RBI/FED/2016-17/52
FED Master Direction No.1/2016-17
February
22, 2017
To
All Authorised Persons who are
Indian Agents under the Money Transfer Service Scheme
Madam / Dear Sir,
Master
Direction – 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
2. Reserve Bank has the powers
under Section 10(1) of the Foreign Exchange Management Act, 1999, to accord
necessary permission (authorization) to any person to act as an Indian
Agent under the Money Transfer Service Scheme.
3. The directions relating to
Money Transfer Service Scheme are being issued in a consolidated form
through the Master Direction enclosed. Reporting instructions can
be found in the Master Direction on Reporting. It may be noted that
whenever necessary, Reserve Bank shall issue directions to Authorised
Persons who are Indian Agents under the MTSS through A.P. (DIR Series)
Circulars in regard to any change in the rules, regulations, notifications,
directions or orders or the manner in which relative transactions are to be
conducted by the Authorised Persons with their customers/ constituents. The
Master Direction issued herewith shall be simultaneously amended suitably.
Yours
faithfully,
(Shekhar
Bhatnagar)
Chief General Manager-in- Charge
Master
Direction on Money Transfer Service Scheme
1. Introduction
1.1 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.
1.2 Statutory Basis
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.
2. Definitions
2.1 ‘Authorised Dealer’ (AD) means a person authorised
as an authorised dealer under sub-section (1) of section 10 of FEMA.
2.2 ‘Authorised Dealer (AD) Category II’ means (i)
Upgraded FFMCs; (ii) Select RRBs; (iii) Select UCBs; and (iv)Other
entities.
2.3 ‘Full Fledged Money Changer (FFMC)’ is an
authorized money changer authorised to purchase foreign exchange from
non-residents visiting India and residents, and to sell foreign exchange
for private and business travel purposes only.
2.4 ‘Overseas Principal’ are reputed money transfer
companies abroad entering into tie up with agents in India known as Indian
agents who would disburse funds to beneficiaries in India at ongoing
exchange rates.
3. Guidelines for Indian Agents
3.1 Entry Norms
(i) 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.
(ii) The applicant should have
minimum Net Owned Funds of Rs.50 lakh.
Note:- (i) Owned Funds :- (Paid-up Equity Capital + Free
reserves + Credit balance in Profit & Loss A/c) minus (Accumulated
balance of loss, Deferred revenue expenditure and Other intangible assets)
(ii) Net Owned Funds:- Owned
funds minus the amount of investments in shares of its subsidiaries,
companies in the same group, all (other) non-banking financial companies as
also the book value of debentures, bonds, outstanding loans and advances
made to and deposits with its subsidiaries and companies in the same group
in excess of 10 per cent of the Owned funds.
3.2 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.
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.
b.
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.
c.
Name
and address of the Overseas Principal with whom the MTSS will be conducted.
d.
Full
details of the operation of the scheme by the Overseas Principal.
e.
List
of branches in India and their addresses where MTSS will be conducted by
the applicant.
f.
Estimated
volume of business per month/year under the scheme.
g.
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.
h.
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.
i.
Confidential
Report from at least two of the applicant's bankers in sealed cover.
j.
Details
of sister/ associated concerns of the applicant functioning in the
financial sector.
k.
A
certified copy of the board resolution for undertaking money transfer
business by the applicant.
l.
A
letter from the proposed Overseas Principal, agreeing to enter into tie up
with the applicant and also to provide necessary collateral.
3.3 Collateral requirement
Collateral equivalent to 3 days'
average drawings or USD 50,000, whichever is higher, may be kept by the
Overseas Principal in favour of the Indian Agent with a designated bank in
India. The minimum amount of USD 50,000 shall be kept as a foreign currency
deposit while the balance amount may be kept in the form of a Bank
Guarantee. The adequacy of collateral should be reviewed by Indian Agents
at quarterly intervals on the basis of remittances received during the past
three months.
3.4 Other conditions
a. Only cross-border personal
remittances, such as, remittances towards family maintenance and
remittances favouring foreign tourists visiting India shall be allowed
under this arrangement. Donations/ contributions to charitable
institutions/t rusts, trade related remittances, remittance towards purchase
of property, investments or credit to NRE Accounts shall not be made
through this arrangement.
b. A cap of USD 2500 has been
placed on individual remittance under the scheme. Amounts up to Rs.50,000/-
may be paid in cash to a beneficiary in India. Any amount exceeding this
limit shall be paid by means of account payee cheque/ demand draft/ payment
order, etc., or credited directly to the beneficiary's bank account only.
