Deposits Archives - Tax Heal

Companies may accept deposits without deposit insurance contract till 31.03.2018

CA Satbir Singh — Sat, 13 May 2017 05:19:38 +0000

Government of India
Ministry of Corporate Affairs
Notification

New Delhi, dated, the 11th May, 2017

G.S. R. _____(E). – In exercise of the powers conferred by sections 73 and 76 read with sub-section (1) and sub-section (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Acceptance of Deposits) Rules, 2014, namely:-

1. (1) These rules may be called the Companies (Acceptance of Deposits) Amendment Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Acceptance of Deposits) Rules, 2014 (hereinafter referred to as the principal rules),-

(a) in rule 2, in sub-rule (1), in clause (c), in sub-clause (xviii), after the words “Domestic Venture Capital Funds” the words “, Infrastructure Investment Trusts” shall be inserted.

(b) in rule 5, in sub-rule (1), for the proviso, the following proviso shall be substituted, namely:-

‘Provided that the companies may accept deposits without deposit insurance contract till the 31st March, 2018 or till the availability of deposit insurance product, whichever is earlier.”.

[File No 1/8/2013-CL-V]

(Amardeep Singh Bhatia)

Joint Secretary to the Government of India

Note. – The principal rules were published in the Gazette of India, Extraordinary, Part 11, Section 3, sub-section (i) vide number G.S.R. 256(E), dated the 31st March, 2014 and were subsequently amended as detailed below:-

Sr. No.	Notification Number	Date
1.	G.S.R. 386(E)	6^thJune, 2014
2.	G.S.R. 241(E)	31^st March, 2015
3,	G.S.R. 695(E)	15^th September, 2015
4.	G.S.R. 639(E)	29th June, 2016

Deposits and Debentures for Companies – Webinar

CA Satbir Singh — Tue, 02 May 2017 13:58:23 +0000

Deposits and Debentures for Companies as per Companies Act 2013

What to Check before depositing your money in any Scheme ?

CA Satbir Singh — Sat, 06 Aug 2016 06:53:12 +0000

1. Which entities are authorised to raise deposits from public?

The entities authorised to accept deposits are given in the table as below:

Sr. No.	Category	Regulator	Additional Comments
1	Commercial and Cooperative Banks	Reserve Bank of India (RBI)	All Commercial and Co-operative Banks are entitled to accept deposits
2	Non-Banking Finance Companies (NBFCs)	RBI	Only few NBFCs are authorised to accept deposit upto a certain limit (Click here to view the complete list)
3	Housing Finance Companies (HFCs)	National Housing Bank (NHB)	Only few HFCs are permitted to accept deposits(Click here to view the complete list)
4	Other Companies	Ministry of Corporate Affairs (MCA)	Only eligible companies are allowed to accept deposits under Companies (Acceptance of Deposit) Rules, 2014 upto a certain limit (Click here to view the list of the companies which have filed advertisements with the MCA for accepting deposits)
5	Cooperative Credit Societies	Registrar of Cooperative Societies (RCS)	Can only accept deposits from their voting members
6	Multi State Cooperative Societies	Central Registrar of Cooperative Societies	Can only accept deposits from their voting members

It is not legally permissible for other entities to accept public deposits.

2. Whether unincorporated bodies can accept deposit?

Unincorporated bodies like individuals, partnership firms, HUF and other association of individuals cannot accept any deposit if they are carrying on any kind of financial business. (Please refer to section 45S of the RBI Act,1934)

3. Can a Co-operative Credit Society accept deposits from the public?

No. They can accept deposits only from their voting members within the limit specified in their bye laws. They cannot accept deposits from nominal/associate members/general public.

4. Can a Salary Earners’ Society accept deposits from the public?

No. These societies are formed for salaried employees and hence they can accept deposit only from their own members and not from others.

