Mumbai: Many consumers are likely to find it cheaper to purchase U.S. dollars ahead of planned trips or when sending money overseas.
The Reserve Bank of India (RBI) has increased pressure on banks to provide more favorable rates for retail customers and small businesses.
In a meeting a few weeks ago, senior RBI officials instructed the top management of several banks to submit quarterly data on the number of customers who have joined a dedicated platform offering slightly more attractive exchange rates. The platform, developed by the Clearing Corporation of India, enables resident individuals and micro, small and medium enterprises to buy and sell USD/INR directly at real‑time inter‑bank market rates. Because many small‑ticket customers prefer the convenience of cash transactions with bank tellers and wish to avoid the registration process for online platforms, they often end up purchasing foreign exchange from banks that charge an additional ₹1.50–₹2 per dollar above the inter‑bank rate.
“RBI’s logic is straightforward: if a mutual fund and a retail investor pay the same price for a stock, why should the cost of buying or selling dollars differ? From now on, quarterly monitoring by the regulator will assess whether banks are doing enough to promote the platform,” said a senior banker who attended the meeting.
However, some bankers are frustrated by the directive, arguing that the forex market structure differs materially from equity exchanges. Retail foreign‑exchange rates are typically set by banks through a markup on the inter‑bank (wholesale) rate, reflecting operational costs, profit margins and risk premiums associated with currency fluctuations.
STIFF MARK-UP
In the inter‑bank market, the standard trading lot is one million dollars. When an individual buys $5,000, the bank is left with an unsold $995,000 of the lot. Besides covering operational costs, banks justify a substantial markup to mitigate the risk of a dollar depreciation, though many merchants, particularly MSMEs, suspect that the charges are excessive.
When setting the inter‑bank base rate, banks provide a two‑way quote, indicating both the buying and selling rates. The CCIL FX‑Retail platform was integrated with Bharat Connect (operated by NPCI’s Bharat BillPay) in October 2025, enabling resident individuals to purchase U.S. dollars, reload forex cards, or make outward remittances via mobile banking and payment applications.
“The volume of foreign‑exchange outflows has increased over the years due to travel, education, healthcare and remittances, which together have significantly raised transaction numbers and values. As the dollar appreciates, retail customers feel the impact,” said a representative from a money‑changer firm.
In line with its 2026 annual report, the RBI has set a target to enhance pricing transparency for retail users by mandating the disclosure of forex conversion and transaction charges for cash, TOM (Tomorrow) and spot trades. The TOM rate applies to trades that settle on the next business day, sitting between CASH (same‑day settlement) and SPOT (two‑day settlement) transactions.