The Hindu : Business : New tier of forex dealers suggested

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Friday, Dec 02, 2005

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Business

New tier of forex dealers suggested

Special Correspondent

Panel favours inclusion of urban co-op banks

MUMBAI: The Reserve Bank of India (RBI) panel to review the licensing policy for authorised dealers (ADs) in foreign exchange related transactions has recommended issue of licenses to more entities including co-operative banks and regional rural banks to meet the increasing day-to-day needs of foreign exchange transactions of a large segment of the population. "Such entities may be called restricted authorised dealers (RADs)," it has stated.

With a view to providing adequate foreign exchange facilities to common persons the committee observed that "for efficient customer service through competition there is a need to widen the scope of activities which the authorised persons are eligible to undertake and also to increase the number of entities that are eligible to sell foreign exchange to public for their day-to-day current account transactions."

It recommended that urban cooperative banks and RRBs "with strong financials, good governance and providing regulatory and prudential comfort may be considered for licensing as RAD-Category II."

The panel suggested to the central bank to consider granting licences to certain entities to undertake some more transactions, in addition to what full-fledged money changers (FFMCs) are permitted, by authorising them to undertake certain non-trade related current account transactions.

At present a company with a minimum capital of Rs. 25 lakh for a single branch and Rs. 50 lakh for multi-branch is eligible to apply for a licence of FFMC for consideration by the RBI. The panel recommended to the RBI to consider granting RAD-Category II licence to the existing, well functioning FFMCs. "Illustratively, the criteria for upgradation of existing FFMC to RAD-Category II may include net owned funds Rs. 10 crore, satisfactory functioning as FFMC for at least two years and credit report from their bankers," it said.

The RBI, which released the report on Thursday on its website www.rbi.org.in, has invited feedback on the recommendations of the report before December 15.

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