5. Can Proprietorship/Partnership Concerns accept public deposits?

No. Proprietorship and partnership concerns are un-incorporated bodies. Hence they are prohibited under Section 45S of the RBI Act, 1934 from accepting public deposits if they are engaged in financial business in any manner.

6. There are many jewellery shops taking money from the public in instalments. Is this amounting to acceptance of deposits?

It depends on whether the money is received as advance for delivering jewellery at a future date or whether the money is received with a promise to return the same with interest, as also on when the jewellery is delivered. The money accepted by Jewellery shops in instalments for the purpose of delivering jewellery within 365 days of receiving the instalment is not deposit. It will amount to acceptance of deposits if in return for the money received, the jewellery shop promises to return the principal amount along with or without interest, or if the jewellery is delivered after more than 365 days of receiving the instalments.

7. What is Collective Investment Schemes (CIS)? Are they regulated?

Any scheme or arrangement made or offered by any company under which the contributions, or payments made by the investors, are pooled and utilised with a view to receive profits, income, produce or property, and is managed on behalf of the investors is a CIS. Investors do not have day to day control over the management and operation of such scheme or arrangement. SEBI is the regulator of CIS. A company can raise money under this scheme only after registration with SEBI and obtaining a credit rating for its scheme. Please click here for the FAQs on CIS for more details.

8. What is Chit Fund Activity?

Chit Funds activity involves contributions by members in instalments by way of subscription to the Chit and by rotation each member of the Chit receives the chit amount. As per section 45I (bb) of the RBI Act, any subscription to Chit is specifically excluded from the definition of deposit and cannot be termed as deposit. While Chit fund Companies registered with respective State Governments may collect subscription to Chit as above, they are prohibited by RBI from accepting deposits.

9. Whether conducting of Chit Fund business permissible under law?

The chit fund business is governed by Chit Funds Act, 1982 which is a Central Act administered by State Governments. The Chit Fund Companies registered under the Chit Fund Act can legally carry on chit fund business.

10. What are money circulation/Ponzi/ schemes?

Money circulation or Ponzi schemes are schemes promising easy or quick money upon enrolment of members. Income under pyramid structured schemes do not come as much from the sale of products, as they are primarily linked with enrolling more and more members from whom hefty subscription fees are taken. It is incumbent upon all members to enrol more members, and a portion of the subscription amounts so collected is distributed among the members at the top of the pyramid. Any break in the chain leads to the collapse of the pyramid, and the members lower in the pyramid are the ones that are affected the most.

Ponzi schemes are those schemes that collect money from the public on promises of high returns. As there is no asset creation, money collected from one depositor is paid as returns to the other. Since there is no other activity generating returns, the scheme becomes unviable and impossible for the people running the scheme to meet the promised return or even return the principal amounts collected after a certain size. Such schemes inevitably fail and the perpetrators disappear with the money.

11. Whether acceptance of money under Money Circulation / Pyramid structured schemes is allowed?

No. Acceptance of money under Money Circulation / Pyramid structured schemes and Ponzi schemes is not allowed as acceptance of money under any scheme is a cognizable offence under the Prize Chit and Money Circulation (Banning) Act, 1978 and are hence banned. Collecting money under such schemes are prohibited under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. The Act prohibits any person or individual to promote or conduct any prize chit or money circulation scheme or enrol as member to its schemes or anyone to participate in it by either receiving or remitting any money in pursuance of such chit or scheme.

The concerned State Governments are responsible for initiating action for violation of the provisions of this Act

12. What if someone operates such a scheme as above?

Any information/grievance relating to such schemes should be given to the police / Economic Offence Wing (EOW) of the concerned State Government. If information on any such scheme is brought to the notice of this forum, the same will be informed to the concerned State Government authorities.

13. Companies registered with MCA but not registered with any other Regulator also sometimes default in repayment of deposit/ amounts kept with them? What is the recourse available to the investors in such an event?

