TMI BlogMaster Direction - Deposits and Accounts (Updated as on January 09, 2020)X X X X Extracts X X X X X X X X Extracts X X X X ..... me to incorporate the changes in the regulatory framework and published through amendment notifications. 2. Within the contours of the Regulations, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999 . These directions lay down the modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/constituents with a view to implementing the regulations framed. 3. Instructions issued on maintenance of deposits and accounts under the Foreign Exchange Management Act, 1999 have been compiled in this Master Direction. The list of underlying circulars/ notifications which form the basis of this Master Direction is furnished in the Appendix. Reporting instructions can be found in Master Directions on reporting ( Master Direction No. 18 dated January 1, 2016 ) 4. 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 Regulations or the manner in which relative transactions are to be conducted by the Authorised Persons with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated in Schedule I to FEMA 10(R). The salient features of the scheme are: 1) Credits: The credits permitted to this account are: 100 percent of the foreign exchange earnings by way of inward remittance through normal banking channel, (other than loans or investments); payments received for the purpose of counter trade; advance remittance received by an exporter towards export of goods or services; professional earnings including director s fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity; interest earned on the funds held in the account; Re-credit of unutilised foreign currency earlier withdrawn from the account; repayment of trade related loans/ advances (which were granted to the account holder's importer customer out of balances held in the EEFC accounts); disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/ GDRs under the 7 DR Scheme, 2014; and 8 Payments received in foreign exchange by an Indian startup arising out of sales/ export made by the startup or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or acquired by him: as pension or superannuation benefits or other monetary benefits from his overseas employer; by converting assets which were acquired by him when he was a non-resident or inherited from or gifted by a person resident outside India and repatriated to India; before July 8, 1947 or any income arising or accruing thereon which is held outside India in pursuance of a general or special permission granted by the Reserve Bank; received as proceeds of LIC claims/ maturity/ surrendered value settled in forex from an Indian insurance company permitted to undertake life insurance business by the Insurance Regulatory and Development Authority. 2) The balances in the RFC account are free from all restrictions regarding utilisation of foreign currency balances outside India. 3) Such accounts can be held jointly with resident relative as joint holder on former or survivor basis. However, such resident Indian relative joint account holder cannot operate the account during the life time of the resident account holder. 4) The balances in the Non-Resident External (NRE) Account and Foreign Currency Bank [FCNR (B)] Account can be credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign Trade Policy of the Government of India may open DDA accounts, details of which are laid down in Schedule II of FEMA 10(R), as amended from time to time, with an AD in India. The salient features of the Scheme are: Realisation of export proceeds and local sales (in USD) of rough, cut, polished diamonds; and pre and post shipment finance availed in USD can be credited to such account. Payments for purchase of rough, cut and polished diamonds can be made from DDA account. Funds can also be transferred to rupee account of the exporter. The account should be maintained in the form of a non-interest bearing current account. The sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. 3.5 Indian agent of shipping or airline companies incorporated outside India can maintain foreign currency account in India for meeting the local expenses of the overseas company. The credits permitted to such accounts are freight or passage fare collections in India or from his pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. can open temporary foreign currency accounts in India subject to the following conditions: Credits: All inward remittances in foreign currency towards registration fees payable by overseas delegates, grant, sponsorship fees and donations, received from abroad, in connection with the conference, convention, etc Debits: (i) Payment to foreign/ special invitees attending the conference, etc., on the specific invitation of the organisers, towards travel, hotel charges, etc., and honorarium to foreign guest speakers; (ii) Remittance towards refund of registration fees to foreign delegates and unutilised sponsorship/grant amount, if any; (iii) Bank charges, if any; (iv) Conversion of funds into rupees. All other credits/ debits would require the prior approval of the Reserve Bank. The account should be closed immediately, after the conference/event is over. 3.9 An exporter who has undertaken a construction contract or a turnkey project outside India or who is exporting services or engineering goods from India on deferred payment terms may open, hold and maintain a Foreign Currency Account with a bank in India, provided that approval as required under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipping or airline company. 