The Reserve Bank of India (RBI) has issued a significant regulatory update concerning the operating framework for non-bank entities facilitating cross-border outward remittances through Authorised Dealer (AD) Category-I banks in India.

Issued vide Circular No. RBI/2026-27/82 dated May 13, 2026, the revised framework marks an important transition from a “prior approval” model to a “compliance-based operational” model for such arrangements.

Shift from Approval-Based to Compliance-Based Framework

Under the earlier framework, non-bank entities were required to obtain prior approval from the RBI before entering into tie-up arrangements with AD Category-I banks for facilitating outward remittance transactions.

With the issuance of the revised circular, the requirement for obtaining prior RBI approval has now been withdrawn.

Going forward, AD Category-I banks may directly enter into such arrangements, subject to strict adherence to the operational guidelines prescribed in the Annex to the circular.

Consequently, Paragraph 10 of the Master Direction – Miscellaneous Remittances from India – Facilities for Residents dated January 1, 2016, stands deleted.

Increased Accountability of AD Category-I Banks

While the revised framework simplifies the approval process, it simultaneously strengthens the compliance responsibility of Authorised Dealer banks.

The RBI has explicitly clarified that:

• The AD bank shall remain fully responsible and liable for the remittance transaction.
• Compliance with FEMA, 1999 provisions and KYC requirements shall continue to rest entirely with the AD bank.
• The AD bank shall also be accountable for all acts and omissions of the third-party service provider involved in the arrangement.

This effectively centralises regulatory accountability with the regulated banking entity.

Key Operational Guidelines Prescribed by RBI

To enhance transparency, customer protection, and operational integrity, RBI has prescribed detailed compliance requirements for AD banks and associated third-party platforms.

1. Enhanced Transparency Requirements

AD banks must ensure that the third-party platform clearly and prominently discloses the following information to remitters:

• Name of the AD bank and its authorised status
• Specific role and responsibility of the AD bank in the transaction flow
• Clear break-up of interbank exchange rates, mark-ups, service charges, and other applicable costs
• Exact amount proposed to be credited to the beneficiary
• Maximum expected timeline for completion of the transaction
• Foreign exchange rate applied, including timestamp and validity period of the quote

The objective is to improve pricing transparency and eliminate ambiguity for customers.

2. Transaction Documentation and Invoicing

For every remittance transaction, the third-party entity must generate a detailed invoice containing:

• Description of all applicable charges
• Amount remitted and final beneficiary credit amount
• Name of the AD bank providing the foreign exchange rate

This requirement aims to strengthen audit trails and improve transaction-level transparency.

3. Data Privacy and Cybersecurity Obligations

The circular places significant emphasis on data governance and cybersecurity controls.

Customer Consent and Data Collection

• Data collection must be strictly need-based.
• Prior and explicit consent of the remitter must be obtained.
• Compliance with the Digital Personal Data Protection (DPDP) Act is mandatory.

Ringfencing of Customer Funds

RBI has specifically directed that remitter funds must not flow through the account of the third-party entity at any stage of the transaction process.

This safeguard is intended to protect customer funds from operational and insolvency-related risks associated with third-party intermediaries.

Cybersecurity Standards

Both the AD bank and the third-party entity are required to comply with RBI-prescribed technology and cybersecurity standards.

Grievance Redressal Framework

AD banks are required to maintain a formal grievance redressal mechanism compliant with RBI requirements.

Additionally:

• Contact details of the grievance officer
• Telephone numbers
• Email addresses

must be prominently displayed on:

• The third-party platform, and
• The official website of the AD bank.

This strengthens customer accessibility and accountability mechanisms.

Additional Compliance Considerations for AD Banks

Contractual Safeguards

The agreement between the AD bank and the third-party entity must explicitly address:

• Dispute resolution mechanisms
• Audit and inspection rights
• Data handling responsibilities
• Compliance with applicable laws and regulations

Doorstep Delivery Activities

Where arrangements involve doorstep delivery of forex cards or foreign currency, AD banks must ensure that all customer protection and transparency requirements are equally complied with for such services.

FATF-Based Enhanced Due Diligence

AD banks are also required to consider FATF statements while identifying jurisdictions with inadequate implementation of global AML/CFT standards.

Enhanced due diligence measures must be applied for transactions involving such high-risk jurisdictions.

Regulatory Significance and Practical Impact

This circular reflects RBI’s broader regulatory approach toward:

• Promoting innovation in remittance services
• Enabling fintech-bank collaborations
• Enhancing customer transparency
• Strengthening data governance and operational controls

The revised framework may facilitate faster operational onboarding of third-party platforms while simultaneously imposing stronger governance expectations on regulated banking entities.

For AD banks, the circular necessitates:

• Stronger vendor oversight mechanisms
• Enhanced contractual controls
• Robust compliance monitoring frameworks
• Strengthened cybersecurity governance

For fintech and non-bank entities, the framework creates operational opportunities but also increases expectations around transparency, customer protection, and regulatory alignment.

Conclusion

RBI’s revised framework for tie-up arrangements between AD Category-I banks and non-bank remittance facilitators marks a notable shift toward a more principle-based and compliance-oriented regulatory regime.

While the removal of prior approval requirements may improve operational flexibility and innovation, the circular clearly reinforces that regulatory accountability continues to rest with Authorised Dealer banks.

Going forward, institutions operating in the remittance ecosystem will need to focus significantly on:

• Transparency
• Customer protection
• Data privacy
• Cybersecurity
• Governance and compliance oversight

to ensure sustainable and compliant operations under the revised framework.