The companies registered under the provisions of the Companies Act and not registered with any other Regulator, may accept deposits under Companies (Acceptance of Deposit) Rules, 2014 prescribed by MCA. The cases of default in repayment of deposit by such companies are dealt with by the concerned Registrar of Companies (RoC) and National Company Law Tribunal (NCLT). The complaints relating to irregularities of such companies should be promptly lodged with RoC concerned for initiating corrective action. The affected persons could also approach the Consumer Fora or Civil Courts or file a police complaint.

14. What precautions should be taken by the public when someone offers a Scheme that offer high rates of interest / return?

Before investing in any scheme/ financial products, the investors must ensure that the entity offering such returns is registered with one of the financial sector regulators and is authorized to accept public deposit, whether in the form of deposits or otherwise. Investors must generally be careful if the interest rates or rates of return on investments offered are very high. Typically, such entities will either indulge in high risk business (to generate higher returns) or they have fraudulent intention from the beginning. As such, the public should forewarn themselves that the likelihood of losing money is high in schemes that offer very high rates of interest / return.

15. Who can the Depositor/Investor turn to in case of grievances?

The two Charts given at Annex I and II show activity wise regulatory jurisdiction. The complaints may accordingly be addressed to the concerned regulator. If the activity is a banned activity, the aggrieved person can approach the State Police/Economic Offences Wing of the State police, and lodge a complaint.

16. There are cases of unscrupulous entities cheating public time and again. How can members of the public bring such instances to the notice of the Regulators / Law Enforcement Authorities?

Members of public can contribute a great deal by being vigilant and providing information immediately if they come across any entity accepting deposits unauthorisedly. They can provide information here. The Regulators / Law Enforcement Authorities examine the references which are received through complaints or market intelligence by them.

17. What is the role of National Company Law Tribunal (NCLT) in protecting the interest of depositors? How can one approach it?

When a company fails to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the National Company Law Tribunal (NCLT) either on its own motion or on an application from the depositor, directs by order the Company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order.

18. What is the purpose of enacting “ State Protection of Interest of Depositors in Financial Establishments Act” (PID) by the State Governments?

The purpose of enacting this law is to protect the interests of the depositors in Financial Establishments as mentioned in the Acts. The PID Acts, wherever enacted and notified, have the provision to effect recovery by attachment and sale of assets of the defaulting companies, entities or their officials. The Acts make wilful default of non-repayment of deposit or accrued interest or failure to provide service as promised etc. an offence. Under the Act, the State Governments have been given vast powers to attach the property of such entities, its promoter, director, partner or manager or member and dispose them off under the orders of designated courts and distribute the proceeds to the depositors.

19. What is a Non-Banking Finance Company (NBFC)? Which are the NBFCs specifically authorized by RBI to accept deposits?

An NBFC is a Financial Institution, which is a company or a non banking institution for Lending or Investment but does not include any institutions which carry on its principal business as agriculture activity, industrial activity, trading and purchase or sale of immovable properties.( Pl. refer to section 45IA(f) of the RBI Act. Only a few NBFCs are authorized to accept deposits from public. Please click here for the list of the NBFCs which are authorized to accept deposits. At times, some companies are prohibited from accepting public deposits. click here for the list of the Deposit taking NBFCs which are prohibited from accepting deposits from the public. The Reserve Bank keeps both these lists updated. Members of the public are advised to check both these lists before placing deposits with NBFCs.

20. What is the rate of interest and period of deposit which NBFCs can offer?

Presently, the maximum rate of interest an NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests. The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.

21. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs?

NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:

1. Only select, specifically authorised NBFCs can accept deposits.

2. NBFC cannot accept demand deposits;

3. NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;

4. Deposits in the Bank are insured by Deposit Insurance and Credit Guarantee Corporation under its deposit insurance facility. However, the same facility is not available to deposits with NBFCs.

