1. Remittances Chapter 5
Remittances
Chapter Overview
Remittances
Cashier’s Order
Demand Draft
Telegraphic Transfer
Mail Transfer
Remittances can be defined as “a sum of money sent in payment for something”
….(Oxford Advanced Learner’s Dictionary, 1995)
or it is the transfer of fund done in a banking system. It is a service provided by a
commercial bank to its customers. In Malaysia remittances can be done through:
i. Cashier’s Order
ii. Demand Draft
iii. Telegraphic Transfer
iv. Mail Transfer
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2. Chapter 5 Remittances
Learning Objectives:
At the end of this chapter you should be able to:
1. Classify various types of remittances
2. Explain the usage of each remittance account
3. Elaborate the process of applying for remittance account
4. Distinguish the feature of each remittance account
5.1 CASHIER’S ORDER
A cashier’s order is also known as Banker’s Cheque. It is in a form of a cheque drawn on a
bank. It has the authorized signatures of bank’s officers. The difference between a
cashier’s orders as compared to a cheque is that the cashier’s order is a cheque issued by a
bank and therefore it normally does not have default in payment.
It is used normally when payment by personal cheque is not accepted or payment in cash is
not advisable. It is drawn and payable at the issuing Bank (branch) itself. A customer
needs to furnish the following information in order for a cashier’s order to be issued by a
bank:
a. Name and address of customer/applicant. An identification card is also required
to be produced to the bank officer.
b. Name and address of beneficiary (who to receive the money/fund).
c. Application date.
d. Amount involved.
e. To mention whether the transfer is by cash, or cheque or debiting the applicant’s
account.
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3. Remittances Chapter 5
SPECIMEN 8 : APPLICATION FORM FOR BANKER’S CHEQUE(BC), DEMAND DRAFT (DD),
PAYMENT ORDER (PO) AND TELEGRAPHIC TRANSFER (TT)
Y2K BANK Date : ……………………………….
APPLICATION FOR PARTICULARS OF PARTICULAR OF
APPLICANT BENEFICIARY
BANKER’S CHEQUE Name: Name:
DEMAND DRAFT IC No: Tel No: Address:
PAYMENT ORDER
Name & Address of Bank:
TELEGRAPHIC
Address:
TRANSFER
Account No:
MACHINE PRINT
For my/our account and risk and without responsibility or liability to yourselves and subject
to the Terms and Conditions set forth on the reverse which I/We have read and understood,
please issue your draft/effect the transfer as specified. Payment is to be made in the
following
Cash
Cheque No.: ………… for RM and debit the bank charges or any shortfall (if the
cheque amount is insufficient) to my/our account.
Debit my/our saving
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4. Chapter 5 Remittances
Continuation:
EXCHANGE CONTRACT NO: FOREIGN CURRENCY
SPECIAL RATE BY RATE LOCAL CURRENCY
Commission
Postage
Stamp Duty
Cost of Cable
TOTAL
This section is to be completed as required under the Exchange Control Act 1953 (for
resident to non‐resident transactions only)
APPLICANT …. RESIDENT….NON‐RESIDENT
BENEFICIARY …. RESIDENT….NON‐RESIDENT
I. For payment above M$10,000, please fill in form P.
II. For payment above M$500 to M$10,000, indicate the reasons as below:
Import of Goods
Services…… Freight & Insurance…..Travel (excluding passenger fares)…….Education
…….Interest on loans, debt securities & deposits…….Other services
Transfer
Capital Transactions
SIGNATURE I/We confirm the above information and
VERIFIED application is correct and in order
APPLICANT’S SIGNATURE & CHOP
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5. Remittances Chapter 5
Continuation:
FOR BANK’S REFERENCE TEST TIME RECEIVED BY RELAYED BY CASH RECEIVED BY
USES ONLY NO. NO. CASHIER/TELLER
5.2 DEMAND DRAFT (DD)
Cashier’s order is used for remitting money/fund in the same area but DD is used to remit
fund to beneficiary who is at different area i.e. in another town/area or country. This is to say
that the bank being addressed is required to pay on DD to the person/beneficiary specified
on the draft.
