The Reserve Bank of India (RBI) has issued a draft proposal aimed at making cross-border payments more transparent and consumer-friendly. With this, the bank aims to address long-standing complaints about hidden charges and unclear pricing in foreign exchange transactions.A large number of individuals face difficulties while making overseas payments for education, living expenses, travel, investments or remittances, mainly due to complex processes and high service costs.In many cases, customers only discover the true cost of a transaction after it has been completed. This includes charges such as fees, margins and intermediary costs that are either bundled into exchange rates or deducted later without a clear explanation.To address these issues, the RBI has proposed new regulations that would require banks and other authorised dealers to disclose the total cost of foreign exchange transactions upfront, before a customer agrees to the deal. The move is intended to help customers compare charges across service providers and make more informed decisions, according to ET.

What the RBI has proposed

Under the draft circular, authorised dealers such as commercial banks and certain financial institutions will be required to clearly communicate all transaction-related costs in advance. This includes commonly used foreign exchange transactions such as:

The disclosure requirement will cover both foreign exchange transactions and related derivative contracts used by retail customers.The RBI observed that a similar step was taken in January 2024, when authorised dealers were mandated to disclose mid-market rates for forex and foreign currency interest rate derivatives. The new proposal builds on a similar framework by extending transparency to the full cost structure of transactions.What counts as “total transaction cost”Before entering into a foreign exchange transaction, authorised dealers will now have to provide a complete breakdown of costs. According to Hemal Shah, Partner and Leader – Treasury and Commodity Advisory, Risk Consulting, EY India, this would include:

Importantly, these details must not only be shared upfront but also included in the final deal confirmation, allowing customers to verify what they were quoted against what they were ultimately charged.Once finalised, the instructions will be applicable within three months from the date of issuance.

Problems faced by retail users

Retail customers have long flagged that international transfers feel far more expensive and opaque than domestic payments. Often, customers are shown only an exchange rate, while additional costs such as remittance fees, FX margins, SWIFT charges and intermediary bank deductions are revealed only later.Experts point out that banks frequently embed margins and multiple fees into a single quoted rate, making it difficult for customers to understand the actual pricing. Charges on the recipient side, such as correspondent bank fees or instances where beneficiaries bear costs instead of remitters, have also added to confusion, particularly for exporters.Another major concern is the lack of transparency around correspondent bank fees, which can vary significantly depending on routing and overseas banking arrangements. While banks often describe these as outside their control, the RBI has flagged this as a key area where disclosure standards need improvement.

How customers will benefit

By mandating upfront disclosure, the RBI aims to give retail users a clearer picture of the true cost of cross-border transactions. This will help customers better understand pricing mechanisms, dealer margins, and the differences between various forex products.“Enhanced visibility on the hidden charges allows retail users to make better decisions on the pricing offered by ADs,” said Shah.Vijay Mani, Partner and Banking and Capital Markets Leader at Deloitte India, added that the move can significantly improve trust and comparability, provided the disclosures are implemented in a clear and customer-friendly manner.The RBI has invited public comments on the draft circular. Feedback can be submitted until January 9, 2026, after which the central bank will review responses before issuing final guidelines.

Who do the rules apply to?

Authorised Dealers under RBI regulations include Authorised Dealer Category-I banks and Standalone Primary Dealers authorised under Category-III to conduct foreign exchange transactions.Customers are classified as retail or non-retail for the purpose of these rules. Non-retail users include large financial institutions, NBFCs, insurance companies, mutual funds, alternative investment funds and Indian entities with a net worth of Rs 500 crore or more or a turnover of Rs 1,000 crore or more. Non-residents, other than individuals, are also treated as non-retail users.Any customer who does not fall into these categories is considered a retail user and will directly benefit from the proposed transparency measures.