Operations of Rupee Vostro Accounts of Non-Resident
Exchange Houses
Introduction
RBI may enter into Rupee Drawing
Arrangements (RDAs) with non-resident Exchange Houses from FATF countries for opening
and maintaining Rupee vostro accounts in India. Prior approval of RBI is
required when they enter into such an arrangement for the first time, subsequently,
they may enter into RDAs and inform RBI immediately. Once the total number of RDAs reaches twenty,
based on the satisfactory report from auditors, banks may authorize more such
arrangements and inform RBI accordingly. The following are the detailed
guidelines for opening and maintaining vostro accounts:
General
Instructions
(a) The
AD-I banks should make necessary enquiries about the financial standing
of the Exchange House and ensure that the Exchange Houses hold valid licenses
issued by the Local authorities to transact currency exchange/ money transfer
business.
(b) The
registration of the RDA Agreement between the AD-I banks and Exchange Houses is
optional. However AD-I banks should take care of all necessary legal
requirements,in this regard.
(c) The
registration of Power of Attorney/ specimen signatures of signing officials of
the Exchange Houses should be done.
4. Instructions regarding operations in the Rupee vostro accounts
(a) The
accounts can be used for channeling cross- border inward remittances up to Rs.
15,00,000/- into India and not for outward remittances. The remitter and the
beneficiary should be individuals barring a few exceptions.
(b) No
overdraft should be granted to the account holders. Funds lying in the Designated
Depository Agency A/c may be used if required. Value dating may be allowed,
where on-line debit to Rupee vostro account is not possible on a real time
basis.
(c) Separate
Rupee vostro account shall be maintained for each arrangement. The accounts
should be funded by sale of permitted foreign currency. Rupee funds will not be
eligible for credit to the account.
(d) Debits
for permitted types of inward remittances may be allowed freely. Such payments
will be eligible for credit to NRE Accounts or for acceptance under priority
allotment schemes. In order to facilitate tourists, AD-I banks may issue certificates of
receipt of foreign exchange in the same form as obtaining for inward
remittances received through Rupee accounts of overseas banks.
(e) Funds
in such accounts will not be convertible, nor will they be transferable to
other AD-I banks or to other non-resident accounts maintained with the same AD-I
banks.
(f) Balances
in such accounts will not qualify for payment of interest.
(g) AD-I
banks should not credit the rupee purchased from the exchange houses into their
vostro account unless the nostro account of the Bank has been credited with the
counter-value in foreign currency.
(h) To
take care of the credit and operational
risks, AD-I banks may like to obtain adequate collateral either in the form of
a cash deposit or bank guarantee.
(i) RBI
has permitted the opening of 300 drawee branches. However, AD-I banks may
obtain necessary approval from the board for opening more than 300 drawee
branches provided such branches are under Core Banking Solution where on-line
monitoring of funds can be ensured. RBI should be informed of such approvals
immediately.
SECTION II
Permitted Transactions
1. Drawing Arrangements with Exchange
Houses are designed to channel cross-border personal inward remittances and not
Donations or contributions to charitable institutions.
2.Permissible transactions under such
Arrangements are:
(i)Credit to NRE accounts maintained by
NRIs in Indian Rupees.
(ii)Payments to families of
Non-resident Indians.
(iii)Payments in favour of Insurance
companies, Mutual Funds and the Post Master.
(iv)Payments in favour of bankers for
investments in shares, debentures.
(v)Payment to Co-operative Housing
Societies, Government Housing Schemes or Estate Developers for acquisition of
residential flats in India in individual names.
(vi)Fee payment to schools, colleges
and other educational institutions.
(vii)Payments for medical treatment of
NRIs, their dependents and nationals of FATF compliant countries.
(viii)Payments to hotels by nationals
of FATF compliant countries / NRIs for their stay.
(ix)Payments to travel agents for
booking of passages of NRIs and their families residing in India towards their
travel in India by domestic airlines / rail, etc.
(x)Trade transactions up to Rs.15,00,000
(Rupees Fifteen lakhs only)[1] per transaction. Payments exceeding such limit may be approved
subject to the following additional steps:
i.
Remittances received under RDA are from
FATF compliant countries,
ii.
KYC/AML/CFT and other due diligence
concerns should be taken care of,
iii.
Exchange houses, which are frequently
sending high value trade related remittances, must be reviewed and reported to
the RBI,
iv.
AD banks must collect additional
information regarding high value trade related transactions and keep them on
record for scrutiny,
v.
AD banks must ensure that the proceeds
of export payment through RDA is applied to the outstanding export finance of
the exporter if any.
(xi)Payments
to utility service providers in India except for mobile top-ups.
(xii)Tax payments in
India.
(xiii)EMI to Banks an
NBFCs, for repayment of loans in India.
(xiv)Direct remittances
to the Prime Minister’s National Relief Fund subject to the banks maintaining
full details of the remitters.