14 Insurance/ reinsurance companies registered with Insurance Regulatory and Development Authority of India (IRDA) to carry out insurance/ reinsurance business. An India firm/ company/ body corporate in the name of its foreign office/ branch or its representative posted outside India. An exporter who is exporting services and engineering goods on deferred payment terms or executing a turnkey project or a construction contract abroad. 4.2 A person resident in India who has gone abroad for studies may open a foreign currency account with a bank outside India during his stay abroad. All credits to the account from India should be made in accordance with FEMA and the rules and regulations made thereunder. 15 On the student s return to India after completion of studies, the account will be deemed to have been opened under the Liberalised Remittance Scheme. 4.3 A person resident in India who is on a visit to a foreign country may open a foreign currency account with a bank outside India during his stay abroad. The balance in the account should be repatriated to India on return of the account holder to India. 4.4 A person goin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia with an authorized dealer in India under the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015, dated January 21, 2016 as amended from time to time, may be opened, held and maintained in the form of current or savings or term deposit account in cases where the account holder is an individual, and in the form of current account or term deposit account in all other cases. 5.2 The account can be held singly or jointly in the name of person eligible to open, hold and maintain such account. 5.3 On the death of a foreign currency account holder - the authorised dealer with whom the account is held or maintained may remit to a nominee being a person resident outside India, funds to the extent of his share or entitlement from the account of the deceased account holder; a nominee being a person resident in India, who is desirous of remitting funds outside India out of his share for meeting the liabilities abroad of the deceased, may apply to the Reserve Bank for such remittance. 18 A resident nominee of an account held outside India in accordance with Regulation 5 of Foreign Exchange Management (Foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(77) of the Companies Act, 2013. 2.8 23 As FEM (Deposit) Regulations, 2000 have been repealed and replaced by FEM (Deposit) Regulations, 2016 with effect from April 1, 2016 (FEMA 5(R)), the term NRI, wherever it appeared, has been replaced by NRI and/or PIO. Prior to this, PIOs were covered within the definition of NRI. 3. Exemptions These restrictions are not applicable for the following: 3.1 Deposits in rupee accounts and special rupee accounts maintained by foreign diplomatic missions and diplomatic personnel. 3.2 Foreign currency accounts maintained by diplomatic missions, diplomatic personnel and non-diplomatic staff who are the nationals of the concerned foreign countries and hold official passport of foreign embassies in India, subject to the following conditions: The permissible credits to the account will be inward remittances received from outside India through banking channels; and transfer of funds, from the rupee account of the diplomatic mission in India, which are collected in India as visa fees and credited to such account; Funds held in such account if converted in rupees cannot be converted back into foreign curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the NRI/PIO account holder and income tax thereon has been deducted/ paid/ provided for, as the case may be. 4.8 24 The regulations for sanction of loans are detailed below: 4.8.1 Authorised Dealers/ banks in India can grant loans against the security of the funds held in NRE accounts to the account holder/ third party in India, without any limits, subject to the usual margin requirements. The loan cannot be repatriated outside India and shall be used for the following purposes: personal purposes or for carrying on business activities except for the purpose of relending or carrying on agricultural/ plantation activities or for investment in real estate business; making direct investment in India on non-repatriation basis by way of contribution to the capital of Indian firms/ companies subject to the provisions of the relevant Regulations made under the Act; acquiring flat/ house in India for his own residential use subject to the provisions of the relevant Regulations made under the Act. In case of loans sanctioned to a third party, there should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the account holder; (d) transfer funds from the account to another NRE account. 