5. NBFCs cannot accept deposit and offer interest beyond the limit prescribed by RBI.

22. What precautions should a depositor take before placing deposit with an NBFC?

A depositor wanting to place deposit with an NBFC must take the following precautions before placing deposits:

1. To ensure that the NBFC is registered with RBI and specifically authorized by the RBI to accept deposits. A list of deposit taking NBFCs entitled to accept deposits is available at www.rbi.org.in → Sitemap → NBFC List. The depositor should check the list of NBFCs permitted to accept public deposits and also check that it is not appearing in the list of companies prohibited from accepting deposits, which is available at www.rbi.org.in → Sitemap → NBFC List → NBFCswho have been issued prohibitory orders, winding up petitions filed and legal cases under Chapter IIIB, IIIC and others.

2. NBFCs have displayed the Certificate of Registration (CoR) issued by Reserve Bank of India on its prominent place. This certificate should also reflect that the NBFC has been specifically authorized by RBI to accept deposits. Depositors must scrutinize the certificate to ensure that the NBFC is authorized to accept deposits.

3. The maximum interest rate that an NBFC can pay to a depositor should not exceed 12.5%.

4. The depositor must insist on a proper receipt for every amount of deposit placed with the company. The receipt should be duly signed by an officer authorized by the company and should state the date of the deposit, the name of the depositor, the amount in words and figures, rate of interest payable, maturity date and amount.

5. In the case of brokers/agents etc collecting public deposits on behalf of NBFCs, the depositors should satisfy themselves that the brokers/agents are duly authorized by the NBFC.

6. The depositor must bear in mind that public deposits are unsecured and Deposit Insurance facility is not available to depositors of NBFCs.

7. The Reserve Bank of India does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

23. Does RBI guarantee the repayment of the deposits collected by NBFCs?

No. The Reserve Bank does not guarantee repayment of deposits by NBFCs even though they may be authorized to collect deposits. As such, investors and depositors should take decisions while placing deposit with an NBFC.

24. In case an NBFC defaults in repayment of deposit what course of action can be taken by depositors?

If an NBFC defaults in repayment of deposit, the depositor should immediately approach the Reserve Bank of India. Please click here to lodge a complaint. (This should take the complainant to the Complaints page) The complainant can also approach National Company Law Tribunal (NCLT) or Consumer Forum or file a civil suit in a court of law or file a police complaint.

Source http://sachet.rbi.org.in/InvestorAwareness/Investor#

Deposits regulations between resident in India & outside India

CA Satbir Singh — Fri, 06 May 2016 05:28:16 +0000

RBI/2015-16/390
A.P. (DIR Series) Circular No. 67/2015-16 [(1)/5(R)]

May 05, 2016

To
All Category – I Authorised Dealers and Authorised Banks

Madam/Sir

Foreign Exchange Management (Deposit) Regulations, 2016

Attention of Authorised Dealers (ADs) is invited to (a) A.D. (M.A. Series) Circular No. 11 dated May 16, 2000 in terms of which ADs were advised of various Rules, Regulations, Notifications/ Directions issued under the Foreign Exchange Management Act, 1999 (hereinafter referred to as the Act) and (b) para 3.2 of Part I and paras 1.1, 2.4, 2.5, 2.7, 2.8, 4, 4.8, 6.6, 6.7, 6.8, 7, 8.1, 9, 10, 12 and the Appendix of Part II of Master Direction No. 14 on Deposits and Accounts. On a review it is felt necessary to revise the regulations issued under the Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time. Accordingly, in consultation with the Government of India, the said regulations have been repealed and superseded by the Foreign Exchange Management (Deposit) Regulations, 2016 (Notification No. FEMA 5(R)/2016-RB dated April 1, 2016), hereinafter referred to as Deposit Regulations.

2. These regulations seek to regulate deposits between a person resident in India and a person resident outside India:

3. Some of the key definitions under the regulations are given below:

(i) ‘Deposit’ includes deposit of money with a bank, company, proprietary concern, partnership firm, corporate body, trust or any other person.

