No meddling as 'middlemen' in forex conversion by banks: New rules forbid conversion of foreign earnings into rupees to detriment of exporters

The Reserve Bank of India has recently implemented new rules to prevent banks from acting as intermediaries in forex conversion, which often resulted in small exporters and individuals receiving less foreign currency than they were entitled to. Previously, banks would sometimes step in to convert foreign exchange into rupees at unfavorable rates, causing significant financial losses for those involved.

To address this issue, the Reserve Bank of India directed banks to refrain from converting foreign currency inward remittances into rupees for the sole purpose of transferring funds to another bank's account, unless there is a specific instruction from the remitter or the beneficiary. This directive aims to ensure clarity and consistency in handling foreign currency transactions, benefiting all parties involved in international transactions.

Banks have been instructed to retain the remittance in the original currency and route it onward, or convert it into INR only if a specific instruction for conversion is received. Additionally, banks must disclose card rates for currency conversion on their websites, enabling clients to compare and choose the best rates available.