How to Start a Money Transfer Service Scheme (MTSS)

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An Overview of Money Transfer Service Scheme (MTSS)

Money Transfer Service Scheme or MTSS is the most appropriate option for the purpose of inward transfer of money from overseas to India. The facility offered by this scheme can be availed by the tourists travelling to India. By using the Money Transfer Service Scheme facility, money can be transferred to India. But, in this scheme, no outward transfer is allowed. Only inward remittance in India is permitted. In this scheme, remittance can be done in a quick and hassle-free manner.

The idea of MTSS has been announced as inward remittances contribute to the national income of India, and it is the primary source of external financing. With the help of this scheme, cross-border inward remittances can be received by the people via banking and postal channels. The most common postal channel used for this purpose is the IFS or the International Financial System platform of UPU (Universal Post Union). Generally, banks are allowed to enter into agreements with other banks for the money transfer business. Apart from this, for the purpose of receiving inward remittance, there are two different modes: RDA or Rupee Drawing Arrangement and MTSS (Money Transfer Service Scheme).

Difference between MTTS (Money Transfer Service Scheme) and RDA (Rupee Drawing Arrangement)

RDA (Rupee Drawing Arrangement) is a type of method by which the money can be received from foreign in the remittance form. Rupee Drawing Arrangement is only limited to individuals, but for the purpose of trade, money can be transferred up to a certain limit through RDA (Rupee Drawing Arrangement). In this way, only Authorized Dealer-I (AD-I) category bank is allowed to transact. For the purpose of money exchange under Rupee Drawing Arrangement, authorized exchange houses as their representative overseas are used by the certified banks, which are approved by the Reserve Bank of India (RBI). Remitted money is transferred to the receiver's bank account, while no remittance in cash is allowed. Under Rupee Drawing Arrangement (RDA), there is no such limit on the money transfer to a bank account of the individual. For the purpose of trade, there is an upper limit on the exchange of money of Rs. 5 lakhs. There is no facility for cash remittance under RDA.

RDA and MTSS are slightly different from the viewpoint of the Reserve Bank of India. Inward remittance via MTSS is done through the transfer of fund services outside India, which work by coordinating certified agents in India. Funds cannot be transferred by this way for trade or charity.

There are definite limits for inward remittance through MTSS (Money Transfer Service Scheme) which are topped at USD 2,500 per transfer; along with this, a maximum limit of thirty transfers can be received by a particular recipient in one calendar year.

Under Money Transfer Service Scheme, there is an allowance for cash transfer. Currently, for cash transfer, there is a limit of Rs. 50,000/- and in case of amount more than Rs. 50,000/- then it will be paid through cheque, DD (Demand Draft), etc. But in case of foreigners or tourists more than Rs. 50,000/- is permitted in the case through MTSS.

Who can carry the money transfer business to India?

Under the Money Transfer Service Scheme, the RBI may grant permission to any individual to perform as an Indian Agent as per Section 10(1) of the FEMA Act, 1999 or the Foreign Exchange Management Act, 1999. Unless the RBI or the Reserve Bank of India has granted permission, no individual can handle the business of cross-border transfer of money to India.

To become an Indian Agent, an applicant should be Authorized Dealer Category-1 Bank or an FFMC (Full Fledged Money Changer or Authorized Dealer Category-II, or the Department of Posts, or a Scheduled Commercial Banks.

What are the Essential Documents Required for filing an Application?

  • Submit a declaration regarding no proceedings have been started or pending against the applicant and its director before the Directorate of Revenue Intelligence or the Directorate of Enforcement or any other law implementing authorities;
  • Submit a declaration regarding the proper policy framework that has been framed in respect of AML or CFT, or KYC in accordance with the guidelines issued by RBI;
  • Details such as full name and full address of the registered company (Overseas Principal) with whom the Indian Agent will come into an agreement under MTSS;
  • Through Overseas Principal, full details of the scheme operation;
  • In this scheme, the measured volume of business per month or years;
  • Facts of branches in India where MTSS will be directed by the applicant;
  • Audited applicant’s financial statements for the past two years, if available otherwise copy of the latest audited accounts along with a certified copy of NOFs (Net Owned Funds) from the legal auditor as on application date;
  • Submit a copy of AOA (Articles of Association) and MOA (Memorandum of Association) of the applicant where there is a provision regarding the transfer of money busi9ness or make the suitable amendment;
  • A confidential report in a sealed cover from a minimum two applicant's bankers;
  • Details of linked concern of the applicant operating in the financial sector;
  • Submit a certified copy of the Board Resolution by the applicant concerning the transfer of money business;
  • A letter from the suggested Overseas Principal who agrees to enter into an agreement with the applicant and also to offer essential collateral.

Guidelines for Overseas Principal

  • It is required to obtain earlier permission from the Department of Payment and Settlement Systems. RBI under such provisions of the Payment and Settlement Systems Act, 2007 to function a payment system by the overseas principal;
  • There must be a minimum net-worth of one million US Dollar of the registered company;
  • They should be registered with the industry bodies or overseas trade;
  • The overseas principal must be a registered company with the Government or Financial Regulatory Authority or Central Bank concerned for carrying on the transfer of money activities;
  • A personal report must be submitted from at least two of its bankers;
  • It will be the full duty of the overseas principal concerning the activities of their agents and sub-agents in India;
  • The Apex Bank may lessen the minimum net-worth criteria in the case of overseas principals incorporated in FATF member nations observed by the Government Authority;
  • This principle must be well established in the transfer of money business with a record of operations in a well-regulated market;

Process of Transferring Money to India through Money Transfer Service Scheme

  • For the money remittance, the remitter has to come Western Union Money Transfer or Money Gram location in such a nation where the service is functional. Then the form has to be filed with the fees as required with the extra charges applicable. Then, a unique Money Transfer Control Number will be created by the system, which performs as the reference number;
  • The remitter has to tell the payee concerning the deposit; then the payee has to go to the Post Office to fill the essential form and to show identification documents for verification;
  • After that, Money Transfer Control Number is required to be given to an officer who inspects from the record of transaction;
  • After the inspection, money is delivered to the payee in INR currency. In a single transaction, transfer of money up to USD 2500 is allowed by the guidelines of the Reserve Bank of India, which cannot be overruled. Only up to Rs. 50,000/- can be paid in cash above this, and the amount can be directly deposited in the account or submit a cheque in the beneficiary's name;
  • The process of money transfer to India barely takes time. Infect there is a limit of thirty transactions yearly, many peoples are taking benefits from this;
  • We strongly recommended people must apply for such an opportunity to become an Indian Agent and take the consent of the proposed authority and disburse funds to recipients in India at ongoing exchange rates.

Frequently Asked Questions

For the candidate, there is a necessity for minimum NOFs of Rs. 50 lakhs.

To perform as an agent, an application must be filed with the RBI (Foreign Exchange Department) under whose authority the registered office of the applicant is located.

RDA stands for Rupee Drawing Arrangement, is a network to receive cross-border money transfers from foreign jurisdictions. Under this arrangement, the AC-I banks enter into tie-ups with non-resident Exchange Houses in the FATF compliant nations to maintain and open their Vostro Account.

The overseas inward remittances to India under Rupee Drawing Arrangement is mainly on private account. The beneficiary or the remitter must be individuals, excepting a few exceptions. Remittances via exchange houses for the financing of trade transactions are also allowed up to the definite limit.

No, cash payment of remittances is permitted under RDA. The remittances have to be transferred to the beneficiary’s bank account.

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