The Reserve Bank of India’s (RBI’s) move to introduce a foreign exchange trading platform for retail customers is set to hit the fee income of banks significantly.

This may also take a toll on the operations of small-time money changers in the long term in case the platform is adopted directly by the customers.

Considering that a customer will have to knock on a bank’s doors to get a limit and a KYC approved beforehand to access the platform could be cumbersome for many, particularly those with small currency requirements.

“Not everyone comes to banks for their currency needs. These forex changers will continue to thrive. Their operation is pretty simple, that is, just exchange notes,” said a senior banker.

While bankers said travel companies that provide currency services could feel the impact, Cox & Kings claimed there will be no impact on its margins. Thomas Cook did not respond to an email query.

Ravi Menon, executive director (ED) & chief executive officer (CEO), foreign exchange, Cox & Kings Financial Service, said “The move by the RBI will definitely help travellers avail foreign exchange online. We do not see this impacting our margins as we are always competitive in the market and our approach is always to provide seamless foreign exchange service at the doorstep of the client. A large section of corporates and SMEs avail our services due to this enhanced level of service.”

But for banks, forex income may constitute 15-20 per cent of the total fee income, especially for private sector banks. The banks are going to lose this money, said the banker.

RBI had issued a discussion paper on such a platform in October 2017. The platform will enable buying and selling of foreign exchange through an internet-based application on which people can purchase/sell foreign currency at market prices.

In its monetary policy on Thursday, the RBI had said the foreign exchange currency platform will “ensure fair and transparent pricing for users of foreign exchange (such as small and medium enterprises or SMEs, exporters and importers as well as individuals, among others).”

“By unifying the existing fragmented market microstructure, this platform will provide transparency of pricing and promote competition among market makers, leading to better pricing for all customers, regardless of order size,” the RBI said.

The platform is likely to be rolled out from August.

The RBI’s foreign exchange trading platform will show the customer rates of all banks in one place. The customer can choose the most competitive rate and buy forex. The customer’s bank will debit the money from his or her account and settle with the forex providing bank. The whole mechanism will be cleared by the Clearing Corporation of India Ltd (CCIL) — the platform’s developer.

Importantly, the platform will try to aggregate bids so that a marketable lot of $500,000 can be created. This can be directly traded in the interbank market. In that case, the rates will become utra-fine for the customer, and at the market rate. The market rate is usually 1-2 per cent cheaper than a bank’s card rate.

The bank, in this case, would charge a small fee to the customer for just facilitation purpose.

In its draft guidelines, the RBI had said there would be a minimum amount involved, that is, $1000 and multiples of $500 thereof.

But that is likely to change when the platform goes online in August, said sources. The idea is to let retail customers get the exact amount they want from the platform.

For now, the facility will be available only for dollars, but more currencies will be introduced later. The platform will be an extension of CCIL’s FX-Clear, which is used for large-volume interbank trading.

Once a trade is done, the ticket generated will reflect the interbank rate, mark-up, and the net rate. Trades can be done for same-day delivery (cash), next-day delivery, or spot delivery (T+2), and interbank rates will reflect accordingly.

The detailed guidelines of this will be known by June-end.