For many individuals making overseas payments, whether for education fees, travel, living expenses or investments, the actual cost of a transaction often becomes clear only after the money is sent. Hidden charges, opaque exchange rates and layered fees have long made it difficult for customers to compare options or assess the true cost in advance.
To address this, the RBI has released a draft circular mandating authorised dealers, including commercial banks, to clearly disclose all components of foreign exchange transactions before a customer agrees to the deal. These include remittance fees, the applicable exchange rate and any currency conversion charges.
The proposed framework applies to commonly used foreign exchange transactions such as cash transactions (T+0), tom transactions that settle the next business day (T+1), and spot contracts that settle within two business days (T+2).
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The regulator has been steadily tightening disclosure norms. In January 2024, authorised dealers were directed to share the mid-market mark, bid and ask prices for foreign exchange derivative and foreign currency interest rate derivative contracts with retail users before execution, and to include these details in deal confirmations and term sheets.
Why this matters for retail users
By making all charges visible upfront, the RBI aims to help retail customers accurately assess the true cost of cross-border transactions and better understand how pricing and margins are applied across cash, tom, spot and derivative transactions. Greater transparency is expected to make it easier for customers to compare providers and choose options that best suit their needs.
Industry participants see the move as a step towards tackling hidden fees. Taneia Bhardwaj, South Asia Expansion Lead at Wise, said the draft circular’s operational focus on clearly showing remittance fees, exchange rates and conversion charges upfront addresses long-standing transparency gaps in cross-border payments and enables customers to make more informed choices.
Who the rules apply to
Under RBI regulations, authorised dealers include authorised dealer category-I banks and standalone primary dealers authorised under category-III to conduct foreign exchange transactions.
Customers are classified as retail or non-retail. Non-retail users include regulated entities such as banks, NBFCs, insurance companies, pension funds, mutual funds and alternative investment funds, as well as Indian entities with a net worth of ₹500 crore or more or a turnover of ₹1,000 crore or more. Non-resident entities, other than individuals, also fall under this category. All other customers are treated as retail users.
Timeline for feedback
The RBI has invited comments on the draft circular, with feedback open until January 9, 2026. If finalised, the rules could significantly change how foreign exchange transactions are priced and presented to customers, reducing surprises and improving trust in cross-border payments.
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