Review of framework for domestic money transfer
RBI, vide circular dated July 24, 2024, has issued certain revisions to the framework for domestic money transfer given the multiple digital options for funds transfer. Some of the key changes in the framework are as follows:
- for the case pay-out service, the remitting bank must obtain and keep a record of the name and address of the beneficiary;
- for the cash pay-in service:
- remitting banks/business correspondents must register the remitter based on a verified cell phone number and a self-certified 'Officially Valid Document' as per the Master Direction – Know Your Customer Direction, 2016;
- every transaction by a remitter must be validated by an additional factor of authentication; and
- remitting banks and their business correspondents must conform to provisions of the Income Tax Act, 1961 for cash deposits.
Further, the guidelines on card-to-card transfer are excluded from the purview of this framework. This framework will come into effect from November 1, 2024.
Release of foreign exchange for miscellaneous remittances
RBI circular dated July 3, 2024, addresses the changes in the release of foreign exchange for miscellaneous remittances by authorised dealers in foreign exchange. The circular rescinds previous guidelines that permitted the release of foreign exchange for current account transactions up to USD 25,000 (US Dollars twenty-five thousand) or its equivalent based on a simple letter without requiring Form A2 or other documentation. Instead, authorised dealers are now required to obtain Form A2 in either physical or digital format for all cross-border remittances, irrespective of the transaction amount.
This change aims to streamline regulatory compliance and operational procedures. Authorised dealers must ensure compliance with the Foreign Exchange Management Act, 1999 ("FEMA"), specifically Section 10(5) of FEMA, to verify that transactions adhere to FEMA provisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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