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TMI BlogMemorandum of Instructions for Opening and Maintenance of Rupee / Foreign Currency Vostro Accounts of Non-resident Exchange HousesX X X X Extracts X X X X X X X X Extracts X X X X ..... dent Exchange Houses. Accordingly, the Memorandum of Instructions containing procedural instructions has been rationalized. The revised instructions are annexed (Annex-I). 3. AD Category - I banks may bring the contents of this circular to the notice of their constituents concerned. 4. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law. Yours faithfully, (Salim Gangadharan) Chief General Manager Annex-I [Annex to A. P. (DIR Series) Circular No. 28 dated February 06, 2008] MEMORANDUM OF INSTRUCTIONS FOR OPENING AND MAINTENANCE OF RUPEE/ FOREIGN CURRENCY VOSTRO ACCOUNTS OF NON-RESIDENT EXCHANGE HOUSES Prior approval of the Reserve Bank is required to be obtained by Authorised Dealer Category-I banks for opening and maintaining rupee/ foreign currency vostro accounts of non-resident Exchange Houses. The following is the detailed guidelines for opening and maintenance of rupee/ foreign currency vostro accounts of non-resident Exchange Houses. (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancing of trade transactions are permitted up to Rs 200,000 (Rupees two lakh only) per transaction. The accounts should not be used for outward remittances from India . ii. 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, the drawee branches should be networked at the earliest. iii. 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 Authorized Dealer Category-I or from another Vostro account will not be eligible for credit to the account. iv. Debits of permitted types ( vide item 4 (i) above ) may be made freely and given the same status as remittances made in foreign exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrangements with Exchange Houses. 1. Credit to Non-resident (External) Rupee accounts maintained by Non-resident Indians in Indian Rupees. 2. Payments to families of Non-resident Indians. 3. Payments in favour of Insurance companies, Mutual Funds and the Post Master for premia / investments. 4. Payments in favour of bankers for investments in shares, debentures. 5. Payment to Coop. Housing Societies, Govt. Housing Schemes or Estate Developers for acquisition of residential flats in India inindividual names subject to compliance of regulations thereof by the Non-resident Indians. 6. Payments of tuition/ boarding, examination fee etc. to schools, colleges and other educational institutions. 7. Payments to medical institutions and hospitals for medical treatment of NRIs / their dependents and nationals of Gulf Countries in India. 8. Payments to hotels by nationals of Gulf countries / NRIs for their stay. 9. 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. 10. Trade transactions up to Rs. 2 lakhs per transaction. Note : No cash disbursement of remittances receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he daily drawings and deposits in the accounts with the DDA as well as transfer to the Nostro account of the drawee bank. For this purpose, the Exchange House will undertake to allow the auditors to inspect the books, pay in vouchers, etc., of the Exchange House in so far as they pertain to rupee drawing arrangement. Such inspections will be done at least once or twice in every week by the auditors. viii. As an alternative to the appointment of auditors as mentioned in paragraph 1 (vii) 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. ix. 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 of agreement, terminate the agency arrangement under notice to the Exchange House. The termination will also be promptly reported to the Reserve Bank. x. So long as the Exchange House complies with the guidelines, the drawee bank will ensure that the drafts issued are honoured at the branches mutually agreed to. xi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equivalent to 15 days drawings on moving average basis in India or abroad. The deposit should be in the name of the AD Category - I bank with interest thereon at market related rates payable to the Exchange House placing the deposits. The Exchange House shall also furnish a bank guarantee from an international bank of repute for an equivalent amount. The amount of deposit and guarantee should be periodically reviewed and properly monitored by the AD Category - I banks to ensure that the collateral covers adequately the drawings and account for the pipeline debits evaluated. 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/ guarantee from a bank of international repute equivalent to 15 days estimated drawings may be obtained. 3. Speed Remittance Procedure AD Category - I banks are permitted to enter into RDA under speed remittance procedure wherein- i) The Exchange House sends payment instructions with complete details like name address, etc via SWIFT or internet. ii) The Exchange House funds the rupee account through the Nostro account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tro 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. iv) The aggregate amount of drafts drawn in foreign currency by the Exchange House on any day should be credited to the Nostro Account of the drawee bank latest by close of business on the second working day. v) The account maintaining branch of the drawee AD Category - I bank should credit foreign currency vostro account of the Exchange House on receipt of confirmation regarding credit to their nostro account. vi) AD Category - I banks should ensure that foreign currency accounts are funded at all times. If the arrangement is under Non-DDA procedure, the Exchange House should communicate to the account maintaining branch by any electronic mode, before close of the following working day, the number and aggregate value of drafts drawn in foreign currency. Under DDA procedure, such information may be obtained frequently, at least on a bi-weekly basis. Collateral cover : Exchange Houses should keep a deposit of not less than USD 50000/- with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n offices in India with prior approval of the Reserve Bank. (vii) AD Category - I banks should obtain approval of the Reserve Bank for maintaining accounts of such Exchange Houses whose name and constitution etc. undergo change. (F) Internal Control and Monitoring of Accounts (i) AD Category - I banks should put in place adequate internal control and a system of monitoring of accounts as per the extant instructions. Dealings with Exchange Houses should be strictly on a credit basis at all times. (ii) Self-inspection of the vostro accounts of Exchange Houses :- AD Category - I banks are required to cause inspection of the vostro accounts of Exchange Houses on a half-yearly basis through experienced officers. The inspection reports should be carefully gone through by the competent authorities in ADs Cat-I so that prompt corrective action is initiated. Observations