Foreign Airlines In India Can't Settle Transactions Abroad, Says RBI

Foreign airlines operating in the country must stop their practice of using overseas banks to settle transactions in Indian Rupees (INR) from online tickets sales in India, an RBI circular has mandated. Those airlines must return to India any surplus collected from such ticket sales and they have to do so through their agents in India, after paying local expenses and taxes due here, the statement says.

The circular was issued on April 5 and can be read here – Acquisition of credit card/debit card transactions in India by overseas banks – payments for airline tickets .

The directions featured in the RBI circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999). It notes that all Category I Authorised Dealer banks should stop providing arrangements to foreign airlines operating in India to select the country and the currency of their choice, when transactions are on air tickets in India and in INR. This is not in conformity with the extant provisions of the Foreign Exchange Management Act, 1999, RBI says.

Currently, debit and credit card companies are offering such arrangements to foreign airlines. Overseas banks receive funds from those card-issuing companies in its Vostro account, maintained with an Authorised Dealer bank in India, or in its foreign currency account, maintained abroad, and make the payment in foreign currency overseas to the foreign airline.