The Reserve Bank of India is clamping down on foreign airlines operating in India by mandating they stop using overseas banks to settle card transactions used to buy airline tickets in India.
Foreign airlines have an arrangement in India with credit card networks to allow customers to select the currency used when buying tickets in India.
In such a transaction, the overseas bank receives funds from the card company in its account maintained with an authorized dealer bank in India or in its foreign currency account maintained abroad, a spokesperson from the central bank explains to PaymentsSource.
The bank then makes the payment in a foreign currency to the foreign airline, and this does not conform to the extant provisions of the Foreign Exchange Management Act, the spokesperson clarified.
Those provisions require that rupee transactions be settled through domestic banks in India.
This is why the central bank is asking foreign airlines to discontinue immediately the practice of using overseas banks for settlement of card transactions used to buy tickets in India.
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