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    How regulations can evolve to make cross border transactions from India seamless

    Synopsis

    As per RBI, only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permissible.

    money
    Money Transfer Service Scheme (MTSS) is a way of transferring personal remittances from abroad to beneficiaries in India.
    A need for efficient cross border payments is increasingly being felt in India to facilitate smooth flow of transactions between economies. As per a World Bank report, India received over $83 billion in remittances in 2020, followed by China and Mexico. However, problems persist with regulations in the country not being in tandem with the evolving landscape.

    Regulations that can ease cross border transactions and make it a seamless process in India were highlighted at the recently held Razorpay FTX 2021. Speaking about the regulations impacting cross border money transfers, Sohini Rajola, Regional Head - APAC & Middle East, Western Union said that one aspect that really helped was when money transfer operators were also permitted to deposit money into bank accounts under the Money Transfer Service Scheme (MTSS) scheme. “It really helped. It is easy, real time and instant and was enabled because of this regulation,” she stated.

    Money Transfer Service Scheme (MTSS) is a way of transferring personal remittances from abroad to beneficiaries in India. As per RBI, only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permissible. No outward remittance from India is allowed.

    Rajola added that another regulation which is a good start is when you try to send money out of India. Under the Liberalised Remittance Scheme (LRS), she says, the process was cumbersome even though the limits were raised from a process perspective. “So clearly you can send money into India in minutes, but if you were to try to send money out of India, it requires a lot of time, effort and documentation. And very limited players are allowed to participate in that.”

    However, she added that a positive move was the RBI allowing money transfer operators to participate and offer digital products in conjunction with existing banks. “This is rising and shining India. There are millions of Indians who have global aspirations and send money out. Both these regulations have been in a positive direction in cross border transfers,” she said.

    Delving on some of the other constraints acting as bottlenecks, Rajola said that most of the regulations around such transfers are a ‘one size fits all.’ A $100 gift will need to go through the same amount of paperwork as a $250,000 transfer. “Right now, we have put very heavy guardrails from a compliance perspective. We need to get the opaqueness out and make it easier for Indians. Regulation needs to evolve in that direction,” she highlighted.

    Adding to her viewpoint, Nalin Bansal, Chief Relationship Management and Key Initiatives, NPCI gave the example of India and Singapore which are working to link their digital payment systems. This is expected to be operational by July 2022. “It is a classy example which will link India’s Unified Payments Interface (UPI) and Singapore’s PayNow to enable users for fast payment systems and instant low-cost fund transfers. This is an experiment which can be expanded further. If this gets done, you can have trade, travel etc as well and the entire cross border piece can have a new life,” he elaborated.
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