Update on “Foreign Exchange Facilities for Individuals”

(As of June 2014)

S. Provision/topic Revised/Current provision Authority for

No revision/change
1 Reporting In terms of Section 11(3) of FEMA, 1999, the AP. Dir 76 dt Jan
under Foreign Reserve Bank may impose on the authorized person 17, 2013
Exchange a penalty for contravening any direction given by
Management the Reserve Bank under this Act or failing to file any
Act, 1999 return as directed by the Reserve Bank.
(FEMA)

2 EEFC account EEFC account holders henceforth are permitted to AP. Dir 79 dt Jan
holders access the forex market for purchasing foreign 22, 2013
henceforth will exchange not necessarily after utilizing fully the
be permitted to available balances in the EEFC accounts.
access the forex
market for
purchasing
foreign
exchange only
after utilizing
fully the
available
balances in
the EEFC
accounts
4 opening NRO ADs are permitted to open NRO account of individual/s of AP. Dir 82 dt Feb
account of Bangladesh nationality without the approval of the
11. 2013
individual/s of Reserve Bank subject to the some conditions:
Bangladesh Opening of accounts by entities of Bangladesh ownership
nationality shall continue to require approval of Reserve Bank, as
hitherto
5 Money Transfer Revised guidelines on MTSS (Very detailed AP. Dir 89 dt
Service Scheme
guidelines have been issued by RBI which may be March 12, 2013
– Revised
Guidelines noted)
6 Liberalization of In view of the recommendations of the Technical AP. Dir 02 dt July
documentation Committee on Services / Facilities for the Exporters
4, 2013
requirements for (Chairman: Shri G. Padmanabhan, Executive Director,
the resident Reserve Bank of India) regarding rationalization of the
entities in the documentation process, it has now been decided that AD
Indian Forex banks, while offering hedging products under the
Market contracted exposure route to their customers  may obtain
an annual certificate from the statutory auditors to the
effect that the contracts outstanding with all AD category
 I banks at any time during the year did not exceed the
value of the underlying exposures at that time. It is
reiterated, however, that  that the AD bank, while
entering into any derivative transaction with a client, shall
have to obtain an undertaking from the client to the effect
that the contracted exposure against which the derivative
transaction is being booked has not been used for any
derivative transaction with any other AD bank.
7 Overseas General permission is granted to a bank in India, being AP. Dir 08 dt July
Investments – licensed by the Reserve Bank under the provisions of the
11, 2013
Shares of SWIFT Banking Regulation Act, 1949, to acquire the shares of
SWIFT as per the by-laws of SWIFT, provided the bank
has been permitted by the Reserve Bank for admission to
the ‘SWIFT User’s Group in India’ as member.
8 Liberalized The existing limit of USD 200,000 per financial year AP. Dir 24 dt Aug
Remittance has been reduced to USD 75,000 per financial year 14, 2013
Scheme for
Resident Remittances under the LRS Scheme for acquisition
Individuals of immovable property outside India are not
allowed.

Resident individuals have now been allowed to set

up Joint Ventures (JV) / Wholly Owned Subsidiaries
(WOS) outside India for bonafide business activities
outside India within the limit of USD 75,000

The limit for gift in Rupees by Resident Individuals

to NRI close relatives and loans in Rupees by
resident individuals to NRI close relatives stand
modified to USD 75,000 per financial year.

The limit has been revised again to US$ 125000 vide

AP. Dir 138 dt June 03, 2014( See item No. 19)
9 Issue of Bank AD Category –I banks are permitted to issue bank AP. Dir 37 dt Sep
Guarantee on guarantee, without prior approval of the Reserve Bank,
05, 2013
behalf of person on behalf of a non-resident acquiring shares or
resident outside convertible debentures of an Indian company through
India for FDI open offers/ delisting/exit offers, provided :
transactions
a) the transaction is in compliance with the provisions of
the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeover) [SEBI(SAST)]
Regulations;

b) the guarantee given by the AD Category –I bank is

covered by a counter guarantee of a bank of international
repute.

