Mumbai: Chances are you may buy dollars a little cheaper before the next vacation or wiring money to kids abroad. The Reserve Bank of India (RBI) has stepped up the heat on banks to push better deals for retail customers and small businesses.
In a meeting few weeks ago, senior RBI officials asked the top brass of several banks to share data every three months on the number of such customers on-boarded on the separate, dedicated platform that offers a slightly more attractive exchange rates.
The forex retail electronic platform, developed by the Clearing Corporation of India, allows resident individuals as well as and micro, small and medium enterprises to buy and sell USD/INR directly at real-time inter-bank market rates. Typically, due to convenience and familiarity of transacting with bank tellers, and in avoiding the registration process for logging into the platform, small-ticket customers end up directly buying forex from banks who end up charging ₹1.50-2 higher than the inter-bank rate for every dollar.
"RBI's logic is simple: If a mutual fund and a retail investor pay the same price for a stock, why shouldn't it be the same for buying or selling dollars? Why should a small customer pay more (or receive less) than a corporate treasury? From now on there will be quarterly monitoring by the regulator to assess from the customer count and transaction value whether banks are doing enough to popularise the platform," said a senior banker who attended the meeting.
However, bankers are annoyed by the nudge from the central bank as the forex market structure is different, and cannot be compared with stock exchanges.
Everyday banks fix retail foreign exchange rates by adding a mark-up on the inter-bank, or wholesale, rate at which they trade with each other. The mark-up is meant to take care of banks' operational costs, profit margin, and risks arising from exchange rate fluctuations.
STIFF MARK-UP
In the inter-bank market, the trading lot is usually a million dollar. So, when an individual buys $5,000, the bank is left with unsold $9,95,000 out of the million it buys to supply the retail customer. Besides the operational cost, banks justify a stiff mark-up to take care of the risk from a fall in the dollar. Still, customers, particularly MSMEs, suspect that banks overcharge.
In fixing the inter-bank base rate, banks offer a two-way quote, capturing the buying and the selling rate. The CCIL FX-Retail platform was integrated with Bharat Connect (operated by NPCI Bharat BillPay) in October 2025 to let resident individuals to purchase US dollars, reload forex cards, or make outward remittances with the use of mobile banking and payment applications.
"Extent of forex outflow has gone up over the years - foreign trips, education, healthcare, remittances, all have contributed in transaction number and value. As the dollar rose, retail customers felt the pinch," said an official with a money changer.
In fact, ensuring greater transparency in pricing for retail users by mandating disclosure of forex conversion and transaction charges for forex cash/tom/spot trades was set as one of its targets by RBI in its 2026 annual report. The TOM (Tomorrow) rate applies to trades that settle on the next business day-placing it somewhere a CASH deal (same-day settlement) and SPOT (two-day settlement).