Note: No cash
disbursement of remittances received is allowed under Rupee / Foreign Currency
Drawing Arrangements.
3. Foreign
inward remittances received by the Partner Bank may be credited directly to the
account of the beneficiary, held with another bank through NEFT, IMPS, etc.,
subject to:
i. The beneficiary’s account should be
KYC compliant.
ii. In case of KYC non compliant
account, recipient Bank shall carry out KYC/CDD before the remittance is
credited or allowed to be withdrawn.
iii. The Partner Bank 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 and beneficiary information is included in the electronic
message. This information should be available, throughout the payment chain.
v. The identification and other
documents of the recipient shall be maintained by the Recipient Bank.
vi. Recipient Banks will report suspicious
transactions to the FIU-IND with details of the Partner Bank through which they
received the remittances.
SECTION
III
Rupee Drawing Arrangement Procedures
and Collateral Cover
1. Designated Depository
Agency (DDA) Procedure
(a) The
Exchange House will be required to open a bank account in a convertible foreign
currency in the name of the drawee bank. The account will be opened with an
international bank at a centre mutually agreed upon. However with the prior approval of the RBI,
the account can also be opened with the drawee bank itself at a branch where
the corresponding Rupee vostro account is maintained,.
(b) The
Exchange House will convert the total drawings in Indian Rupees to foreign
currency at the end of each day and deposit it into the account of the drawee
bank on the next working day before
noon.
(c) The
Exchange House will inform the drawee bank about the total number/value of
drafts drawn and daily deposits in the DDA account. Transfer from the DDA
account should be as frequently as possible
(d) The
funds will be held in the DDA account under lien to the drawee bank. The only debits
allowed from the DDA account will be (i)
for transfer to the nostro account of the drawee bank (ii) for crediting the
Rupee vostro account of the Exchange House.
(e) It
will be the responsibility of the Exchange House to transfer 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, up
to the date of transfer to the nostro account of the drawee bank, will accrue
to the Exchange House.
(g) To
ensure compliance, the drawee bank in India will appoint Auditors, operating in
the country concerned to examine the account with the DDA. Such inspections
will be done at least once or twice every week.
(h) Alternately,
the AD-I banks may depute an official as their representative to the Exchange
House.
(i) In
case of default on the part of the Exchange House, the drawee bank may terminate
the agency arrangement. The termination will be promptly reported to the RBI.
(j) So
long as the Exchange House complies with the guidelines, the drawee bank will
ensure that the drafts issued are honoured at the branches mutually agreed to.
(k) The
remuneration payable to the auditors will be borne by the drawee banks.
(l) Drafts drawn by the Exchange House should have a validity of only three months from the date of issue thereof.
(l) Drafts drawn by the Exchange House should have a validity of only three months from the date of issue thereof.
(m) AD-I
banks should satisfy themselves that the books of accounts of Exchange Houses
are regularly audited by auditors approved by the local supervisory
authorities.
(n) AD-I
banks should call for periodical credit reports, audited balance sheet and
profit and loss account etc. of the Exchange House.
(o) Valid
copies of all licenses should be kept on record by the AD-I banks.
(p) Since
the books of accounts of the Exchange House cannot be inspected, AD-I banks
should periodically review the arrangement by way of visits to the exchange
house or periodical review of opinion reports.
(q) For
Exchange Houses which have not completed three years of operation, collateral
cover in cash or bank guarantee equivalent to 7 days’ projected drawings may be
obtained. Though no collateral is prescribed for others, AD-I banks may acquire
adequate collateral cover if they wish to. Cash deposit or bank guarantee
equivalent to 15 days’ estimated drawings may be obtained as collateral cover
where it is not possible to appoint auditors. The deposit should be in the name
of the AD-I banks with interest payable to the Exchange House. The amount of
deposit and guarantee should be periodically reviewed so as to cover the
drawings adequately.
2. Non-
DDA procedure
(a) As
an alternative to maintaining a DDA account and appointment of auditors, the AD-I
banks may opt for the Non-DDA procedure.
(b) Under
Non–DDA procedure, the Exchange House funds their vostro account by purchasing
rupees from the AD-I banks against USD for the total value of drafts issued by
them at periodic intervals.
(c) For
Exchange Houses which have not completed three years of operation, collateral
cover in cash deposit or bank guarantee equivalent to 7 days’ projected
drawings may be obtained. For others, no collateral is prescribed. Further,
under Non-DDA arrangement, a collateral cover in cash deposit or bank
guarantees equivalent to 10 days’ projected drawings may be obtained. In addition, if
there is a restriction on the bank’s right to depute its own staff for
examination of books of the Exchange House, additional cash deposit or bank
guarantee equivalent to 15 days’ estimated drawings may be obtained. The
deposit should be in the name of the AD-I banks with interest payable to the
Exchange House. The amount of deposit and guarantee should be periodically
reviewed to ensure that the collateral adequately covers the drawings and
pipeline debits.
