The Reserve Bank of India (RBI) has introduced updated guidelines to enhance the reporting of foreign exchange (forex) transactions, ensuring transparency and timely monitoring. These changes focus on expanding reporting requirements for banks and financial institutions dealing with forex.

Key Highlights

• What’s New?

1. The RBI now mandates banks to report even basic forex transactions such as cash exchanges and next-day settlements to a centralized database.
2. These updates aim to streamline data collection and bolster oversight of the forex market.

• Who Needs to Report?

1. Authorized Dealers (ADs): Banks and financial institutions licensed to handle forex transactions must adhere to these new requirements.

• What Transactions Must Be Reported?

1. Immediate cash exchanges.
2. Next-day settlements (commonly called TOM transactions).
3. Spot transactions, usually settled within two business days.
4. Exclusions: Retail currency exchanges (e.g., at airports) are not covered under these guidelines.

• Implementation Timeline​ 

1. Bank-to-Bank Transactions (Starting February 10, 2025):

• Transactions involving the Indian Rupee must be reported within 30 minutes.
• Other currency pairs should be reported by 5:30 PM on the same day.

        2.  Customer Transactions (Phased Rollout):

• From May 12, 2025, transactions of $1 million or more must be reported by noon the next business day.
• From November 10, 2025, the threshold reduces to $50,000, with the same reporting deadline.

• Key Responsibilities for Banks

1. Accuracy in reporting is critical, and banks must regularly reconcile their records with the submitted data.
2. Reporting will be centralized through the Clearing Corporation of India Ltd. (CCIL), which manages the real-time database.

• Why These Changes?

       The updates aim to create a more transparent and efficient forex ecosystem in India. They align with global best practices, providing regulators with better tools to monitor market activities and mitigate risks such as money laundering or unauthorized forex dealings.

• Implications for Businesses and Banks

         For financial institutions, these new requirements mean upgrading their systems for real-time reporting. For businesses engaging in significant forex transactions, compliance with these norms ensures smoother operations and avoids penalties.

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