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

What was the trigger for the latest RBI rule?

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.

What kind of cards come under the purview of this rule?

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

What are prepaid forex cards and travel cards?

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.

What had the RBI said earlier?

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.

What do experts say about the RBI's latest move?

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.