MC Explains | The RBI’s latest rule on levy of forex card charges

Charges or fees levied on forex prepaid cards, store value cards, and travel cards payable in India must be settled in rupees.

The Reserve Bank of India issued a circular on May 9 regarding the levy of charges on forex cards that are payable in India.

Here is an explainer to understand the details:

The central bank said charges or fees on international debit cards, store value cards, charge cards, or smart cards, which are payable in India, must now be denominated and settled in rupees.

The central bank said it had observed that a few authorised persons were levying certain fees/charges, which are payable in India on such instruments, in foreign currency. In this context, the RBI advised that such fees/charges must be paid only in rupees.

Charges or fees levied on forex prepaid cards, store value cards, and travel cards payable in India must be settled in rupees.

MC Explains | The RBI’s latest rule on levy of forex card charges

Typically, banks issue forex cards that are denominated in foreign currencies including the US dollar, Australian dollar, the UK pound, euro, dirham and the Singapore dollar. Travel cards are also used by international travelers to carry foreign exchange.

RBI had said earlier that no prior permission was required for the issue of such cards. However, it said the use of such cards is limited to permissible current account transactions and subject to limits under the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time.

According to Naresh Malhotra, a former State Bank of India senior official who now works as a consultant, the RBI guideline is a welcome move. It will help both customers and dealers by reducing transaction costs. The recovery of charges in domestic currency will eliminate conversion costs.