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Master Direction Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses (Updated as on October 20 2016)

FEMA - 2/2015-16 - Dated:- 1-1-2016 - RBI/FED/2015-16/16 FED Master Direction No.2/2015-16 January 1, 2016 (Updated as on April 28, 2016) (Updated as on October 20, 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 .....

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ance 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 .....

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unt 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 .....

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ay 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 .....

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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 subje .....

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rding 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 ₹ 15,00,000 (Rupees fifteen lakhs only) per transaction. The accounts should not be used for cross-border outward remittances from India. (b) The accounts sh .....

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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 4(a) above] may be allowed freely and given the same s .....

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d 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. (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 .....

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rantee 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 regard1. (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 over .....

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nnel cross-border inward personal remittances. Under no circumstances, donations / contributions to charitable institutions should be routed through the Exchange Houses. (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 .....

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dical 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 ₹ 15,00,000 (Rupees Fifteen lakhs only) per transaction.2 (xi) Payments to uti .....

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e: 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 electronic mode, such as, NEFT, IMPS, etc., subject to the following conditions: i. The Recipient Bank wi .....

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ate 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 electro .....

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itional 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. 5 Types of Rupee Drawing Arrangements and Collateral Cover Rupee Drawing Arrangements can be conducted under the Designated Depository Agency (DDA), Non-Designated Depository Agency (Non-DDA) and Speed Remittance procedures. A. Designated Depository Agency (DDA) Procedure (a) The Exchange House will be required to open a b .....

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into foreign currency which shall be deposited into the account of the drawee bank (a/c-Exchange House) [known as DDA account, as described at 1(a) above] on the next working day before noon. (c) The Exchange House will send to the drawee bank information about the total number and the aggregate value of drafts drawn and daily deposits in the DDA account. Transfer from the DDA account should be as frequently as possible and is subject to the stipulation as at 1(e) below. (d) The funds will be he .....

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r the transfer of the sum collected on any particular day to the DDA account. The float period for the funds with DDA account will be decided by the drawee bank in consultation with the Exchange House subject to a maximum of five days. (f) The interest earned on the amount deposited by the Exchange House with the DDA as provided for at 1 (b) above, up to the date of transfer to the nostro account of the drawee bank will accrue to the Exchange House. (g) To ensure compliance of the above, the dra .....

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ice every week by the auditors. (h) As an alternative to the appointment of auditors as mentioned in paragraph 1(g) above, the AD Category-I bank may depute a suitable official as their representative to the Exchange House to take up such functions so as to safeguard the interests of the AD Category-I bank. (i) The auditors / representative will promptly report the findings to the drawee bank. In case of default on the part of the Exchange House, the drawee bank will as per terms and conditions .....

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thereof. (m) AD Category-I banks should satisfy themselves that the books of accounts of Exchange Houses are regularly audited by auditors approved by the local supervisory authorities. (n) AD Category-I banks should call for periodical credit reports, audited balance sheet and profit and loss account of the Exchange House and other relevant information so as to take a decision regarding continuance of accounts in their books. (o) Valid copies of all licenses should also be kept on record by th .....

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e not completed three years of operation, collateral cover in cash deposit in any convertible foreign currency or guarantee from a bank of international repute equivalent to 7 days projected drawings may be obtained. For Exchange Houses which have completed three years of successful operations, no collateral is prescribed. However, AD Category-I banks may secure their position by acquiring adequate collateral cover. Cash deposit in any convertible foreign currency or a guarantee from a bank of i .....

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awings. B. Non- DDA procedure (a) As an alternative to maintaining a DDA account and appointment of auditors as above, the AD Category-I banks may opt for the Non-DDA procedure. (b) Under Non-DDA procedure, the Exchange House funds their vostro account with the AD Category-I banks by purchasing rupees from the AD Category-I banks against USD for the total of drafts issued by them at periodic intervals and sends weekly statements of drawing and funding to the AD Category-I banks. (c) Collateral C .....

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ank of international repute equivalent to 10 days projected drawings may be obtained from Exchange Houses. In addition to the above, if there is a restriction on the bank s right to depute its own staff for examination of books of the Exchange House, as was in case of Exchange Houses in Kuwait, additional cash deposit in any convertible foreign currency / guarantee from a bank of international repute equivalent to 15 days estimated drawings may be obtained. The deposit should be in the name of t .....

