New RBI Norms Aim To Speed Up Cross-Border Inward Payments

The Reserve Bank of India (RBI) has come up with new policies to enhance the handling of cross-border inward payments.

Through risk assessment and adherence to the current regulations falling under the Foreign Exchange Management Act (FEMA), it has been recommended that banks adopt a straight-through processing (STP) system to credit inward remittances of people into customer accounts.

What Changes Have Been Introduced?

The guidelines also mandate the banks to inform the customers as soon as they receive the cross-border payment messages.

In case the messages are received out of banking hours, then the customer should be notified at the beginning of the next business day.

Banks will also be required to offer digital interfaces where customers can post documents, monitor transactions, and transact other activities related to foreign exchange more effectively.

How Will Payment Processing Improve?

Banks have been instructed to reconcile and confirm credits in their nostro accounts on a near real-time basis or at frequent intervals.

The reconciliation cycle should ideally not exceed one hour, ensuring faster verification of incoming funds.

Moreover, banks are expected to credit payments obtained on the foreign exchange market hours on the same business day.

The receipt of transactions outside the market hours must be credited the following business day, in compliance with the regulations.

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What Does This Mean For Investors?

To investors, the guidelines are an indication that there is still an endeavour to enhance the financial infrastructure of India and to make it easier to transact across the borders.

Banks with strong digital systems and efficient processes can deliver a better customer experience and run operations more smoothly.

Investors ought to monitor the manner in which banks adopt such systems and whether they can make more transactions per settlement schedule and be able to generate higher fees.

Sources:

The HIndu BusinessLine

Tribune India