(ii) A ‘Non-resident Indian (NRI)’ is a person resident outside India who is a citizen of India.

(iii) A ‘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.

(iv) Permissible currency means a foreign currency which is freely convertible.

4. In terms of Regulation 4 of the Deposit Regulations, no restriction under these regulations shall be applicable for opening of rupee/ foreign currency deposit accounts by certain persons, viz.

(i) Rupee/ foreign currency accounts by foreign diplomatic missions and diplomatic personnel or their family members in India with an Authorised Dealer in India subject to conditions mentioned therein.

(ii) Deposits in rupees maintained by persons resident in Nepal and Bhutan with Authorised Dealer in India.

(iii) Deposits with Authorised Dealer in India maintained by any multilateral organization, of which India is a member nation, and the subsidiary/ affiliate bodies and officials of such organizations in India.

5. In terms of Regulations 5 and 6 of the Deposit Regulations, a person resident outside India may open deposit accounts with Authorized Dealer/ authorized bank/Indian company under various schemes. Details of the schemes have been specified in the respective schedules. The major features are highlighted below:

A) Non-Resident (External) Account (NRE) Scheme

i) NRIs and PIOs are permitted to open these accounts in Indian Rupee with Authorized Dealers and authorized banks in any form e.g saving, current, recurring or fixed deposit subject to the conditions specified in Schedule 1 of the Deposit Regulations.

ii) Inward remittances from outside India to the NRE account and remittances outside India from the NRE account are permitted.

iii) Authorised Dealers/ banks in India may grant loans against the security of the funds held in NRE accounts to the account holder/ third party in India, without any limits, subject to the usual margin requirements. The loan sanctioned to the account holder can be repaid either by adjusting the deposits or through inward remittances from outside India through banking channels or out of balances held in the NRO account of the account holder. The loan shall be used for the purpose laid down in the regulations and cannot be repatriated outside India.

iv) Authorised Dealers may allow their branches/ correspondents outside India to grant loans outside India to the non-resident depositor or to a third party against the security of deposits, subject to the conditions laid down in the regulations.

v) The facility for premature withdrawal of the deposits shall not be available where loans against such deposits are availed of.

vi) The term “loan” shall include all types of fund based/ non-fund based facilities.

vii) Income from interest on the balances in the account is exempt from income tax and balances are exempt from wealth tax.

viii) Current income like rent, dividend, pension, interest, etc. of NRIs and PIOs will be construed as a permissible credit to their 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.

ix) AD Category – I banks and authorized banks may credit proceeds of demand drafts / bankers’ cheques/ account payee cheques issued against encashment of foreign currency to the NRE account where the instruments issued to the NRE account holder are supported by encashment certificate issued by an AD Category I/ Category – II.

x) An NRE account can be opened jointly:

(a) in the names of two or more eligible NRIs and/or PIOs;

(b) with resident relative(s) on “former or survivor” basis.

B) Foreign Currency (Non-Resident) Account (Banks) (FCNR(B)) Scheme

i) NRIs and PIOs are permitted to open these accounts in any permissible foreign currency with Authorized Dealers subject to the conditions specified in Schedule 2 of the Deposit Regulations.

ii) These accounts can only be maintained in the form of term deposit.

iii) Other terms and conditions applicable to NRE accounts (cf. Schedule 1 of the Deposit Regulations) in respect of joint accounts, repatriation of funds, loans/ overdrafts applies mutatis mutandis to FCNR(B) accounts.

iv) Form A2 is not required to be filled while remitting funds at the time of closure of FCNR (B) accounts.

