RUPEE ACCOUNTS OF NON -RESIDENT BANKS

General

Rules and regulations governing the opening of and operations on rupee accounts of overseas branches and correspondents, other than those in Nepal and Bhutan, are laid down in this section.

Opening and Closing Accounts

(i) Banks may open/close rupee accounts (non-interest bearing) in the names of their overseas branches and correspondents without prior reference to Reserve Bank.

NOTES

(i)Opening of rupee accounts in the names of branches of Pakistani banks operating outside Pakistan requires specific approval of Reserve Bank (ii)The Head/Principal Office of each bank should furnish an up to date list (in triplicate) of all its offices/branches which are maintaining rupee accounts of non-resident banks as at the end of December every year giving their code numbers allotted by Reserve Bank. The list should be submitted before 15th January of the following year to the Central Office of Reserve Bank (Central Statistical Division). The offices/branches should be classified according to area of jurisdiction of Reserve Bank Offices within which they are situated.

Implications of Rupee Credits/Debits to Accounts of Non-Resident Banks

(i)Credit to the accounts 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 accounts is in effect an inward remittance in foreign currency.

NOTES

A. In the case of individual payments of Rupees one lakh or more, the purpose of remittance should be reported in the statement annexed to R Return. B. Banks may issue encashment certificates in accordance with the procedure laid down in paragraph 3A.6

Form A3

All debits/credits to the accounts of non-resident banks should be reported in form A3.

Funding of Accounts of Non-resident Banks

(i) Banks may freely purchase foreign currency at ongoing market rates to lay down funds in the accounts of their correspondents 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 rupee. Any such instances should be brought to the notice of Reserve Bank.

NOTE

Forward purchase or sale of foreign currencies against rupees and offer of two-way quotes to non-resident banks are prohibited.

Transfers from other Accounts

Transfer of funds between the accounts of the same bank or different banks is freely permitted.

Conversion of Rupees into Foreign Currencies

Balances may be freely converted into foreign currency. All such transactions should be reported on Form A2 for the foreign currency leg and on form A3 for the rupee leg under the relevant R Returns.

Responsibilities of Paying and Receiving Banks

In the case of credit to accounts the paying banker should ensure that all Control requirements are met and are correctly furnished in form A1/A2 as the case may be. The receiving banker after ensuring that the funds are eligible for credit should submit form A1/A2 under cover of the R Return.

Refund of Rupee Remittances

Requests for cancellation of inward remittances may be complied with subject to the regulations laid down in paragraph 3A.7.

Overdrafts/Loans to Overseas Branches/Correspondents

(i) Banks may permit their overseas branches/correspondents temporary overdrawals not exceeding Rs.500 lakhs in the aggregate, for meeting normal business requirements. This limit applies to the amount outstanding against all overseas branches and correspondents in the books of all the branches of the bank in India. This facility should not be used to postpone funding of accounts. If overdrafts in excess of the above limit are not adjusted within five days a report should be submitted to the Central Office of Reserve Bank (Forex Markets Division) within 15 days from the close of the month, stating the reasons therefor. Such a report is not necessary if arrangements exist for value dating. (ii) Banks wishing to extend any other credit facility in excess of (i) above to overseas banks should seek prior approval from the Central Office of Reserve Bank (Forex Markets Division).

Rupee Accounts of Exchange Houses

Opening of rupee accounts in the names of exchange houses for facilitating private remittances into India requires approval of Reserve Bank. Remittances through exchange houses for financing trade transactions are permitted upto Rs.2,00,000 per transaction.