Money transfer scheme ambit may be enlarged

The finance ministry proposes to widen the ambit of the money transfer service scheme, allowing non-financial retail outlets to offer this service, even as it introduces checks and balances to prevent money laundering and funding of terrorist activities.

According to sources, the proposal was recently mooted for consideration of the Committee of Secretaries by the banking division of the finance ministry.

The proposals aim to empower the RBI to directly clear scheduled commercial banks, authorised post offices and full-fledged money changers as principal agents for money transfer, subject to their meeting security norms and the prior approval of the Ministry of Home Affairs.

In addition, existing and proposed entities other than these shall also be allowed as principal agents by the central bank provided they meet norms.

Money transfer is a quick and easy way to transfer from abroad personal remittances to beneficiaries in India "" family members and foreign tourists. Remittances during 2005-06 were estimated at $22 billion.

Western Union, one of the largest players in the business, has for some time now been saying that restricting non-finance retail outlets as a "class of trade" from participating in this business will have an adverse impact on employment as well as tourism.

Several countries allow such outlets to function in this sector.

The proposed norms seek to bring in more clarity with regard to appointment of agents as well as enforce stiffer security norms.

On a request from the RBI, all arrangements of existing and proposed sub-agents (other than scheduled commercial banks, authorised post offices and full-fledged money changers) shall be considered for clearance by the home ministry.

Principal agents shall be required to send through RBI details of all their existing and proposed sub-agencies other than scheduled commercial banks, post offices and money changers to the home ministry for clearance.

Once the ministry is satisfied that all security-related parameters have been met, it will accord approval to the sub-agents, within 60 days of receipt of the information.

The entities will have to maintain records, including identification in respect of all transactions, both in physical and electronic format for a minimum period of five years.

RBI would continue to regulate money transfer agents and would extend its regulatory supervision to the sub-agents as well.

Each agent will be required to conduct due diligence before appointing a sub-agent and certify the same to RBI as per pre-determined standards. The requirement of identification document will be rendered mandatory regardless of the quantum of remittance.