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Forex retail trading platform ready for roll-out on August 5, says RBI

Business Standard:  June 21, 2019

Mumbai: The Reserve Bank of India (RBI) on Thursday said the currency trading platform for retail trading is ready for roll-out by the Clearing Corporation of India (CCIL) on August 5 to enable transparent and fair pricing for retail users, such as individuals and micro, small and medium enterprises.

According to sources, the customer orders would be bunched up to make marketable lots of $5 million and above, which can be directly traded by the CCIL platform in the interbank market, which will help the customer avail of superfine interbank rates. This will significantly cut down on exorbitant exchange rates that the banks charge for foreign currency needs.

Generally, banks charge about 1-2 per cent extra to provide foreign exchange (forex) currencies, which can be eliminated by the use of this platform. The RBI had announced in its June policy the launch of this platform, but a draft guideline on this was issued in October 2017.

“Overall, this would bring down the total cost faced by the retail customer in the forex market. Facilitating direct access of retail customers to the market, rather than through price-setting by their banks, would also bring down the risk that banks face in warehousing transactions,” the RBI said in a notification on its website.

There will be no cap on the number of transactions (buy or sell) per customer during a day, but the total amount of transactions of a customer will be subject to the limit assigned by the customer’s bank.

The size of a single transaction should not be more than $5 million, but no minimum transaction limit was set by the RBI.

While the bank will charge the retail customer an administrative charge, CCIL won’t charge any fee for transactions up to $50,000 per day.

“A transaction charge of 0.0004 per cent shall be charged by the CCIL for transactions in excess of $50,000 per day,” the notification said.

Fees charged by banks, if any, should be spelt out on the FX-Retail platform.

The FX-Retail platform can be accessed by any customer of a bank through the website, for any transaction on a cash basis (same day), tom basis (next day) or spot basis (two days after date of transaction).

“In view of the advantages of transparency and pricing to retail customers, as well as the systemic advantage of improved price discovery, banks shall facilitate onboarding of retail customers to the platform expeditiously,” the RBI said, adding a quarterly return shall be submitted by all banks on the distribution of customer transactions.

The CCIL will issue detailed guidelines on this at a later date.

The customer registration process on the platform will commence on July 1, and the platform will be available for transactions from August 5.

The CCIL, in a notification on its website, said customers are required to get registered for availing of the FX-Retail platform, for which a separate registration portal was made available by the CCIL.

According to instructions on the CCIL, the customer will have to provide the name of its bank at the time of registration. On successful registration, the customer’s details would be forwarded to the bank for verification and approval. On approval, the customer will be provided with the user credentials, which would include a login ID and password.

The FX-CLEAR interbank spot rates would also be available to customers for viewing purpose on the platform.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.