It may be noted that the guarantee shall be valid for a

tenure co-terminus with the offer period as required
 under the SEBI (SAST) Regulations.

10 Purchase of A non resident including a Non Resident Indian has been AP. Dir 38 dt Sep
shares on the permitted to acquire shares of a listed Indian company on
06, 2013
recognized stock the stock exchange through a registered broker under
exchanges in FDI scheme provided that:
accordance with
SEBI (Substantial i. The non-resident investor has already acquired and
Acquisition of continues to hold the control in accordance with SEBI
Shares and (Substantial Acquisition of Shares and Takeover)
Takeover) Regulations;
Regulations
ii. The amount of consideration for transfer of shares to
non-resident consequent to purchase on the stock
exchange may be paid as below:

a. by way of inward remittance through normal

banking channels, or
b. by way of debit to the NRE/FCNR account of the
person concerned maintained with an authorized
dealer/bank;

c. by debit to non-interest bearing Escrow account

(in Indian Rupees) maintained in India with the
AD bank in accordance with Foreign Exchange
Management (Deposit) Regulations, 2000;

d. the consideration amount may also be paid out of

the dividend payable by Indian investee
company, in which the said non-resident holds
control as (i) above, provided the right to receive
dividend is established and the dividend amount
has been credited to specially designated non –
interest bearing rupee account for acquisition of
shares on the floor of stock exchange.

iii. The pricing for subsequent transfer of shares to non-

resident shareholder shall be in accordance with the
pricing guidelines under FEMA;

iv. The original and resultant investments are in line with

the extant FDI policy and FEMA regulations in respect of
sectoral cap, entry route, reporting requirement,
documentation, etc;
11 Export and Any person resident in India: AP. Dir 39 dt.
Import of
Sep 06, 2013
Currency i) may take outside India (other than to Nepal and
Bhutan) currency notes of Government of India and
Reserve Bank of India notes up to an amount not
exceeding Rs.10,000 (Rupees ten thousand only) per
 person; and

ii) who had gone out of India on a temporary visit, may

bring into India at the time of his return from any place
outside India (other than from Nepal and Bhutan),
currency notes of Government of India and Reserve
Bank of India notes up to an amount not exceeding
Rs.10,000 (Rupees ten thousand only) per person.

The limit has been revised again vide AP. Dir 146 of
June 19, 2014 to Rs. 25000/-.( See item No. 21)
12 Borrowing and Resident entities / companies in India, authorized by the AP. Dir 81 dt Dec
Lending in Government of India, are permitted to issue tax-free,
24, 2013
Rupees - secured, redeemable, non-convertible bonds in Rupees
Investments by to persons resident outside India to use such borrowed
persons resident funds for the following purposes:
outside India in
the tax free, (a) for on lending / re-lending to the infrastructure sector;
secured, and
redeemable, non-
convertible bonds (b) for keeping in fixed deposits with banks in India
pending utilization by them for permissible end-uses.

13 Resident Bank For operational convenience the Non-Resident Indians AP. Dir 87 dt Jan
account (NRIs), as defined in Regulation 2(vi) of FEMA
09, 2014
maintained by Notification No.5 dated May 3, 2000, are permitted to
residents in India operate such accounts on “Either or Survivor” basis.
– Accordingly, on a review, it has been decided that AD
Joint holder – banks may include an NRI close relative (relatives as
liberalization defined in Section 6 of the Companies Act, 1956) in
existing / new resident bank accounts as joint holder with
the resident account holder on “Either or Survivor” basis
subject to the following conditions:

a. Such account will be treated as resident bank

account for all purposes and all regulations
applicable to a resident bank account shall be
applicable.
b. Cheques, instruments, remittances, cash, card or
any other proceeds belonging to the NRI close
relative shall not be eligible for credit to this
account.

c. The NRI close relative shall operate such

account only for and on behalf of the resident for
domestic payment and not for creating any
beneficial interest for himself.

