Financial Glossary
Essential terms for international money transfers, forex cards, NRI banking, and cross-border finance. Bookmark this page as your go-to reference for remittance and forex terminology.
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Remittance
SWIFT
Society for Worldwide Interbank Financial Telecommunication. A global network that enables banks to send and receive information about financial transactions securely. SWIFT codes (also called BIC codes) are unique identifiers for banks used in international wire transfers. A SWIFT transfer typically takes 1-5 business days and costs $15-$50.
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Remittance
Money sent by a person working or living abroad to their home country. India is the world's largest recipient of remittances, receiving over $125 billion annually. Common remittance corridors include USA-India, UK-India, UAE-India, and Canada-India. Digital remittance services like Wise and Remitly are 3-5% cheaper than bank wire transfers.
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Wire Transfer
An electronic transfer of funds between banks using networks like SWIFT or Fedwire. International wire transfers typically take 2-5 business days and cost $15-$50 per transaction. Banks also add a 2-4% exchange rate markup, making wires expensive for regular remittances. Domestic wire transfers within the same country are usually same-day.
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Forex
Forex Card
A prepaid travel card loaded with foreign currency at a locked-in exchange rate. Also called a multi-currency card or travel card. Safer than carrying cash, cheaper than using a regular debit/credit card abroad. Can be loaded with multiple currencies and reloaded online. Widely accepted wherever Visa/Mastercard is accepted.
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Mid-Market Rate
The midpoint between the buy and sell prices of two currencies in the global currency market. Also called the interbank rate or real exchange rate. This is the "true" rate you see on Google or Reuters. Banks and money transfer services add a markup to this rate to make profit. Services like Wise use the mid-market rate with transparent fees instead of hidden markups.
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Exchange Rate Markup
The hidden fee charged by banks and exchange services by offering an exchange rate worse than the mid-market rate. For example, if the mid-market rate is 83.00 INR/USD and you're offered 80.50, the 2.50 difference (3% markup) is the hidden fee. Digital services typically charge 0-1%, banks charge 2-4%, airports charge 5-8%.
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Spread
The difference between the buy and sell price of a currency. In forex, it represents the profit margin for the exchange service. A tighter spread means better rates for customers. The mid-market rate is at the center of the spread. Major currency pairs like USD/INR have tighter spreads than exotic pairs.
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Forward Contract
An agreement to exchange currencies at a predetermined rate on a future date. Used by businesses and individuals to lock in exchange rates and hedge against currency fluctuation risk. For example, an NRI can lock in today's USD/INR rate for a property purchase in India 3 months from now. Banks and forex services offer forward contracts for large transfers.
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Cross-Currency Conversion
Converting one foreign currency to another foreign currency, not involving the local currency. For example, converting USD to EUR on a forex card while traveling in Europe. This typically incurs an additional fee (1-3%) on top of the regular forex markup. Avoid by loading the exact currency you need before travel.
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Hedging
A risk management strategy to offset potential losses from currency fluctuations. NRIs and businesses use hedging tools like forward contracts, options, and currency swaps to protect against adverse exchange rate movements. For example, locking in today's rate for a future purchase protects you if the exchange rate worsens.
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Banking
IBAN
International Bank Account Number. A standardized international numbering system for identifying bank accounts across borders. Primarily used in Europe and some Middle Eastern countries. An IBAN can be up to 34 characters long and includes the country code, check digits, bank code, and account number.
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IMPS
Immediate Payment Service. An instant, 24/7 interbank electronic fund transfer system in India. IMPS allows you to transfer money instantly between bank accounts, with transfers completing in seconds. Available via mobile, internet banking, and ATMs. Most remittance services use IMPS for instant deposits to Indian bank accounts.
NEFT
National Electronic Funds Transfer. A nationwide payment system in India that facilitates one-to-one funds transfer between bank accounts. NEFT operates in hourly batches and typically settles within 2 hours. Available 24/7 for retail customers. Most remittance providers use NEFT for standard bank deposits in India.
RTGS
Real Time Gross Settlement. A continuous real-time fund transfer system for high-value transactions in India. Minimum transfer amount is ₹2 lakh. RTGS is the fastest method for large transfers, settling individually and immediately. Operates on business days during RBI working hours.
UPI
Unified Payments Interface. A real-time payment system developed by NPCI that powers multiple bank accounts into a single mobile application. UPI enables instant peer-to-peer and merchant payments in India using a Virtual Payment Address (VPA) like name@bankname. Some international remittance services now support direct UPI deposits.
NRE Account
Non-Resident External Account. A bank account for NRIs to deposit foreign earnings in Indian rupees. Funds are fully repatriable (can be transferred back abroad). Interest earned is tax-free in India. Joint account can only be held with another NRI. Ideal for parking foreign income with the flexibility to move money in and out of India.
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NRO Account
Non-Resident Ordinary Account. A bank account for NRIs to manage income earned in India (rent, dividends, pension). Funds are not freely repatriable—principal repatriation is limited to USD 1 million per financial year with proper documentation. Interest earned is taxable in India. Joint account can be held with a resident Indian.
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FCNR Account
Foreign Currency Non-Resident Account. A fixed deposit account where NRIs can park foreign currency earnings. Deposits are maintained in foreign currency (USD, GBP, EUR, etc.) and are fully repatriable. Interest earned is tax-free in India. Protects against rupee depreciation since funds remain in foreign currency.
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ACH Transfer
Automated Clearing House transfer. A low-cost electronic network for financial transactions in the United States. ACH transfers take 1-3 business days but cost significantly less than wire transfers (often free). Many digital remittance services use ACH to debit your US bank account, keeping costs low.
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Correspondent Bank
A bank that provides services on behalf of another bank, typically in international transfers. When your bank doesn't have a direct relationship with the recipient's bank abroad, it uses a correspondent bank as an intermediary. Each correspondent bank may charge a fee ($10-$25), making multi-hop transfers expensive and slow.
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LRS
Liberalized Remittance Scheme. RBI scheme that allows resident Indians to remit up to USD 250,000 per financial year for permitted current or capital account transactions. Common uses include foreign education, travel, investment abroad, gifting to NRIs, and medical treatment. Transfers under LRS require a declaration (Form A2) and PAN card.
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General
KYC
Know Your Customer. Regulatory requirements for financial services to verify customer identity. KYC typically requires government-issued ID (passport, driver's license, Aadhaar), proof of address, and sometimes employment verification. Required by anti-money laundering (AML) laws. Higher transfer limits are unlocked after completing full KYC verification.
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AML
Anti-Money Laundering. Regulations designed to prevent criminals from disguising illegally obtained funds as legitimate income. Financial services monitor transactions for suspicious patterns, verify customer identities (KYC), and report large or unusual transfers to authorities. Compliance with AML regulations is why services ask detailed questions about transfer purpose.
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Liquidity
How easily an asset can be converted to cash without affecting its price. In forex, high liquidity means large volumes can be exchanged with minimal price impact. Major currency pairs like USD/INR have high liquidity with tight spreads. Exotic currency pairs have lower liquidity with wider spreads and higher costs.
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TCS
Tax Collected at Source. A tax collected by banks on foreign remittances under the Liberalized Remittance Scheme (LRS). As of 2023, TCS is 20% on forex spending above ₹7 lakh per year (excluding education and medical expenses). TCS can be claimed as credit when filing income tax returns. Applicable to forex cards, travel expenses, and overseas investments.
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