The central banks in 2021 reviewed the foreign exchange system to rationalise and streamline it, but that may remain incomplete unless the Foreign Exchange Dealers Association of India also doing its part in reviewing its guidelines, RBI deputy governor Rajeshwar Rao said.
“We have had many occasions of customers of Authorised Dealers, especially from the MSME and retail segments, approaching us and expressing concerns about the “high” charges for foreign exchange transactions levied by Authorised Dealer banks,” Rao told the 17th FEDAI Annual Conference recently.
“The FX-Retail platform was introduced in a bid to shift price discovery to an automated platform. Banks do not, however, appear to have made efforts to encourage customers to use that platform. 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.”
The foreign exchange market is among the most opaque of India’s financial markets where the mark-ups, charges, fees remain particularly high.
The central bank introduced a platform where small customers could transact with transparency.
“While the regulatory framework for financial markets and the broader foreign exchange system has been simplified and overhauled over the last few years, it would be required of you individually or collectively through FEDAI, to make sufficient efforts to ensure that the benefits of simplification, rationalization and procedural ease reach every customer,” said Rao.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.”
Deputy Governor Rao warned that the proliferation of many foreign exchange trading platforms are luring gullible investors and that FEDAI also had a responsibility in preventing their customers from getting trapped by those operators.