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The International Financial Services Centres Authority clarifies that the prohibition on the drawal of foreign exchange under the FEMA Rules does not apply to remittances between a financial institution and a person resident outside India. Such remittances represent a transaction between persons resident outside India. The concept of an authorised person does not apply to Banking Units because these transactions do not involve conversion between Indian Rupees and foreign exchange. Banking Units permit clients that are financial institutions to execute remittances to persons resident outside India, which includes residents of Nepal and Bhutan.
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[Image omitted. See the official document.]
International Financial Services Centres Authority
F.No.110/IFSCA/Banking Regulation/2020-21/11
February 11, 2021
To,
All Banking Units
Dear Sir/Madam,
Transactions with residents of Nepal and Bhutan- clarification
Banking units (BUs) may refer to para 20 of the annex to the “Instructions and clarifications on circulars issued under the IFSC (Banking) Regulations, 2020” dated December 24, 2020.
2.It is hereby clarified that remittance between a financial institution (as defined in Section 3 (1)(c) of the International Financial Services Centres Authority Act, 2019) and a person resident outside India, being a transaction between persons resident outside India, the prohibition on drawal of foreign exchange vide Section 3 (c) of the FEMA (Current Account Transaction) Rules, 2000 shall not be applicable to such transactions.
Further, as such transactions do not involve conversion from INR to foreign exchange or vice-versa, the concept of authorised person (as defined in section 2(c) of the Foreign Exchange Management Act, 1999) shall not be applicable to BUs.
BUs may therefore permit remittances by their clients, being financial institutions, to persons resident outside India (including residents of Nepal and Bhutan).
Yours faithfully
(Supriyo Bhattacharjee)
General Manager
supriyo.b@ifsca.gov.in
