What changed
Earlier, a September 2002 circular had prohibited UCBs from acting as agents or sub-agents under Money Transfer Service Schemes. This circular revokes that prohibition and allows eligible UCBs to participate, provided they meet specific conditions.
What it means for you
UCBs with AD licence can now earn fee income by facilitating cross-border money transfers, expanding their service portfolio. However, they must maintain strict AML/KYC standards and ensure payout reimbursements never exceed security deposits, adding operational and compliance responsibilities.
What you must do
- Verify your UCB holds a valid AD Category I or II licence before applying to act as agent/sub-agent.
- Ensure robust AML/KYC processes are in place and pass supervisory review.
- Arrange for the required security deposit: for agents, USD 50,000 or 3 days' average payout (whichever higher); for sub-agents, Rs 20 lakh or 3 days' average payout (whichever higher).
- Monitor payout reimbursements to ensure they never exceed the security deposit held.
- Do not appoint any other UCB or entity as your sub-agent.
Who it affects
Primary (Urban) Co-operative Banks holding AD Category I or II licence, Overseas principals and agents under Money Transfer Service Schemes, Customers of UCBs seeking inward remittance services
Can a UCB without an AD licence act as an agent under this scheme?
No, only UCBs holding AD Category I or II licence are permitted to act as agents or sub-agents under Money Transfer Service Schemes.
What is the minimum security deposit required for a UCB acting as an agent?
The principal must maintain a foreign currency deposit with the designated bank equivalent to 3 days' average payout or USD 50,000, whichever is higher.
Can a UCB appoint another UCB as its sub-agent?
No, the circular explicitly prohibits any UCB from appointing any other UCB or entity as its sub-agent.