TaxTMI 
TaxTMI 
TaxTMI 
Master Direction – Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses (Updated as on December 22, 2022)
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....regulations, notifications, directions or orders made there under. 3. The directions relating to Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses in India are being issued in a consolidated form through the Master Direction enclosed herewith. Reporting instructions can be found in Master Direction on Reporting. 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 rules, regulations, notifications, directions or orders or the manner in which relative transactions are to be conducted by the Authorised Persons with their customers/constituents. The Master Direction issued herewith shall be amended suitably simultaneously. Yours faithfully, (Vivek Srivastava) Chief General Manager Master Direction - Opening and Maintenance of Rupee/ Foreign Currency Vostro Accounts of Non-resident Exchange Houses 1. Introduction Cross-border inward remittances may also be received under Rupee Drawing Arrangements (RDAs) through the Rupee Vostro Account of Exchange Houses situated in Gulf countries, Hong Kong, Singapore, Malaysia (for....
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....gements should be subjected to comprehensive legal documentation and AD Category-I banks should take care of all necessary 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. 3. 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.15,00,000 (Rupees fifteen lakhs 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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....cy (cf. paragraph 3.3.1 of the Guidelines for Internal Control over Foreign Exchange Business, February, 2011). (h) AD Category-I banks may 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. They may frame their own policy in this regard2. (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. 4. Permitted Transactions (a) Drawi....
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....I Bank (termed as 'Partner Bank') having RDA with Non Resident Exchange Houses may be credited directly to the account of the beneficiary held with a bank other than the AD Category-I Bank (termed as 'Recipient Bank') through the following means: i. Electronic mode, such as, NEFT, IMPS, etc. ii. 6Bharat Bill Payment System (BBPS) The above shall be subject to the following conditions: i. The Recipient Bank will credit the amount transferred by the Partner Bank only to the KYC compliant bank accounts. ii. In respect of the bank accounts which are not KYC compliant, the Recipient Bank shall carry out KYC/CDD of the recipient before the remittance to such account is credited or allowed to be withdrawn. iii. The Partner Bank (i.e. the AD Category -I Bank receiving foreign inward remittance through non-resident exchange houses under RDA) shall appropriately mark the direct-to-account remittances to indicate to the Recipient Bank that it is a foreign inward remittance. iv. The Partner Bank shall ensure that accurate originator information and necessary beneficiary information is included in the electronic message while transferring the fund to the Recipient Bank. This infor....
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.... 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 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 practicing 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, p....
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....Houses which have completed three years of successful operations, no collateral is prescribed. However, AD Category-I 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-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. B. 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 st....
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....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. 9(b) The AD Category - I banks are free to determine the requirement of collateral, if any, based on factors such as whether the remittances are pre-funded, the track record of the Exchange House, whether the remittances are effected on gross (real-time) or net (file transfer) basis, etc. and may frame their own policy in this regard. 6. 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 Category-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' cate....
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....dit 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. (c) 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. (d) 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 exercising constant vigil in the matter. (e) AD Category-I banks shall ensure that licenses of the Exchange Houses, which have expired are renewed and copies of authenticated English versions placed with them for their record. (f) The Exchange Houses should not enter into any arrangement with service providers for their back office operations in India such as issuance of drawing advices and stop pay....
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..... (DIR Series) Circular No. 120 April 10, 2014 12. A. P. (DIR Series) Circular No. 7 July 18, 2014 13. A. P. (DIR Series) Circular No. 35 October 9, 2014 14. A. P. (DIR Series) Circular No. 50 December 16, 2014 15. A.P. (DIR Series) Circular No.102 May 21, 2015 16. A.P. (DIR Series) Circular No.66 April 28, 2016 17. A.P. (DIR Series) Circular No. 9 October 20, 2016 18. A.P. (DIR Series) Circular No. 5 August 29, 2018 19. A.P. (DIR Series) Circular No. 28 April 03, 2020 20. A.P. (DIR Series) Circular No. 14 September 15, 2022 1 Inserted on May 19, 2017 2 Inserted vide A.P. (DIR Series) Circular No.66 dated April 28, 2016 3 Deleted Vide A.P. (DIR Series) Circular No. 09 dated October 20, 2016 4 Inserted vide A.P. (DIR Series) Circular No. dated August 29, 2018 5 Inserted vide A. P. (DIR Series) Circular No. 28 dated April 03, 2020 6 Inserted vide A.P (DIR Series) Circular No. 14 dated September 15, 2022 7 Replaced vide A.P.(DIR Series) Circular No.66 dated April 28, 2016. Prior to the replacement it read as: "The Exchange House funds the Rupee account through the nostro account of the AD Category-I bank well in advance before issuing payment instruc....