Mumbai: The next time you are travelling abroad and need foreign currency, you may not need to pay a premium to the bank or the currency dealer to exchange your notes. You can do so at the inter-bank rate, the lowest rate possible, through FX-Retail, the foreign exchange trading platform notified by the Reserve Bank of India (RBI) for retail participants . Trading on FX-Retail will start from 5 August, though registration for the platform opens from 1 July itself. The platform will be operated by the Clearing Corp. of India Ltd (CCIL).

The platform aims at improving transparency and pricing of forex for retail customers. “Such a mechanism will provide transparency while enhancing competition and lead to better pricing for retail customers. Banks may charge their retail customers a pre-agreed flat fee towards administrative expenses, which should be publicly declared. Overall, this would bring down the total cost faced by the retail customer in the foreign exchange market," the RBI notification said. Here, the term retail customers denotes individuals as well as businesses that, unlike banks, do not have access to the inter-bank forex market. Here’s what it means for a retail customer.

The trading platform

At present, retail users who need foreign exchange need to either go to their bank or to a currency dealer to get foreign currency. Usually, customers buying forex from a bank are unaware of the exact exchange rate being offered and the exact amount of charges they are paying. Sudarshan Motwani, founder and chief executive officer, BookMyForex.com, a foreign exchange marketplace, said that the new system could bring transparency to the retail forex market. “Banks today charge you a high and a very un-uniform rate on a forex transaction," he said.

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As a consumer, you will have to register on the FX-Retail platform through Fxretail.co.in. You will need to submit your KYC (know your customer) details as well as your bank account details like branch, IFSC code and account number. Based on the funds available in the bank account, banks will set a limit for you to trade. Banks will be able to charge an “administrative charge".

You will also be charged a one-time registration fee of ₹300 plus GST. The fee for non-individuals is ₹1,000. While there is no fee for transactions of up to $50,000 in a day, beyond that, 0.0004% of the transaction amount would be charged.

Will it benefit you?

Amitabh Bhatnagar, head , relationships, insignia preferred banking and diplomatic segment, RBL Bank Ltd, said the platform is expected to act as an electronic trading platform. “Retail customer can directly deal on the platform and have access to current rates, thus moving away from negotiating with banks or money changers on price," he said.

However, there could also be some challenges. The limitation that banks could face will be in providing hard currency to buyers. “We have observed that the supply of foreign currency (cash) varies in different cities and regions. Hence, you will see that a dollar available in Mumbai and Bengaluru could be expensive compared to a dollar in Punjab, which sees a lot of inflow of forex. So when you settle a trade, the bank or your nearest nodal branch may or may not have the forex in cash,"Motwani said.

A banker, requesting anonymity, said initially banks would only accept electronic transactions and may not settle trades for hard currency. “But as a corollary to this trade, the bank can facilitate moving that foreign currency to an instrument like a forex card for the consumer (individual)," the banker said.

Bankers are also expecting the platform to be largely used by businesses initially. When volume on the platform picks up, it will become like any other exchange where all buyers could be able to participate, the banker said.

Gaurang Somaiya, research analyst (currency) at Motilal Oswal Financial Services Ltd, said the concern on delivering the foreign exchange in cash is valid. “But when new platforms are introduced, there will be challenges. If I have an urgent need of forex for a trip abroad, I might still have to go to the money exchanger. The system might take a year or more to improve those things. Currency supply chain will also come into play," he said.

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