d. Where the NRI close relative becomes a joint

holder with more than one resident in such
account, such NRI close relative should be the
 close relative of all the resident bank account
holders.

e. Where due to any eventuality, the non-resident

account holder becomes the survivor of such an
account, it shall be categorized as Non-Resident
Ordinary Rupee (NRO) account as per the extant
regulations.

f. Onus will be on the non-resident account holder

to keep AD bank informed to get the account
categorized as NRO account and all such
regulations as applicable to NRO account shall
be applicable.

g. The above joint account holder facility may be

extended to all types of resident accounts
including savings bank account.

3. While extending this facility the AD bank should satisfy

itself about the actual need for such a facility and also
obtain the following declaration duly signed by the non-
resident account holder:

“I am the joint account holder of SB/FD/RD/Current

Account bearing No ……. which stands in my name and
in the name of Shri/Smt. ……….. who is my ……….
(state relationship). I hereby undertake that I shall not
use the proceeds lying in the above account for any
transaction in contravention of the provisions of the
Foreign Exchange Management Act (FEMA) 1999,
Rules/Regulations made there under and the related
circulars/instructions issued by the Reserve Bank from
time to time. I further undertake that if any such
transaction is put through the said account in
contravention of the FEMA, 1999 or Rules/Regulations
made there under, I shall be held responsible for the
same. I shall intimate my bank in the event of any change
in my Non-resident / Resident status.”

14 Provisions under Section 6(4) of FEMA, 1999 covers the following AP. Dir 90 dt Jan
section 6 (4) of transactions:
09, 2014
Foreign
Exchange i. Foreign currency accounts opened and
Management Act, maintained by such a person when he was
1999 - resident outside India;
Clarifications ii. Income earned through employment or business
or vocation outside India taken up or commenced
while such person was resident outside India, or
from investments made while such person was
resident outside India, or from gift or inheritance
received while such a person was resident
 outside India;

iii. Foreign exchange including any income arising

there from, and conversion or replacement or
accrual to the same, held outside India by a
person resident in India acquired by way of
inheritance from a person resident outside India.

iv. A person resident in India may freely utilize all

their eligible assets abroad as well as income on
such assets or sale proceeds thereof received
after their return to India for making any
payments or to make any fresh investments
abroad without approval of Reserve Bank,
provided the cost of such investments and/ or
any subsequent payments received there for are
met exclusively out of funds forming part of
eligible assets held by them and the transaction
is not in contravention to extant FEMA
provisions.

15 Money Transfer To facilitate receipt of foreign inward remittances directly AP. Dir 110 dt
Service Scheme into bank account of the beneficiary, it has been decided
March 04, 2014
– ‘Direct to to allow foreign inward remittances received under MTSS
Account’ facility to be transferred to the KYC compliant beneficiary bank
account through electronic mode, such as NEFT, IMPS
etc.
16 Rupee Drawing The limit of trade transactions has been increased from AP. Dir 111 dt
Arrangement - the existing Rs 2,00,000/- (Rupees Two Lakh only) per
March 13, 2014
Increase in trade transaction to Rs 5,00,000/- (Rupees Five Lakh only) per
related transaction
remittance limit
17 Rupee Drawing In order to facilitate receipt of foreign inward remittances AP. Dir 120 dt
Arrangement – directly into bank accounts of the beneficiaries, Banks
April 10, 2014
‘Direct to have been permitted to allow foreign inward remittances
Account’ Facility received under Rupee Drawing Arrangement (RDA) to be
transferred to the KYC compliant beneficiary bank
accounts through electronic mode, such as, NEFT, IMPS,
etc
18 Crystallization of (i) In case a foreign currency denominated deposit with a AP. Dir 136 dt
Inoperative fixed maturity date remains inoperative for a period of
May 28, 2014
Foreign Currency three years from the date of maturity of the deposit, at the
Deposits end of the third year, the authorized bank shall convert
the balances lying in the foreign currency denominated
deposit into Indian Rupee at the exchange rate prevailing
as on that date. Thereafter, the depositor shall be entitled
to claim either the said Indian Rupee proceeds and
interest thereon, if any, or the foreign currency equivalent
(calculated at the rate prevalent as on the date of
payment) of the Indian Rupee proceeds of the original
deposit and interest, if any, on such Indian Rupee
proceeds.

