In terms of Section 4(1) of the payment and settlements Systems Act, 2007, no person other than the Reserve Bank shall commence or operate a payment system except under and in accordance with an authorization issued by the Reserve Bank under the provisions of the said Act. In terms of explanation of Section 2(1)(i) of the Act, a payment system includes money transfer operations.
In terms of Section 3(c) of Foreign Exchange Management Act (FEMA), 1999, save as otherwise provided in the said Act, rules or regulations made thereunder, or with the general or special permission of the Reserve Bank, no person shall receive otherwise (than) through an authorized person, any payment by order or on behalf of any person resident outside India in any manner.
Under Money Transfer Service Scheme (MTSS), the Indian agent who has to be an Authorised Dealer Category-I/ Authorised Dealer Category-II/ Full Fledged Money Changer requires prior RBI approval under the provisions of FEMA, 1999 to enter into such an arrangement with an Overseas Principal for received cross border personal inward remittances in India. The Overseas Principals are authorized by the Reserve Bank under Section 4(1) of the Payment and Settlement Systems Act, 2007.
RBI has so far given permission to 25 Indian Agents to route cross-border inward personal remittances into India under MTSS.
While according permission to Indian Agents for entering into tie-ups with overseas Principals under MTSS, it is ensured that Overseas Principals are regulated entities, having sound financials, good credit rating and complying with Know Your Customer (KYC)/ Anti Money Laundering (AML)/ Combating the Financing of Terrorism (CFT) Guidelines as applicable in their home countries. The necessary KYC/ AML/ CFT Guidelines have been prescribed by the Reserve Bank for the Indian Agents under MTSS for money transfer activities. Further collateral equivalent to 3 days’ average drawings or USD 50,000 whichever is higher, is kept by the Overseas Principal with Indian Agents credit exposures.
This information was given by the Minister of State for Finance, Shri Namo Narain Meena in a written reply to an Unstarred Question raised in Rajya Sabha today.
