What an RDA is
RBI's master direction on Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses (FED Master Direction No. 2/2015-16, dated 1 January 2016 and updated since) describes an RDA as a channel for receiving cross-border remittances. An Authorised Dealer Category I bank in India ties up with a non-resident exchange house. The exchange house opens and maintains a rupee vostro account with the bank, and the bank pays the Indian beneficiaries.
The arrangements are mainly for personal inward remittances. The master direction lists permitted uses, such as credits to non-resident rupee accounts, payments to families, education and medical fees, insurance premia and loan instalments. It excludes others, such as donations to charitable institutions. The remitted funds may not be paid out in cash.
The IFSCA circular of 10 April 2026
The circular builds on IFSCA's circular of 6 June 2025, under which a PSP needs prior approval to join an international payment system for payments with banks or institutions outside the IFSC. It provides that:
- prior permission from IFSCA is also required for a PSP proposing to participate in an RDA scheme as a non-resident exchange house, in accordance with RBI's master direction; and
- the request must be accompanied by a comprehensive overview of the framework and processes the PSP has put in place to comply with the IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022 and similar laws, for the transactions to be undertaken under the RDA.
The circular was issued under sections 12 and 13 of the IFSCA Act, 2019 and took effect immediately. It is addressed to all PSPs in the IFSC. Among the five payment services under the Payment Services Regulations, 2024, an RDA would ordinarily sit within cross-border money transfer. See Payment services.
RBI's side of the arrangement
The Indian bank is responsible to RBI under the master direction. Points that will shape the bank's diligence on an IFSC PSP include:
- Eligible exchange houses. The direction covers exchange houses in the Gulf countries, Hong Kong and Singapore. Malaysia and other FATF-compliant countries are covered under the Speed Remittance Procedure only. The bank must confirm that the exchange house is licensed by its local monetary or supervisory authority for money transfer or currency exchange business, and must be satisfied about its financial standing.
- RBI approval. For its first RDA with an exchange house from a covered jurisdiction, the bank applies to the relevant RBI regional office. Later arrangements are reported to RBI. A new separate rupee account under the Speed Remittance Procedure needs RBI's prior approval.
- Funding and collateral. Under the Speed Remittance Procedure, the exchange house ordinarily pre-funds the rupee account, and the bank sets collateral. Under the other procedures, collateral is set by reference to days of projected drawings.
- KYC and AML. The bank applies RBI's KYC, AML and CFT rules, includes RDA operations in concurrent audit, and obtains an annual auditor-certified compliance report from each exchange house.
Matters to settle early
- Fit with the RBI direction. The master direction describes exchange houses by jurisdiction. How an IFSC-based PSP fits that description, and which procedure applies, should be settled with the partner bank, and if necessary with RBI, before the IFSCA request is filed.
- Scope of authorisation. Confirm that the PSP's authorisation covers the service it will provide under the RDA, and that the arrangement is consistent with the conditions of its authorisation.
- The AML overview. IFSCA expects a comprehensive account of controls for RDA transactions. It should cover customer due diligence on remitters, beneficiary information, sanctions screening, transaction monitoring and suspicious transaction reporting. See AML and CFT.
- Permitted purposes. Build the master direction's list of permitted and excluded purposes into onboarding and transaction controls.
- Currency and accounts. The PSP itself deals in foreign currency in the IFSC, while the rupee leg sits in the vostro account in India. Map the flow of funds and the settlement timetable with the bank.