A self regulatory organisation (SRO) such as the Foreign Exchange dealers association ( FEDAI) could play an important role in ensuring fair pricing and streamlining the procedures and guidelines for the financial markets, he said.
The central bank has had to deal with several representations from small customers especially the MSMEs and other retail participants complaining about high foreign exchange transaction charges.
“Let me also outline a few specific areas where we in the Reserve Bank would like to see more efforts by FEDAI ” Rao said in his keynote address at the 17th FEDAI Annual Conference at Cairo, Egypt. ” One such issue is about fair pricing for the retail / smaller customers’ ‘.
While large corporates are able to enjoy the benefits of tighter pricing warranted by the liquidity in the markets, charges recovered from smaller customers do not appear to be justified by higher cost of processing and warehousing small ticket transactions.
The foreign exchange retail platform was introduced to shift price discovery to an automated platform. ” Banks do not, however, appear to have made efforts to encourage customers to use that platform” Rao said.
But what is worrisome about the higher charges levied on the smaller customers, is the complete lack of transparency regarding the information on charges levied for such customers. ” We would definitely like to see concerted efforts by FEDAI and all banks in ensuring fair and transparent pricing for the less resourceful customers of the forex markets.” Rao said.While the regulatory framework for financial markets and the broader foreign exchange system has been simplified and overhauled over the last few years, Rao underscored that it would be required of banks individually or collectively through FEDAI, to make sufficient efforts to ensure that the benefits of simplification, rationalization and procedural ease reach every customer.
Raso also advised FEDAI that it should supplement RBI’s FEDAI RBI’s efforts in streamlining and rationalising procedures. He said that the RBI’s efforts to review the regulations and compliance procedures would be incomplete without the FEDAI also undertaking a similar assessment of its guidelines with a view to identifying and removing impediments that hinder the fulfilment of regulatory objectives.
Referring to the recent budget announcement of the need to undertake a comprehensive review of existing regulations by the financial sector regulators with a view to simplify, ease and reduce cost of compliance, Rao admonished FEDAI to play its role as an SRO ” While we would be doing what is expected from us, this endeavour should be forthcoming from the SROs as well”.