Guidelines for Money Transfer Services
Scheme (MTSS)
[RBI/FED/2016-17/52
– FED Master Direction No. 01/2016-17 dated 22nd February 2017]
Sub: Master
Direction – Money Transfer Service Scheme (MTSS)
Money
Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal
remittances from abroad to beneficiaries in India
2. Reserve
Bank has the powers under Section 10(1) of the Foreign Exchange Management Act,
1999, to accord necessary permission (authorization) to any person to act as an
Indian Agent under the Money Transfer Service Scheme.
3. The
directions relating to Money Transfer Service Scheme are being issued in a
consolidated form through the Master Direction enclosed.
Reporting instructions can be found in the Master Direction on Reporting. It
may be noted that whenever necessary, Reserve Bank shall issue directions to
Authorised Persons who are Indian Agents under the MTSS through A.P. (DIR
Series) Circulars in regard to any change in the rules, regulations,
notifications, directions or orders or the manner in which relative
transactions are to be conducted by the Authorised Persons with their
customers/ constituents. The Master Direction issued herewith shall be
simultaneously amended suitably.
Master Direction on Money Transfer
Service Scheme
1.
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 funds
to beneficiaries in India at ongoing exchange rates. The Indian Agents can in
turn also appoint sub-agents to expand their network. The Indian Agent is not
allowed to remit any amount to the Overseas Principal. Under MTSS the remitters
and the beneficiaries are individuals only. This document covers the details
regarding the entry norms, authorization, renewal and various operating
instructions pertaining to the entities involved in this scheme.
1.2
Statutory Basis
In terms of
the powers granted under Section 10(1) of the 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 to do so
by the Reserve Bank.
2.
Definitions
2.1 ‘Authorised
Dealer’ (AD) means a person authorised as an authorised dealer under
sub-section (1) of section 10 of FEMA.
2.2 ‘Authorised
Dealer (AD) Category II’ means (i) Upgraded FFMCs;
(ii) Select RRBs; (iii) Select UCBs; and (iv)Other
entities.
2.3 ‘Full
Fledged Money Changer (FFMC)’ is an authorized money changer authorised to
purchase foreign exchange from non-residents visiting India and residents, and
to sell foreign exchange for private and business travel purposes only.
2.4 ‘Overseas
Principal’ are reputed money transfer companies abroad entering into tie up
with agents in India known as Indian agents who would disburse funds to
beneficiaries in India at ongoing exchange rates.
3.
Guidelines for Indian Agents
3.1 Entry
Norms
(i) The applicant to become an Indian Agent should be an Authorised
Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged
Money Changer (FFMC), or a Scheduled Commercial Bank or the Department of
Posts.
(ii) The
applicant should have minimum Net Owned Funds of Rs.50 lakh.
Note:- (i)
Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit balance in
Profit & Loss A/c) minus (Accumulated balance of loss, Deferred revenue
expenditure and Other intangible assets)
(ii) Net
Owned Funds:- Owned funds minus the amount of
investments in shares of its subsidiaries, companies in the same group, all
(other) non-banking financial companies as also the book value of debentures,
bonds, outstanding loans and advances made to and deposits with its
subsidiaries and companies in the same group in excess of 10 per cent of the
Owned funds.
3.2
Procedure for making Applications to the Reserve Bank
Application
for necessary permission to act as an Indian Agent may be made to the
respective regional office of the Foreign Exchange Department of the Reserve
Bank of India, under whose jurisdiction the registered office of the applicant
falls and should be accompanied by the documents pertaining to its proposed
Overseas Principal, as detailed below:
a.
A declaration to the effect that no
proceedings have been initiated by / are pending with the Directorate of
Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law
enforcing authorities, against the applicant or its directors and that no
criminal cases are initiated / pending against the applicant or its directors.
b.
A declaration to the effect that proper
policy framework on Know Your Customer (KYC) norms/ Anti-Money Laundering (AML)
standards/ Combating the Financing of Terrorism (CFT), in accordance with the
guidelines issued by Reserve Bank of India, Department of Banking Regulation,
Central Office as referred to in their latest ‘Master
Direction – Know Your Customer (KYC) Direction, 2016’ and other
instructions in this regard so far and from time to time in future, mutatis
mutandis, applicable to Indian agents and their Sub-agents in place on
obtaining permission (authorization) of the Reserve Bank and before
commencement of money transfer operations.
c.
