Retail Forex Products and Facilities for Individuals
The retail product set
Authorised dealers and full-fledged money changers sell foreign currency notes and coins, prepaid forex cards and travellers cheques, and authorised dealers also execute outward remittances by wire or demand draft. They encash inbound foreign currency too. Only authorised dealers handle outward remittances; FFMCs are principally money changers. Products differ in KYC, limits, replacement risk and cost.
Rules that shape the sale
- Foreign currency notes for a private visit: generally up to USD 3,000 or equivalent per visit; the balance can be loaded on a card or sent by remittance.
- Prepaid forex cards are loadable within LRS; they are not credit facilities, and residual balances follow encashment or refund rules.
- Outward remittances need Form A2, PAN, purpose code and supporting documents.
- Inbound encashment requires identification; tourists may use a passport.
- Product choice affects pricing: cash rates are wider than card or TT rates, and cards carry loading and replacement fees.
Worked example
A traveller wants USD 7,000 for a holiday: USD 2,500 cash and USD 4,500 on a prepaid card. Cash is within the USD 3,000 note limit; the card load is within LRS and needs KYC. If she asks for USD 4,000 cash, the bank should cap notes at USD 3,000 and offer a card or remittance for the rest.
Traps
- Assuming the cash limit is the LRS limit.
- Treating a forex card as a separate LRS quota.
- Expecting an FFMC to execute a SWIFT remittance.
- Forgetting that travellers cheques are poorly accepted.