savings compared to bank rates
- Transfers are completed within 48 working hours.
- Dedicated expert support is available to resolve all your queries and ensure the transaction happens smoothly.
In conclusion
International money transfers can be costly because of several fees, including conversion fees, intermediary bank fees, and exchange rate markups. By carefully researching rates and comparing providers, you can reduce the cost of sending money abroad. You can make your transfer as cost-effective as possible and save money by being informed and making wise decisions.
Also Read: 6 Tips to Save Money on International Transfers: Expert Advice
Rinsha K A is a Content Writing Intern at Extravelmoney.com. With a Bachelor’s degree in Software Development and a strong background in digital marketing, she crafts clear and engaging content. Her work helps readers easily understand topics like foreign exchange, international money transfers, currency exchange, and travel abroad.