The use of International Debit Cards, Store Value Cards, Charge Cards, Smart Cards, and other instruments that create financial liability as ‘currency’ has been governed by a series of directives from the Reserve Bank of India (RBI). Attention of Authorized Dealers (ADs) is specifically drawn to the instructions contained in A.P. (DIR Series) Circular No. 46 dated June 14, 2005, and A.P. (DIR Series) Circular No. 102 dated April 02, 2012. These circulars regulate the use of these financial instruments within the framework of the Foreign Exchange Management Act, 1999 (FEMA).
Recently, it has come to the notice of regulatory authorities that certain Authorized Persons have been levying fees and charges in foreign currency for transactions that are payable in India. This practice has raised concerns as it contradicts the established guidelines. The RBI has reiterated that all fees and charges payable within India must be denominated and settled in Indian Rupees only. This directive aims to maintain transparency and consistency in the financial operations involving these instruments.
The circular emphasizes that fees or charges for services provided in India should not be billed in any foreign currency. Such a practice not only creates confusion among consumers but also potentially violates the principles of fair trade and transparency. The directive serves as a reminder to all ADs and Authorized Persons to adhere strictly to these regulations to avoid any punitive actions.
The directions contained in the circular are issued under sections 10 (4) and 11(1) of the Foreign Exchange Management Act, 1999. Section 10 (4) of FEMA authorizes the RBI to give directions to any authorized person to ensure compliance with the provisions of the Act. Section 11(1) empowers the RBI to issue directions to authorized persons to regulate the transactions related to foreign exchange and securities.
It’s important to note that these instructions are without prejudice to any permissions or approvals required under other laws. This means that while ADs must comply with this directive, they must also ensure that they meet any other legal requirements that may apply to their operations.
In conclusion, the RBI’s directive to ensure that fees and charges on forex prepaid cards, store value cards, travel cards, and similar instruments are denominated and settled in Rupees underscores the importance of compliance with regulatory norms. ADs must review their current practices to align with these instructions, ensuring that they provide clear and fair financial services to their customers. This move not only fosters trust but also strengthens the integrity of the financial system in India.
Access the full RBI circular here