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ds payment instructions with complete details like name, address, etc., via SWIFT or internet. 3(ii) Ordinarily, the Exchange House should fund the Rupee account through the nostro account of the AD Category-I bank in advance before issuing payment instructions and on verification of data and availability of balances in the vostro account of the exchange house the AD Category-I bank issues drafts in favour of the beneficiary or credits the account of the beneficiary. 4(iii) Where facility of spe .....

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uments from the Exchange House. However, the Reserve Bank should be informed in the matter immediately. 5(b) The AD Category - I banks are free to determine the requirement of collateral, if any, based on factors such as whether the remittances are pre-funded, the track record of the Exchange House, whether the remittances are effected on gross (real-time) or net (file transfer) basis, etc. and may frame their own policy in this regard. 6. Foreign Currency Drawing Arrangements AD Category-I bank .....

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ry branches of AD Category-I bank. No C category branch is allowed to participate in the arrangement. (b) The foreign currency drawing arrangement shall be kept distinct from the Rupee drawing arrangement. (c) A separate foreign currency vostro account of the Exchange House shall be opened with the account maintaining branch. Payment of such drafts shall be made by debit to this account maintained by the Exchange House and not to the nostro Account of the AD Category-I bank. (d) The aggregate am .....

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rrangement is under the Non-DDA procedure, the Exchange House should communicate to the account maintaining branch by any electronic mode, the number and aggregate value of drafts drawn in foreign currency before close of the following working day. Under DDA procedure, such information may be obtained frequently, at least on a bi-weekly basis. (h) Collateral cover: Exchange Houses should keep a deposit of not less than USD 50,000 with the drawee AD Category-I bank. Adequacy of quantum of deposit .....

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7. Miscellaneous Provisions (a) AD Category-I banks should adhere to the Know Your Customer (KYC)/ Anti Money Laundering (AML) / Combating the Financing of Terrorism (CFT) Guidelines issued by the Reserve Bank, while undertaking any transaction under Rupee/ Foreign Currency Drawing Arrangements, as applicable. (b) AD Category-I banks should include in their concurrent audit the Rupee/ Foreign Currency Drawing Arrangement to ensure that credit of funds to the vostro account of the Exchange House .....

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. (d) AD Category-I banks should keep the Reserve Bank informed of the unusual feature(s) in the operations of the Rupee/ Foreign Currency Drawing Arrangement by exercising constant vigil in the matter. (e) AD Category-I banks shall ensure that licenses of the Exchange Houses, which have expired are renewed and copies of authenticated English versions placed with them for their record. (f) The Exchange Houses should not enter into any arrangement with service providers for their back office oper .....

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nks should obtain approval of the Reserve Bank for maintaining accounts of Exchange Houses whose name and constitution, etc., undergo changes. 8. Internal Control and Monitoring of Accounts (a) AD Category-I banks should put in place adequate internal controls and a system of monitoring of accounts as per the extant instructions. Dealings with Exchange Houses should be strictly on credit basis at all times and no overdraft should be granted to the account holders. (b) Self-inspection of the vost .....

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olidated in the Master Direction on Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses Sl. No. Notification/ Circular Date 1. A.P. (DIR Series) Circular No. 28 [ A.P.(FL/ RL Series) Circular No. 02] February 6, 2008 2. A.P. (DIR Series) Circular No.11 [ A.P.(FL/ RL Series) Circular No. 01] August 22, 2008 3. A.P. (DIR Series) Circular No.37 [A.P.(FL/ RL Series) Circular No. 02] December 2, 2008 4. A.P. (DIR Series) Circular No. 16 [ A.P.(FL/ RL Ser .....

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, 2014 13. A. P. (DIR Series) Circular No. 35 October 9, 2014 14. A. P. (DIR Series) Circular No. 50 December 16, 2014 15. A.P. (DIR Series) Circular No.102 May 21, 2015 16. A.P. (DIR Series) Circular No.66 April 28, 2016 17. A.P. (DIR Series) Circular No. 9 October 20, 2016 1 Inserted vide A.P. (DIR Series) Circular No.66 dated April 28, 2016 2 Deleted Vide A.P. (DIR Series) Circular No. 09 dated October 20, 2016 3 Replaced vide A.P.(DIR Series) Circular No.66 dated April 28, 2016. Prior to the .....

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