Money Transfer Service Scheme

WHAT IS MONEY TRANSFER SERVICE SCHEME (MTSS)?

Money Transfer Service Scheme (MTSS) is a 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. Under the scheme there is 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.

WHO IS AN OVERSEAS PRINCIPAL?

The Overseas Principal should be a registered entity, licenced by the Central Bank / Government or financial regulatory authority of the country concerned for carrying on Money Transfer Activities. The country of registration of the Overseas Principal should be AML compliant. The Overseas Principal should 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 to commence/ operate a payment system.

WHO IS AN INDIAN AGENT?

To become an Indian Agent, the applicant should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full-Fledged Money Changer (FFMC) or the Department of Posts. Further, the Indian agents can also appoint sub-agents which can be retail outlets, commercial entities having a place of business, and whose bonafides are acceptable to the Indian Agent.

WHAT ARE THE TYPES OF REMITTANCES WHICH CAN BE RECEIVED UNDER THE MTSS?

Only cross-border personal remittances, such as, remittances towards family maintenance and remittances favouring foreign tourists visiting India are allowed under this arrangement. Donations/contributions to charitable institutions/trusts, trade related remittances, remittance towards purchase of property, investments or credit to NRE Accounts are not allowed through this arrangement.

APPROVAL OF RESERVE BANK OF INDIA

in terms of the powers granted under Section 10(1) of the Foreign Exchange Management Act (FEMA), 1999, the Reserve Bank of India may accord necessary permission (authorization) to any person to act as an Indian Agent under the Money Transfer Service Scheme. No person can handle the business of cross-border money transfer to India in any capacity unless specifically permitted to do so by the Reserve Bank.

ELIGIBILITY NORMS AND OTHER CONDITIONS AND PROCEDURE IN BRIEF FOR GETTING RBI APPROVAL

ENTRY NORMS

• The applicant to become an Indian Agent should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full-Fledged Money Changer (FFMC), or a Scheduled Commercial Bank or the Department of Posts.
• The applicant should have minimum Net Owned Funds of Rs.50 lakh.

PROCEDURE FOR MAKING APPLICATIONS TO THE RESERVE BANK

Application for necessary permission to act as an Indian Agent may be made to the respective regional office of the Foreign Exchange Department of the Reserve Bank of India, under whose jurisdiction the registered office of the applicant falls and should be accompanied by the documents pertaining to its proposed Overseas Principal, as detailed below:

• A declaration to the effect that no proceedings have been initiated by / are pending with the Directorate of Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the applicant or its directors and that no criminal cases are initiated / pending against the applicant or its directors.
• A declaration to the effect that proper policy framework on Know Your Customer (KYC) norms/ Anti-Money Laundering (AML) standards/ Combating the Financing of Terrorism (CFT), in accordance with the guidelines issued by Reserve Bank of India, Department of Banking Regulation, Central Office as referred to in their latest ‘Master Direction – Know Your Customer (KYC) Direction, 2016’ and other instructions in this regard so far and from time to time in future, mutatis mutandis, applicable to Indian agents and their Sub-agents in place on obtaining permission (authorization) of the Reserve Bank and before commencement of money transfer operations.
• Name and address of the Overseas Principal with whom the MTSS will be conducted.
• Full details of the operation of the scheme by the Overseas Principal.
• List of branches in India and their addresses where MTSS will be conducted by the applicant.
• Estimated volume of business per month/year under the scheme.
• Audited Balance Sheet and Profit and Loss Account for the last two financial years of the applicant, if available or a copy of the latest audited accounts, with a certificate from Statutory Auditors regarding the position of the Net Owned Funds as on the date of application.
• Memorandum and Articles of Association of the applicant where either a provision exists for taking up money transfer business or an appropriate amendment thereto has been filed with the Company Law Board.
• Confidential Report from at least two of the applicant’s bankers in sealed cover.
• Details of sister/ associated concerns of the applicant functioning in the financial sector.
• A certified copy of the board resolution for undertaking money transfer business by the applicant.
• A letter from the proposed Overseas Principal, agreeing to enter into tie up with the applicant and also to provide necessary collateral.

Apart from the above-mentioned documents and compliances there are other conditions also which the applicant has to be complied with in order to get the authorisation for Money changing service scheme.