C) Non-Resident (Ordinary) Rupee (NRO) Account

i) Any person resident outside India may open NRO account in Indian Rupee with Authorized Dealers and authorized banks for the purpose of putting through bona fide transactions in rupees subject to the conditions specified in Schedule 3 to the Deposit Regulations.

ii) The account can be maintained in any form e.g savings, current, recurring or fixed deposit.

iii) Balances in the NRO account cannot be repatriated abroad except for current income of the account holder and up to USD 1 million per financial year by NRIs and PIOs, subject to conditions specified in Foreign Exchange Management (Remittance of Assets) Regulations, 2016. Funds can be transferred to the NRE account within the USD 1 million facility.

iv) Loans may be granted in India to the account holder or third party subject to usual norms and margin requirement.

v) Transfers from other NRO accounts is a permissible credit for the account. Similarly, transfers to other NRO accounts is a permissible debit.

vi) An NRO account can be opened jointly with residents on ‘former or survivor’ basis. NRIs and/or PIOs may hold NRO accounts jointly with other NRIs and/or PIOs.

vii) Rupee gift/ loan made by a resident to a NRI/ PIO relative within the limits prescribed under the Liberalized Remittance Scheme may be credited to the latter’s NRO account.

viii) 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.

ix) Authorized Dealer Banks may furnish on a monthly basis, a statement on the number of applicants and total amount remitted, as per proforma at annex.

x) Opening of accounts by individuals of Pakistan nationality and entities of Pakistan/ Bangladesh nationality/ ownership will require prior approval of the Reserve Bank of India.

xi) Individuals of Bangladesh nationality can open an NRO account provided they hold a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned.

D) Special Non-Resident Rupee (SNRR) Account

i) Any person resident outside India, having a business interest in India, may open an SNRR account in Indian Rupee with Authorized Dealers for the purpose of putting through bona fide transactions in rupees, subject to the conditions specified in Schedule 4 of the Deposit Regulations.

ii) The SNRR account shall carry the nomenclature of the specific business for which it is opened and shall not earn any interest.

iii) The debits/ credits and the balances in the account shall be incidental and commensurate with the business operations of the account holder.

iv) The tenure of the account should be concurrent to the tenure of the contract/ period of operation/ the business of the account holder and shall in no case exceed seven years.

v) The balances in the SNRR account shall be eligible for repatriation.

vi) Opening of account by individual/ entities of Pakistan/ Bangladesh nationality/ ownership will require prior approval of the Reserve Bank of India.

E) Escrow Account

i) Resident/ non-resident acquirers and non-resident corporates may open Escrow account in INR with an Authorized Dealer in India as an escrow agent subject to the terms and conditions specified in Schedule 5 of the Deposit Regulations.

ii) Transactions shall be in accordance with the Foreign Exchange Management (Transfer or Issue of Security by a person resident Outside India) Regulations, 2000 and regulations of the Securities and Exchange Board of India (SEBI), as applicable.

iii) The accounts shall be non-interest bearing.

iv) No fund/ non-fund based facility would be permitted against the balances in the account.

F) Acceptance of deposit by a company in India from NRIs and PIOs on repatriation basis

A company incorporated in India including a Non-Banking Financial Company (NBFC) registered with the Reserve Bank shall not accept deposits from NRIs/PIOs on repatriation basis. It may, however, renew the deposits it had accepted in accordance with Schedule 6 of the Deposit Regulations.

G) Acceptance of deposits by Indian proprietorship concern/ firm or a company from NRIs and PIOs on non-repatriation basis

General permission has been granted to Indian proprietorship concern/firm or a company (including Non-Banking Finance Company registered with Reserve Bank) to accept deposits from NRIs and PIOs on non-repatriation basis subject to the terms and conditions specified in Schedule 7 of these Regulations.