Name and address of the Overseas
Principal with whom the MTSS will be conducted.
d.
Full details of the operation of the
scheme by the Overseas Principal.
e.
List of branches in India and their
addresses where MTSS will be conducted by the applicant.
f.
Estimated volume of business per month/year
under the scheme.
g.
Audited Balance Sheet and Profit and
Loss Account for the last two financial years of the applicant, 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.
h.
Memorandum and Articles of Association
of the applicant where either a provision exists for taking up money transfer
business or an appropriate amendment thereto has been filed with the Company
Law Board.
i.
Confidential Report from at least two
of the applicant's bankers in sealed cover.
j.
Details of sister/ associated concerns
of the applicant functioning in the financial sector.
k.
A certified copy of the board
resolution for undertaking money transfer business by the applicant.
l.
A letter from the proposed Overseas
Principal, agreeing to enter into tie up with the applicant and also to provide
necessary collateral.
3.3
Collateral requirement
Collateral
equivalent to 3 days' average drawings or USD 50,000, whichever is higher, may
be kept by the Overseas Principal in favour of the Indian Agent 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 by Indian Agents
at quarterly intervals on the basis of remittances received during the past
three months.
3.4 Other
conditions
a. Only
cross-border personal remittances, such as, remittances towards family
maintenance and remittances favouring foreign tourists visiting India shall be
allowed under this arrangement. Donations/ contributions to charitable
institutions/t rusts, 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 details 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.
3.5 Criteria
for RBI decisions
(i) The Indian Agents need to have strength and efficiency
to function profitably in a highly competitive environment. As a number of
Indian Agents are already functioning, permission (authorization) will be
issued on a very selective basis to those who meet the above requirements, have
necessary outreach and who are likely to conform to the best international and
domestic standards of customer service and efficiency.
(ii) The
Indian Agent should commence its money transfer operations under the scheme
within a period of six months from the date of issuance of
permission (authorization) and inform the regional office concerned of the
Foreign Exchange Department of the Reserve Bank.
4. Guidelines
for Overseas Principals
Indian
Agents entering into arrangements with Money Transfer Operators overseas, known
as Overseas Principals, may note that Overseas Principals with adequate volume
of business, track record and outreach will only be considered under the
scheme. Further, since the primary objective of permitting the business of
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 be entertained.
Applicant
Indian Agents should submit the following documents/ comply with the following
requirements, in respect of their 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 (PSS Act), 2007 to commence/ operate a payment system. Prior to
such authorization, the Reserve Bank will verify the background and antecedents
of the Overseas Principal with the help of Govt. of India,
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 minimum net-worth of Overseas
Principals should be at least USD 1 million as per the latest audited balance
sheet, which should be maintained at all times. However, the Reserve Bank may
consider relaxing the minimum Net Worth criterion in case of Overseas
Principals incorporated in FATF member countries and are supervised by the
concerned Central Bank/ Government or financial regulatory authority.
d.
The Overseas Principal should be well
established in the money transfer business with a track record of operations in
well regulated markets.
e.
The arrangement with Overseas Principal
should result in considerably increasing access to formal money transfer
facilities at both ends.
f.
The Overseas Principal should be
registered with the overseas trade / Industry bodies.
g.
The Overseas Principal should have a
good rating from one of the international credit rating agencies.
h.
The Overseas Principal should submit
confidential reports from at least two of its bankers.
i.
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.
j.
The Overseas Principals will be fully
responsible for the activities of their Agents and Sub Agents in India.
k.
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., Ministry of
Finance, 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.
5.
Guidelines for appointment of Sub Agents by Indian Agents
5.1 The
Scheme
Under the
Scheme, Indian Agents can enter into Sub Agency agreements with entities,
fulfilling certain conditions, for the purpose of undertaking money transfer
business.
5.2 Sub
Agents
A Sub Agent
should have a place of business, and whose bonafides
are acceptable to the Indian Agent. Indian Agents are free to decide on the
tenor of the arrangement as also the commission or fee through mutual agreement
with the Sub Agent. The audit and on-site inspection of premises and records of
the Sub Agents by the Indian Agent to be conducted at least once in a month and
in a year respectively.
