➢ Basic Terminology in Foreign Exchange

 Domestic Currency & Foreign Currency

Domestic currency as the name indicates it is the currency of the land. In India Rupee is the domestic
currency and any other currency is a foreign currency.

 Direct Rates & Indirect Rates

The Two means of quoting a foreign exchange rates are Direct & Indirect Rates.
If the Foreign currency is kept as a standard unit and the price is quoted in Domestic Currency it is called
a Direct Rate (e.g.: $ 1 = Rs. 68.10). Day to day variations is indicated in domestic currency (e.g.: $ 1 =
Rs. 68.10). In India since 1994, we have adopted the Direct Rate quotations.

If the Domestic currency is kept as a standard unit and the price is quoted in Foreign Currency it is called
Indirect Rate (e.g.: Rs.100 = $ 1.4684). Day to day variations is indicated in Foreign currency (e.g.:
Rs.100 = $ 1.4684).

 Two way quotation – Buy Low & Sell High Maxim

The practice in quoting foreign exchange rates is quoting Buying & selling prices in one maxim (e.g. $ 1 =
Rs. 53.50 / 53.75). Of the two prices the lower one in direct rates means the buying price of the quoter
and the higher one is his selling price. This is an implied rule. This will be the reverse way in Indirect
quotations

 Buying & Selling

For a Banker, Buying transaction of foreign exchange is he buys foreign exchange and parts with Indian
rupees (e.g. Export Bill, Payment of a DD, Purchase of Foreign Travelers Cheques etc)

In selling transaction the Banker sells foreign exchange against Indian Rupees (e.g. Issuing DD, Selling
Foreign Travelers Cheques, Retiring Import
Bills etc)

 Spot Transactions

Spot Transactions are quoted for immediate/ ready delivery transactions involving a period not exceeding
2-3 business days including the day of transaction. (DDs/TTs/TCs)

 Forward Transactions

Forward Transaction is a deal for taking up a foreign exchange transaction at a future date at the pre-
determined rates on the date of deal.

 Types of Rates in Transactions

Depending on the Type of transactions different rates are quoted by the dealers. The various rates have
come into effect due to variation in the exchange margin for different types of transactions. The dealer will
quote his margin in the rate itself. Hence all spot transactions may not carry the same rate. Similarly rates
for all forward transactions may also differ. Few examples are

Buying Rates

1. DD/ TT Buying Rate

2. Travelers Cheque Buying Rate
3. Export Bill Buying Rate
4. Foreign Currency Buying Rate
5. Foreign Currency Instrument Purchase Rate

Selling Rates

6. DD/ TT Selling Rate

7. Bill Selling Rate
8. Travelers Cheque Selling Rate
9. Foreign Currency Selling Rate
 Cover Transactions

Holder of a foreign exchange runs the risk of variation of its value in terms of the domestic currency. A
prudent dealer will always aim to maintain the lowest possible balance in the foreign currency / accounts /
exchange. The best way to check the market risk is to make a cross deal for the original deal. If the dealer
purchases foreign exchange from his export customer, he will try to sell the same in the market. More so
with forward transactions, Whenever a dealer enters into a forward sale transactions with his customer, he
will make a forward buying transaction with other dealers/customers/ market for the same amount and
delivery date, Such later transaction is called cover transaction as it covers the risk.

 Squaring up

Maintaining Zero Balance is the ultimate motto of a prudent Banker. Squaring up is the word used to
make a cross deal and minimize the exposure. 100% squared up means zero balance & zero risk
position, which is not practically possible.

 Swap Transactions

Foreign exchange rates are sensitive to the global conditions. The rates vary from time to time on the
same day or from to place to place on the same day. The dealers will enter into simultaneous buying &
selling transactions on the same day or at different market places to make margin taking advantage of
price variations. They also make cross tying of spot & forward deals. Such transactions are called swap
transactions.

➢ Premium & discounts on forward period

Depending upon the market conditions the forward rates for currencies may be more than the spot rates
or less than the spot rates. Under direct rates, If the forward rates (for a future date) are more than the
spot rate, the currency is said to be at premium. Similarly, if the forward rates are less than the spot rates
the currency is said to be at discount. Premiums & Discounts are also called forward margins.