6. Other deposits (subject to Regulations 6 and 7 of the Deposit Regulations)

i) General permission has been granted to Indian companies to accept deposits from NRIs and PIOs by issue of Commercial Papers subject to conditions.

ii) 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.

iii) 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, provided the credits to such accounts are only by way of freight or passage fare collections in India or by inward remittances through banking channels from its office outside India.

iv) 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 SNRR account as specified in Schedule 4 of the Deposit Regulations for the purpose of undertaking transactions in the ordinary course of its business. The debits and credits in these accounts should be incidental to the business requirement of the UJV. The tenure of the account should be concurrent to the tenure of the contract/ period of operation of the UJV and all operations in the account shall be in accordance with the provisions of the Act or the rules or regulations made or the directions issued thereunder. Opening of such accounts by companies/ entities of Pakistan/ Bangladesh ownership/ nationality would require the prior approval of the Reserve Bank.

v) Opening of a foreign currency Escrow account with an Authorised Dealer in India for the purpose of routing counter-trade transactions would require approval of Reserve Bank.

7. To facilitate the foreign nationals to collect their pending dues in India, ADs 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 bonafide dues, subject to the bank satisfying itself that the credit of amounts are bonafide dues of the account holder when she/ he was a resident in India. The funds credited to the NRO account should be repatriated abroad immediately, subject to payment of the applicable Income tax and other taxes in India. The amount repatriated abroad should not exceed USD one million per financial year. The debit to the account should be only for the purpose of repatriation to the account holder’s account maintained abroad. The account should be closed immediately after all the dues have been received and repatriated as per the declaration made by the account holder when the account was designated as an NRO account.

8. Maturity proceeds of term deposits, if any, under the erstwhile Non-Resident (Special) rupee Account Scheme (NRSR Account) which was discontinued with effect from April 1, 2002, may be credited to the NRO account of the account holder.

9. Balances in the Exchange Earner’s Foreign Currency (EEFC) Account and Resident Foreign Currency (Domestic) [RFC(D)] 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.

10. Authorised Dealers may issue International Credit Cards (ICCs) to NRIs and PIOs, the debits of which are subject to the conditions for use of the ICCs by residents. Charges on the use of ICCs should be settled by the NRI/PIO out of inward remittances or balances held in NRE/ FCNR(B)/ NRO accounts. Settlement of charges out of balances held in NRO accounts are subject to the limits for repatriation of balances held in NRO accounts specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets) Regulations, 2016.

11. Authorised Dealers can allow the following operations on non-resident accounts in terms of Power of Attorney granted in favour of a resident by the non-resident account holder:

(a) The operations in NRE/ FCNR(B) Accounts are restricted to:

(i) Withdrawal for local payments; and

(ii) Remittance of funds through banking channels to the non-resident account holder.

(b) The operations in NRO Accounts are restricted to:

(i) All local payments in rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Bank; and

(ii) Remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes.

The resident Power of Attorney holder is not permitted to repatriate outside India funds held in the account other than to the non-resident individual account holder nor making payment by way of gift to a resident on behalf of the non-resident account holder or transfer funds from the account to another NRO account.

12. Regional Rural Banks (RRBs) are permitted to open and maintain NRO/ NRE accounts in Rupees and accept FCNR(B) deposits as per the eligibility criteria prescribed by the Reserve Bank vide Circular No. RPCD.CO.RRB.No.BC.106 /03.05.33(C)/2006-07 dated June 28, 2007. RRBs may approach the respective Regional Office of the Foreign Exchange Department, for authorization for opening of accounts/ acceptance of deposits.

13. Any deposit between a person resident in India and a person resident outside India which is not covered by the provisions of the Act or these Regulations would require approval of Reserve Bank.

14. The new regulations have been notified vide Notification No. FEMA. 5(R)/2016-RB dated April 1, 2016 c.f. G.S.R. No. 389 (E) dated April 1, 2016 and have come into force with effect from April 1, 2016 except the provisions of Regulation 7(2) (Para 6 (iii) above), which have come into effect from January 21, 2016. The Master Direction No. 14 of 2015-16 (Deposits and Accounts) has been updated accordingly to incorporate the above changes.

15. AD Category- I banks may bring the contents of the circular to the notice of their constituents concerned.

16. The directions contained in this circular have been issued under Section 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully

(Shekhar Bhatnagar)
Chief General Manager-in- charge