4.12 Income from interest on balances standing to the credit of NRE Accounts is exempt from Income Tax. Likewise balances held in such accounts are exempt from wealth tax. 4.13 The rate of interest and tenor applicable to these accounts will be in accordance with the directions/ instructions issued by the Department of Banking Regulations, Reserve Bank of India. 5. Foreign Currency (Non-resident) Account (Banks) Scheme FCNR (B) Account The detailed instructions for opening and maintaining this account are laid down in Schedule 2 to Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time. The salient features of the scheme are given below: 5.1 Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) are permitted to open and maintain these accounts with authorised dealers and banks authorised by the Reserve Bank to maintain such accounts. Deposits may be accepted in any permissible currency. 5.2 The accounts can be maintained only in the form of fixed deposit. 5.3 Other conditions such as credits/debits, joint accounts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hists, Jains, Parsis and Christians, residing in India and who has been granted a Long Term Visa (LTV) by the Central Government. The account will be converted to a resident account once such a person becomes a citizen of India. This account can also be opened if such person has applied for LTV which is under consideration of the Central Government, in which case the account will be opened for a period of six months and may be renewed at six monthly intervals subject to the condition that the individual holds a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned. The opening of such NRO accounts will be subject to reporting of the details of accounts opened by the concerned Authorised bank to the Ministry of Home Affairs (MHA) on a quarterly basis. The report shall contain details of (i) name/s of the individual/s; (ii) date of arrival in India; (iii) Passport No. and place/country of issue; (iv) Residential Permit/Long Term Visa reference and date place of issue; (v) name of the FRO/FRRO concerned; (vi) complete address and contact number of the branch where the bank account is being maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-designate their resident account maintained in India as NRO account on leaving the country after their employment to enable them to receive their pending bona fide dues, subject to the bank satisfying itself that the credit of amounts are bona fide dues of the account holder when she/ he was a resident in India. The funds credited to the NRO account should be repatriated abroad immediately, subject to payment of the applicable income tax and other taxes in India. The amount repatriated abroad should not exceed USD one million per financial year. The debit to the account should be only for the purpose of repatriation to the account holder s account maintained abroad. The account should be closed immediately after all the dues have been received and repatriated as per the declaration made by the account holder when the account was designated as an NRO account. 6.13 International Credit Cards - Authorised Dealer banks have been permitted to issue International Credit Cards to NRIs/PIOs, without prior approval of Reserve Bank. Such transactions may be settled by inward remittance or out of balances held in the cardholder s FCNR (B) / NRE / NRO Accounts. 6.14 Income-Tax - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt from sale of scrap, Government incentives in INR, etc. The account will be maintained with a bank in India (outside IFSC). 7.2 32 The SNRR account shall carry the nomenclature of the specific business for which it is in operation and shall not earn any interest. Indian bank may, at its discretion, maintain separate SNRR account for each category of transactions or a single SNRR Account for a person resident outside India engaged in multiple categories of transactions provided it is able to identify/segregate and account them category-wise. 7.3 The debits/ credits and the balances in the account shall be incidental and commensurate with the business operations of the account holder. 7.4 Authorised Dealers shall ensure that all the operations in the SNRR account are in accordance with the provisions of the Act, rules and regulations made thereunder. 7.5 33 The tenure of the SNRR account should be concurrent to the tenure of the contract/ period of operation/ the business of the account holder and in no case should exceed seven years. Approval of the Reserve Bank shall be obtained in cases requiring renewal. However, the restriction of seven years shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 10.1 An Indian proprietorship concern/ firm or a company (including Non-Banking Finance Company) registered with Reserve Bank can accept deposits from NRIs or PIOs on non-repatriation basis subject to the terms and conditions specified in Schedule 7 to 39 Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time. 10.2 40 11. 