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TMI BlogForeign Exchange Management (Deposit) Regulations, 2016X X X X Extracts X X X X X X X X Extracts X X X X ..... :- In these Regulations, unless the context otherwise requires, - i) 'Act' means the Foreign Exchange Management Act, 1999 (42 of 1999); ii) 'Authorised bank' means a bank including a co-operative bank (other than an authorised dealer) authorised by the Reserve Bank to maintain an account of a person resident outside India; iii) 'Authorised dealer' means a person authorised as an authorised dealer under subsection (1) of section 10 of the Act; iv) 'Deposit' includes deposit of money with a bank, company, proprietary concern, partnership firm, corporate body, trust or any other person; v) 'FCNR (B) account' means a Foreign Currency Non-Resident (Bank) account referred to in clause (ii) of sub-regulation (1) of Regulation 5; vi) 'Non-Resident Indian (NRI)' means a person resident outside India who is a citizen of India. vii) 'NRE account' means a Non-Resident External account referred to in clause (i) of sub-regulation (1) of Regulation 5; viii) 'NRO account' means a Non-Resident Ordinary account referred to in clause (iii) of sub-regulation (1) of Regulation 5; ix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases of bonded stocks from firms and companies who have been granted special facilities by customs authorities for import of stores into bond, subject to following conditions: a) Credits to the account shall be only by way of proceeds of inward remittances received from outside India through banking channels or by a transfer from a foreign currency account in India of the account holder maintained with an authorised dealer in accordance with clause 3 of this Regulation ; b) All cheque leaves issued to the account holder shall be superscribed as Diplomatic Bond Stores Account No. ; c) Debits to the accounts shall be for local disbursements, or for payments for purchases of bonded stocks to firms and companies who have been granted special facilities by customs authorities for import of stores into bond; d) The funds in the account may be repatriated outside India without the approval of Reserve Bank. 3) Deposits held in accounts maintained in foreign currency by diplomatic missions, diplomatic personnel and non-diplomatic staff, who are the nationals of the concerned foreign countries and hold o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulation (1), deposits under FCNR(B) Account Schemes referred to in clause (ii) of that sub-regulation, may also be accepted by a Regional Rural Bank, in accordance with the provisions contained in the Schedule, subject to the conditions prescribed by Reserve Bank in this regard. 4) Any person resident outside India having a business interest in India may open, hold and maintain with an authorised dealer in India, a Special Non-Resident Rupee Account (SNRR account), specified in Schedule 4. 5) Resident or non-resident acquirers may, subject to the terms and conditions specified in Schedule 5, open, hold and maintain Escrow Account with Authorised Dealers in India 6. Acceptance of deposits by persons other than authorised dealer/ authorised bank:- 1) A company registered under Companies Act, 2013 or a body corporate created under an Act of Parliament or State Legislature shall not accept deposits on repatriation basis from a non-resident Indian or a person of Indian origin. The company may, however, renew the deposits which had been accepted on repatriation basis from an NRI or a PIO subject to terms and conditions mentioned in Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian entities, executing a contract in India, to open and maintain non-interest bearing foreign currency account and a SNRR account as specified in schedule 4 for the purpose of undertaking transactions in the ordinary course of its business. The debits and credits in these accounts shall be incidental to the business requirement of the UJV. Provided that the tenure of the account is concurrent to the tenure of the contract/ period of operation of the UJV. Provided further that 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. Note : Opening of accounts by companies/ entities of Pakistan/ Bangladesh ownership/ nationality would require the prior approval of the Reserve Bank 4) An authorised dealer in India, with the prior approval of Reserve Bank, may open an account expressed in foreign currency in the name of a person resident outside India for the purpose of adjustment of value of goods imported into India against the value of goods exported from India in terms of an arrangement voluntarily entered into by such person with a person resident in India. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anking channels. Provided that the investment was made in accordance with the foreign exchange regulations in force at the time of making such investment. h) Refund of share/ debenture subscriptions to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from other NRE/ FCNR (B) account of the account holder or by remittance from outside India through banking channels. i) Refund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings / deals for purchase of residential/ commercial property, together with interest, if any (net of income tax payable thereon), provided the original payment was made out of NRE/ FCNR(B) account of the account holder or remittance from outside India through banking channels and the authorised dealer is satisfied about the genuineness of the transaction. j) Any other credit if covered under general or special permission granted by Reserve Bank. 4. Permitted Debits: a) Local disbursements. b) Remittances outside India. c) Transfer to NRE/ FCNR (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to pledge his deposits to enable the resident individual/ firm/ company to obtain such facilities. iii) The usual norms and considerations as applicable in the case of advances to trade/ industry shall be applicable to such credit facilities. 