Indian student account opportinity

My supervisor and I were approached by our Wealth Management department regarding a new opportunity they would like to explore. Here is the opportunity:

A college in the area has an international studies program. There are many foreign students that come to this particular college to go to school for either engineering or medical. Each ethnicity is assigned a representative from the school of the same ethnicity to try and bridge the communication barriers and make the foreign students' arrival as seamless as possible.These representatives also asist these students with their housing, banking and any other needs they may have.

The representative for the Indian students has recently been in contact with our Wealth Management team regarding a different matter and asked if we would be willing to work with his Indian students and their banking needs. It was explained to myself and my supervisor that these students would arrive with suitcases full of Rupees (their currency) which would equate to approximately $30-35K in cash for them to pay for school with and live on for the year. My bank would need to verify the currency and exchange it for them and use it to open a bank account for the students.

It is aparrently the tendency that when the parents (who are generally wealthy) send their children to America for schooling they also reside here part time and open bank accounts and utilize the American banking system since the Indian banking system is not as regulated and trustworthy. (this is according to the Wealth Management Officer who presented the opportunity)

CIP would not be an issue as they will have valid Passports, F-1 Student Visa's and their school identification. Each year around the beginning of the school year we would need to exchange additional Rupees for them so they can pay tuition and have funds to live on. The currency will be declared at customs.

Does anyone have experience banking foreign students, in particular Indian? Any pointers, thoughts, things to consider?

We are in a university town that has MANY Indian students. We do not do currency exchanges, so I can not help you there. Typically our international students arrive with a Travel Card (MC or Visa) that we will do cash advances to get the account opened. Once opened typically the parents will send wires directly to their accounts. Others will use Western Union and the students will deposit those checks.
I know that we have learned over the years that they seem to bank differently that we do here. There they keep the funds in Savings and spend out of Savings. So we have had to work on educating the students that the Checking account is for spending and Savings is for saving. (Being a CU, everyone has a savings and can have a checking, so things are a little different for us)
A product that our international students love is our Secured MasterCard. Once they are eligible, they get their SSN and want to start building credit. So we will secure in their account $300+ (depending on what they want their spending limit to be) and issue a card. We tell them to use the card for a year and typically by then, as long as all payments were made on time, they will have enough credit built up to offer an unsecured card or a car loan.
Hope this helps!
-K

I'm going to assume each one of these fine, upstanding students have filed a CMIR (I know it's not the Bank's job to do so, but just food for thought).

That aside, how do you plan to conduct DD on the origin of the funds? I'm going to assume that some story that my parents gave me a suitcase with $35,000 in cash to pay for school isn't sufficient?

You might want to take into account the Indian government's limit on exports of Indian currency; no more than 1000 Rupees per person.

Also, the largest denomination rupee is 1000 rupees. USD35K would be roughly 2.5MM rupees, or 2500 thousand-rupee banknotes. And way more than they are legally permitted to take out of the country.

this entire story sounds a tad far fetched. if you think there is validity to this, i would suggest reaching out to the school office of admissions directly and inquiring about the process...from selecting the student representative to the paying of tuition...

And just because it's not confusing enough, the customs desk at the Mumbai airport, gives the following limit:

I have worked at a number of banks where we had foreign students from many countries and none showed up with suitcases of cash. The very wealthy generally sent wires.

The explaination that we are receiving is that it is very difficult to wire funds from the Indian Banks, and that the Indians do not generally trust their banking system. Upon researching the Indian banking system I find it a tad bit confusing.

We were told that it would be declared at customs, and if requested we could obtain a copy of their I-20 which should answer questions regarding orgin of funds and so on.

Kathleen B and CULady, have you worked with Indian students specifically? From what I gather it is just the Indian students that would work in this manner.

I have never heard that Indians do not trust their banking system, especially wealthy Indians. It is a well established system. They even have US banks over there.

Has this school done this in the past with other banks? If yes, why the change? Perhaps because other banks did not want to do this? Why are you getting this "opportunity"?

The explanation you're receiving is complete BS. As Kathleen pointed out, there are US banks in India and a number of large Indian FI's operate successfully as well. Bank of India and Icici Bank are prime examples.

This whole story sounds unusual. I would be asking a lot more questions if I were in your position Bhazzard.

To the first point, and others have said this as well, it is not particularly difficult for Indians to wire money.

To the second point, 'being declared at customs' missed the entire point of the currency export limits. Using the Mumbai airport customs desk as the limit; they would not be allowed to take out more than 7500 rupees per person per trip.

Take "Indian" and "student" out of the discussion for the moment. If your Wealth Mgmt person came to you with a proposal that you bank a group of people, each of whom would be coming in to the bank with a "suitcase full of cash", what would your reaction be?

Thank you everyone for your insight and thoughts.

These are all questions I have been asking myself awhile trying to find some validation to what I am being presented with.

I appreciate all of your feedback and am open to any more comments or insight!

Run as fast as you can.

I second Kathleen, you don't want any of that cake, but I'm sure your wealth management guy gets compensated differently than you do.

It is not worth the risk to the bank just based on the earlier posts. If it sounds to good to be true, most likely trouble is not far behind.

Perfect.