(ii) In case of foreign currency denominated deposit with

 no fixed maturity period, if the deposit remains
inoperative for a period of three years (debit of bank
charges not to be reckoned as operation), the authorized
bank shall, after giving a three month notice to the
depositor at his last known address as available with it,
convert the deposit from the foreign currency in which it
is denominated to Indian Rupee at the end of the notice
period at the prevailing exchange rate. Thereafter, the
depositor shall be entitled to claim either the said Indian
Rupee proceeds and interest thereon, if any, or the
foreign currency equivalent (calculated at the rate
prevalent as on the date of payment) of the Indian Rupee
proceeds of the original deposit and interest, if any, on
such Indian Rupee proceeds. 
19 Liberalized The existing limit of USD 75,000 per financial year (April- AP. Dir 138 dt
Remittance March) has been enhanced to USD 125,000 with
June 03, 2014
Scheme (LRS) immediate effect. Accordingly, AD Category –I banks
for resident may now allow remittances up to USD 125,000 per
individuals- financial year, under the Scheme, for any permitted
Increase in the current or capital account transaction or a combination of
limit from USD both.
75,000 to USD
125,000
20 Pledge of RBI delegated to the AD Category – I banks the powers AP. Dir 141 dt
shares for to allow pledge of equity shares of an Indian company
June 06, 2014
business held by non-resident investor/s in accordance with the
purposes in FDI policy, in favour of the Non - Banking Financial
favour of NBFCs Companies (NBFCs) – whether listed or not, to secure
the credit facilities extended to the resident investee
company for bona-fide business purposes / operations,
subject to compliance with the conditions indicated
below:

a. only the equity shares listed on a recognized

stock exchange/s in India can be pledged in
favour of the NBFCs ;
b. in case of invocation of pledge, transfer of shares
should be in accordance with the extant
guidelines on credit concentration norms

c. (i) The AD may obtain a board resolution ‘ex

ante’, passed by the Board of Directors of the
investee company, that the loan proceeds
received consequent to pledge of shares will be
utilized by the investee company for the declared
purpose; (ii) The AD may also obtain a certificate
‘ex post’, from the statutory auditor of investee
company, that the loan proceeds received
consequent to pledge of shares, have been
utilized by the investee company for the declared
purpose;

d. the Indian company has to follow the relevant

SEBI disclosure norms, as applicable;
 e. under no circumstances, the credit concentration
norms should be breached by the NBFC. If there
is a breach on invocation of pledge, the shares
should be sold and the breach shall be rectified
within a period of 30 days from the date of
invocation of pledge.

21 Export and Any person resident in India: AP. Dir 146 dt

Import of
June 19, 2014
Currency: i) may take outside India (other than to Nepal and
Enhanced Bhutan) currency notes of Government of India and
facilities for Reserve Bank of India notes up to an amount not
residents and exceeding Rs.25,000 (Rupees twenty five thousand
non-residents only); and

ii) who had gone out of India on a temporary visit, may

bring into India at the time of his return from any place
outside India (other than from Nepal and Bhutan),
currency notes of Government of India and Reserve
Bank of India notes up to an amount not exceeding
Rs.25,000 (Rupees twenty five thousand only).

4. Any person resident outside India, not being a citizen

of Pakistan and Bangladesh and also not a traveller
coming from and going to Pakistan and Bangladesh, and
visiting India:

i) may take outside India currency notes of Government

of India and Reserve Bank of India notes up to an
amount not exceeding Rs. 25,000 (Rupees twenty five
thousand only) while exiting only through an airport.

ii) may bring into India currency notes of Government of

India and Reserve Bank of India notes up to an amount
not exceeding Rs. 25,000 (Rupees twenty five thousand
only) while entering only through an airport.

