How RBI plans to make sending money home faster for Indians abroad

The Reserve Bank of India (RBI) is planning to let Indians abroad send money home faster.

The central bank has issued draft guidelines that outline how payments from Indians and businesses abroad can be repatriated faster.

“One of the challenges with the speed of cross-border payments is the delay between the receipt of the payment at the beneficiary bank and credit to the beneficiary account. This draft circular aims to address some of the frictions for facilitating timely intimation of payment information and credit to the beneficiary’s account,” the RBI wrote in the draft.

But what do we know? How will this work?

Let’s take a closer look.

What we know

Under the proposed norms, the RBI has said that the banks which receive payments from abroad during the foreign exchange market hours must credit the accounts of the beneficiaries on the very same business day.

More from Explainers

How and why RBI is flying more of India's gold back home Did US fly B-1 bombers near Venezuela?

The central bank noted that most banks employ end-of-day nostro account statements to authenticate and settle incoming funds. This, it noted, can result in postponements in crediting money into the accounts of the customer.

A nostro account is an account held by an Indian bank in a foreign country. It is usually held in that country’s currency and with another bank. Inward payments are sent to the nostro account first before being routed to the beneficiary’s account in India.

The RBI, in its draft guidelines, has suggested that banks reconcile and authenticate the money in their nostro accounts either on a near real-time basis or at regular intervals. The central bank has proposed that these intervals should not exceed more than 30 minutes.

Editor’s Picks

1

How and why RBI is flying more of India's gold back home 2

This Dhanteras, should you buy silver over gold?

The central bank suggested doing so by means of a ‘straight-through’ automated system that will reduce delays and human errors. It also said that banks must set up websites or apps that let verified customers track the progress of their remittances.

The RBI urged banks to “within a reasonable timeframe, provide digital interfaces for customers to facilitate foreign exchange transactions — including document submission, information exchange, and real-time monitoring of transaction status.”

‘Credit payment on same business day’

The RBI said remittances must be credited to customers on the same day if the payment is made during market hours. If the payment is made after market hours, it must be credited on the next business day.

“Banks should inform their customers of the receipt of cross-border inward transactions immediately upon receiving the message. Messages received after the close of operating hours should be notified to customers at the start of the next business day,” the RBI said in its circular.

“Banks shall endeavour to credit the inward payments received during the foreign exchange market hours within the same business day to the beneficiary’s account, and credit the inward payments received after market hours on the next business day, subject to compliance with the extant FEMA and other regulatory requirements,” it added.

Currently, under eight to ten per cent of inward remittances in India are credited to beneficiary accounts within an hour. That compares unfavourably to the United States, where that figure is at 75 per cent. This, even though 90 per cent of all cross-border payments processed via SWIFT reach the beneficiary bank within an hour.

The development will boost India’s status as a global financial hub and align its cross-border payment system with global benchmarks.

The RBI has asked banks and other stakeholders to share their feedback by November 19. The directions will take effect six months after the final circular is issued.

With inputs from agencies