5.3
Procedure for Submission of information in respect of Sub Agents by Indian
Agents.
Indian
Agents should submit on a quarterly basis necessary information in the
prescribed format in soft copy form pertaining to their Sub Agents appointed
during a quarter within 15 days from the end of the quarter, to the respective
regional offices of the Foreign Exchange Department of the Reserve Bank under
whose jurisdiction the registered office of the Indian Agent falls for onward
submission to the Ministry of Home Affairs (MHA), Govt. of India (GoI) through the Ministry of Finance (MoF),
Govt. of India (GoI). In case of any objection by the
MHA, the Sub Agency arrangement concerned should be terminated immediately.
Indian
Agents should also furnish certificates that the Sub Agents appointed by them
comply with the eligibility norms and also they have done due diligence,
wherever applicable, in respect of their Sub Agents.
5.4 Due
Diligence of Sub Agents
The Indian
Agents and the Overseas Principals should undertake the following minimum
checks while conducting due diligence of the Sub Agents, other than AD
Category-I, AD Category-II, Scheduled Commercial Banks, Full Fledged Money
Changers and the Department of Posts:
·
Existing business activities of the Sub
Agent/ its position in area
·
Shop & Establishment/ other
applicable municipal certification in favour of the Sub Agent
·
Verification of physical existence of
location of the Sub Agent
·
Conduct certificate of the Sub Agent
from the local police authorities (certified copy of Memorandum and Articles of
Association and Certificate of Incorporation in respect of incorporated
entities).
Note : Although
obtaining of conduct certificate of the Sub Agent from the local police
authorities is non-mandatory for the Indian Agents, the Indian Agents must take
due care to avoid appointing individuals/ entities as Sub Agents who have cases
/ proceedings initiated / pending against them by any law enforcing agencies.
·
Declaration regarding past criminal
cases, cases initiated/ pending against the Sub Agent and/or its directors/
partners by any law enforcing agency, if any
·
PAN Card of the Sub Agents and its
directors/ partners
·
Photographs of the directors/ partners
and the key persons of the Sub Agent
The above
checks should be done on a regular basis, at least once in a year. The Indian
Agents should obtain from the Sub Agents proper documentary evidence confirming
the location of the Sub Agents in addition to personal visits to the site. The
Indian Agents should discontinue agreements with Sub Agents who do not meet the
criteria laid down above within three months from the date of this circular.
5.5
Selection of Centers
The Indian
Agents are free to select centers for
operationalizing the Scheme. However, this may be advised to the Reserve Bank.
5.6 Training
The Indian
Agents would be expected to impart training to the Sub Agents as regards
operations and maintenance of records.
5.7
Reporting, Audit and Inspection
The Indian
Agents would be expected to put in place adequate arrangements for reporting of
transactions by the Sub Agents to the Indian Agents (on a regular basis) in a
simple format to be prescribed by them, say at monthly intervals.
Regular spot
audits of all locations of Sub Agents, at least on a monthly basis, should be
conducted by Indian Agents. Such audits should involve a dedicated team and
'mystery customer' (Individuals acting as potential customers to experience and
measure the extent up to which people and process perform as they should)
concept should be used to test the compliance carried out by Sub Agents. As
mentioned above, a system of inspection of the books of the Sub Agents should
be put in place. The purpose of such inspection, which should be done at least
once a year, would be to ensure that the money transfer business is being
carried out by the Sub Agents in conformity with the terms of
agreement/prevailing RBI guidelines and that necessary records are being
maintained by the Sub Agents.
Note:- 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
conduct of activities of the Sub Agents in the prescribed manner will lie
solely on the Indian Agents concerned and Reserve Bank of India can in no way
be held responsible for the activities of the Sub Agents. Each 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.
6.
Guidelines for renewal of permission (authorization) of existing Indian Agents
(i) Necessary permission to Indian Agents will be issued
initially for a period of one year, which may be renewed for one to three years
at a time on the basis of fulfilment of all conditions and other directions/
instructions issued by the Reserve Bank from time to time.
