Remittances mean sending money or goods to people across foreign lands, typically to an individual or a family member to meet specific financial needs. These are of two types- inward and outward remittances. Transferring funds to the home country (Eg- to India from abroad) is called inward remittances and transferring funds abroad (Eg- to a foreign country from India) is called outward remittances. These are an important source of family and national income. Rupee Drawing Arrangements (RDA) and Money Transfer Service Schemes (MTSS) are two major channels of RBI to receive these remittances in the country.
In this blog, we will understand and learn about these two channels of the RBI to receive inward remittances in the country.
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Also Read: Let’s understand all about the Liberalised Remittance Scheme in this blog, which allows Indian residents to remit (transfer) money abroad for diverse reasons.
What is Rupee Drawing Arrangement (RDA)?
A person working outside the home country might need to send money back to India for various purposes and the RDA is one of the most convenient ways to remit money to India from abroad. RDA is a channel under which Category 1 banks enter into tie-ups with non-resident exchange houses in countries that are compliant with the FATF (Financial Action Task Force).
The non-resident exchange houses are the companies and financial institutions that are permitted by the competent authorities to gather funds from people sending money from abroad.
Note: Authorised Dealers Category 1 banks are the banks with an RBI license to buy and sell foreign exchange for specified purposes.
Features of Rupee Drawing Arrangement
One of the major features of the Rupee Drawing Arrangement is that it can only receive cross-border remittances from overseas and is not meant for cross-border outward remittances. Some other features of this channel are-
- The remitter and the beneficiary must be individuals and the channel is primarily for personal remittances. However, financial trade transactions are permitted under certain exceptions.
- There are no limits on the number or amount of transactions that can be made but trade-related remittances of up to INR 15 lakhs are permitted.
- The remittances can be made directly credited into the bank account of the beneficiary and no cash disbursements are allowed. You can learn about how foreign remittances work here.
- If a bank account of the beneficiary does not have any tie-up with a non-resident exchange house, then inward remittances with a bank other than Category 1 can be made through IMPS, NEFT or other electronic means under RDA. These best Indian Banks for inward remittances provide excellent services.
What is a Money Transfer Service Scheme (MTSS)?
The Money Transfer Service Scheme (MTSS) is similar to the Rupee Drawing Arrangement of transferring personal funds from abroad to beneficiaries in India. Under this scheme, trusted overseas companies (Overseas Principals) partner with agents in India (Indian Agents). These agents disburse the funds to recipients in India, at the ongoing exchange rates in the forex market.
An Overseas Principal is a company registered and licensed by the Central Bank or government in its home country to conduct Money Transfer Activities. The country where the Overseas Principal is registered must comply with AML (anti-money laundering) regulations. Additionally, the Overseas Principal needs authorization from the Reserve Bank of India, under the Payment and Settlement Systems Act of 2007, to start or operate a payment system.
Also Read: Explore the RBI Restructuring 2.0 Scheme FAQs: eligibility, loan types, application process, credit score impact and more.
Features of Money Transfer Service Scheme
Here are some of the features of the Money Transfer Service Scheme-
- Inward personal remittances like funds towards family maintenance and remittances favouring foreign tourists visiting India are permitted under the MTSS.
- Remittances such as charity, donations, trade-related remittances, remittances towards the purchase of property, investments or credits to NRE accounts are strictly prohibited under this channel.
- The number of thirty transactions can be received by an individual beneficiary in a calendar year of up to USD 2,500.
- Unlike RDA, remittances of up to INR 50,000 are allowed in cash. These amounts can also be loaded onto a pre-paid card issued by banks. If any amount exceeds this limit, then it must be paid using account payee cheque/ demand draft/ payment order, etc., or credited directly to the beneficiary’s bank account. In exceptional circumstances, higher amounts may be disbursed in cash (if the beneficiary is a foreign tourist).
FAQs on Remittances of RBI (MTSS and RDA)
Rupee Drawing Arrangements (RDA) and Money Transfer Service Schemes (MTSS) are two major channels of RBI to receive these remittances in the country apart from the International Financial System (IFS) platform of Universal Post Union (UPU) which is generally used for the postal channel.
RDA is one of the most convenient ways to remit money to India from abroad. It’s a channel under which Category 1 banks enter into tie-ups with non-resident exchange houses in countries that are compliant with the FATF (Financial Action Task Force).
The Money Transfer Service Scheme (MTSS) is similar to the Rupee Drawing Arrangement of transferring personal funds from abroad to beneficiaries in India. Under this scheme, trusted overseas companies (Overseas Principals) partner with agents in India (Indian Agents). These agents disburse the funds to recipients in India, at the ongoing exchange rates in the forex market.
There is no limit on the number or amount of transactions that can be made but trade-related remittances of up to INR 15 lakhs are permitted.
The number of thirty transactions can be received by an individual beneficiary in a calendar year of up to USD 2,500. Remittances of up to INR 50,000 are allowed in cash under the MTSS.
This was all about the Remittances of RBI (MTSS- Money Transfer Service Scheme and RDA- Rupee Drawing Arrangement). To know about education loans, the loan application process, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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