September 4, 2025

Mumbai is witnessing a money transfer shake-up! If you thought sending funds abroad was easy, think again. Almost all banks in India — government, private, and multinational — are now refusing to send money overseas unless the sender clearly states the exact reason for the transfer. For years, many individuals and businesses just used a vague label: 'other services not included elsewhere'. No questions asked! This mysterious tag was allowed under the Reserve Bank of India's purpose codes, where if you didn't specify the service, you could pick code S1099, simply called 'other services'. But hold on! In the last two months, banks suddenly stopped processing remittances under this vague S1099 code. Sources tell ET that the RBI sent secret signals to banks to watch this code like hawks. Why? Because the 'other services' slot was being misused for fake or shady money transfers. Harshal Bhuta, partner at the chartered accountant firm PR Bhuta & Co, explained, “Probably due to potential misuse of miscellaneous codes like S1099 for fraudulent or fictitious remittances, RBI has informally instructed authorised dealer banks to restrict remittances under this code.” This crackdown has a funny side effect. People now scramble to pick purpose codes that don't match their real transfer reason just to get their money through. It’s like forcing a square peg in a round hole! The RBI’s list of purpose codes is detailed. It covers plenty of activities — paying for overseas courses, advertising abroad, subscribing to foreign magazines, paying employees posted overseas, buying foreign properties, and even acquiring shares of offshore companies. Every activity gets its special code. With the government and RBI tightening rules on overseas investments and remittances for individuals and companies, banks have become super careful — some say even overcautious. Initially, only a few big banks were strict with these rules. Now, it’s a nation-wide trend. Isha Sekhri, partner at Isha Sekhri Advisory, shared, “Purpose codes are a mandatory requirement under FEMA and RBI regulations, and any deviation can create significant compliance challenges. There can be operational hurdles if banks don't allow the residuary purpose code (i.e., 1099) for transactions that don't neatly fit within the specific codes.” She gave an example, “Payments towards memberships and subscriptions to foreign professional organisations don’t have a specific purpose code. In such situations, it becomes very difficult to identify a purpose code acceptable to RBI without causing unwanted tax consequences.” Technically, banks can get special approval to use the S1099 code under rare cases, but don’t bet on speeding through that process. Sekhri advises, “Remitters should verify the correct code and coordinate with the bank before initiating remittance.” So, the message is clear — no more vague money transfers abroad! The RBI has flipped the script, and banks are playing by the new rules. If you want your funds to fly overseas, you better get your paperwork and purpose codes on point, or your transfer might get stuck on the ground!

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Tags: Rbi, Remittance, Purpose codes, Banks, Foreign transfer, Compliance,