RBI Master Circular No: RBI/2012-13/1 (02-Jul-12) Master Circular on Money Transfer Service Scheme

Master Circular No.1/2012-13

To

All Authorised Persons, who are Indian Agents under
the Money Transfer Service Scheme

Madam / Sir,

Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. 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 permissible under MTSS.

2. This Master Circular consolidates the existing instructions on the subject of "Money Transfer Service Scheme" at one place. The list of underlying circulars/ notifications is set out in Appendix.

3. This Master Circular is being issued with a sunset clause of one year. This circular will stand withdrawn on July 1, 2013 and will be replaced by an updated Master Circular on the subject.

Yours faithfully,

Rudra Narayan Kar

Chief General Manager

INDEX

PART-A
SECTION I
Guidelines for permitting Indian Agents under Money Transfer Service Scheme (MTSS)
SECTION II
Guidelines for Overseas Principals
SECTION III
Guidelines for appointment of Sub-Agents by Indian Agents
SECTION IV
Guidelines for renewal of permission of existing Indian Agents
SECTION V
Inspection of Indian Agents
SECTION VI
KYC/ AML/ CFT Guidelines for the Indian Agents
PART-B
Reports / Statements
KYC/ AML/ CFT Guidelines for Indian Agents
Statement showing details of remittances received through Money
Transfer Scheme during the quarter ended

PART-A

SECTION I

Guidelines for permitting Indian Agents under Money Transfer Service Scheme (MTSS)

Brief Introduction

1.1 Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. 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 permissible under MTSS. The system envisages a tie-up between reputed money transfer companies abroad known as Overseas Principals and agents in India known as Indian Agents, who would disburse the funds to the beneficiaries in India at ongoing exchange rates. The Indian Agent is not allowed to remit any amount to the Overseas Principal. Under MTSS, the remitters and the beneficiaries are individuals only.

Statutory Basis

1.2 In terms of powers granted under Section 10 (1) of Foreign Exchange Management Act (FEMA), 1999, the Reserve Bank of India may accord necessary permission (authorization) to any person to act as an Indian Agent under the Money Transfer Service Scheme. No person can handle the business of cross-border money transfer to India in any capacity, unless specifically permitted by the Reserve Bank.

2. Guidelines

Entry Norms

The applicant should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC), as defined in the A.P. (DIR Series) Circular No. 25 [A.P. (FL Series) Circular No. 02] dated March 6, 2006.

3. Procedure for making Applications

The application for necessary permission to act as an Indian Agent may be made to the Chief General Manager-in-Charge, Forex Markets Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai-400 001 and should be accompanied by the following documents:

a. An undertaking that no cases have been initiated/ are pending against the Indian Agent/ its directors by any law enforcing agency.

b. Name and address of the Overseas Principal with whom the MTS will be conducted.

c. Full details of the operation of the scheme by the Overseas Principal.

d. List of branches in India and their addresses where MTS will be conducted by the Indian Agent.

e. Estimated volume of business per month/year under the scheme.

f. Audited Balance Sheet and Profit and Loss Account for the last two financial years, if available or a copy of the latest audited accounts, with a certificate from statutory auditors regarding the position of the net owned funds as on the date of application.

g. Memorandum and Articles of Association where either a provision exists for taking up money transfer business or an appropriate amendment thereto has been filed with the Company Law Board.

h. Confidential Report from the applicant's bankers (two) in a sealed cover.

i. Details of sister/ associated concerns functioning in the financial sector.

j. A certified copy of the board resolution for undertaking money transfer business.

4. Collateral requirement

Collateral equivalent to 3 days' average drawings or USD 50,000 whichever is higher, may be kept by the Overseas Principal with a designated bank in India. The minimum amount of USD 50,000 shall be kept as a foreign currency deposit while the balance amount may be kept in the form of a Bank Guarantee. The adequacy of collateral should be reviewed at half yearly intervals on the basis of remittances received during the past six months.

