TaxTMI 
TaxTMI 
Master Direction - Deposits and Accounts (Updated as on April 16, 2025)
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....the changes in the regulatory framework and published through amendment notifications. 2. To operationalize the Regulations as may be necessary, Reserve Bank of India also issues directions to Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999. 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, which continue to remain in force. Reporting instructions can be found in Master Directions on reporting (Master Direction No. 18 dated January 1, 2016) 4. The present amendment in this Master Direction is aimed at consolidating the directions pertaining to Vostro accounts of non-resident banks hitherto contained in Part B and paragraph A.(x) of Part E of Master Direction - Risk Management and Inter-Bank Dealings (FMRD Master Direction No. 1/2016-17 dated July 5, 2016, as amended from time to time). Alongside, a reference to the directions related to Special Rupee Vostro Accounts and the Vostro Accounts of Non-Resident Exchange....
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....ount held or maintained in currency other than the currency of India or Nepal or Bhutan. 2.3 'Relative' is a person as defined in 5section 2(77) of the Companies Act, 2013. 62.4 A 'Startup' is an entity which complies with the conditions laid down in Notification No. GSR 180(E) dated February 17, 2016 issued by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India. 3. Foreign Currency Accounts that can be held in India 3.1 Exchange Earner's Foreign Currency (EEFC) Account - EEFC Account A person resident in India may open an EEFC account with an AD in India as per the conditions stipulated in Schedule I to FEMA 10(R). The salient features of the scheme are: 1) Credits: The credits permitted to this account are: * 100 percent 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 rec....
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....n EEFC Accounts. 8) Exporters can repay packing credit advances, whether availed of in Rupee or in foreign currency, from balances in their EEFC account to the extent exports have actually taken place. 9) Balances held in the account may be credited to NRE/ FCNR (B) Accounts, at the option/ request of the account holders consequent upon change of their residential status from resident to non-resident. 3.2 Resident Foreign Currency (RFC) Account - RFC Account 1) A person resident in India is permitted to open a RFC account with an AD bank in India out of foreign exchange received or acquired by him: * as pension or superannuation benefits or other monetary benefits from his overseas employer; * by converting assets which were acquired by him when he was a non-resident or inherited from 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 insu....
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....n accordance with the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 or the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, respectively. 5) Balances may be credited to NRE/ FCNR (B) Accounts, at the option/ request of the account holders consequent upon change of their residential status from resident to non-resident. 3.4 Diamond Dollar Account (DDA) Scheme - DDA Account Firms and companies which comply with the eligibility criteria stipulated in the Foreign Trade Policy of the Government of India may open DDA accounts, details of which are laid down in Schedule II of FEMA 10(R), as amended from time to time, with an AD in India. The salient features of the Scheme are: * Realisation of export proceeds and local sales (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....
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....permission of the Regional Office of the Reserve Bank under whose jurisdiction the project office is situated. 8) In case of disputes between the Project Office and the project sanctioning authority or other Government/ Non-Government agencies etc., the balance held in such account shall be converted into INR and credited to a special account which shall be dealt with as per the settlement of the dispute. 3.8 Organisers of international Seminars, Conferences, Conventions, etc. - can open temporary foreign currency accounts in India subject to the following conditions: * Credits: All inward remittances in foreign currency towards registration fees payable by overseas delegates, grant, sponsorship fees and donations, received from abroad, in connection with the conference, convention, etc * Debits: (i) 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....
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....nsactions in the ordinary course of their business. 4. Foreign Currency Accounts that can be held outside India 4.1 The following persons can open a foreign currency account with a bank outside India for carrying on normal business and incidental transactions. * An authorized dealer in India with its branch/ head office/ correspondent outside India. * A branch outside India of a bank incorporated in India. * An Indian shipping or airline company. * 14Insurance/ reinsurance companies registered with Insurance Regulatory and Development Authority of India (IRDA) to carry out insurance/ reinsurance business. * An India firm/ company/ body corporate in the name of its foreign office/ branch or its representative posted outside India. * An exporter who is exporting services and engineering goods on deferred 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 s....
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....ent they represent exports from India, shall be repatriated to India within the period prescribed for realization of exports, in Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 dated January 12, 2016, as amended from time to time. 184.10 A person resident in India, being an exporter, may open, hold and maintain a Foreign Currency Account with a bank outside India, for realisation of full export value and advance remittance received by the exporter towards export of goods or services. Funds in this account may be utilised by the exporter for paying for its imports into India or repatriated into India within a period not exceeding the end of the next month from the date of receipt of the funds after adjusting for forward commitments, provided that the realisation and repatriation requirements as 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 r....