41 Acceptance of deposits by Indian companies from a person resident outside India for nomination as Director Keeping deposits with an Indian company by persons resident outside India, in accordance with section 160 of the Companies Act, 2013, is a current account (payment) transaction and, as such, does not require any approval from Reserve Bank. All refunds of such deposits, arising in the event of selection of the person as director or getting more than twenty five percent votes, shall be treated similarly. 12. Other Accounts / Deposits 42 12.1 A deposit made by an Authorised Dealer with its branch, head office or correspondent outside India, and a deposit made by a branch or correspondent outside India of an Authorised Dealer, and held in its books in India, will be governed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) submit periodic return or statement, if any, as may be stipulated by the Reserve Bank. APPENDIX List of notifications/ circulars which have been consolidated in this Master Direction Sl No Notification/ AP (DIR Series) Circular Date 1 46 Notification No. FEMA 10(R)/2015-RB January 21, 2016 2 47 Notification No. FEMA 5(R)/2015-RB April 1, 2016 3 48 Notification No. FEMA 10(R)/(1)/2016-RB June 1, 2016 3 A.P (DIR Series) Circular No. 44 [(1)/10(R)] February 4, 2016 4 A.P (DIR Series) Circular No. 59 April 13, 2016 6 A.P (DIR Series) Circular No. 67/2015-16/ [(1)/5(R)] May 5, 2016 7 A.P (DIR Series) Circular No. 77[(2)/10(R)] June 23, 2016 8 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 2016 intimated vide AP (Dir Series) Circular No. 77[(2)/10(R)] dated June 23, 2016. 9 Inserted by AP (DIR Series) circular No 67/2015-16/ [(1)/5(R)] dated May 5, 2016 vide FEMA Notification No. 5(R)/2016-RB dated April 1, 2016. Prior to this, PIOs were covered within the definition of NRIs. 10 Inserted by FEM (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015 with effect from January 21, 2016. Prior to insertion it read as ADR/GDR Scheme approved by the Government of India. 11 Inserted by FEM (Foreign Currency Accounts by a Person resident in India) Regulations, 2015 with effect from January 21, 2016. 12 Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 has been superseded by Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 issued by Government on October 17, 2019. 13 Inserted vide Notification No. FEMA 10(R)(2) dated February 27, 2019 and AP (DIR Series) Circular No. 29 dated April 11, 2019. 14 Inserted by Amendment Notification No. FEMA 10(R)/(1)/2016-RB notified vide G.S.R.No.570(E) dated June 1, 2016 intimated vide AP ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on it read as, An authorised dealer or its overseas branch/ correspondent can grant loans against security of the funds to the account holder/ a third party in or outside India, respectively without any limits subject to the usual margin requirements. The facility for premature withdrawal of the deposits shall not be available where loans against such deposits are availed of. The term loan shall include all types of fund based/ non-fund based facilities. 25 Modified by insertion of (a) and (b), vide Foreign Exchange Management (Deposit) (Amendment) Regulations, 2018 Notification No. FEMA 5 (R)(1)/2018-RB dated November 09, 2018 and AP (DIR Series) Circular No. 28 dated March 28, 2019. Prior to insertion it read as Opening of accounts by individuals/ entities of Pakistan nationality/ ownership and entities of Bangladesh ownership requires prior approval of the Reserve Bank. However, individuals of Bangladesh nationality may be allowed to open these accounts subject to the individual/ s holding a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned. 26 Inserted by AP (DIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the tenure of the contract/ period of operation/ the business of the account holder and in no case should exceed seven years. No operations are permissible in the account after seven years from the date of opening of the account. 34 Modified vide AP (Dir) Circular no. 9 dated November 22, 2019 and vide Notification No. FEMA 5(R)/3/2019-RB dated November 13, 2019. Prior to modification, it read as, purpose of making investment in India in accordance with Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2017, as amended from time to time. 35 Modified vide AP (DIR Series) Circular No. 9 dated November 22, 2019 read with Notification No. FEMA 5(R)/3/2019-RB dated November 13, 2019. Prior to modification, it read as, The amount due/ payable to non-resident nominee from the account of a deceased account holder, will be credited to NRO account of the nominee with an authorised dealer/ authorised bank in India. 36 Inserted by AP (DIR Series) circular No 67/2015-16/ [(1)/5(R)] dated May 5, 2016 vide FEMA Notification No. 5(R)/2016-RB dated April 1, 2016. Prior to this, the provisions were stipulated i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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