However, in exceptional circumstances, where the beneficiary is a foreign
tourist, higher amounts may be disbursed in cash. Full details of such
transactions should be kept on record for scrutiny by the auditors/
inspectors.
c. Only 30 remittances can be
received by a single individual beneficiary under the scheme during a
calendar year.
3.5 Criteria for RBI decisions
(i) 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.
(ii) 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.
4. Guidelines for Overseas
Principals
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:
a.
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,
b.
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.
c.
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.
d.
The
Overseas Principal should be well established in the money transfer
business with a track record of operations in well regulated markets.
e.
The
arrangement with Overseas Principal should result in considerably
increasing access to formal money transfer facilities at both ends.
f.
The
Overseas Principal should be registered with the overseas trade / Industry
bodies.
g.
The
Overseas Principal should have a good rating from one of the international
credit rating agencies.
h.
The
Overseas Principal should submit confidential reports from at least two of
its bankers.
i.
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.
j.
The
Overseas Principals will be fully responsible for the activities of their
Agents and Sub Agents in India.
k.
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.
5. Guidelines for appointment of
Sub Agents by Indian Agents
5.1 The Scheme
Under the Scheme, Indian Agents
can enter into Sub Agency agreements with entities, fulfilling certain
conditions, for the purpose of undertaking money transfer business.
5.2 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.
5.3 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.
5.4 Due Diligence of Sub Agents
The Indian Agents and the
Overseas Principals should undertake the following minimum checks while
conducting due diligence of the Sub Agents, other than AD Category-I, AD
Category-II, Scheduled Commercial Banks, Full Fledged Money Changers and
the Department of Posts:
·
Existing
business activities of the Sub Agent/ its position in area
·
Shop
& Establishment/ other applicable municipal certification in favour of
the Sub Agent
·
Verification
of physical existence of location of the Sub Agent
·
Conduct
certificate of the Sub Agent from the local police authorities (certified
copy of Memorandum and Articles of Association and Certificate of
Incorporation in respect of incorporated entities).
Note : Although obtaining of conduct certificate of the
Sub Agent from the local police authorities is non-mandatory for the Indian
Agents, the Indian Agents must take due care to avoid appointing individuals/
entities as Sub Agents who have cases / proceedings initiated / pending
against them by any law enforcing agencies.
·
Declaration
regarding past criminal cases, cases initiated/ pending against the Sub
Agent and/or its directors/ partners by any law enforcing agency, if any
·
PAN
Card of the Sub Agents and its directors/ partners
·
Photographs
of the directors/ partners and the key persons of the Sub Agent
The above checks should be done
on a regular basis, at least once in a year. The Indian Agents should
obtain from the Sub Agents proper documentary evidence confirming the
location of the Sub Agents in addition to personal visits to the site. The
Indian Agents should discontinue agreements with Sub Agents who do not meet
the criteria laid down above within three months from the date of this
circular.
5.5 Selection of Centers
The Indian Agents are free to
select centers for operationalizing the Scheme. However, this may be
advised to the Reserve Bank.
5.6 Training
The Indian Agents would be
expected to impart training to the Sub Agents as regards operations and
maintenance of records.
5.7 Reporting, Audit and
Inspection
The Indian Agents would be
expected to put in place adequate arrangements for reporting of
transactions by the Sub Agents to the Indian Agents (on a regular basis) in
a simple format to be prescribed by them, say at monthly intervals.
Regular spot audits of all
locations of Sub Agents, at least on a monthly basis, should be conducted
by Indian Agents. Such audits should involve a dedicated team and 'mystery
customer' (Individuals acting as potential customers to experience and
measure the extent up to which people and process perform as they should)
concept should be used to test the compliance carried out by Sub Agents. As
mentioned above, a system of inspection of the books of the Sub Agents
should be put in place. The purpose of such inspection, which should be
done at least once a year, would be to ensure that the money transfer
business is being carried out by the Sub Agents in conformity with the
terms of agreement/prevailing RBI guidelines and that necessary records are
being maintained by the Sub Agents.