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....f India. 2.5 22A 'Person of Indian Origin (PIO)' is a person resident outside India who is a citizen of any country other than Bangladesh or Pakistan or such other country as may be specified by the Central Government, satisfying the following conditions: * Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or * Who belonged to a territory that became part of India after the 15th day of August, 1947; or * Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or * Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in clause (a) or (b) or (c) Explanation: PIO will include an 'Overseas Citizen of India' cardholder within the meaning of Section 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....
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.... be opened by two or more NRIs and/or PIOs or by an NRI/PIO with a resident relative(s) on 'former or survivor' basis. However, during the life time of the NRI/PIO account holder, the resident relative can operate the account only as a Power of Attorney holder. 4.4 Inward remittances to the account and remittances outside India from NRE account are permitted. 4.5 Credits permitted to this account as inward remittance are interest accruing on the account, interest on investment, transfer from other NRE/ FCNR(B) accounts, maturity proceeds if such investments were made from this account or through inward remittance. 4.6 The debits allowed from this account are local disbursements, transfer to other NRE/ FCNR(B) and investments in India. 4.7 Current income like rent, dividend, pension, interest etc. will be construed as a permissible credit to 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 l....
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....e of funds outside India for meeting the liabilities, if any, of the deceased account holder or for similar other purposes, should be forwarded to the Reserve Bank for consideration. 4.11 Operations on an NRE account may be allowed in terms of Power of Attorney or other authority granted in favour of a resident by the non-resident account holder, provided such operations are restricted to withdrawals for local payments or remittance to the account holder himself through banking channels. In cases where the account holder or a bank designated by him is eligible to make investments in India, the Power of Attorney holder may be permitted to operate the account to facilitate such investment. The resident Power of Attorney holder is not allowed to (a) open a NRE account; (b) repatriate outside India funds held in the account other than to the account holder 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 ....
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....count has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon. 6.4 26Opening of accounts by individuals/ entities of certain countries: (a) Opening of accounts by individuals/ entities of Pakistan nationality/ ownership and entities of Bangladesh ownership requires prior approval of the Reserve Bank. However, individuals of Bangladesh nationality may be allowed to open these accounts subject to the individual/s holding a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned. (b) Authorized Dealers may open only one Non-Resident Ordinary (NRO) Account for a citizen of Bangladesh or Pakistan, belonging to minority communities in those countries, namely Hindus, Sikhs, 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....
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...., carrying on agricultural/plantation activities or investment in real estate. 6.10 NRO accounts may be designated as resident accounts on the return of the account holder to India for any purpose indicating his intention to stay in India for an uncertain period. Likewise, when a resident Indian becomes a person resident outside India, his existing resident account should be designated as NRO account. 6.11 Powers have been delegated to the Authorized Dealers/ Authorised banks to allow operations on an NRO account in terms of a Power of Attorney granted in favour of a resident by the non-resident individual account holder provided such operations are restricted to local payments and remittances to non-residents. 6.12 To facilitate the foreign nationals to collect their pending dues in India, AD Category-I banks may permit such foreign nationals to re-designate their resident 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....
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....son resident outside India engaged in multiple categories of transactions provided it is able to identify/segregate and account them category-wise. 7.3 The debits/ credits and the balances in the account shall be incidental and commensurate with the business operations of the account holder. 7.4 Authorised Dealers shall ensure that all the operations in the SNRR account are in accordance with the provisions of the Act, rules and regulations made thereunder. 7.5 34The tenure of the SNRR account should be concurrent to the tenure of the contract/ period of operation/ the business of the account holder35. 7.6 The operations in the SNRR account shall 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. 7.7 The balances in the SNRR account 36in India shall be eligible for repatriation.Transfers 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....
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....d, as such, does not require any approval from Reserve Bank. All refunds of such deposits, arising in the event of selection of the person as director or getting more than twenty five percent votes, shall be treated similarly. 12. Other Accounts / Deposits 4712.1 A deposit made by an Authorised Dealer with its branch, head office or correspondent outside India, and a deposit made by a branch or correspondent outside India of an Authorised Dealer, and held in its books in India, will be governed by the directions issued by the Reserve Bank in this regard. 12.2 A shipping or airline company incorporated outside India, can open, hold and maintain a Foreign Currency Account with an authorized dealer for meeting the local expenses in India of such airline or shipping company. The credits permitted to such accounts are only freight or passage fare collections in India or by inward remittances through banking channels from its office outside India. 4812.3 An Authorised Dealer 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 SNR....
