RBI formulating KYC norms for online money transfer abroad

The Reserve Bank of India (RBI) is thinking over a proposal to allow non-banking entities like online money transfer portals to undertake wire transfers for outward remittances from India. With the implementation of this proposal sending money overseas instantly can become a reality.

Currently this facility is restricted to inward remittances, as only banks are permitted to carry out outward remittance orders.

According to sources connected with this development, the central bank has been approached by a number of banks to allow outward remittance facilities on their money transfer channels. The banking regulator is in the process of formulating the know-your-customer (KYC) norms that are to be followed while sending cash abroad via online payment web-portals.

As per the RBI data the first half of the ongoing financial year has observed outward remittances to the tune of $ 431 million, marking a sharp rise compared to $440.5 million during the full financial year of 2007-08.

As per Money Transfer Service Scheme (MTSS) personal remittances are transferred from overseas to beneficiaries in India. Only personal remittances such as remittances towards family maintenance and remittances favoring foreign tourists visiting India are permissible under the scheme.

The system envision a tie-up between money transfer companies abroad and agents in India such as authorized dealers (ADs) and full-fledged money changers, who would disburse the funds to the beneficiaries at prevailing exchange rates. By the April-end 2008, there were around 26 Indian agents and 11 overseas principals under the MTSS. However currently the system, do not allow the repatriation of such inward remittances.

According to sources soon RBI may approve online outward remittance facilities as well for Indian customers.

At present money transfer operators such as Western Union Money Transfer and Moneygram are not allowed to offer outward remittance facilities in India. But TimesofMoney an online money transfer portal currently provides inward remittance facilities.

Although money changers like Wall Street and Thomas Cook offer outward remittance facilities, but these are not on a real time online basis. Outward remittances in India are mostly carried out at bank-branch levels, and there is an annual remit limit of $200,000 for each customer.