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, plunging to 6.55% from Tuesday's high of 6.70%. This represents a dramatic 15 basis point drop from the day's peak, marking the biggest single-session decline since May and reflecting overwhelming market confidence in the RBI's intervention strategy.

The yield movement was particularly significant given that bond yields move inversely to prices, 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 four-week liquidity injection strategy designed to absorb over 65% of government bond supply in the next quarter, ensuring structurally lower yields and optimal banking system liquidity conditions.

Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership, noted that "RBI measures confirm central bank is committed to keep liquidity conditions easy, and surplus of 1% of deposits is now achievable by end of the year. However, the pace of injections is a surprise and more than double the monthly rate of buying we had assumed."

Market Impact and Banking Sector Benefits

The RBI's intervention strategy will provide significant benefits to the banking sector, which holds substantial government debt portfolios. With the 10-year bond yield ending the prior quarter at 6.57%, a sustained close beneath that level will positively impact banks when marking their investment portfolios to market at the end of March.

Alok Singh, head of treasury at CSB Bank, expressed optimism: "The move was necessary and I will not be surprised if more is announced in March. I expect the 10-year bond yield to test 6.48%, before moving towards 6.30% level in medium term."

Policy Transmission and Economic Benefits

Lower bond yields are crucial for ensuring that policy rate cuts effectively transmit through the economy, boosting credit demand and reducing government borrowing costs. The RBI's measures will help banking system liquidity, which has been fluctuating between deficit and surplus, take a clearer positive direction.

Sustained Rally Expectations

Traders anticipate the liquidity injection will ensure sustained government bond price increases and maintain optimal banking system liquidity through the financial year-end. The central bank's proactive approach addresses market concerns about the estimated ₹8.10 trillion aggregate debt supply in the next quarter, positioning the bond market for continued strength in the coming months.