RBI asks citizens to settle fee, charges on forex prepaid cards in rupee

The Reserve Bank of India (RBI) on Tuesday directed to settle fees and charges payable in India on forex prepaid cards, store value cards, and travel cards in the local currency, ie. Rupee.

The central bank also stated, "The use of such cards is limited to permissible current account transactions and subject to the prescribed limits under the Foreign Exchange Management Rules."

Previously, the central bank said that no prior permission is required from the banks for such cards. It further said that Indian citizens who will purchase the travel cards can also refund unutilised foreign exchange balance after a period of ten days from the last transaction.

RBI's Deputy Governor T Rabi Sankar on October 21, 2022, announced that the central bank has taken steps for internationalisation of the local currency. At the Annual Day event of the Foreign Exchange Dealers Association of India (FEDAI), Sankar said, "Enabling external commercial borrowings in Rupees (especially Masala Bonds) was one step. Though invoicing export and import in Rupees was long permitted, it was being resorted to for limited uses. The July 2022 Scheme of RBI permitting Rupee settlement of external trade created a more comprehensive framework, including the flexibility of investing surplus Rupees in Indian bond markets."

The internationalisation of the domestic currency would make domestic monetary policy more challenging but the option of compromising on growth by playing it safe is clearly not an optimal choice, said Sankar.

He further added that the RBI is receiving a positive response from different countries to engage in Rupee-based trading.  

"We need to calibrate our moves to the evolving size of our economy, particularly the size of the external sector, and to our appetite for risk in framing policy for external trade and capital flows. But the direction is clear," he added.