RBI Talks to Banks on Uniform Fee Disclosure and Removal of Overlaps

Source: ET

Context:

The Reserve Bank of India (RBI) has initiated discussions with authorised banks to ensure uniform disclosure of fees and to address overlaps in retail foreign exchange (forex) services. This move aims to enhance transparency for retail users in transactions involving forex cash, tom (next-day settlement) and spot contracts.

Key Highlights:

• Objective:
  • Full disclosure of transaction costs, including:
    • Remittance fees
    • Foreign exchange rates
    • Currency conversion charges
  • Removal of overlaps and inconsistencies across banking services
• Scope: Retail customers using foreign exchange cash, tom, and spot contracts

Previous Norms

• Banks were free to charge and disclose fees differently for forex services.
• Fee structures varied across banks and products, including cash, TOM, and spot contracts.
• No standardised format or mandatory transparency requirement, leading to:
  • Hidden or overlapping charges.
  • Difficulty for customers to compare costs across banks.

Proposed Measures

• Banks must provide a breakdown of total transaction costs before executing forex contracts with retail users.
• Details must be included in deal confirmations or term sheets.
• Prior RBI guidance (January 2024) already mandated disclosure of:
  • Mid-market rates
  • Bid-ask quotes for forex or foreign currency derivative contracts