GLOBAL MONEY TRANSFER

Question 1

What is a Local Currency Settlement System (LCSS)?

Answer 1

A system established between countries to allow trade transactions in their domestic currencies, bypassing the need for a third currency (often the US dollar).

Question 2

What are the benefits of an LCSS?

Answer 2

Reduces transaction costs for businesses.
Lowers currency exchange risks.
Promotes trade between the two countries.

Question 3

What are India and the UAE’s mobile-based fast payment systems?

Answer 3

India: UPI (Unified Payments Interface)
UAE: IPP (Instant Payment Platform)

Question 4

Describe the significance of linking UPI and IPP within an LCSS framework.

Answer 4

Enables seamless and quick payments between individuals and businesses in both countries.
Promotes easier cross-border transactions using local currencies.
Reduces reliance on traditional banking channels.

Question 5

What is the RuPay card, and what significant development occurred in June 2023?

Answer 5

RuPay is an Indian debit and credit card scheme similar to Visa and Mastercard
In June 2023, the Reserve Bank of India (RBI) permitted international use of RuPay cards, allowing Indian travelers to utilize them for shopping and ATM transactions abroad.

Question 6

What is SWIFT?

Answer 6

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication.
It’s a secure messaging system that facilitates international money transfers between banks.
Founded in 1973 as a cooperative organization.

Question 7

What is SFMS?

Answer 7

SFMS stands for Structured Financial Messaging System.
It’s a system designed for sending and receiving money transfers within India.
Created by Tata Consultancy Services (TCS) for the Reserve Bank of India (RBI).

Question 8

What’s the key difference between SWIFT and SFMS?

Answer 8

SWIFT is used for international money transfers, while SFMS is specifically for transfers within India.

Question 9

Why are systems like SWIFT and SFMS important?

Answer 9

They provide a secure and standardized way for banks to communicate and transfer funds.
They facilitate trade, investment, and personal remittances across borders (SWIFT) or within a country (SFMS).

Question 10

What is SWIFT?

Answer 10

A global messaging system enabling secure international financial transactions between banks and other financial institutions.

Question 11

What is the purpose of SFMS?

Answer 11

A secure domestic messaging system within India, similar to SWIFT, used for financial transactions between banks and related institutions.

Question 12

Describe the difference between NEFT and RTGS.

Answer 12

NEFT: Processes smaller transfer amounts in batches.
RTGS: Processes larger transfer amounts in real time, on an individual basis.

Question 13

How does SWIFT facilitate transactions across borders?

Answer 13

SWIFT provides secure standardized communication, allowing international transfers between banks even if they lack a direct, pre-existing relationship.

Question 14

Why are systems like SWIFT and SFMS important?

Answer 14

These standardized systems streamline international and domestic financial activities like trade, investments, and the sending of remittances

Question 15

What is a key similarity between SWIFT and SFMS?

Answer 15

Both provide a secure messaging platform for financial institutions to communicate and conduct transactions.

Question 16

You need to send money internationally. What is likely the best system to use?

Answer 16

SWIFT, as it is designed for secure cross-border transactions.

Question 17

You need to transfer a small amount of money to a friend within India. What system might you choose?

Answer 17

NEFT is appropriate for smaller domestic transfers.

Question 18

An urgent, high-value transaction needs to be sent within India. Which system would likely be used?

Answer 18

RTGS, as it processes large amounts in real-time.

Question 19

How does SWIFT facilitate transactions across borders?

Answer 19

SWIFT acts as a global network connecting banks, enabling international transfers even without direct relationships:

Global Reach: Connects thousands of banks, eliminating the need for pre-existing connections between every single pair.
Standardized Messaging: Ensures clear and secure communication through a universal message format.
Intermediary Banks: Routes transactions (and funds) through a chain of connected banks if a direct relationship is missing.

Question 20

What is SWIFT?

Answer 20

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication.
It’s a global cooperative founded in 1973, headquartered in La Hulpe, Belgium.
SWIFT provides a secure messaging network enabling financial institutions worldwide to communicate and transfer funds.

Question 21

What is SWIFT and why is being banned from it significant?

Answer 21

SWIFT: Stands for the Society for Worldwide Interbank Financial Telecommunication. It’s a secure messaging network for banks to exchange financial information, like for international transfers.
Being Banned: Nations can be banned from SWIFT as a severe economic sanction. This makes it extremely difficult for their banks to conduct business internationally.
Examples of Banned Nations:

Iran (Capital: Tehran): Banned for various reasons, impacting its economy.
Russia (Banned in 2022): A sanction in response to the invasion of Ukraine.