RBI Proposes Mandatory FX Transaction Cost Disclosure for Retail Users

PR no. 2025-2026/1666; Dated: 09.12.2025

1. Regulatory Context

The Reserve Bank of India (RBI) has released a draft circular proposing enhanced disclosure requirements on transaction costs associated with foreign exchange (FX) transactions undertaken by retail users. The proposal is part of RBI’s ongoing efforts to improve transparency, pricing clarity and consumer protection in India’s retail FX market.

2. Previous Disclosure Framework (January 2024)

In January 2024, RBI mandated that Authorised Dealers (ADs) must:

• Provide mid-market mark/bid and ask price for:

1. 1. Foreign exchange derivative contracts, and
   2. Foreign currency interest rate derivative contracts

• Communicate this information to retail users before execution, and
• Include the same in the deal confirmation or term sheet

This ensured that retail market participants were able to view reference pricing benchmarks, helping them understand spreads and pricing outcomes more transparently.

3. Proposed Disclosure of Transaction Cost Components

Taking the transparency initiative further, the draft circular proposes that Authorised Dealers must mandatorily disclose all transaction cost elements for:

• Foreign exchange cash transactions, and
• Foreign exchange spot contracts,

offered to retail users

Transaction cost elements may include:

• Remittance fees
• Currency conversion charges
• Foreign exchange rate applied
• Margin or spread components
• Any additional charges or deductions embedded in the exchange rate or settlement amount

The requirement is aimed at enabling retail users to understand the true cost of transacting, rather than relying solely on headline conversion rates.

4. Scope and Target Users

The disclosure framework applies to retail market participants, including individuals and small enterprises, who often lack visibility into embedded spreads or cross-border remittance charges.

The obligation is placed on Authorised Dealers, i.e., banks and other RBI-permitted entities dealing in FX.

5. Market Consultation

RBI has sought public and industry feedback on the draft proposal.

• Comments are invited from banks and market participants
• Last date for submission – January 9, 2026

Stakeholder feedback will assist RBI in refining the disclosure design, operational format and system readiness expectations.

6. Regulatory Intent

The proposal aims to:

• Improve pricing transparency and fairness for retail FX customers
• Increase competitive market pricing and informed decision-making
• Reduce disputes and misunderstandings associated with hidden fees or spreads
• Strengthen trust in market conduct and supervisory oversight

The initiative also aligns with global regulatory practices that emphasise clear disclosure of FX transaction costs to non-institutional consumers.

7. Compliance Considerations for Authorised Dealers

ADs would be required to:

• Build system logic and display standards for transaction cost disclosures
• Provide pre-execution visibility of all fees and embedded charges
• Incorporate cost details into confirmations or payment summaries
• Train client-facing staff on communication protocols and disclosure norms
• Update documentation, product notes and platform interfaces

Failure to comply could lead to supervisory findings, customer disputes or disclosure breach penalties once implemented.

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