RBI streamlines overseas remittance tie-ups for banks, fintechs

Mumbai: The Reserve Bank of India on Thursday relaxed rules governing tie-ups between banks and non-bank entities for outward remittances used largely by individuals, shifting responsibility to banks to ensure regulatory compliance by their partners.

The move is expected to streamline cross-border payments for non-trade purposes such as overseas education, medical treatment, overseas investments, travel and family maintenance, while increasing transparency on foreign exchange rates and charges disclosed to customers. Top destinations for outward remittances from India are the US, the UAE, the UK, Canada and Australia.

The rules are applicable for tie-ups with authorised dealer category- 1 (AD-1) banks. All commercial banks and some small finance and co-operative banks have an AD-1 licence for cross-border transactions.

“On a review, it has been decided to dispense with the process of granting of the approvals by RBI for such tie-ups and instead Authorised Dealers are advised to comply with instructions while facilitating cross-border outward remittance of funds for non-trade current account transactions using third party entity in online mode,” the central bank said in the notification.

This move signals RBI's real confidence in how the fintech ecosystem has matured, said Taneia Bhardwaj, South Asia expansion lead at UK-based cross-border payments platform Wise. Making disclosure requirements and transparency standards a baseline across the industry is a "big deal", she said.

She said the framework could benefit consumers who have been paying hidden costs and opaque pricing.

RBI data on the expenditure under the liberalised remittances scheme (LRS), the formal scheme under which individuals can spend abroad, showed $26.4 billion was spent between April 2025 and February 2026, 2.3% lower than the corresponding period of the previous year.

The largest category, spending on foreign travel, comprised $15.3 billion, 3.1% lower whereas spending on gifts sent abroad contracted 12.7%. Investment by Indians in foreign debt and equity surged nearly 59% to $2.2 billion over the same period.

This change formalises the regulatory position that had been in place since the 2023 Payment Aggregator-Cross Border (PA-CB) framework and details that non-bank entities must now either obtain a PA-CB authorisation or work through an AD bank. “It is essentially a clarification and clean-up aimed at bringing greater order to the sector while maintaining strong safeguards for customers,” said Utkarsh Bhatnagar, partner, Cyril Amarchand Mangaldas.

RBI said AD-1 banks will be solely responsible for ensuring compliance with The Foreign Exchange Management Act,1999, and undertaking know your customer as per regulatory guidelines.

They will also be required to “prominently” display all required information to customers remitting funds through the website, online platform, software application, mobile application or any interface of the third party.

“The total estimated cost of the transaction along with break-up of the exchange rate (interbank rate and mark-up separately), service charges, other charges, if any, with description without any ambiguity (will need to be displayed,” RBI said, adding that the exact amount in foreign exchange that will be credited along with the maximum time taken for crediting the beneficiary’s account will also need to be shown.

Banks will also need to display the details of all third-party tie-ups on their website, and their policy regarding storage of customer data.

The RBI has also directed banks to ringfence customer funds from insolvency risks and ensure that remittance money does not flow into the accounts of third-party entities in India at any stage. Transfers must move directly from the remitter’s bank account to the beneficiary’s account overseas.

“The onus has now been passed on to the AD entities to ensure that whatever is being offered by a third party partner, they are responsible end-to-end to ensure that it is compliant, friendly from a customer point of view, and that the associated risks have been tackled,” Pushkar Kanitkar - head of risk and compliance at Revolut India said, adding that this would help improve compliance and customer experience and bring in the required level of transparency.

UK-based cross-border payments platform Revolut has an AD-2 licence in India. The platform currently does not facilitate outward remittances but is in the process of rolling out the facility.