RBI/FED/2015-16/16
FED Master Direction No.2/2015-16
January 1, 2016
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Updated as on December 22, 2022
)
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Updated as on September 08, 2020
)
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Updated as on August 31, 2018
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Updated as on May 19, 2017
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Updated as on October 20, 2016
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Updated as on April 28, 2016
)
To
All Authorised Persons in Foreign Exchange
Madam / Dear Sir,
Master Direction – Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses
Rupee Drawing Arrangement (RDA) is a channel to receive cross-border remittances from overseas jurisdictions. Under this arrangement, the Authorised Category I banks enter into tie-ups with the non-resident Exchange Houses to open and maintain their Vostro Account.
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Reserve Bank issues directions to Authorised Persons, including Authorised Category I banks, under Section 11 of the Foreign Exchange Management Act, 1999, in regard to conduct foreign exchange business in compliance with the provisions of the Act and any rules, regulations, notifications, directions or orders made there under.
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The directions relating to Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses in India are being issued in a consolidated form through the
Master Direction
enclosed herewith. Reporting instructions can be found in Master Direction on Reporting. It may be noted that whenever necessary, Reserve Bank shall issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the rules, regulations, notifications, directions or orders or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/constituents. The Master Direction issued herewith shall be amended suitably simultaneously.
Yours faithfully,
(Vivek Srivastava)
Chief General Manager
Master Direction - Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses
- Introduction
Cross-border inward remittances may also be received under Rupee Drawing Arrangements (RDAs) through the Rupee Vostro Account of Exchange Houses situated in Gulf countries, Hong Kong, Singapore, Malaysia (for Malaysia only under Speed Remittance Procedure) and all other countries which are FATF compliant (for all other countries which are FATF compliant only under Speed Remittance Procedure).
This document covers the general instructions, permitted transactions and the various types of arrangements under this route. The guidelines for Foreign Currency Drawing Arrangements and other miscellaneous provisions are also covered in the later part of the document.
- General Instructions
AD Category–I banks should apply to the concerned Regional Office of the Reserve Bank in the prescribed form with necessary documents for the first time they enter into RDAs with non–resident Exchange Houses from Gulf countries, Hong Kong, Singapore, Malaysia and all other countries which are FATF compliant, for opening and maintaining in India the Rupee vostro accounts of those non-resident Exchange Houses. Subsequently, they may enter into RDAs, subject to the prescribed guidelines and inform the Reserve Bank immediately. However, once the total number of RDAs reaches twenty, the AD Category-I bank may cause a detailed external audit of their internal system to ensure that it is working satisfactorily. Based on the satisfactory report, the Board of AD Category-I banks may authorize more such arrangements. A copy of the Board Note together with Board Resolution in the matter may be filed with the Reserve Bank and new arrangements informed to the Reserve Bank immediately. Rupee/ foreign currency vostro accounts of non-resident Exchange Houses in India may be opened by the AD Category I banks subject to the following conditions:
- (a) While considering the request of an Exchange House for opening an account in India, the AD Category-I banks concerned should make necessary enquiries about the financial standing of the Exchange House, in accordance with the normal banking practices and satisfy themselves fully in all respects. AD Category-I banks should also ensure that the Exchange Houses hold valid licenses issued by the Local Monetary/ Supervisory Authority concerned and have necessary authority / license to transact currency exchange/ money transfer business.
- (b) The requirement of registration of the Agreement between the AD Category-I banks and Exchange Houses under the Rupee Drawing Arrangement/ Foreign Currency Drawing Arrangement has been made optional. However, such arrangements should be subjected to comprehensive legal documentation and AD Category-I banks should take care of all necessary legal requirements in this regard. Further, it should be ensured that all the partners of the Exchange Houses are jointly and severally bound to honour the obligations devolving on the Exchange Houses under the agreement.
- (c) The normal banking requirements of registration of Power of Attorney/ specimen signatures of signing officials of the Exchange Houses should be observed.
- Instructions regarding operations in the Rupee vostro accounts
- (a) The accounts can be used for channeling cross- border inward remittances into India primarily on private account. The remitter and the beneficiary should be individuals barring a few exceptions. Remittances through Exchange Houses for financing of trade transactions are permitted up to Rs.15,00,000 (Rupees fifteen lakhs only) per transaction.
The accounts should not be used for cross-border outward remittances from India
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- (b) The accounts should run on a credit basis. No overdraft should be granted to the account holders. However, in case of Designated Depository Agency (DDA) procedure, the funds lying in the DDA A/c may be taken into account, if need be. AD Category-I banks shall adopt value dating where on-line debit to Rupee vostro account is not possible on a real time basis when any payment is made at drawee branches, to check adequacy of funds and detect concealed overdrafts. However, in such cases, it may be ensured that the drawee branches are networked at the earliest.
- (c) Separate Rupee vostro account shall be maintained for each arrangement. The accounts should be funded by sale of permitted foreign currency to the AD Category-I bank, which maintains the account. Rupee funds transferred from another AD Category-I bank or from another vostro account will not be eligible for credit to the account.
- (d) Debits of permitted types of inward remittances [vide item
3(a)
above] may be allowed freely and given the same status as remittances made in foreign exchange in an approved manner to India. Thus, such payments will be eligible for credit to Non-Resident (External) Rupee Accounts maintained by Non-Resident Indians, or for acceptance under priority allotment, etc., schemes. In order to facilitate tourists (whether Indian or not), receiving remittances through such accounts to prove the external sources of the funds wherever required (such as for payment of passages in India or for re-conversion of unutilised balances), AD Category-I banks may issue certificates in the same form as obtaining for inward remittances received through Rupee accounts of overseas banks.
