Remittances are an important source of family and national income and also are one of the largest sources of external financing. Beneficiaries in India can receive cross-border inward remittances through banking and postal channels. Banks have general permission to enter into a partnership with other banks for conducting remittance business. The International Financial System (IFS) platform of Universal Post Union (UPU) is generally used for the postal channel. Besides, there are two more channels for receiving inward remittances, viz. Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS) which are the most common arrangements under which the remittances are received into the country.
Money Transfer Service Scheme (MTSS)
Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. Only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permissible. No outward remittance from India is permissible under MTSS. The system envisages a tie-up between reputed money transfer companies abroad known as Overseas Principals and agents in India known as Indian Agents who would disburse funds to beneficiaries in India at ongoing exchange rates. The Indian Agents can in turn also appoint sub-agents to expand their network. The Indian Agent is not allowed to remit any amount to the Overseas Principal. Under MTSS the remitters and the beneficiaries are individuals only. This document covers the details regarding the entry norms, authorization, renewal and various operating instructions pertaining to the entities involved in this scheme.
Permissions needed for carrying out MTSS
Indian Agents need permission from the Regional Office concerned of the Foreign Exchange Department, Reserve Bank of India to operate under the MTSS framework. Further, the Overseas Principal also need to obtain necessary authorisation from the Department of Payment and Settlement Systems, Reserve Bank of India under the provisions of the Payment and Settlement Systems Act (PSS Act), 2007.
Salient features of MTSS:
♦ Only personal remittances such as remittances towards personal expenses and remittances favouring foreign tourists visiting India can be sent through MTSS. Trade related remittances, remittances towards purchase of property, investments or credit to NRE / FCNR accounts, etc. or donations/contributions to charitable organization are not allowed under this arrangement.
♦ Maximum remittance with a ceiling of USD 2500.
♦ Amounts up to Rs. 50,000/- may be paid in cash. Any amount exceeding this limit shall be paid by means of cheque / DD /PO etc or credited directly to the beneficiary’s account.
♦ Only 30 Transactions per beneficiary are permitted in a calendar year.
♦ Payment is made in INR only, without any deduction of charges from beneficiary.
♦ Reliable, swift and convenient.
♦ It is a hassle free instantaneous payment to beneficiary against photo identification.
♦ The scheme does not envisage repatriation of such inward remittances
Rupee Drawing Arrangement (RDA)
Rupee Drawing Arrangement (RDA) is a channel to receive cross-border remittances from overseas jurisdictions. Under this arrangement, the Authorised Category I banks enter into tie-ups with the non-resident Exchange Houses in the FATF compliant countries to open and maintain their Vostro Account.
Non-resident Exchange Houses
These are companies and financial institutions which are licenced and regulated by the competent authority in the sending country for sourcing the funds from the remitters.
Types of remittances which can be sent under RDA
The cross- border inward remittances into India under RDA is primarily on private account. The remitter and the beneficiary should be individuals barring a few exceptions. Remittances through Exchange Houses for financing of trade transactions are also permitted up to certain limit. This scheme is not used for cross-border outward remittances from India.