1 [(3) Loans outside India - Authorised dealers may allow their branches/correspondents outside India to grant loans to or in favour of non-resident depositor or to third parties at the request of depositor for bona fide purpose, against the security of funds held in the NRE accounts in India and also agree for remittance of the funds from India, if necessary, for liquidation of the outstanding. ] (4) The authorised dealer/ bank should ensure that the advances are fully secured by the fixed deposits and regulations relating to normal margin, interest rate, etc. are complied with. (5) The loans granted under this paragraph shall be subject to such directions as may be issued by the Reserve Bank from time to time. (6) The term loan shall include all types of fund based/ non-fund based facilities. 7. Change of residential status of the account holder: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower of Attorney holder shall not, however, be allowed to repatriate outside India funds held in the account under any circumstances other than to the account holder himself, nor to make payment by way of gift to a resident on behalf of the account holder nor to transfer funds from the account to another NRE account. d) Special Series of Cheques: For easy identification and quicker processing of cheques drawn on NRE accounts, authorised dealers/ banks shall issue cheque books containing a special series of cheques to their constituents holding NRE accounts. e) Temporary overdrawings: Authorised dealers/ authorised banks may at their discretion/ commercial judgement allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, up to a limit of ₹ 50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/ repaid within the said period of two weeks, out of inward remittances through banking channels or by transfer of funds from other NRE/ FCNR(B) accounts. f) Remittances abroad by Resident nominee: Application from a resident nominee for remittance of funds outside India for meeting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Interest: The rate of interest on funds held in these deposit accounts will be in accordance with the directives issued by the Reserve Bank from time to time. 5. Permissible Debits/ Credits: All debits/ credits permissible in respect of NRE accounts as specified in Schedule 1 shall be permissible in respect of these accounts also. 6. Rate for Conversion of Rupees into Designated Currencies and vice versa: i) Remittances received in Indian rupees for opening these accounts shall be converted by the authorised dealer into the designated foreign currency at the clean T.T. selling rate for that currency ruling on the date of conversion. ii) For the purpose of payment in rupees, funds held in these accounts shall be converted into rupees at the authorised dealer's clean T.T. buying rate for the concerned currency ruling on the date of withdrawal. 7. Inland Movement of Funds: Any inland movement of funds for the purpose of opening these accounts as well as for repatriation outside India of balances held in these accounts will be free of inland exchange or commission for the non-resident depositors. The Authorised dealer receiving fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied about the bona fides of the transaction. 12. Reporting: The transactions in these accounts shall be reported to Reserve Bank in accordance with the directions issued by it from time to time. 13. Other features: (a) Reserve Bank will not provide exchange rate guarantee to authorised dealers for deposits of any maturity in these accounts. (b) Lending of resources mobilised by authorised dealers under these accounts are not subject to any interest rate stipulations. SCHEDULE 3 [See Regulation 5(1) (iii)] NON-RESIDENT ORDINARY RUPEE ACCOUNT SCHEME NRO Account 1. Eligibility (a) Any person resident outside India may open NRO account with an authorised dealer or an authorised bank for the purpose of putting through bona fide transactions in rupees not involving any violation of the provisions of the Act, rules and regulations made thereunder. (b) The operations on the accounts should not result in the account holder making available foreign exchange to any person resident in India against reimbursement in rupees or in any other manner. (c) At the time of opening of the account, the account holder should furn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable taxes. (iii) Transfers to other NRO accounts. (iv) Settlement of charges on International Credit Cards issued by authorised dealer banks in India to NRIs or PIOs, subject to the limits for repatriation of balances held in NRO accounts specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets) Regulations, 2016. 