The Reserve Bank of India has said that foreign airlines cannot route collections from online tickets sales in India directly to foreign bank accounts. At present, some airlines give Indian passengers the option to buy tickets online with the option to make payments in a foreign currency. The Indian central bank has been allowing Indian cardholders to make small purchases through international credit cards. However, in case of airfares, RBI has pointed out that under the Foreign Exchange Management Act 2000, foreign airlines can repatriate ticket proceeds through their agents in India after payment of the local expenses and applicable taxes in India.
Most passengers pay for their fare in domestic currency and RBI's move appears to be aimed at plugging a loophole. RBI has said that in some cases where tickets are sold online through credit or debit cards, the card company has given to the airline the choice of booking the fare in either Indian or international currency. "In such transactions, the overseas bank as the acquiring bank receives the funds from Card Issuing Company in its Vostro account maintained with an Authorised Dealer bank in India or in its foreign currency account maintained abroad and makes the payment in foreign currency overseas to the foreign airline" RBI said. According to RBI such direct transfers are in violation of the FEMA 1999 and has asked airlines to immediately cease the using overseas banks for settlement of transactions in Indian rupees.