- City Fajr Shuruq Duhr Asr Magrib Isha
- Dubai 04:00 05:25 12:20 15:41 19:09 20:34
Exchange houses in the Gulf catering to non-resident Indians (NRIs) have begun to take a second look at their clients’ accounts after India’s central bank imposed strict regulations on Indian banks receiving funds from exchange companies.
The move by the Reserve Bank of India (RBI) is an attempt to control the increasing influx of capital into the stock markets and lotteries from NRIs. The huge inflows of foreign wealth have been increasing speculation in the Indian market, which the government fears is artificial and unhealthy, said analysts.
The number of companies offering remittance services to India has been growing in the Gulf and the introduction of net-based cash transaction services has lead to a boom in outlets competing to receive remittances.
Salim Gangadharan, chief general manager of the RBI Foreign Exchange Department, asked exchange companies in the Gulf to make sure their accounts are not used for commercial purposes or to remit money for trading purposes.
“In view of the increasing number of transactions being handled by the exchange houses and the rapid developments in the communication facilities between exchange houses and drawee banks, there was a need to rationalise the existing instructions on maintenance of rupee/foreign currency vostro accounts of non-resident exchange houses,” said the official notification.
A senior staffer at UAE-based Ahlia Exchange Bureau said: “The new restrictions will make us more cautious. Some of these instructions were not fully implemented. The RBI move may be to prevent more exchange firms from starting operations as many new exchange companies have applied for RBI permission to start remittance businesses.”
Indians working in foreign countries reportedly sent back more than $25.7 billion (Dh94.3bn) in remittances in 2006 and the small number of exchange companies in the Gulf has expanded to compete for the growing business. In addition, internet-based cash remittance schemes have revolutionised the sector with private banks, travel agents and finance companies starting remittance businesses.
Under the new rules, RBI approval is required for Indian banks to open a foreign currency vostro account to make and receive international payments from a foreign bank.
The RBI notification said: “Under Rupee Drawing Arrangements, inward remittances are received in India through exchange houses situated in the Gulf countries, Hong Kong and Singapore. While considering the request of an exchange house for opening an account, banks should make necessary inquiries about the financial standing of the exchange house and ensure that it has a valid licence issued by the monetary authority to transact money exchange business.”
Prem Raj, business development manager, Emirates India International Exchange in Sharjah, said: “There was an RBI notification regulating remittance through money exchanges into charitable trusts and other accounts. Exchange companies are supposed to remit money only in private accounts of NRIs and the remitter and beneficiary in most cases should be individuals.
“The new restriction was imposed because some NRI money remitted through exchange houses could be used for speculative investments in lottery, real estate, plantation and stock markets.”
Raj said many NRIs from all over the world used the remittance service to invest money in lottery schemes and speculative investments.
The RBI notification also asked banks to reject large remittances listed as charitable contributions.
Previously, the RBI has launched efforts to combat money laundering through exchange houses. Officers trained to recognise suspicious transactions were placed in every money exchange branch in India to review remittances.
Follow Emirates 24|7 on Google News.