5. Other conditions

a. Only personal remittances shall be allowed under this arrangement. Donations/contributions to charitable institutions/trusts, trade related remittances, remittance towards purchase of property, investments or credit to NRE Accounts shall not be made through this arrangement.

b. A cap of USD 2500 has been placed on individual remittance under the scheme. Amounts up to Rs.50,000/- may be paid in cash to a beneficiary in India. Any amount exceeding this limit shall be paid by means of account payee cheque/ demand draft/ payment order, etc. or credited directly to the beneficiary's bank account only. However, in exceptional circumstances, where the beneficiary is a foreign tourist, higher amounts may be disbursed in cash. Full record of such transactions should be kept on record for scrutiny by the auditors/ inspectors.

c. Only 30 remittances can be received by a single individual beneficiary under the scheme during a calendar year.

SECTION II

Guidelines for Overseas Principals

Indian Agents entering into arrangements with Money Transfer Operators overseas, known as Overseas Principals, may note that only Overseas Principals with adequate volume of business, track record and outreach will be considered under the scheme. Further, since the primary objective of permitting money transfer business in the country is to facilitate cheaper and more efficient means of receipt of remittances, operators with limited outreach in terms of branch network in the country and localized operations overseas will not generally be entertained.

Applicant Indian Agents should submit the following documents / comply with the following requirements, in respect of Overseas Principals:

a. The Overseas Principal should obtain necessary authorisation from the Department of Payment and Settlement Systems, Reserve Bank of India under the provisions of the Payment and Settlement Systems Act, 2007 to commence/ operate a payment system.

b. The Overseas Principal should be a registered entity, licenced by the Central Bank / Government or financial regulatory authority of the country concerned for carrying on Money Transfer Activities. The country of registration of the Overseas Principal should be AML compliant.

c. The Overseas Principal should be well established in the money transfer business with a track record of operations in well regulated markets.

d. The arrangement with Overseas Principal should result in considerably increasing access to formal money transfer facilities at both ends.

e. The Overseas Principal should be registered with the overseas trade / Industry bodies.

f. The Overseas Principal should have a good rating from one of the international credit rating agencies.

g. The Overseas Principal should submit confidential reports from two banks.

h. The Overseas Principal should submit a report certified by independent Chartered Accountants, regarding steps taken to comply with anti money laundering norms in the home/ host country.

i. The Overseas Principals will be fully responsible for the activities of their Agents and Sub-Agents in India.

j. Proper records of remitters as also beneficiaries pertaining to all pay-outs in India are to be maintained by the Overseas Principals. All records must be made accessible on demand to the Reserve Bank or other agencies of the Government of India, viz., Customs, Ministry of Home Affairs, FIU-IND, etc. Full details of the remitters and the beneficiaries should be provided by the Overseas Principals, if called for.

SECTION III

Guidelines for appointment of Sub-Agents by Indian Agents

The Indian Agent may appoint Sub-Agents who have place of business and a minimum net worth of `. 5 lakh.The Sub-Agents should operate through the Indian Agents and should not deal directly with the Overseas Principal. The Sub-Agents should act on the payment instructions issued by the Indian Agents. The Indian Agents are fully responsible for the activities of their Sub-Agents. While the Indian Agents will be encouraged to act as self-regulated entities, the onus of ensuring the proper conduct of activities of the Sub-Agents in the prescribed manner will lie solely on the Indian Agents. Every Indian Agent would be required to conduct due diligence before appointing a Sub-Agent and any irregularity observed could render the Indian Agent''s permission liable for cancellation.

SECTION IV

Guidelines for renewal of permission of existing Indian Agents

1. Necessary permission to Indian Agents will be issued initially for a period of one year, which may be renewed annually on the basis of fulfillment of all conditions mentioned at section I above and other directions/ instructions issued by the Reserve Bank from time to time.

2. The applicant should be an Authorised Dealer...

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