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TMI BlogMaster Direction - Deposits and Accounts (Updated as on January 16, 2025)X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 their customers/ constituents. The Master Direction issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercent 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capacity; * interest earned on the funds held in the account; * Re-credit of unutilised foreign currency earlier withdrawn from the account; * repayment of trade related loans/ advances (which were granted to the account holder's importer customer out of balances held in the EEFC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 7DR Scheme, 2014; and 8Payments received in foreign exchange by an Indian startup arising out of sales/ export made by the startup or its overseas subsidiaries. 2) Debits: The debits allowed in these accounts are: * Payment outside India towards capital or current account transactions in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 to the RFC account when the residential status of the non-resident Indian (NRI) 9or person of Indian origin (PIO) changes to that of a Resident. 3.3 Resident Foreign Currency (Domestic) Account - RFC (D) Account 1) A resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 principal outside India. 3.6 Ship-manning/ crew managing agencies in India may maintain non-interest bearing foreign currency account in India for the purpose of undertaking transactions in the ordinary course of their business, as detailed: * Credits: Only by way of inward remitta ..... 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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 the Foreign Exchange Management (Export of goods and services) Regulations, 2015, as amended from time to time has been obtained for undertaking the contract/ project/ export of goods or services, and the terms and conditions stipulated in the letter of approval have been duly complied with. 3.10 A unit located in a Special Economic Zone (SEZ) - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred 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. 15On 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 going abroad to participate in an exhibition/ trade fair may open a foreign currency account with a bank outside India for crediting the sale proceeds of goods. The balance should be repatriated to India within one month from the date of closure of the exhibition/ trade fair. 4.5 The following persons can open a foreign currency account outside India for remitting/ receiving their entire salary payable to him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s specified in Regulation 9 of Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 are also met. 5. Miscellaneous 5.1 Unless otherwise specifically stated, a foreign currency account maintained by a person resident in India 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7(A) of the Citizenship Act, 1955. 2.6 'Permissible currency' is a foreign currency which is freely convertible. 2.7 23'Relative' means relative as defined in section 2(77) of the Companies Act, 2013. 2.8 24As 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the NRE account provided the Authorised Dealer is satisfied that the credit represents current income of the NRI/PIO account holder and income tax thereon has been deducted/ paid/ provided for, as the case may be. 4.8 25The 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er himself; (c) make payment by way of gift to a resident on 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Buddhists, 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 bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 - The remittances (net of applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfers from any NRO account to the SNRR account are prohibited. 7.8 All transactions in the SNRR account 37in India will be subject to payment of applicable taxes in India. 7.9 SNRR account 38maintained in India may be designated as resident rupee account on the account holder becoming a resident. 7.10 39The amount due/ payable to non-resident nominee from the 40SNRR account in India of a deceased account holder, shall be credited to NRO/NRE account of the nominee with an authorised dealer/ authorised bank in India or by remittance through normal banking channels. 7.11 Opening of SNRR accounts by Pakistan and Bangladesh nationals and entities incorporated in Pakistan and Bangladesh requires prior approval of Reserve Bank. 8. Escrow Account 8.1 Resident or non-resident corporate/ acquirers may open Escrow account in INR with an authorized dealer in India as an Escrow agent subject to the terms and conditions specified in Schedule 415 of the Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time. 8.2 Transactions shall be in accordance with the 42Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 dated October 17, 2019, as am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er may allow unincorporated joint ventures (UJV) of foreign companies/ entities, with Indian entities, executing a contract in India, to open and maintain non-interest bearing foreign currency account and an SNRR account as specified in Schedule 4 of the Deposit Regulations for the purpose of undertaking transactions in the ordinary course of its business. The debits and credits in these accounts should be incidental to the business requirement of the UJV. The tenure of the account should be concurrent to the tenure of the contract/ period of operation of the UJV and all operations in the account shall be in accordance with the provisions of the Act or the rules or regulations made or the directions issued thereunder. Opening of such accounts by companies/ entities of Pakistan/ Bangladesh ownership/ nationality would require the prior approval of the Reserve Bank. 4912.4 An Authorised Dealer in India may allow a Foreign Portfolio Investor and a Foreign Venture Capital Investor, both registered with the Securities and Exchange Board of India (SEBI) under the relevant SEBI Regulations, to open and maintain a non-interest bearing foreign currency account for the purpose of making in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anuary 21, 2016. 2 FEM (Deposit) Regulations, 2000 was repealed and replaced by FEM (Deposit) Regulations, 2016 with effect from April 1, 2016. 3 Updated up to April 12, 2019 (cf. AP (DIR Series) circular No 29 dated April 11, 2019). The Original Master Direction No. 14/2015-16 was issued on January 1, 2016. 4 FEM (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000 was repealed and replaced by FEM (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015 with effect from January 21, 2016. 5 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 "section 6 of the Companies Act, 1956". 6 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 (Dir Series) Circular No. 77[(2)/10(R)] dated June 23, 2016. 7 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." 8 Inserted by Amendment Notification No. FEMA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(R)/2016-RB dated April 1, 2016. Prior to insertion it read as, "A 'Non-resident Indian' (NRI) is a person resident outside India who is a citizen of India or is a 'Person of Indian Origin'." 22 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 insertion it read as "Person of Indian Origin' (PIO) means a citizen of any country other than Bangladesh or Pakistan who had (a) at any time held Indian passport or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; or (c) the person is a spouse of an Indian citizen or a person referred to in (a) or (b)." 23 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 insertion it read as, "section 6 of the Companies Act, 1956." 24 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. 25 Inserted by AP (DIR Series) circular No 67/2015-16/ [(1)/5(R)] dated May ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 dated October 17, 2019 and Foreign Exchange Management (Debt Instruments) Regulations, 2019 notified vide Notification No. FEMA 396/2019-RB dated October 17, 2019, as applicable and as amended from time to time. * Import of goods and services in accordance with Section 5 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May 3, 2000, viz., Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time; * Export of goods and services in accordance with Section 7 of the Foreign Exchange Management Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May 3, 2000, viz. Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time, and further read with FEMA Notification No.23(R)/2015-RB dated January 12, 2016, as amended from time to time; * Trade credit transactions and lending under External Commercial Borrowings (ECB) framework in accordance with Foreign Exchange Management (Borrowing and Lending) Regulations, 2018, as amended from time to time; and * Bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in Schedule 8. 42 FEM (Transfer or Issue of Security by a person resident Outside India) Regulations, 2017 has been superseded by Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 issued by Government on October 17, 2019 43 FEM (Deposit) Regulations, 2000 repealed and replaced by FEM (Deposit) Regulations, 2016 vide FEMA Notification No. 5(R)/2016-RB dated April 1, 2016. 44 FEM (Deposit) Regulations, 2000 repealed and replaced by FEM (Deposit) Regulations, 2016 vide FEMA Notification No. 5(R)/2016-RB dated April 1, 2016. 45 Deleted vide Notification No. FEMA 5(R)(2)/2019-RB dated July 16, 2019 read with AP (DIR Series) Circular No. 06 dated August 16, 2019. Prior to deletion, it read as, "Indian companies can accept deposits from NRIs or PIOs by issue of a commercial paper subject to terms and conditions specified in sub-Regulation (3) of Regulation 6 of Notification No FEMA 5(R)/ 2016-RB dated April 1, 2016." 46 Inserted vide AP (DIR Series) Circular No. 59 dated April 13, 2016. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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