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Master Circular on Memorandum of Instructions for Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses
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....ement Procedures and Collateral Cover. SECTION IV .... Foreign Currency Drawing Arrangements SECTION V ................ SECTION VI....... Internal Control and Monitoring of Accounts. PART-B............... Reports/Statements. Annex- ................ Application for obtaining permission to enter into Rupee / 7 ..7 13 13 .15 15 17 17 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 8222222222222553 .29 29 .31 .31 **** 33 ... 18 18 ..20 .20 20 ...25 27 .27 2 of 34 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-1) 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 Arrangement....
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....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-l 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-l bank, which maintains the account. Rupee funds transferred from 4 of 34 another AD Category-l 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 ....
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....oncealed 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-l 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. 6 of 34 SECTION I| 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 Soc....
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....(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 8 of 34 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 Exch....
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....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-l 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-l 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. 10 of 34 2. Non-DDA procedure (a) As an alternative to maintaining a DDA account and appointment of auditors as above, the AD Category-l 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 rupee....
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....o payment unless clear funds are available in the account. (b) (vi) The AD Category-l 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-l 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. 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 eq....
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.... such information may be obtained frequently, at least on a bi-weekly basis. 14 of 34 (h) Collateral cover: Exchange Houses should keep a deposit of not less than USD 50,000 with the drawee AD Category-l 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-l banks should allow interest on this deposit at an appropriate rate. (i) AD Category-l 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. 15 of 34 SECTION V Miscellaneous Provisions 1. AD Category-l 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-l banks should include in their concurrent audit the Rupee/ Foreign Currency Drawing Arrangeme....
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....es in AD Category-l banks so that prompt corrective action is initiated. Observations thereon shall be included in the annual review of the accounts submitted to the Board. 18 of 34 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 ....
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....ing the annual review note, the particulars such as (a) complete particulars of Drawing Arrangements (DDA/ Non-DDA / Speed Remittance) that the AD Category-l 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. 20 of 34 Annex-I [See SECTION I, Paragraph 2(a)] Application for obtaining permission to enter into Rupee / Foreign Currency Drawing Arrangements with Exchange Houses (a) The application for obtaining permission to enter into Rupee / Foreign Currency Drawing Arrangements with Exchange Houses should be completed and submitted in the prescribed format (given below), to the Chief General Manager-In-Charge, Foreign Exchange Department, Forex Markets Division, Reserve Bank of India, Central Office, Mumbai- 400001. The application should be signed by the General Manager (or an officer of equivalent rank), International Banking Division/ Foreign Department of the applicant AD Category-I bank. (b) Documentation: AD Category-....
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....ated by the bank. 22 of 34 Part II- 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 standing, etc. means and 2(a) Whether the EH has operative RDA with any other bank in India? (b) If yes, state the name/s of the bank/s 3. Furnish details of the management structure of the EH: (a) Status of EH (company, firm, joint-ventures, etc.) (b) With whom the management vests (c) Name, nationality and line of business of the promoters of the EH (d) Capital holding pattern (e) Whether the applicant bank will have any investment in EH? Furnish complete details (f) Whether the applicant bank will have any role in management of EH.? Furnish details 4. Profit earned/loss sustained by the EH during the previous three calendar years 5. Particulars of licence issued by the Central Bank/ Supervisory Authority of the country concerned: 6. a) Licence No b) Date of issue c) Validity period d) Special conditions, if any Particulars o....
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....egory-1: Full address: Name of the Exchange House: Particulars of operations in the account in the month of 1. Opening balance in the account (Cr/Dr) at the start of 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 progressive annual debit summations or by item No.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 as collateral by the bank or under DDA procedure. 7. Surplus/deficit in balances/collaterals in the account to cover item No.5 8. State amount of counter-value foreign currency recovered from the Exchange House against each specific foreign credit afforded to the account during the month corresponding to the sale of Rupees made by the bank to the Exchange House : Date Amount of foreign currency recovered A) All payment advices received during the month from our paying branches have been taken into account for raising debits in the Rupee accounts of the Exchange Hou....
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.... all the accounts reported above are under the concerned Exchange Houses have been duly suspended and closure of the accounts is being followed up. General Manager-in-Charge of International Division/ International Operations in the AD Category-I 28 of 34 Annex-IV [See PART B, Paragraph 3] Statement C Monthly statement regarding particulars of Exchange House account held at overseas branches of Indian banks (ADs Category-I) Name of the AD Category-l: Date of Name of Name of Nature Why Sr. Opening the the of No.the Exchange overseas account opened account House branch it Balance Balance Outstanding was of end of any as at theas at the liabilities, if end (quote the the H.O. previous month to authority month which the if any) statement relates 1. 2. 3. 4. 5. 6. 7. 8. 9. 29 of 34 Annex- V [See PART B, Paragraph 4] Statement D Name of the AD Category-I : Full Address : Name of the Exchange House: No. of drawee branches : Type of Account : RBI Approval No. and date : Particulars of operations in the Account during the month of Sr. Particulars No. 1. 2345 Opening balance in the account (Cr/ Dr) at the start of the month to which....
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.... for the period beginning from the month of January each year. Just below these figures, please furnish in brackets data for the corresponding period of the previous year. The data in respect of Drawing Arrangements should cover inflow of 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. (c), (f), (g), (h), (i) and (j) of Para 1 of SECTION III 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: 32 of 34 iii) The growth....