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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 ..... cedures 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 of Rupee/ foreign currency vostro accounts of non-resident Exchange Houses in India. 2. (a) Under the Rupee Drawing Arrangements (RDAs), cross-border inward remittances are received in India through Exchange Houses situated in Gulf countries, Hong Kong and Singapore. Prior approval of the Reserve Bank is required for opening and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 4(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 tourist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 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. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mated 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 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 Cover for Non-DDA : 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 international repute equivalent to 7 days' projected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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. Further, the Exchange House shall keep with the AD Category-I bank an additional cash deposit in any convertible foreign currency or guarantee from a bank of international repute equivalent to 1 day's estimated drawings. The deposit should be in the name of the AD Category-I bank with interest thereon at market related rates pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eep 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 to the vostro account of the Exchange House takes place before payments are made to the beneficiaries. 3. AD Category-I banks should undertake a 'due diligence' exercise in respect of remittances received through Rupee/ Foreign Currency Drawing Arrangements so that regulations relating to anti-money laundering standards are complied with scrupulously. AD Category-I banks should call for an annual compliance report from the Exchange Houses duly certified by their auditors that they are adhering to the home country KYC/ AML/ CFT regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 : This monthly statement (as at Annex- V) provides information about operations in the foreign currency vostro account of the Exchange House. Note - While statements A to D are not required to be submitted to the Reserve Bank, ADs Category-I should prepare these statements and cause inspections at the prescribed periodicities. The relative statements/ reports should invariably be submitted to their respective Top Managements with suitable explanatory notes indicating corrective measures taken/ being initiated wherever necessary. 5. Statement E: This statement (as at Annex- VI) is d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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