Note:- The Indian Agents are fully responsible for the
activities of their Sub Agents. While the Indian Agents will be encouraged
to act as self-regulated entities, the onus of ensuring the conduct of
activities of the Sub Agents in the prescribed manner will lie solely on
the Indian Agents concerned and Reserve Bank of India can in no way be held
responsible for the activities of the Sub Agents. Each Indian Agent would
be required to conduct due diligence before appointing a Sub Agent and any
irregularity observed could render the Indian Agent’s permission liable for
cancellation.
6. Guidelines for renewal of
permission (authorization) of existing Indian Agents
(i) Necessary permission to
Indian Agents will be issued initially for a period of one year, which may
be renewed for one to three years at a time on the basis of fulfilment of
all conditions and other directions/ instructions issued by the Reserve
Bank from time to time.
(ii) The applicant should be an
Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a
Full Fledged Money Changer (FFMC).
(iii) The Indian Agent should
have minimum Net Owned Funds of Rs.50 lakh.
(iv) Application for renewal of
permission should be submitted to the Regional Office concerned of the
Foreign Exchange Department of the Reserve Bank under whose jurisdiction
the registered office of the Indian Agent falls along-with the documents pertaining
to the Overseas Principal as detailed above and the following documents:
a.
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
Indian Agent or its directors and that no criminal cases are initiated/
pending against the Indian Agent or its directors.
b.
A
write up on the KYC/ AML/ CFT, risk management and internal control policy
framework, put in place by the Indian Agent.
c.
Audited
Balance Sheet and Profit and Loss Account for the last two financial years
of the Indian Agent, 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.
d.
Confidential
Reports from at least two of the bankers of the Indian Agent in sealed
cover.
e.
Details
of sister/ associated concerns of the Indian Agent functioning in the
financial sector.
f.
A
certified copy of the board resolution for renewal of permission.
Note :- An application for the renewal of permission under
MTSS shall be made not later than one month, or such other period as the
Reserve Bank may prescribe, before the expiry of the permission. Where an
entity submits an application for the renewal of its MTSS permission, the
permission shall continue in force until the date on which the permission
is renewed or the application for renewal of permission is rejected, as the
case may be. No application for renewal of MTSS permission shall be made
after the expiry of the permission.
7. Inspection of Indian Agents
Inspections of the Indian Agents
may be conducted by the Reserve Bank under the provisions of Section 12(1)
of the FEMA, 1999.
8. KYC/ AML/ CFT Guidelines for
the Indian Agents
(i) Detailed instructions on
Know Your Customer (KYC) norms/ Anti-Money Laundering (AML) standards/
Combating the Financing of Terrorism (CFT) for Indian Agents under MTSS in
respect of cross-border inward remittance activities, in the context of the
FATF Recommendations on Anti Money Laundering standards and on Combating
the Financing of Terrorism 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 issued in the regard from time to time in
future, shall, mutatis mutandis, be applicable to all Authorised Persons
(APs), who are Indian agents under MTSS and to their Sub-agents.
(ii) To facilitate receipt of
foreign inward remittances directly into bank account of the beneficiary,
the foreign inward remittances received under MTSS can be transferred to
the KYC compliant beneficiary bank account through electronic mode, such as
NEFT, IMPS etc. Foreign inward remittances received by the bank acting as
Indian Agent under MTSS (termed as ‘Partner Bank’), may also be electronically
credited directly to the account of the beneficiary, held with a bank other
than the Indian Agent Bank (termed as ‘Recipient Bank’), subject to the
following conditions:
a.
The
Recipient Bank will credit the amount transferred by the Partner bank only
to KYC compliant bank accounts.
b.
In
respect of the bank accounts which are not KYC compliant, the Recipient
Bank shall carry out KYC/ Customer Due Diligence (CDD) of the recipient
before the remittance to such account is credited or allowed to be withdrawn.
c.
The
Partner Bank shall appropriately mark the direct-to-account remittances to
indicate to the Recipient Bank that it is a foreign inward remittance.
d.
The
Partner Bank shall ensure that accurate originator information and
necessary beneficiary information is included in the electronic message
while transferring the fund to the Recipient Bank. This information should
be available in the remittance message throughout the payment chain i.e.
the overseas principal, the Partner Bank and the Recipient Bank. The
Partner Bank should add an appropriate alert in the electronic message
indicating that this is a foreign inward remittance and should not be
credited to KYC non-compliant account or NRE/ NRO accounts.
e.
The
identification and other documents of the recipient shall be maintained by
the Recipient Bank as per the provisions of Prevention of Money Laundering
(Maintenance of Records) Rules, 2005. All other requirements under KYC/
AML/ CFT guidelines issued by the Reserve Bank of India for MTSS from time
to time shall be adhered to by the Partner Bank.
f.