(ii) The
applicant should be an Authorised Dealer Category-I bank or an Authorised
Dealer Category-II or a Full Fledged Money Changer (FFMC).
(iii) The
Indian Agent should have minimum Net Owned Funds of Rs.50 lakh.
(iv)
Application for renewal of permission should be
submitted to the Regional Office concerned of the Foreign Exchange Department
of the Reserve Bank under whose jurisdiction the registered office of the
Indian Agent falls along-with the documents pertaining to the Overseas
Principal as detailed above and the following documents:
a.
A declaration to the effect that no
proceedings have been initiated by/ are pending with the Directorate of
Enforcement (DoE)/ Directorate of Revenue Intelligence (DRI) or any other law
enforcing authorities, against the Indian Agent or its directors and that no
criminal cases are initiated/ pending against the Indian Agent or its
directors.
b.
A write up on the KYC/ AML/ CFT, risk
management and internal control policy framework, put in place by the Indian
Agent.
c.
Audited Balance Sheet and Profit and
Loss Account for the last two financial years of the Indian Agent, 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.
d.
Confidential Reports from at least two
of the bankers of the Indian Agent in sealed cover.
e.
Details of sister/ associated concerns
of the Indian Agent functioning in the financial sector.
f.
A certified copy of the board
resolution for renewal of permission.
Note :- An
application for the renewal of permission under MTSS shall be made not later
than one month, or such other period as the Reserve Bank may prescribe, before
the expiry of the permission. Where an entity submits an application for the
renewal of its MTSS permission, the permission shall continue in force until
the date on which the permission is renewed or the application for renewal of
permission is rejected, as the case may be. No application for renewal of MTSS
permission shall be made after the expiry of the permission.
7.
Inspection of Indian Agents
Inspections
of the Indian Agents may be conducted by the Reserve Bank under the provisions
of Section 12(1) of the FEMA, 1999.
8. KYC/ AML/
CFT Guidelines for the Indian Agents
(i) Detailed instructions on Know Your Customer (KYC) norms/
Anti-Money Laundering (AML) standards/ Combating the Financing of Terrorism
(CFT) for Indian Agents under MTSS in respect of cross-border inward remittance
activities, in the context of the FATF Recommendations on Anti Money Laundering
standards and on Combating the Financing of Terrorism issued by Reserve Bank of
India, Department of Banking Regulation, Central Office as referred to in their
latest ‘Master
Direction – Know Your Customer (KYC) Direction, 2016’ and other
instructions in this regard issued in the regard from time to time in future,
shall, mutatis mutandis, be applicable to all Authorised Persons (APs), who are
Indian agents under MTSS and to their Sub-agents.
(ii) To
facilitate receipt of foreign inward remittances directly into bank account of
the beneficiary, the foreign inward remittances received under MTSS can be
transferred to the KYC compliant beneficiary bank account through electronic
mode, such as NEFT, IMPS etc. Foreign inward remittances received by the bank
acting as Indian Agent under MTSS (termed as ‘Partner Bank’), may also be
electronically credited directly to the account of the beneficiary, held with a
bank other than the Indian Agent Bank (termed as ‘Recipient Bank’), subject to
the following conditions:
a.
The Recipient Bank will credit the
amount transferred by the Partner bank only to KYC compliant bank accounts.
b.
In respect of the bank accounts which
are not KYC compliant, the Recipient Bank shall carry out KYC/ Customer Due
Diligence (CDD) of the recipient before the remittance to such account is
credited or allowed to be withdrawn.
c.
The Partner Bank shall appropriately
mark the direct-to-account remittances to indicate to the Recipient Bank that
it is a foreign inward remittance.
d.
The Partner Bank shall ensure that
accurate originator information and necessary beneficiary information is
included in the electronic message while transferring the fund to the Recipient
Bank. This information should be available in the remittance message throughout
the payment chain i.e. the overseas principal, the Partner Bank and the
Recipient Bank. The Partner Bank should add an appropriate alert in the
electronic message indicating that this is a foreign inward remittance and
should not be credited to KYC non-compliant account or NRE/ NRO accounts.
e.