- (e) Funds in such accounts will not be convertible, nor will they be transferable to other AD Category-I banks or to other non-resident accounts maintained with the same AD Category-I bank.
For closure of the Vostro accounts and remitting back funds (in foreign currency), if any, under RDA, prior permission of RBI is not required. However, the AD Category I bank may reconcile the accounts before effecting the closure. Further, the AD Category I banks may report the foreign currency outflow in Statement ‘E’.
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- (f) Balances in such accounts will not qualify for payment of interest.
- (g) The branch of the AD Category–I bank maintaining the Rupee vostro account of the Exchange House should not credit to the account, rupees purchased by the latter unless confirmation is received to the effect that the nostro account of the AD Category-I bank has been credited with the counter-value in foreign currency (cf. paragraph 3.3.1 of the Guidelines for Internal Control over Foreign Exchange Business, February, 2011).
- (h) AD Category-I banks may obtain suitable and adequate collateral either in the form of a cash deposit in any convertible foreign currency or guarantee of a bank of international repute, depending on the type of arrangement to take care of the credit and operational risks.
They may frame their own policy in this regard
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- (i) A cap of 300 on the number of drawee branches has been prescribed by the Reserve Bank as a prudential measure. However, AD Category-I banks may designate drawee branches beyond 300, provided such branches are under the Core Banking Solution where on-line monitoring of funds position is ensured to avoid concealed overdrafts in vostro accounts, subject to the terms and conditions of Reserve Bank’s approval for the tie-up with an Exchange House and the instructions pertaining to RDA issued by the Reserve Bank from time to time. The AD Category-I banks should obtain necessary Board approval before increasing the number of drawee branches beyond 300 and should inform the position to the Reserve Bank immediately.
- Permitted Transactions
- (a) Drawing Arrangements with Exchange Houses are primarily designed to channel cross-border inward personal remittances.
Under no circumstances, donations / contributions to charitable institutions should be routed through the Exchange Houses
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- (b) The following is the list of permissible transactions under Drawing Arrangements with Exchange Houses:
- (i) Credit to Non-resident (External) Rupee accounts maintained by Non-Resident Indians in Indian Rupees.
- (ii) Payments to families of Non-resident Indians.
- (iii) Payments in favour of Insurance companies, Mutual Funds and the Post Master for premia / investments.
- (iv) Payments in favour of bankers for investments in shares, debentures.
- (v) Payment to Co-operative Housing Societies, Government Housing Schemes or Estate Developers for acquisition of residential flats in India in individual names, subject to compliance of regulations applicable thereof, by the Non-resident Indians.
- (vi) Payments of tuition/ boarding, examination fee, etc., to schools, colleges and other educational institutions.
- (vii) Payments to medical institutions and hospitals in India, for medical treatment of NRIs / their dependents and nationals of all FATF countries.
- (viii) Payments to hotels by nationals of all FATF compliant countries / NRIs for their stay.
- (ix) Payments to travel agents for booking of passages of NRIs and their families residing in India towards their travel in India by domestic airlines / rail, etc.
- (x) Trade transactions up to Rs.15,00,000 (Rupees Fifteen lakhs only) per transaction.
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- (xi) Payments to utility service providers in India, for services such as water supply, electricity supply, telephone (except for mobile top-ups), internet, television, etc.
- (xii) Tax payments in India
- (xiii) EMI payments in India to Banks and Non-Banking Financial Companies (NBFCs) for repayment of loans.
- (xiv) Remittances to the Prime Minister’s National Relief Fund
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Chief Minister’s Distress Relief Fund- Kerala
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Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM-CARES) Fund
subject to the condition that the remittances are directly credited to the Fund by the banks and the banks maintain full details of the remitters
Note: No cash disbursement of remittances received is allowed under Rupee / Foreign Currency Drawing Arrangements.
- (c) Foreign inward remittances received by the AD Category-I Bank (termed as ‘Partner Bank’) having RDA with Non Resident Exchange Houses may be credited directly to the account of the beneficiary held with a bank other than the AD Category-I Bank (termed as ‘Recipient Bank’)
through the following means:
- i. Electronic mode, such as, NEFT, IMPS, etc.
- ii.
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Bharat Bill Payment System (BBPS)
The above shall be subject to the following conditions:
- i. The Recipient Bank will credit the amount transferred by the Partner Bank only to the KYC compliant bank accounts.
- ii. In respect of the bank accounts which are not KYC compliant, the Recipient Bank shall carry out KYC/CDD of the recipient before the remittance to such account is credited or allowed to be withdrawn.
- iii. The Partner Bank (i.e. the AD Category -I Bank receiving foreign inward remittance through non-resident exchange houses under RDA) shall appropriately mark the direct-to-account remittances to indicate to the Recipient Bank that it is a foreign inward remittance.
- iv. The Partner Bank shall ensure that accurate originator information and necessary beneficiary information is included in the electronic message while transferring the fund to the Recipient Bank. This information should be available in the remittance message throughout the payment chain, i.e., the Non Resident Exchange House, the Partner Bank and the Recipient Bank. The Partner Bank should add an appropriate alert in the electronic message indicating that this is a foreign inward remittance and should not be credited to a KYC non-compliant account.
- v. The identification and other documents of the recipient shall be maintained by the Recipient Bank as per the provisions of Prevention of Money Laundering (Maintenance of Records) Rules, 2005. All other requirements under KYC/AML/CFT guidelines issued by the Reserve Bank of India from time to time shall be adhered to by the Partner Bank.
- vi. The Recipient Bank may seek additional information from the Partner Bank and shall report suspicious transactions to the FIU-IND with details of the Partner Bank through which they received the remittances.
