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    Will this new platform for retail foreign exchange customers benefit you?

    Synopsis

    Customers can expect their overall foreign exchange transaction costs to come down with this facility- a centralised electronic forex trading platform— FX-Retail.

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    Customers can expect a dip in overall foreign exchange transaction costs, say experts.
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    Soon, a simple mechanism will allow you to get better rates on foreign exchange. The Clearing Corporation of India Ltd (CCIL) is set to launch a centralised electronic forex trading platform— FX-Retail— for individual and small and medium enterprise customers. Overseas-bound students and travellers as also those looking to remit money will be able to make use of the facility, which will become operational from 5 August. “The platform is aimed at ensuring better pricing and complete transparency,” says Shekhar Bhandari, Senior EVP and Business Head, Global Transaction Banking, Kotak Mahindra Bank. It will provide a transparent reference rate to retail customers.

    Its launch follows a proposal in a Reserve Bank of India (RBI) discussion paper floated in October 2017. The objective was to “provide customers with access to an electronic trading platform through an Internet-based application.” Subsequently, the central bank formalised the rollout in its Statement on Developmental and Regulatory Policies on 6 June. “This platform will provide transparency of pricing and promote competition among marketmakers leading to better pricing for all customers,” RBI noted.

    Know the process
    Customer registrations on the dedicated portal – www.fxretail.co.in – will begin 1 July. Bank customers who need to purchase or sell US$ against the INR can register themselves on the platform. Market players expect the basket of currencies to be expanded in future. The delivery will take place on cash (same day), tom (next day) or spot (two days after date of transaction) basis. CCIL will not charge any fee for low-value transactions, but a nominal 0.0004% charge on the transaction value (in rupee terms) will come into play for transactions worth over $50,000. Banks, however, are allowed to levy charges for services, which have to be displayed on the platform. “Banks may recover transaction and settlement charges levied by the CCIL,” RBI said in a notification.

    They can also decide the mark-up for their customers, which will then be adjusted with the traded rates. The size of a single transaction cannot exceed $5 million, but there is no cap on the number of transactions per customer in a day, though your bank could impose some limits. “A bank has to set the trading limits for customers. The customer would be allowed to place an order based on the limits set by the relationship bank. These can be an ‘Only Sell’ limit or ‘Only Buy’ limit, or both, depending on the customer profile,” CCIL explained in its note on Fx-retail.

    Towards more transparency
    Currency pair traded US$-Indian₹
    Transaction size Up to $5 million
    Per day, per customer cap on transactions No limit
    Bank charges To be decided*

    CCIL transaction charges
    Up to $50,000 per day Over $50000 per day
    Nil 0.0004%
    One-time registration fee** Rs 300
    Source: RBI and CCIL. **For retail customers. *Bank charges will be reflected on the platform once it is fully operational.

    The banking regulator has directed banks to facilitate on-boarding of retail customers to the platform. You can register through the fx-retail portal after paying a one-time fee of Rs 300 and providing details like your name, address, gender, PAN, mobile number and email ID. You will also have to select the bank you intend to use for these transactions, (the relationship bank), your home branch (where you maintain an account), trading branch and bank account number. You can add multiple relationship banks subsequently. After you complete the process at your end, your details will be forwarded to your bank for verification. Once it approves the information, you will be allotted a login name and password through email to start trading. Transactions executed by you will be settled bilaterally between you and your bank, which is a member.

    Advantage retail customers
    Customers can expect a dip in overall foreign exchange transaction costs, say experts. “Values of forex trades usually run into millions of dollars. Retail individuals, who need to carry out low-value transactions, may not find space and can feel squeezed out. The spreads charged are often as wide as over 2%, which means customers have to shell out at least 50 paise-Re 1 more. RBI’s move is aimed at reducing this burden,” says Kishore Narne, Head, Commodities and Currencies, Motilal Oswal Financial Services Ltd. Customers are bound to benefit by way of narrowing of spreads and reduction in transaction charges. “Typically, banks charge 1-3% for providing forex currency to retail customers, besides onboarding/transaction fees.

    Under the new platform, banks can charge their retail customers a pre-agreed flat fee towards administrative expenses, which is to be publicly declared,” says Vineet Sethi, CMO, NiYO Global Cards, which offers a forex travel card through a tie up with DCB Bank. Do note, however, that the picture will be clear only after banks disclose their charges on the fullyoperational platform 5 August onwards. What is clear though is since banks are involved, the process is likely to be secure. “There is no need to exchange physical currency for forex, as is the traditional practice for unorganised forex dealer market,” he adds.
    (Click here to know how to save on taxes for the financial year 2020-21.)

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    1 Comment on this Story

    K S V Padmanabhan599 days ago
    Well done, RBI! Wonderful move indeed! The site is not operational now (16th July, 2019), please do the needful.
    2. Please also ensure that this website contains a page for regulatory compliance by retail customers, details about Laws, all other relevant matters, as otherwise we read them all from RBI Website directly. It will help further.
    3. There are many banks (including few private sector banks) provide very good rates for Retail customers backed by transparent process and service delivery, for your kind information. Additional step in service and price delivery is always welcome! Regards.
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