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October 1: Banks Gain Power Over Global Payments
1 Sep
Summary
- Banks to verify service contracts and foreign entities for payments.
- Export revenues and overdue bills will be tracked by banks.
- New rules aim to curb money laundering in service trade.
Effective October 1, banks will be responsible for overseeing cross-border payment transactions, requiring them to verify the validity of service contracts and foreign entities. This shift aims to curb money laundering and suspicious trading practices.
Banks will now use their discretion to clear payments, confirm overseas party legitimacy, and track export proceeds. They must also decide how to handle companies with overdue export bills. The new regulations place a greater investigative burden on financial institutions.
A significant challenge lies in managing service imports and exports, as related data will be uploaded to RBI-mandated digital platforms for the first time. Banks will endorse service export deals based on self-declarations and rely on contracts and invoices for service import data.
