Indian banks told not to convert incoming foreign currency without instructions

India's foreign exchange dealers have told banks not to convert incoming foreign currency without instructions from the sender or recipient.

The guidance applies to payments sent to people and businesses in India, including small exporters receiving overseas earnings.

Previously, an intermediary bank could convert the money into rupees before sending it to the recipient's bank.

Some recipients received less money because intermediaries used unfavourable exchange rates, according to the account.

The Reserve Bank of India raised the issue with the Foreign Exchange Dealers' Association of India, which advised its member banks.

Without instructions to convert, banks must keep the money in its original currency as it is routed to the recipient's bank.

If the sender or recipient asks for conversion, the bank can convert at its prevailing rate under its policies.

Banks have been told to follow the guidance and instruct their branches and operating units.