RBI Mandates Faster Cross-Border Inward Payments for Banks

In a circular issued to all scheduled commercial banks, the central bank said the move is aimed at improving efficiency in cross-border payments and aligning with global targets set by the G20.

"The Reserve Bank's Payments Vision 2025 aims to bring efficiency in the cross-border payments, aligning with the G20 roadmap for cross-border payments that has set targets for achieving cheaper, faster, more transparent, and more accessible cross-border payments," the RBI said.

The RBI noted that delays often occur at the stage when the beneficiary bank receives the payment and credits it to the customer's account.

"One of the challenges with speed of payments is experienced at the beneficiary leg i.e., the time taken from receipt of the payment at the beneficiary bank till credit to the beneficiary account," the circular said.

Following a review of the existing process, the central bank said there is a need to streamline procedures to ensure quicker credit of funds and faster communication to customers.

"Review of the extant process for inward cross-border payments indicated the need for streamlining the processes at the beneficiary bank for ensuring timely intimation of payment information and credit to the beneficiary's account," it stated.

"Banks shall inform their customer of the receipt of cross-border inward transactions immediately on receipt of inward message," the RBI said, adding that if messages are received after operating hours, customers must be informed "immediately at the start of the next business day."

The central bank also flagged delays caused by banks relying on end-of-day statements of their nostro accounts for reconciliation.

"It is observed that several banks rely upon end-of-day statements of the nostro account for confirming and reconciling receipts in nostro accounts, resulting in a delay in crediting funds to the beneficiary's account," the circular said.

A Nostro account is a bank account held by a domestic bank in a foreign bank, denominated in the foreign country's currency

To address this, banks have been advised to carry out reconciliation more frequently.

"To expedite this process, banks are advised to undertake reconciliation and confirmation of credit in the nostro account frequently either on near real time basis or at periodic intervals," the RBI said, adding that the reconciliation interval "should normally not exceed one hour."

"Banks shall endeavour to credit the inward payments received during the foreign exchange market hours within the same business day to the beneficiary's account," it said.

In addition, banks may introduce straight-through processing for crediting payments to resident individuals, based on risk assessment and compliance with existing FEMA rules.

"Banks may, based on their risk assessment and subject to compliance with extant FEMA guidelines, put in place straight through process for crediting the inward payments to the account of individual residents," the RBI said.

The central bank also encouraged banks to provide digital interfaces for customers to handle foreign exchange transactions and track their payments.

"Banks may, within a reasonable time frame, endeavour to provide digital interface to their customers to facilitate foreign exchange transactions, including submission of documents or information, and monitoring of transactions," the circular added.

The RBI said the new directions will come into effect six months from the date of the circular.

- ANI