RBI Relaxes Outward Remittance Rules for Non-Bank Entities
Reserve Bank Eases Rules for Outward Remittance Services
The Reserve Bank of India (RBI) has made significant changes to its regulations regarding outward remittance services in India. On Wednesday, the central bank removed the prior approval requirement for non-bank entities to form tie-up arrangements with banks for facilitating outward remittance services through banks in India.
The RBI has issued an operating framework for facilitating outward remittance services by non-bank entities through Authorised Dealer (Category I) banks in India. This move is a departure from the 2016 direction that required non-bank entities to obtain specific approval from the Reserve Bank for tie-up arrangements to facilitate outward remittance services through Authorised Dealer (AD) Category-I banks in India.
According to the revised framework, Authorised Dealer (AD) banks will be solely responsible for ensuring compliance with the Foreign Exchange Management Act (FEMA) and undertaking Know Your Customer (KYC) procedures. The AD banks will also be required to display certain information prominently to the customer remitting funds through a website, online platform, software application, or mobile application.
The information to be displayed includes the forex rate quoted by the AD, along with the timestamp and period of validity of the rate for the transaction, and the total estimated cost of the transaction. Additionally, the exact amount credited in foreign exchange, along with the maximum time taken for crediting the beneficiary's account, will be informed to customers.
| Comparison of Remittance Services | Pre-2016 Direction | Revised Framework |
|---|---|---|
| Prior Approval Requirement | Non-bank entities required prior approval from RBI | Prior approval requirement removed |
| Compliance Responsibility | Non-bank entities responsible for compliance | Authorised Dealer (AD) banks responsible for compliance |
| KYC Procedures | Non-bank entities responsible for KYC procedures | Authorised Dealer (AD) banks responsible for KYC procedures |
Investor Takeaway
The RBI's relaxation of outward remittance rules may positively impact non-bank entities and the overall economy.
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