thereon shall be included in the annual review of the accounts submitted to the Board. (G) Reports / Statements (i) Statement A : This statement (as at Annex-III) is designed to elicit details of operations in rupee/ foreign currency vostro accounts of Exchange Houses and has to be prepared every month Exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... home country KYC/ AML Guidelines by Exchange Houses (c) financial losses suffered if any on account of transactions, events, disputes etc., (d) business turnover separately under each arrangement, (e) funding arrangements in respect of vostro accounts, (f) half-yearly inspection of the account of the Exchange House, (g) supervision (system in vogue to monitor operations in the account), (h) internal control and risk management system, (i) overdrafts and interest collected. An extract of directions, if any issued by the Board should be forwarded to the Reserve Bank along with the Annual Review note. While submitting the annual review note, the particulars such as (a) complete particulars of Drawing Arrangements (DDA/ Non-DDA / Speed Remittance) AD Category - I banks have with Exchange Houses with the date of approval by RBI and opening of the vostro accounts (b) dates of termination of Drawing Arrangements, if any (including Drawing Arrangements which could not be concluded), (c) number of drawee branches under each arrangement should be included. Annex- II [Annex to A. P. (DIR Series) Circular No. 28 dated February 06, 2008] Application for obtaining permission to ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary) 4. Financial losses sustained if any during last five years (April-March) (i) Year (ii) Name of the EH (iii) Amount of loss (iv) Particulars of loss (v) Ref. Nos. and dates lodged with RBI and RBI's permission to write off 5. Financial disputes if any with EH(s) pending settlement (i) Name of EH (ii) Expected amount of loss (iii) Particulars of loss (iv) Ref. No. dated of report lodged with RBI 6. Furnish an EH-wise summary of the major irregularities observed in the existing drawing arrangements during inspections by Internal Auditors, RBI Inspectors as also Overseas Auditors indicating the corrective measures initiated by the bank Part B - Particulars of the Exchange House for the proposed drawing arrangement 1(a) Name and address of the Exchange House with which the bank proposes to enter into RDA (b) Date of establishment of the EH (c) Furnish details of other Group companies of EH viz. name, management control, financial means and standing, etc. 2(a) Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me and address of the account maintaining Branch 5. No of drawee branches to be included in the proposed RDA 6. Whether EH is prepared to provide additional collateral cover equivalent to one month's projected drawings ?(Applicable to EHs which have not completed three years of its operations) 7. Any other information which the bank wishes to furnish in support of this application We hereby certify that - i) the proposed arrangement with . has been considered by us carefully taking into account the means and standing of the aforesaid EH and we are fully satisfied about the credentials and competence of the persons / firms / companies associated with the EH. (ii) our branches already having DD drawing arrangements with other EH(s) and which are now proposed to be covered under the proposed arrangement with the above EH viz have sufficient expertise to handle business emanating from one more EH. iii) We have put in place adequate internal control and risk management system which are working satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report / warning signals from the General Manager of our International Department whose accounts are maintained by us at the time of submitting the statement. Statement countersigned by certifying that it has been internally reviewed in the bank and the conduct of the account is considered satisfactory. _________________________ ______________________________________ Chief Manager of the Account Signature of the General Manager - in-Charge of Maintaining Branch International Division /International Operations in the bank. Annex- IV [Annex to A. P. (DIR Series) Circular No. 28 dated February 06, 2008] Statement B Consolidated statement of position of Exchange Houses' accounts to be closed/ under closure (to be submitted by the Account maintaining office through the International Division) Sr. No. Name of the Exchange House Centre/ Country Opening balance in the account Credits if any, during the month Debits if any, during the month Closing balance Any collateral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ___________ Type of Account : ____________ RBI Approval No. and date : _______ Name of the Exchange House : ________________________ Particulars of operations in the Account during the month of __________ Sr. No. Particulars (Amount in USD) (Amount in GBP) 1. Opening balance in the account (Cr/ Dr) at the start of the month to which the statement relates 2. Total credits during the month 3. Total debits during the month 4. Closing balance (Cr/ Dr) as on-------- 5. Estimated value of pipeline debits ( Average 15 days drawings determined by progressing annual debit summations or by item 3 above, whichever estimate is higher ) 5 (a) The amount of actual payments made by the principal encashing branches/ offices during the last one week (for adding to estimated pipeline) 6. Funds held abroad either as collateral by the bank or under procedure 7. Surplus/ deficit in balance (s)/ collaterals in the account to cover item 5 8(a) All payment advices received during the month from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f funds both through RDA and Foreign Currency Drawing Arrangement. (b) Foreign currency should be shown in US dollars only. (c) Furnish amount (+) or (-) accompanied by an expression in percentage terms in column (9). (d) This statement should be signed by Chief of International Banking Department / Division of the Bank at Head Office, but not less than the grade of a DGM. (e) Please attach separate sheets furnishing details of deviations from the requirements as per declaration at sr.no.(v), (vi), (vii), (viii), (ix) and (x) of (C) 1 of Annex-I wherever necessary. Please also indicate the corrective action taken and the current status. We hereby certify that i) The above information has been compiled with reference to actuals and excludes the transactions in the pipeline. ii) The number of branches covered has increased from _______to _______since the submission of the last statement in view of the following reasons: iii) The growth/deceleration in the inflows of foreign currency is due to the following reasons: iv) The outflows reported above are on account of _______________ and have the approval of RBI vide its letter No. ________________dated __ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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