How To Encash A Foreign Cheque?

by Shashank Bhaskar Finance Adviser

Tourism is fascinating, where you can roam worldwide and explore different cultures in every country. It enables you to lead an adventurous life with many memories to cherish. However, money is essential for fulfilling all your needs and helping you manage your expenses. Every country has their unique currency.

Suppose you have a foreign cheque denominated in currencies other than Indian Rupees like Euro, Pound Sterling, US Dollar, Yen, etc. In that case, you can encash it by depositing it in an Indian bank. The duration of its realisation depends on the country and method followed. The bank sends the cheque to the concerned country.

The collection processes

As per the Reserve Bank of India (RBI), customers deposit US Dollar cheques in a majority for realisation. The collection process varies depending on the institutional arrangements they make.

Cash Letter Arrangement (CLA)

The customers present the foreign currency cheque to the bank in India, which sends it to the correspondent banks in the US for domestic clearing. The correspondent banks collect the funds and credit them to the account of the presenting bank maintained in the US, known as NOSTRO accounts.

The cooling period based on provisional credit will happen. After the cooling period, your account with the presenting bank in India gets credited. The cooling period is when banks wait after receiving provisional credit for the cheque amount in the NOSTRO account for possible return under US law provisions by the drawee bank before giving credit.

Direct Collection Arrangement (DCA)

Banks in India send the cheques directly to the drawee banks in the US for collection. Usually, collection services ensure receipt of clear funds where the risk of return gets eliminated. It is the most preferred method of collecting high-value cheques, even though it consumes more time.

Final Credit Services (FCS)

The correspondent bank offering this service guarantees confirmed credit against the instrument. It receives final credit in the NOSTRO account without recourse. It does not have any cooling period before the bank can release the clear funds.

You need to visit your bank and deposit the foreign cheque at the NRI desk. Attach the foreign currency deposit form to it and fill in all the details regarding overseas income. Check with your bank the deposit limit for the cheque. For higher amounts, you need to follow the foreign exchange rules as per Indian law.

The currency purpose code

You need to enter the purpose of remittance while filling in the cheque details. Remember to maintain a photocopy of the cheque, the deposited form, and also the receipt returned by the bank officer.

The credit time

Typically, it takes a few weeks to credit the money to your bank account. Most banks take around 21 international days to complete the process. They will also deduct a small percentage as processing charges.