4. Remittance of funds held in NRO accounts Balances in NRO accounts are not eligible for remittance outside India without the general or specific approval of Reserve Bank. Funds received by way of remittances from outside India in foreign exchange which have not lost their identity as remittable funds will only be considered by Reserve Bank for remittance outside India. Where an account (current/ savings) is opened by a foreign tourist visiting India, with funds remitted from outside India in a specified manner or by sale of foreign exchange brought by him to India, authorised dealers may convert the balance in the account at the time of departure of the tourist from India to foreign currency for payment to the account holder provided the account has been maintained for a period not ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Attorney, provided such operations are restricted to (i) all local payments in rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Bank; and (ii) remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes. The resident Power of Attorney holder shall not repatriate outside India funds held in the account under any circumstances other than to the nonresident individual account holder himself nor shall make payment by way of gift to a resident on behalf of the nonresident account holder nor transfer funds from the account to another NRO account. Any remittance outside India shall be within the ceiling as may be prescribed by the Bank from time to time and subject to tax compliance. 9. Change of Resident Status of Account holder (a) From Resident to Non-resident When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment, or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clature of the specific business for which it is in operation. 3. The operations in the SNRR account should not result in the account holder making available foreign exchange to any person resident in India against reimbursement in rupees or in any other manner. 4. The SNRR account shall not bear any interest. 5. The debits and credits in the SNRR account should be specific/ incidental to the business proposed to be done by the account holder. 6. Authorised dealers should ensure that the balances are commensurate with the business operations of the account holder. 7. All the operations in the SNRR account should be in accordance with the provisions of the Act, rules and regulations made thereunder. 8. 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. No operations are permissible in the account after seven years from the date of opening of the account. 9. The balances in the SNRR account shall be eligible for repatriation. 10. Transfers from any NRO account to the SNRR account are prohibited. 11. All transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Remittance of consideration for issue/ transfer of shares directly into the bank account of the beneficiary (issuer in India or transferor of s hares in India or abroad); ii. Remittance of consideration for refund to the initial remitter of funds in case of failure/ non-materialisation of FDI transaction for which the Escrow account was opened. c. The securities kept/ linked with the Escrow account may be linked with demat account maintained with SEBI authorised Depositary Participants as Esc row agents. d. The Escrow account shall remain operational for a maximum period of six months only and the account shall be closed immediately after completing the requirements as outlined above or on completion of six months from the date of opening of such account, whichever is earlier. In case the Escrow account is required to be maintained beyond six months, specific permission from the Reserve Bank has to be sought. e. Notwithstanding what has been stated in paragraph d . above, in case of transfer of shares between a resident buyer and a non-resident seller or vice- versa, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit rating as stipulated under the guidelines issued by Reserve Bank for such companies. iii) The amount representing the deposit is received by inward remittance from outside India through banking channels or by debit to the NRE or FCNR (B) Account maintained with an authorised dealer/ authorised bank in India. iv) If the deposit accepting company is a non-banking finance company, the rate of interest payable on deposits shall be in conformity with the guidelines/ directions issued by Reserve Bank for such companies. In other cases the rate of interest payable on deposits shall not exceed the ceiling rate prescribed from time to time under the Companies (Acceptance of Deposit) Rules, 2014. v) The maturity period of deposits shall not exceed 3 years. vi) The company accepting the deposits shall comply with the provisions of any other law, rules, regulations, orders issued by the Government of India or any other competent authority, as are applicable to it in regard to acceptance of deposits. vii) The amount of aggregate deposits accepted by the company shall not exceed 35% of its net owned funds. viii) The payment of interest net of taxes may be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng finance company the rate of interest payable on deposits shall be in conformity with the guidelines/ directions issued by Reserve Bank for such companies. In other cases the rate of interest payable on deposits shall not exceed the ceiling rate prescribed from time to time under the Companies (Acceptance of Deposit) Rules, 2014. v) The amount of deposit shall be received by debit to NRO account only, provided that the amount of the deposit shall not represent inward remittances or transfer of funds from NRE/ FCNR (B) accounts into the NRO account. vi) The proprietorship concern/ firm/ company accepting the deposit should comply with the provisions of any other law, rules, regulations or orders made by Government or any other competent authority, as are applicable to it in regard to acceptance of deposits. vii) The proprietorship concern, firm or company accepting the deposit shall not utilise the amount of deposits for relending (not applicable to a Non-Banking Finance Company) or for undertaking agricultural/ plantation activities or real estate business or for investing in any other concern or firm or company engaged in or proposing to engage in agricultural/ ..... 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