CRITERIA FOR RBI DECISIONS

• The Indian Agents need to have strength and efficiency to function profitably in a highly competitive environment. As a number of Indian Agents are already functioning, permission (authorization) will be issued on a very selective basis to those who meet the above requirements, have necessary outreach and who are likely to conform to the best international and domestic standards of customer service and efficiency.
• The Indian Agent should commence its money transfer operations under the scheme within a period of six months from the date of issuance of permission (authorization) and inform the regional office concerned of the Foreign Exchange Department of the Reserve Bank.

THERE ARE CERTAIN GUIDELINES APPLICABLE ON OVERSEAS PRINCIPLES

Indian Agents entering into arrangements with Money Transfer Operators overseas, known as Overseas Principals, may note that Overseas Principals with adequate volume of business, track record and outreach will only be considered under the scheme. Further, since the primary objective of permitting the business of money transfer business in the country is to facilitate cheaper and more efficient means of receipt of remittances, operators with limited outreach in terms of branch network in the country and localized operations overseas will not be entertained.

APPLICANT INDIAN AGENTS SHOULD SUBMIT THE FOLLOWING DOCUMENTS/ COMPLY WITH THE FOLLOWING REQUIREMENTS, IN RESPECT OF THEIR OVERSEAS PRINCIPALS:

• The Overseas Principal should 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 to commence/ operate a payment system. Prior to such authorization, the Reserve Bank will verify the background and antecedents of the Overseas Principal with the help of Govt. of India,
• The Overseas Principal should be a registered entity, licenced by the Central Bank / Government or financial regulatory authority of the country concerned for carrying on Money Transfer Activities. The country of registration of the Overseas Principal should be AML compliant.
• The minimum net-worth of Overseas Principals should be at least USD 1 million as per the latest audited balance sheet, which should be maintained at all times. However, the Reserve Bank may consider relaxing the minimum Net Worth criterion in case of Overseas Principals incorporated in FATF member countries and are supervised by the concerned Central Bank/ Government or financial regulatory authority.
• The Overseas Principal should be well established in the money transfer business with a track record of operations in well-regulated markets.
• The arrangement with Overseas Principal should result in considerably increasing access to formal money transfer facilities at both ends.
• The Overseas Principal should be registered with the overseas trade / Industry bodies.
• The Overseas Principal should have a good rating from one of the international credit rating agencies.
• The Overseas Principal should submit confidential reports from at least two of its bankers.
• The Overseas Principal should submit a report certified by independent Chartered Accountants, regarding steps taken to comply with anti-money laundering norms in the home/ host country.
• The Overseas Principals will be fully responsible for the activities of their Agents and Sub Agents in India.
• Proper records of remitters as also beneficiaries pertaining to all pay-outs in India are to be maintained by the Overseas Principals. All records must be made accessible on demand to the Reserve Bank or other agencies of the Government of India, viz., Ministry of Finance, Ministry of Home Affairs, FIU-IND, etc. Full details of the remitters and the beneficiaries should be provided by the Overseas Principals, if called for.

APPOINTMENT OF SUB AGENTS BY INDIAN AGENTS

Under the Scheme, Indian Agents can enter into Sub Agency agreements with entities, fulfilling certain conditions, for the purpose of undertaking money transfer business.

SUB AGENTS

A Sub Agent should have a place of business, and whose bonafides are acceptable to the Indian Agent. Indian Agents are free to decide on the tenor of the arrangement as also the commission or fee through mutual agreement with the Sub Agent. The audit and on-site inspection of premises and records of the Sub Agents by the Indian Agent to be conducted at least once in a month and in a year respectively.

PROCEDURE FOR SUBMISSION OF INFORMATION IN RESPECT OF SUB AGENTS BY INDIAN AGENTS.

Indian Agents should submit on a quarterly basis necessary information in the prescribed format in soft copy form pertaining to their Sub Agents appointed during a quarter within 15 days from the end of the quarter, to the respective regional offices of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the Indian Agent falls for onward submission to the Ministry of Home Affairs (MHA), Govt. of India (GoI) through the Ministry of Finance (MoF), Govt. of India (GoI). In case of any objection by the MHA, the Sub Agency arrangement concerned should be terminated immediately.

Indian Agents should also furnish certificates that the Sub Agents appointed by them comply with the eligibility norms and also, they have done due diligence, wherever applicable, in respect of their Sub Agents.

Apart from this there are other regulatory and Contractual compliances and conditions are also there for the Sub Agents.

Source- https://m.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10868