The
Recipient Bank may seek additional information from the Partner Bank and
shall report suspicious transactions to the FIU-IND with details of the
Partner Bank through which they received the remittances.
9. General Instructions
All Overseas Principals are
required to submit their annual audited balance sheet along with a
certificate on Net Worth from their Statutory Auditors to the concerned
Regional Office of the Foreign Exchange Department and the Department of
Payment and Settlement Systems of the Reserve Bank. Similarly, all Indian
Agents are required to submit their annual audited balance sheet along with
a certificate from their Statutory Auditors on Net Owned Funds to the
regional offices concerned of the Foreign Exchange Department of the
Reserve Bank. As the Overseas Principals and the Indian Agents are expected
to maintain minimum Net Worth and Net Owned Funds respectively on an
ongoing basis, they are required to bring it to the notice of the Reserve Bank
immediately along with a detailed plan of restoring the Net Worth/ Net
Owned Funds to the minimum required level, if there is any reduction in
their Net Worth/ Net Owned Funds below the minimum level.
10. Standard Operating Procedure
(SOP) during elections
The SOP given as ‘Annex’ for
non-bank APs is to be followed by all non-bank APs who are Indian Agents
under MTSS and they are also required to bring the contents of the SOP to
the notice of their Sub-Agents/ constituents concerned.
Annex
Standard Operating Procedure
(SOP) for non-bank money changers during elections
The movement of foreign exchange
can take place between Authorised Dealer Category I (AD Cat. I), Authorised
Dealer Category II (AD Cat. II), Full Fledged Money Changers (FFMC), their
offices/branches, their customers and their franchisees.
On a request received from the
Election Commission of India the following Standard Operating Practice
(SOP) for movement of cash (foreign exchange), during elections is being
notified:
A. Physical Movement-
1.
All
movement of Indian currency or foreign exchange should be effected by the
person(s) authorised, who should carry the supporting documents while
moving the cash. The movement should be on the basis of requisition made by
the receiver and to the address of the destination.
2.
If the
cash is being moved from the office/branch of the AP, it should leave the
place only after it has been recorded in the books of accounts of the AP.
3.
Similarly,
if the destination point of movement of the currency is the office/branch
of the AP, it should be recorded in the books of accounts of the AP, on the
same day or on the date of receipt.
4.
Transfer
of foreign currency between branches of the same AP should be accounted as
stock transfer and not as sale so that double counting is avoided.
B. In the case of doorstep forex service by FFMCs / Authorised
Dealers Category II to their regular customers, inter-alia, the processing
and accounting of the transaction should take place in the office of the AP
and the transaction should be supported by necessary documents for value
received. The delivery of the forex should be done by authorised officials
of the AP only.
C. As far as possible movement of Indian Currency
should be made through banking channels (viz. cheque, demand draft, NEFT,
RTGS, IMPS etc.) only. The transactions between authorized dealers and
FFMCs should be settled by way of account payee crossed cheques / demand
drafts/ and in no circumstances the settlement of Indian Currency should be
made in cash. The cash (INR) collected by the AP or its franchisee should
be deposited to a bank branch on the same day or next day.
D. The cancellation of any move for transportation of
cash should be properly documented.
E. The movement of cash should be in sync with the
documents.
F. The upper limit for movement of cash in INR would
be Rs.10,00,000/- and in Foreign Currency equivalent of USD 1,00,000 except
the transactions where the imported foreign currency is being transported
to the offices/ branch of the AP.
Appendix
List of Circulars/ Notifications
which have been consolidated in the Master Direction on Money Transfer
Service Scheme
S.
No.
|
Circulars
|
Date
|
1.
|
A.P. (DIR Series) Circular No.
25
|
March 06, 2006
|
2.
|
A.P.(DIR Series) Circular No.
132
|
June 8, 2012
|
3.
|
A.P.(DIR Series) Circular No.
89
|
March 12, 2013
|
4.
|
A.P.(DIR Series) Circular
No.110
|
March 4, 2014
|
5.
|
A. P. (DIR Series) Circular
No. 8
|
July 18, 2014
|
6.
|
A. P. (DIR Series) Circular
No. 49
|
December 16, 2014
|
7.
|
A. P. (DIR Series) Circular
No. 88
|
March 25, 2015
|
|