The Reserve Bank of India (RBI) has released draft rules that could transform transparency in foreign exchange transactions by requiring banks and authorised dealers to disclose all costs upfront. The proposed regulations target the persistent problem of hidden charges that have long plagued customers making cross-border payments for education fees, travel expenses, and overseas investments.

Comprehensive Disclosure Requirements

The draft circular mandates that authorised dealers, including commercial banks, must clearly reveal all components of foreign exchange transactions before customers commit to any deal. This transparency framework covers three key areas that have traditionally been sources of unexpected costs:

The proposed rules apply to the most commonly used foreign exchange transaction types, ensuring broad coverage across different customer needs:

• Cash transactions (T+0): Same-day settlement deals
• Tom transactions (T+1): Next business day settlement
• Spot contracts (T+2): Two business day settlement period

Building on Previous Regulatory Measures

This initiative represents the latest step in the RBI's ongoing effort to strengthen disclosure norms in the foreign exchange market. The regulator had already directed authorised dealers to share mid-market mark, bid and ask prices for foreign exchange derivative and foreign currency interest rate derivative contracts with retail users before execution.

The enhanced requirements extend these transparency measures to cover the full spectrum of retail foreign exchange transactions, addressing gaps that have allowed hidden fees to persist in cross-border payments.

Impact on Retail Customers

The new framework specifically targets improvements for retail users who have historically faced challenges in understanding the true cost of international transactions. By mandating upfront disclosure of all charges, the RBI aims to enable customers to:

• Accurately assess total transaction costs before committing
• Compare different service providers effectively
• Make informed decisions based on complete pricing information
• Understand how margins are applied across different transaction types

Taneia Bhardwaj, South Asia Expansion Lead at Wise, highlighted that the draft circular's operational focus on showing remittance fees, exchange rates and conversion charges upfront addresses long-standing transparency gaps in cross-border payments.

Regulatory Scope and Classifications

The rules apply to authorised dealers operating under RBI regulations, including authorised dealer category-I banks and standalone primary dealers with category-III authorization for foreign exchange transactions. The framework establishes clear distinctions between customer categories:

Implementation Timeline

The RBI has opened the draft circular for public consultation, with feedback accepted until January 9, 2026. This extended consultation period allows industry participants and stakeholders to provide input on the proposed transparency measures before final implementation.

If adopted, these rules could fundamentally change how foreign exchange transactions are priced and presented to customers, potentially reducing unexpected costs and improving confidence in cross-border payment services across India's growing international transaction market.

Indian government bonds experienced their biggest rally in seven months following the Reserve Bank of India's announcement of a substantial liquidity injection worth ₹2.90 trillion ($32.34 billion). The comprehensive intervention has sparked what traders are calling a "Santa Claus rally," with sustained bond price increases expected through the end of the financial year as the central bank's measures address supply concerns and optimize banking system liquidity.

Bond Yield Movement and Market Response

The benchmark 10-year government bond yield demonstrated exceptional movement, closing at 6.54% with a drop of over 9 basis points in the biggest single-session decline in seven months. The yield had climbed to 6.70% on Tuesday to multi-month highs on heavy state debt supply and seasonal tax outflows, but is now expected to soften as RBI purchases absorb supply.

Bond yields and prices move in opposite directions, indicating substantial buying interest in government securities following the RBI's comprehensive liquidity plan.

RBI's Strategic Liquidity Injection Plan

The Reserve Bank of India outlined a detailed liquidity injection strategy designed to absorb government bond supply and ensure optimal banking system liquidity conditions through aggressive open market operations and forex interventions.

According to Venkatakrishnan Srinivas, founder of Rockfort Fincap, the 10-year yield is likely to be in the range of 6.40-6.50% by end-February, assuming RBI maintains surplus liquidity at 1% of net demand and time liabilities.

Market Liquidity Conditions and Corporate Impact

Liquidity conditions tightened over the past two weeks due to RBI's likely intervention in the forex market to strengthen the rupee and advance tax outflows since mid-December. The money market has remained in deficit since mid-December, prompting the central bank's aggressive response.

The sharp rise in yields had forced Power Finance Corp to scrap a ₹6,000 crore bond sale on Tuesday after bids came in at higher-than-expected coupons, highlighting the market stress that prompted RBI's intervention.

Policy Transmission and Market Outlook

Nomura noted in a report that "OMO auctions will contain longer-tenor yields and reduce steepening pressure on the curve." The dollar swap is expected to inject rupee liquidity and lower forex forward premia, which had surged amid tight cash conditions and persistent RBI intervention.

While the RBI measures provide immediate relief, traders remain cautious given looming state development loan supply and fiscal uncertainty ahead of the budget. "The ₹2 lakh crore of buying is notable and will likely cap yields for now, but concerns around supply and fiscal outlook persist," Nomura said, indicating continued market vigilance despite the comprehensive intervention.