The identification and other documents
of the recipient shall be maintained by the Recipient Bank as per the
provisions of Prevention of Money Laundering (Maintenance of Records) Rules,
2005. All other requirements under KYC/ AML/ CFT guidelines issued by the
Reserve Bank of India for MTSS from time to time shall be adhered to by the
Partner Bank.
f.
The Recipient Bank may seek additional
information from the Partner Bank and shall report suspicious transactions to
the FIU-IND with details of the Partner Bank through which they received the
remittances.
9. General
Instructions
All Overseas
Principals are required to submit their annual audited balance sheet along with
a certificate on Net Worth from their Statutory Auditors to the concerned
Regional Office of the Foreign Exchange Department and the Department of
Payment and Settlement Systems of the Reserve Bank. Similarly, all Indian
Agents are required to submit their annual audited balance sheet along with a
certificate from their Statutory Auditors on Net Owned Funds to the regional
offices concerned of the Foreign Exchange Department of the Reserve Bank. As
the Overseas Principals and the Indian Agents are expected to maintain minimum
Net Worth and Net Owned Funds respectively on an ongoing basis, they are
required to bring it to the notice of the Reserve Bank immediately along with a
detailed plan of restoring the Net Worth/ Net Owned Funds to the minimum
required level, if there is any reduction in their Net Worth/ Net Owned Funds
below the minimum level.
10. Standard
Operating Procedure (SOP) during elections
The SOP
given as ‘Annex’ for non-bank
APs is to be followed by all non-bank APs who are Indian Agents under MTSS and
they are also required to bring the contents of the SOP to the notice of their
Sub-Agents/ constituents concerned.
Annex
Standard
Operating Procedure (SOP) for non-bank money changers during elections
The movement
of foreign exchange can take place between Authorised Dealer Category I (AD
Cat. I), Authorised Dealer Category II (AD Cat. II), Full Fledged Money
Changers (FFMC), their offices/branches, their customers and their franchisees.
On a request
received from the Election Commission of India the following Standard Operating
Practice (SOP) for movement of cash (foreign exchange), during elections is
being notified:
A. Physical
Movement-
1.
All movement of Indian currency or
foreign exchange should be effected by the person(s) authorised, who should
carry the supporting documents while moving the cash. The movement should be on
the basis of requisition made by the receiver and to the address of the
destination.
2.
If the cash is being moved from the
office/branch of the AP, it should leave the place only after it has been recorded
in the books of accounts of the AP.
3.
Similarly, if the destination point of
movement of the currency is the office/branch of the AP, it should be recorded
in the books of accounts of the AP, on the same day or on the date of receipt.
4.
Transfer of foreign currency between
branches of the same AP should be accounted as stock transfer and not as sale
so that double counting is avoided.
B. In the
case of doorstep forex service by FFMCs / Authorised Dealers Category II to
their regular customers, inter-alia, the processing and accounting of the
transaction should take place in the office of the AP and the transaction
should be supported by necessary documents for value received. The delivery of
the forex should be done by authorised officials of the AP only.
C. As far
as possible movement of Indian Currency should be made through banking channels
(viz. cheque, demand draft, NEFT, RTGS, IMPS etc.) only. The transactions
between authorized dealers and FFMCs should be settled by way of account payee
crossed cheques / demand drafts/ and in no circumstances the settlement of
Indian Currency should be made in cash. The cash (INR) collected by the AP or
its franchisee should be deposited to a bank branch on the same day or next
day.
D. The
cancellation of any move for transportation of cash should be properly
documented.
E. The
movement of cash should be in sync with the documents.
F. The
upper limit for movement of cash in INR would be Rs.10,00,000/- and in Foreign
Currency equivalent of USD 1,00,000 except the transactions where the imported
foreign currency is being transported to the offices/ branch of the AP.
Appendix
List of
Circulars/ Notifications which have been consolidated in the Master Direction
on Money Transfer Service Scheme
|
S. No. |
Circulars |
Date |
|
1. |
March 06, 2006 |
|
|
2. |
June 8, 2012 |
|
|
3. |
March 12, 2013 |
|
|
4. |
March 4, 2014 |
|
|
5. |
July 18, 2014 |
|
|
6. |
December 16, 2014 |
|
|
7. |
March 25, 2015 |