The Reserve Bank of India (RBI) has unveiled a significant draft proposal designed to bring unprecedented transparency to cross-border payments. The move directly targets long-standing consumer grievances about hidden fees and unclear pricing in foreign exchange transactions, a common pain point for millions of Indians.
What the RBI's New Draft Circular Proposes
Under the draft guidelines, all entities authorised to deal in foreign exchange, including commercial banks and specific financial institutions, will be legally required to disclose the complete cost of a transaction to the customer before they agree to the deal. This mandate aims to end the practice where customers discover the true expense only after a transaction is completed.
The transparency rule will apply to a wide range of common retail forex activities, including same-day currency exchange (T+0), next-business-day settlement (T+1), and spot transactions settled within two business days (T+2). It also covers related derivative contracts used by retail customers.
Breaking Down the "Total Transaction Cost"
Experts clarify that the upfront disclosure must provide a comprehensive breakdown. According to Hemal Shah of EY India, this includes:
- The applied foreign exchange rate
- Currency conversion charges
- Outward remittance or sending fees
- Any receiving fees
- Charges levied by intermediary or correspondent banks
- All other fees linked to executing the transaction
Critically, these details must also feature in the final deal confirmation, allowing customers to cross-check the quoted price against the final charge. The central bank has invited public comments on this draft, with the feedback window open until January 9, 2026. Finalised instructions will become effective within three months of their official issuance.
How Retail Customers Stand to Benefit
For years, retail users sending money abroad for education, travel, investments, or family support have faced an opaque system. Banks often quote a single exchange rate, bundling various margins and fees like SWIFT charges or correspondent bank deductions into it, revealing the full cost only post-transaction.
Vijay Mani of Deloitte India notes that this RBI initiative can significantly improve trust and comparability between service providers. By seeing the full cost structure upfront, customers can make genuinely informed choices, fostering competition among Authorised Dealers (ADs) on pricing.
The rules define retail users as any customer not classified as 'non-retail.' The non-retail category includes large institutions like big financial firms, NBFCs, mutual funds, and Indian entities with a net worth of Rs 500 crore or more or a turnover of Rs 1,000 crore or more. All individual users and smaller entities will benefit directly from these transparency measures.