3. Speed
Remittance Procedure
(a) AD-I
banks are permitted to enter into RDA
under speed remittance procedure wherein:
(i)
The Exchange House sends payment instructions with complete details like name,
address, etc., via SWIFT or internet.
(ii)The
Exchange House credits the nostro account of the AD-I banks with Rupee fund well
in advance before issuing payment instructions.
(iii)On
verification of data and availability of balances in the vostro account of the
exchange house the AD-I bank makes the payment to the beneficiary.
(iv)The
Exchange House shall address all payment instructions, to the account holding
branch irrespective of the beneficiaries’ centre.
(v)The
branch shall make no payment unless clear funds are available in the account.
(vi)The
AD-I banks shall obtain date-wise information regarding number and aggregate
value of such transfers from the Exchange House.
(vii) Where facility of speed remittance is
extended to existing Rupee drawing arrangements, the Exchange House shall open
a separate Rupee account with the prior approval of the RBI. No such approval
is required where the operations in the existing Rupee drawing arrangements
under DDA/ Non-DDA are satisfactory. However, the RBI should be informed in the
matter immediately.
(b) For
Exchange Houses, which have not completed three years of operation, collateral
cover in cash deposit or bank guarantee equivalent to 7 days’ projected
drawings may be obtained. For others, no collateral is prescribed. Further,
the Exchange House shall keep with the AD-I banks an additional cash deposit or
bank guarantee equivalent to 1 day’s estimated drawings. The deposit should be
in the name of the AD-I banks with interest payable to the Exchange House. The
amount of deposit and guarantee should be periodically reviewed and properly
monitored in order to ensure adequacy of cover.
SECTION IV
Foreign Currency Drawing
Arrangements
AD-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 RBI. Each tie-up arrangement of an AD-I bank with an
Exchange House is required to be approved by the RBI. The conditions are:
(a) Exchange
Houses shall draw drafts in any convertible foreign currency only on ‘A’ or ‘B’
category branches of AD-I banks.
(b) The
foreign currency drawing arrangement shall be kept distinct from the Rupee
drawing arrangement.
(c) A
separate foreign currency vostro account of the Exchange House shall be opened.
Payment of drafts shall be made by debit to this account.
(d) The
aggregate amount of drafts drawn by the Exchange House on any day should be
credited to the nostro Account of the drawee bank latest by close of business
on the second working day.
(e) The
account maintaining branch of the drawee AD-I banks should credit foreign
currency vostro account of the Exchange House on receipt of confirmation
regarding credit to their nostro account.
(f) AD-I
banks should ensure that foreign currency accounts are funded at all times.
(g) If
the arrangement is under the Non-DDA procedure, the Exchange House should
communicate the number and value of drafts drawn, to the account maintaining
branch, before close of the following working day. Under DDA procedure, such
information may be obtained at least twice a week.
(h) Exchange
Houses should keep a deposit of not less than USD 50,000 with the drawee AD-I
bank. The amount of deposit should be reviewed every six months in order to
ensure adequacy of cover and if found necessary the quantum of the deposit
should be increased. AD-I banks should allow interest on this deposit.
(i) AD-I
banks are allowed to keep the amount of deposit in all cases, with the Account
maintaining branch.
SECTION V
Miscellaneous Provisions
1. AD-I banks should adhere to the KYV/AML/CFT
Guidelines issued by the RBI, while undertaking any transaction under Rupee/
Foreign Currency Drawing Arrangements, as applicable.
2. AD-I banks should keep RDA/FCDA
under concurrent audit to ensure that
credit to the vostro account of the Exchange House takes place before payments
are made.
3. Exchange Houses should submit an
annual compliance report duly certified by their auditors to the AD-I banks regarding adherance to the home country KYC/
AML/ CFT regulations.
4. AD-I banks should inform RBI of any
unusual operations by exercising constant vigil.
5. AD-I banks shall ensure that expired
licenses of the Exchange Houses, are renewed and copies of authenticated
English versions placed with them for their record.
6.The Exchange Houses should not enter
into any arrangement with service providers for their back office operations in
India. However, they can establish liaison offices in India. Operations such as
printing of drafts, issuance of drawing advices and stop payment instructions
can be undertaken by such offices with the prior approval of the RBI.
7. AD-I
banks should obtain approval of the RBI for maintaining accounts of Exchange Houses
whose name and constitution, etc., undergo changes.
SECTION VI
Internal Control and Monitoring
of Accounts
1. Dealings with Exchange Houses should
be strictly on credit basis at all times and no overdraft should be granted to
the account holders.
2. AD-I
banks are required to inspect the vostro accounts of Exchange Houses on a
half-yearly basis through experienced officers. Observations thereon shall be
included in the annual review of the accounts submitted to the Board.
Based
on RBI master circular dated 1/7/2015. Please refer www.rbi.org
for further details if required……………….Poppy
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