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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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.... 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 Authorised Dealer Category-I (AD Category-I) banks may obtain prior approval of the Reserve Bank the first time they enter into Rupee Drawing Arrangements(RDAs) with non-resident Exchange Houses from Gulf countries, Hong Kong, Singapore and Malaysia for opening and maintaining Rupee vostro accounts in India of those non-resident Exchange Houses under the said RDAs. Subsequently, they may enter into RDAs, subject to the prescribed guidelines and inform the Reserve Bank immedia....
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....ecessary legal requirements in this regard. Further, it should be ensured that all the partners of the Exchange Houses are jointly and severally bound to honour the obligations devolving on the Exchange Houses under the agreement. (c) The normal banking requirements of registration of Power of Attorney/ Specimen signatures of signing officials of the Exchange Houses should be observed. 4. Instructions regarding operations in the Rupee vostro accounts (a) The accounts can be used for channeling cross- border inward remittances into India primarily on private account. The remitter and the beneficiary should be individuals barring 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....
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.... (h) AD Category-I banks may like to obtain suitable and adequate collateral either in the form of a cash deposit in any convertible foreign currency or guarantee of a bank of international repute, depending on the type of arrangement to take care of the credit and operational risks. (i) A cap of 300 on the number of drawee branches has been prescribed by the Reserve Bank as a prudential measure. However, , AD Category-I banks may designate drawee branches beyond 300, provided such branches are under the Core Banking 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....
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....uired to open a bank account in a convertible foreign currency (known as DDA account) in the name of the drawee bank (a/c- Exchange House) with an international bank acceptable to the drawee bank at a centre mutually agreed upon or with the drawee bank itself at the branch where the corresponding Rupee Vostro account is maintained, with the prior approval of the Reserve Bank. (b) The Exchange House will, at the end of each day, arrive at the total drawings in Indian Rupees for the day and will convert the same into foreign currency which shall be deposited into the account of the drawee bank (a/c-Exchange House) [known as DDA account, as described at 1(a) above] on the next working day before noon. (c) The Exchange House will send to the drawee bank information about the total number and the aggregate value of drafts drawn and daily deposits in the DDA account. Transfer from the DDA account should be as frequently as possible and is subject to the stipulation as at 1(e) below. (d) The funds will be held in the DDA account under lien to the drawee ba....
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....g as the Exchange House complies with the guidelines, the drawee bank will ensure that the drafts issued are honoured at the branches mutually agreed to. (k) The remuneration payable to the auditors will be borne by the drawee banks. (l) Drafts drawn by the Exchange House should have a validity of only three months from the date of issue thereof. (m) AD Category-I banks should satisfy themselves that the books of accounts of Exchange Houses are regularly audited by auditors approved by the local supervisory authorities. (n) AD Category-I banks should call for periodical credit reports, audited balance sheet and profit and loss account of the Exchange House and other relevant information so as to take a decision regarding continuance of accounts in their books. (o) Valid copies of all licences should also be kept on record by the AD Category-I bank. (p) Since the books of accounts of the Exchange House cannot be inspected, AD Category-I ban....
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....ears of successful operations, no collateral is prescribed. Further, under Non-DDA arrangement, a collateral cover in cash deposit in any convertible foreign currency or guarantee from a bank of international repute equivalent to 10 days' projected drawings may be obtained from Exchange Houses. In addition to the above, if there is a restriction on the bank's right to depute its own staff for examination of books of the Exchange House, as was in case of Exchange Houses in Kuwait, additional cash deposit in any convertible foreign currency / guarantee from a bank of international repute equivalent to 15 days' estimated drawings may be obtained. 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 adequately covers the drawings and account for the pipeline debits evaluated. 3. Speed Remittance Procedure (a) AD Category-I banks are permitted to ente....
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....l 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 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. SECTION IV Foreign Currency Drawing Arrangements AD Category-I banks may enter into foreign currency drawing arrangements under DDA or Non-DDA procedure with those Exchange Houses with whom they have Rupee Drawing Arrangements (RDAs), with prior approval of the Reserve Bank, subject to the following conditions. Each tie-up arrangement of an AD Cat-I bank with an Exchange House under Foreign Currency Drawing Arrangements is required to be approved by the Reserve Bank. (a) Exchange Houses shall draw drafts in any convertible foreign currency on 'A' or 'B' category branches of AD Category-I bank. No 'C' category branch is allowed to participate in the arrangement. (b) &nbs....
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....ML) / 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 regulations. 4. AD Category-I banks should keep the Reserve Bank informed of the unusual feature(s) in the operations of the Rupee/ Foreign Currency Drawing Arrangement by exer....
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....s 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 : 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....