RBI Simplifies Outward Remittances Rules: Prior Approval Not Needed for Non-Banks Entities

The Reserve Bank of India (RBI) has removed the requirement for non-bank entities to obtain prior approval before partnering with banks to provide outward remittance services, as per PTI reports. The decision was announced through a revised operational framework issued on Wednesday. 

The framework applies to outward remittances facilitated through Authorised Dealer (AD) Category-I banks using 3rd-party digital platforms. These platforms include websites, mobile applications, software applications and other online interfaces used for overseas fund transfers. 

Earlier Approval System Discontinued 

Under directions issued in 2016, non-bank entities were required to seek specific approval from the RBI before entering tie-up arrangements with AD banks for outward remittance services. 

The central bank said this approval process has now been withdrawn after a review of the existing mechanism. Instead of seeking permission from the RBI, banks will now be required to ensure that transactions carried out through third-party entities comply with applicable rules. 

The revised framework covers non-trade current account remittances processed through online mode. 

Compliance Responsibility on Banks 

According to the RBI, AD Category-I banks will remain responsible for compliance with the Foreign Exchange Management Act (FEMA) and Know Your Customer (KYC) requirements. 

Banks facilitating these transactions through third-party entities must also ensure adherence to regulatory instructions issued by the central bank from time to time. The move shifts operational responsibility to authorised dealer banks while removing a separate approval stage for non-bank firms. 

The RBI has not announced any change in the underlying compliance obligations linked to outward remittance transactions. 

Customer Information Requirements 

The revised framework also introduces mandatory disclosure requirements for customers using digital remittance platforms. 

Banks and partner entities will have to display the foreign exchange rate offered for the transaction, along with the timestamp and validity period of that rate.  

Customers must also be informed about the total estimated cost of the remittance before the transfer is initiated. In addition, the exact foreign exchange amount expected to be credited to the beneficiary account, and the maximum expected time for credit must be disclosed. 

Read More: SEBI Proposes Overhauling Municipal Bond Rules to Boost Urban Infrastructure Funding! 

Conclusion 

The updated framework removes the RBI approval requirement for non-bank outward remittance tie-ups while retaining compliance responsibilities with authorised dealer banks.  

The changes apply to online outward remittance services for permitted current account transactions. 

For daily market updates and regular stock market news in Hindi, stay tuned to Angel One's share market news in Hindi. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.   
 
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.