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TMI BlogMaster Circular on Memorandum of Instructions for Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses.X X X X Extracts X X X X X X X X Extracts X X X X ..... e Houses SECTION II Permitted Transactions SECTION III Rupee Drawing Arrangement Procedures and Collateral Cover SECTION IV Foreign Currency Drawing Arrangements SECTION V Miscellaneous Provisions SECTION VI Internal Control and Monitoring of Accounts PART-B Reports / Statements Annex- I Application for obtaining permission to enter into Rupee / Foreign Currency Drawing Arrangements with Exchange Houses Annex-II Statement A Annex- III Statement B Annex- IV Statement C Annex- V Statement D Annex- VI Statement E Appendix PART-A SECTION I Operations of Rupee Vostro Accounts of Non-resident Exchange Houses 1. Introduction Prior approval of the Reserve Bank is required to be obtained by Authorised Dealer Category-I (AD Category-I) banks for opening and maintaining Rupee/ foreign currency vostro accounts in India of non-resident Exchange Houses. The following are the detailed guidelines for opening and maintenance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a few exceptions. Remittances through Exchange Houses for financing of trade transactions are permitted up to Rs 2,00,000 (Rupees two lakh only) per transaction. The accounts should not be used for cross-border outward remittances from India. (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 rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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. SECTION II Permitted Transactions 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 . 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 investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawee bank. The only debits allowed from the DDA account will be (i) on account of transfer to the Nostro account of the drawee bank where the DDA account is maintained with a bank other than the drawee bank, (ii) for crediting the Rupee vostro account of the Exchange House by selling permitted foreign currency to the drawee bank where the DDA account is maintained with the drawee bank. (e) It will be the responsibility of the Exchange House to arrange for 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 drawee bank in India will appoint a firm of practising Chartered Accountants/ Auditors, operating in the country concerned to examine the daily drawings and deposits in the accounts with the DDA as well as transfer to the Nostro ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 international repute equivalent to 15 days estimated drawings may be obtained as collateral cover where it is not possible to appoint auditors as mentioned at 1(g) above. 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 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. 2. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he branch shall make no payment unless clear funds are available in the account. vi. The AD Category-I bank shall obtain date-wise information regarding number and aggregate value of such transfers from the Exchange House. vii. Where facility of speed remittance is extended to existing Rupee drawing arrangements, the Exchange House shall open a separate Rupee account with the prior approval of the Reserve Bank and no payment instructions shall be executed unless there are clear funds available in this account. However, where the operations in the existing Rupee drawing arrangements under DDA/ Non-DDA procedure are satisfactory, AD Category-I banks can extend the facility of speed remittance to the same Exchange House without prior approval of the Reserve Bank, subject to usual terms and conditions and after obtaining all the necessary documents from the Exchange House. However, the Reserve Bank should be informed in the matter immediately. (b) Collateral Cover for Speed Remittance Arrangement: For Exchange Houses, which have not completed three years of operation, collateral cover in cash deposit in any convertible foreign currency or guarantee from a bank of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation 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 kept with the bank should be reviewed every six months on the basis of operations under this arrangement and if necessary the Exchange House should increase the quantum of the deposit. AD Category-I banks should allow interest on this deposit at an appropriate rate. (i) AD Category-I banks are allowed to keep the amount of deposit required to be kept under foreign currency draft drawing arrangements and Non-DDA procedure of Rupee Drawing Arrangement in India with the Account maintaining branch. SECTION V Miscellaneous Provisions 1. 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. 2. AD Category-I banks should include in their concurrent audit the Rupee/ Foreign Currency Drawing Arrangement to ensure that credit of funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiated. Observations thereon shall be included in the annual review of the accounts submitted to the Board. PART-B Reports / Statements 1. Statement A : This statement ( as at Annex-II ) is designed to elicit details of operations in Rupee/ foreign currency vostro accounts of Exchange Houses and has to be prepared every month Exchange House-wise. This statement should be critically examined to ascertain whether funds held in the account are adequate to cover estimated pipeline debits. The Top Managements of the ADs Category-I may work out the pipeline data and set their own limits. The adherence to the limits set should be informed to the Top Management on a quarterly basis. 2. Statement B : This is a consolidated half-yearly statement ( as at Annex-III ) showing position of Rupee/ foreign currency vostro accounts of Exchange Houses which are to be closed/ are in the process of closure. 3. Statement C : This is a monthly statement ( as at Annex- IV ) giving information regarding Exchange House s account held at overseas branches of Indian banks under DDA/ Non-DDA procedures for holding collection proceeds and additional collaterals. 4. Statement D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars of Drawing Arrangements (DDA/ Non-DDA / Speed Remittance) that the 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), and (c) number of drawee branches under each arrangement should be included. Appendix List of A.P.(DIR Series) Circulars which have been consolidated in the Master Circular on Memorandum of Instructions governing money changing activities 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 Series) Circular No. 3] November 27, 2009 - Circular - Trade Notice - Public Notice - Instructions - Office orders Tax Management India - taxmana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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