Mumbai: The Reserve Bank of India (RBI) has pulled up banks for top fees on foreign currency echange transactions and for an entire loss of transparency.
“We have had many occasions of customers of authorized dealers, especially from the MSME and retail segments, approaching us and expressing concerns about the ‘high’ charges for foreign exchange transactions levied by authorized dealer banks,” stated RBI deputy governor M Rajeshwar Rao. He used to be addressing the Foreign Exchange Dealers’ Association of India (FEDAI).
Rao stated that whilst massive corporates experience the advantages of tighter pricing due to the liquidity within the foreign exchange markets, fees recovered from smaller consumers don’t seem to be justified by means of upper prices.
“The FX-Retail platform used to be offered in a bid to shift value discovery to an automatic platform. Banks don’t, alternatively, seem to have made efforts to inspire consumers to make use of that platform. What is being worried concerning the upper fees is your entire loss of transparency,” said Rao. The deputy governor asked 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 the changes in regulatory framework are being reflected in the conduct of inter-bank and customer transactions,” said Rao.
Rao highlighted the cost barriers on retail transactions at a time when the RBI is promoting internationalization of the rupee. Rao said that while internationalization and a freer capital account comes with benefits, it is not without risks.
“Freer capital flows come with their own set of challenges, the primary one being that of volatility and we need to gear up to manage that,” said Rao. “We are seeing a good amount of interest in the rupee-trading arrangements that we have been endeavoring to put in place. If our efforts towards 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 who may need to hedge,” he added.
“We have had many occasions of customers of authorized dealers, especially from the MSME and retail segments, approaching us and expressing concerns about the ‘high’ charges for foreign exchange transactions levied by authorized dealer banks,” stated RBI deputy governor M Rajeshwar Rao. He used to be addressing the Foreign Exchange Dealers’ Association of India (FEDAI).
Rao stated that whilst massive corporates experience the advantages of tighter pricing due to the liquidity within the foreign exchange markets, fees recovered from smaller consumers don’t seem to be justified by means of upper prices.
“The FX-Retail platform used to be offered in a bid to shift value discovery to an automatic platform. Banks don’t, alternatively, seem to have made efforts to inspire consumers to make use of that platform. What is being worried concerning the upper fees is your entire loss of transparency,” said Rao. The deputy governor asked 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 the changes in regulatory framework are being reflected in the conduct of inter-bank and customer transactions,” said Rao.
Rao highlighted the cost barriers on retail transactions at a time when the RBI is promoting internationalization of the rupee. Rao said that while internationalization and a freer capital account comes with benefits, it is not without risks.
“Freer capital flows come with their own set of challenges, the primary one being that of volatility and we need to gear up to manage that,” said Rao. “We are seeing a good amount of interest in the rupee-trading arrangements that we have been endeavoring to put in place. If our efforts towards 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 who may need to hedge,” he added.
