Mumbai: The Reserve Bank of India (RBI) has pulled up banks for high charges on foreign exchange transactions and complete lack of transparency.
RBI Deputy Governor M Rajeswara Rao said, “We have had several occasions of authorized dealers’ customers, especially from the MSME and retail segments, coming to us and seeking ‘high’ rates for foreign exchange transactions imposed by authorized dealer banks.” Expressing concern about the fee. He was addressing the Foreign Exchange Dealers Association of India (FEDAI).
Rao said that large corporates get the benefit of tighter pricing due to the liquidity in the foreign exchange markets, but the fees charged to smaller customers do not seem to justify the higher cost.
“The FX-Retail platform was introduced to shift price discovery to automated platforms. However, banks have not made efforts to encourage customers to use that platform. The concern about the high fees There is a complete lack of transparency,” Rao said. The Deputy Governor asked the banks, individually or collectively through FEDAI, to make efforts so that the benefits of simplification, rationalization and procedural ease reach every customer. “An open issue is whether changes in the regulatory framework are reflected in the conduct of inter-bank and customer transactions,” Rao said.
Rao highlighted cost constraints on retail transactions at a time when the RBI is promoting internationalization of the rupee. Rao said that while internationalization and a free capital account come with benefits, it is not without risks.
“Free capital flows come with their own set of challenges, the primary being volatility and we need to gear up to manage it,” Rao said. “We are seeing a good amount of interest in the rupee-trading arrangement that we are trying to put in place. If our efforts for rupee invoicing bear fruit, domestic exporters and importers will not need to hedge, but There will be other opportunities in the form of their non-resident counterparts which may need to be hedged,” he said.
RBI Deputy Governor M Rajeswara Rao said, “We have had several occasions of authorized dealers’ customers, especially from the MSME and retail segments, coming to us and seeking ‘high’ rates for foreign exchange transactions imposed by authorized dealer banks.” Expressing concern about the fee. He was addressing the Foreign Exchange Dealers Association of India (FEDAI).
Rao said that large corporates get the benefit of tighter pricing due to the liquidity in the foreign exchange markets, but the fees charged to smaller customers do not seem to justify the higher cost.
“The FX-Retail platform was introduced to shift price discovery to automated platforms. However, banks have not made efforts to encourage customers to use that platform. The concern about the high fees There is a complete lack of transparency,” Rao said. The Deputy Governor asked the banks, individually or collectively through FEDAI, to make efforts so that the benefits of simplification, rationalization and procedural ease reach every customer. “An open issue is whether changes in the regulatory framework are reflected in the conduct of inter-bank and customer transactions,” Rao said.
Rao highlighted cost constraints on retail transactions at a time when the RBI is promoting internationalization of the rupee. Rao said that while internationalization and a free capital account come with benefits, it is not without risks.
“Free capital flows come with their own set of challenges, the primary being volatility and we need to gear up to manage it,” Rao said. “We are seeing a good amount of interest in the rupee-trading arrangement that we are trying to put in place. If our efforts for rupee invoicing bear fruit, domestic exporters and importers will not need to hedge, but There will be other opportunities in the form of their non-resident counterparts which may need to be hedged,” he said.
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