DD can be divided into two types:
a. Local DD
DD is drawn in Malaysian Ringgit and payable in Malaysia. The applicant will
indicate where he wants the DD to be payable. The bank officer in return will
locate the branch of the bank in that town and if there is no branch of the
bank available, the DD can be drawn at its correspondence bank and if no
correspondence bank available, the bank officer will try to find other bank
available. Drawing bank/issuer has to inform the drawee bank that it has
issued the DD and also to make arrangements to transfer fund to the drawee
bank. The maturity of a DD is six months.
Under local DD, we have 2 types:
• Outward DD – is DD drawn by an issuing bank/drawing bank
• Inward DD - is DD issued by other bank and received by a drawee
bank
b. Foreign DD
If local DD is in Malaysian Ringgit, foreign DD will be in foreign currency.
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6. Chapter 5 Remittances
Foreign DD also can be divided into two:
• Outward foreign DD – it is necessary to mention the amount and
currency involved and also the selling rate
• Inward foreign DD - DD issued by other bank and received by a
drawee bank
5.3 TELEGRAPHIC TRANSFER (TT)
TT is a mode to transfer of fund electronically by using cable, telex, fax, telephone
transmission and through Soceity for Worldwide Interbank Financial Telecommunication
(SWIFT) . Since the transfer is not using any signature, therefore Test Key (authentication
system) is needed. TT can be used domestically or internationally.
TT can be divided into two:
a. Outward TT
Outward TT can be for in or out a country. Please refer to Specimen 8 for
applying an outward TT. Local outward TT can be made in Malaysian
Rinngit but for overseas transfers can be done in Malaysian Ringgit or foreign
currencies. The cost involved will include the amount to be remitted, cost of
inland exchange for local TT and transmission charges. If the TT is done in
foreign currency, the Malaysian Ringgit equivalent will be calculated at
prevailing selling rate.
b. Inward TT
Inward TT can be from in or out the country, either from other local branches,
local agents or from overseas branches or overseas agents. To remit the
fund, 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.
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7. Remittances Chapter 5
5.4 MAIL TRANSFER
Mail transfer is the same as the TT. The difference will be the message is sent through mail
rather than electronically. Please refer to Specimen 8 for applying for a mail transfer.
To end-up Chapter B2 : Remittances, we need also to know about standing order
since it is also related to transmitting/remitting fund from one person to another.
5.5 OTHER: STANDING INSTRUCTIONS
A standing instruction is an instruction given by a customer to a bank to remit regular interval
of payment or transfer of fund to a same person or beneficiary. The amount involved is also
the same amount. Examples of such payments will be payments for loans, insurance
premium, monthly gift to parents or children pocket money (for children staying in boarding
schools or away from parents). A form needs to be filled up with the information related to
name and address of beneficiary, amount involved, the 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, or
DD, or TT, or mail transfer or by crediting the beneficiary account.
Checklist
I am now able to:
Classify 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
Take a break before you try doing the following problems
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8. Chapter 5 Remittances
Practice
1. Discuss the ways how a person can remit money/fund in Malaysia by using services
offered by a commercial bank.
2. Compare and contrast between cashier’s order and demand draft.
3. List the advantages of using telegraphic transfer in remitting money.
Reference
1. Money and Banking, Bank Negara Malaysia, 1994, Kuala Lumpur
2. The Central Bank And The Financial System In Malaysia, Bank Negara Malaysia,
1999, Kuala Lumpur
3. BNM Annual Report 1999, Bank Negara Malaysia, 1999, Kuala Lumpur
4. Reed, Cotter, Gill; Commercial Banking, Prentice Hall, U.S.A.
5. Operations of Financial Institutions, IBBM, 1996, Kuala Lumpur
6. Johnson Pang and Nathaniel G Savarimuthu, Banking In Malaysia, Longman
Malaysia, 1991
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