New rules ban banks from converting forex without explicit consent

The Foreign Exchange Dealers' Association of India (FEDAI) has issued new directives instructing banks not to convert foreign currency remittances into rupees without explicit instructions from the sender or beneficiary. The move addresses concerns that intermediary banks were converting dollars and other foreign currency at unfavourable exchange rates, resulting in financial losses for small exporters and individuals receiving overseas payments.

Under the new guidelines, banks must obtain clear consent before performing any forex conversion. Additionally, banks have been directed to ensure transparency in forex service charges and publicly disclose currency conversion rates on their websites. These measures aim to eliminate the practice of banks acting as unaccountable middlemen in forex transactions.

The directive protects vulnerable exporters and remittance recipients from being disadvantaged by opaque conversion practices. By mandating consent and rate transparency, FEDAI seeks to bring greater accountability and fairness to India's foreign exchange services sector.