22 Participation of Domestic participants in the currency futures and AP. Dir 147 dt
Residents in the exchange traded currency options will be subject to the
June 20, 2014
Exchange following terms and conditions:
Traded
Currency a. Domestic participants shall be allowed to take a long
Derivatives (bought) as well as short (sold) position up to USD 10
(ETCD) market million per exchange without having to establish the
existence of any underlying exposure. For the purpose of
convenience, exchanges may prescribe a fixed limit for
the contracts in currencies other than USD such that the
limit is within the equivalent of USD 10 million.

b. Domestic participants who want to take a position

exceeding USD 10 million in the ETCD market will have
to establish the existence of an underlying exposure. The
procedure for the same shall be as under:

i. For participants who are exporters or importers

of goods and services, the eligible limit up to
which they can take appropriate hedging
positions in ETCDs will be determined as (a)
higher of the (I) average of the last three years’
export turnover, or (II) previous year’s export
turnover, in case they are exporters and (b) fifty
per cent of the higher of the (I) average of their
last three years’ imports turnover or (II) the
previous year’s turnover, in case they are
importers.
ii. The participants shall furnish, to the trading
member of the exchange, a certificate(s) from
their statutory auditors regarding the limit(s)
mentioned above along with an undertaking
signed by the Chief Financial Officer (CFO) to
the effect that at all time, the sum total of the
outstanding OTC derivative contracts and the
outstanding ETCD contracts shall be
corresponding to the actual exports or imports
contracted, as the case may be.

iii. Based on the above certificate, a trading member

can book ETCD contracts up to fifty per cent of
the eligible limit [as at paragraph (i) above] on
behalf of the concerned customer. If a participant
wishes to take position beyond the fifty per cent
of the eligible limit in the ETCD, it has to produce
a certificate from the statutory auditors certifying
that the sum total of the outstanding OTC
derivative contracts and outstanding ETCD
contracts has generally been in correspondence
with the eligible limits. Based on such a
certificate, the trading member can book ETCD
contracts beyond fifty per cent of the limit and up
to limit mentioned in paragraph (i) above.

iv. For all other participants having an underlying

foreign currency exposure in respect of both
current and capital account transactions as also
exporters and importers who wish to access the
ETCD market on the basis of contracted
exposure, they will have to undertake the
transaction through AD Category-I bank/s who
are operating as trading members. In such
cases, the responsibility for verification of the
underlying exposures and ensuring that the
ETCD bought/sold is in conformity with the
underlying exposure and that no OTC contract
has been booked against the same underlying
exposure shall rest with the concerned (AD
 Category I bank) trading member.

v. All participants in the ETCD market, except those

covered by paragraph (iv) above, will be required
to submit to the concerned trading member of the
exchange a half-yearly certificate from their
statutory auditors as on March 31st and
September 30th, within fifteen days from the said
dates, to the effect that during the preceding six
months, the derivative contracts entered into by
the participant in the OTC and the ETCD markets
put together did not exceed the actual exposure.

c. It may be noted that the onus of complying with the

provisions of this circular rests with the participant and in
case of any contravention the participant shall render
itself liable to any action that may be warranted as per
the provisions of Foreign Exchange Management Act,
1999 and those of the Regulations, Directions, etc.
framed there under.
23 Authorised RBI/2013-14/658
Persons who are In view of the amendment to Section 12 of Prevention of A. P. (DIR Series)
Indian Agents Money Laundering Act, 2002 through Prevention of Circular No. 150
under MTSS are Money Laundering (Amendment) Act, 2012, Authorised June 25, 2014
required Persons who are Indian Agents under MTSS are now
to maintain and required to maintain and preserve records for a
preserve period of at least five years.
records mention
ed therein for a
period of at
least ten years