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....roval of the Reserve Bank. (i) Credit to the account of a non-resident bank is a permitted method of payment to non-residents and is, therefore, subject to the regulations applicable to transfers in foreign currency. (ii) Debit to the account of a non-resident bank is in effect an inward remittance in foreign currency. 1.1 Funding of Accounts of Non-resident Banks (i) AD Category I banks may freely purchase foreign currency from their overseas correspondents/ branches at on-going market rates to lay down funds in their accounts for meeting their bonafide needs in India. (ii) Transactions in the accounts should be closely monitored to ensure that overseas banks do not take a speculative view on the Indian Rupee (INR). Any such instances should be notified to the Reserve Bank. NOTE: Forward purchase/sale of foreign currencies against INR for repatriation/ funding is prohibited. Offer of two-way quotes in INR to non-resident banks is also prohibited. 1.2 Transfers from other Accounts Transfer of funds between the accounts of the same bank or different banks is freely permitted. 1.3 Conversion of Rupees into Foreign Currencies Balances held in Rupee accounts of non-....
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....for Banks AD Category-I banks may also open Special Rupee Vostro Accounts of correspondent bank/s for settlement of trade transactions of the partner trading country. The detailed instructions are consolidated in FED Master Direction No. 16/2015-16 dated January 01, 2016, on export of goods and services, as amended from time to time. 3. Rupee Vostro Accounts of Exchange Houses Opening of Rupee accounts in the name of Exchange Houses for facilitating private remittances into India requires approval of the Reserve Bank. Remittances through Exchange Houses for financing trade transactions are permitted upto INR 15,00,000/- per transaction. The detailed instructions are consolidated in FED Master Direction No. 2/2015-16 dated January 01, 2016, on opening and maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses, as amended from time to time. APPENDIX List of notifications/ circulars which have been consolidated in this Master Direction Sl No Notification/ AP (DIR Series) Circular Date 1 Part B of A.P. (DIR Series) Circular No.92 April 04, 2003 2 53Notification No. FEMA 10(R)/2015-RB January 21, 2016 3 54Notification No....
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....dia." 8 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. 9 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 this, PIOs were covered within the definition of NRIs. 10 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." 11 Inserted by FEM (Foreign Currency Accounts by a Person resident in India) Regulations, 2015 with effect from January 21, 2016. 12 Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 has been superseded by Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 issued by Government on October 17, 2019. 13 Inserted vide Notification No. FEMA 10(R)(2) dated February 27, 2019 and AP (DIR Series) Circular No. 29 dated ....
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....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 5, 2016. Prior to insertion it read as, "An authorised dealer or its overseas branch/ correspondent can grant loans against security of the funds to the account holder/ a third party in or outside India, respectively without any limits subject to the usual margin requirements. The facility for premature withdrawal of the deposits shall not be available where loans against such deposits are availed of. The term "loan" shall include all types of fund based/ non-fund based facilities." 26 Modified by insertion of (a) and (b), vide Foreign Exchange Management (Deposit) (Amendment) Regulations, 2018 Notification No. FEMA 5 (R)(1)/2018-RB dated November 09, 2018 and AP (DIR Series) Circular No. 28 dated March 28, 2019. Prior to insertion it read as "Opening of accounts by individuals/ entities of Pakistan nationality/ ownership and entities of Bangladesh ownership req....
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....e 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 * Business related transactions outside International Financial Service Centre (IFSC) by IFSC units at GIFT city like administrative expenses in INR outside IFSC, INR amount from sale of scrap, Government incentives in INR, etc. The account will be maintained with a bank in India (outside IFSC). 32 Modified vide AP (Dir) Circular no. 9 dated November 22, 2019 and vide Notification No. FEMA 5(R)/3/2019-RB dated November 13, 2019. Prior to modification, it read as, "The SNRR account shall carry the nomenclature of the specific business for which it is opened and shall not earn any interest." 33 Modified vide Notification No. FEMA 5(R)(5)/2025-RB dated January 15, 2025. Prior to modification it read as "Indian". 34 Modified....
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.... 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, existing paras 11, 12 and 13 re-numbered as 12, 13 and 14, respectively. 47 Inserted by AP (DIR Series) circular No 67/2015-16/ [(1)/5(R)] dated May 5, 2016. 48 Inserted by 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. 49 Inserted vide Notification No. FEMA 5(R)(1)/2018-RB dated November 09, 2018 and AP (DIR Series) Circular No. 28 dated March 28, 2019. 50 Foreign Exchange Management (Tran....