RBI Advises Foreign Airlines to Discontinue using Overseas Banks for
INR Transactions on Sale of Air Tickets in India
[RBI
Circular No. 48 dated 5th April 2011]
Sub: Acquisition
of credit card/debit card transactions in India by overseas banks - payments
for airline tickets
Attention of the Authorised
Dealers Category-I (AD Category-I) banks is invited to Regulation 6 of the
Foreign Exchange Management (Foreign currency accounts by a person resident in
India) Regulations, 2000, notified vide Notification No. FEMA 10/2000-RB, dated
May 3, 2000, read with para 7(v) of Annexure I to the
A.D. (M.A. Series) Circular No. 11 dated May 16, 2000, in terms of which
airline companies incorporated outside India are permitted to repatriate the
surplus arising from sale of air tickets through their agents in India after
payment of the local expenses and applicable taxes in India.
2. It has come to
our notice that in certain cases where the payment for the tickets are made by
the residents using credit /debit card, Card Companies have been providing
arrangements to the foreign airlines operating in India to select the country
and currency of their choice, in respect of transactions arising from the sale
of the air tickets in India in Indian Rupees (INR). In such transactions, the
overseas bank as the acquiring bank receives the funds from Card Issuing
Company in its Vostro account maintained with an Authorised Dealer bank in India or in its foreign currency
account maintained abroad and makes the payment in foreign currency overseas to
the foreign airline.
3. It is
clarified that the practice adopted by foreign airlines, as mentioned above, is
not in conformity with the extant provisions of the Foreign Exchange Management
Act, 1999. AD Category- I banks may, therefore, advise
the foreign airlines to discontinue immediately the practice of using overseas
banks for settlement of INR transactions on account of sale of air tickets in
India.
4. AD Category -I banks may bring the contents of this circular to the
notice of their constituents / customers concerned (foreign airlines).
5. The directions contained in this circular have been issued under
sections 10(4) & 11(1) of the Foreign Exchange Management Act, 1999 (42 of
1999) and are without prejudice to permissions / approvals, if any, required
under any other law.