 Correspondent

Every Banker will maintain his foreign exchange account with a foreign banker to
facilitate his transactions. He also enters into agreements for paying the drafts drawn on him by the
foreign bank or for paying the drafts drawn by him by the foreign bank. Such arrangements lead to a
relationship between the two banks, which will have specimen signatures of all the authorized signatories
of the other. They also undertake advising / confirming of LCs, Collection of Instruments etc. Such Banks
are called correspondents of each other.

➢ Nostro, Vostro & Loro Accounts

Foreign Trade / Exchange / Banking are very old developments vis-à-vis the technology. In 19 th century,
the telegram was the only means of communication. The Banks used small Phrases to supplement
frequently used set of words. These Phrases are into practice over a century. They have become the
means of communication. The meanings of the phrases are as under:

Nostro : Our Account with yourselves

Vostro : Your Account with Ourselves

Loro : Their Account with yourselves

➢ DIFFERENT FORMS USED IN FOREIGN TRADE & REMITTANCES

From A1 – Declaration to be submitted for purchasing Foreign Exchange

For payment of Import Bills

Form A 2 - Declaration to be submitted for purchasing Foreign Exchange

Through DD/ TT / TC / FC / Advance for Imports

BE From - Bill of Entry – evidencing receipt of goods in India certified by

 Customs – to be submitted by the Importer to the Bank within 90 days of retiring of
import Bills

ED Form – A declaration furnished by exporter and Certified by Customs evidencing dispatch

of good exported and essential for negotiating an export Bill ( EDF = Export
Declaration Form)

SDF Form – Electronic supplement to ED Form – where Customs Offices are computerised

SOFTEX Form – Where exports are software items exported through

Electronic Hubs, Magnetic Tapes, coded electronic media.

CDF Form – Currency Declaration form to be submitted by a returning Indian

If the foreign exchange brought in is more than USD 10,000/- or
Foreign Currency brought in is more than USD 5,000/-

R-Returns – To be submitted fortnightly by Authorized Dealers to RBI within seven--week days from
the end of the fortnight. The transactions made in foreign currencies during the
fortnight are reported.

BEF Return- To be submitted Half yearly to RBI – within 15 days from the end of the Half year.
Statement includes defaulters in submission of Bill of Entry for import remittances in
excess of USD 1,00,000/- and above

EDF Forms – General Terminology for Export Declaration Forms include

ED Forms / SDF / SOFTEX

XOS Statement – Return of Overdue Export Bills pending for realisation for a period exceeding 6
months – to be submitted to RBI at half yearly intervals, irrespective whether the bills
are sent on discount or collection basis (Data is Cumulative)
 INCO TERMS – 2010

INCOTERMS are internationally accepted commercial terms defining the respective roles of buyer
and seller in the arrangement of transportation and other responsibilities and clarify when the
ownership of merchandise takes place. In International trade delivery is effective when seller
completes all obligations under the contract. Delivery denotes transfer of risk from seller to buyer,
This is different from transfer of ownership and the liability to meet expenses. International
Commercial Terms (INCOTERMS) coined by ICC to standardise liabilities of parties under different
types of contracts. Latest version is INCOTERMS 2010

EXW - Ex Works -- Title and risk pass to buyer including payment of all transportation and
insurance cost from the sellers door. Used for any mode of transportation.

FCA - Free Carrier -- Title and risk pass to buyer including transportation and insurance cost when
the seller delivers goods cleared for export to the carrier. Seller is obligated to load the goods on the
buyers collecting vehicle; it is the buyers obligation to receive the sellers arriving vehicle unloaded.

FAS - Free Alongside Ship -- Title and risk pass to buyer including payment of all transportation
and insurance cost once delivered alongside ship by the seller. Used for sea or inland waterway
transportation. The export clearance obligation rests with the seller.

FOB - Free On Board – Title and risk pass to buyer including payment of all transportation and
insurance cost once delivered on board the ship by the seller. Used for sea or inland waterway
transportation.

CFR - Cost and Freight -- Title, Risk and insurance cost pass to the buyer when delivered when
delivered on board the ship by the seller who pays the transportation cost to the destination post.
Used for sea or inland waterway transportation.

CIF - Cost, Insurance and Freight -- Title and risk pass to the buyer when delivered on board the
ship by the seller who pays transportation and insurance cost to the destination port. Used for sea or
inland waterway transportation.

CPT - Carriage Paid To -- Title, Risk and insurance cost pass to the buyer when delivered when
delivered to the carrier by seller who pays transportation cost to destination. Used for any mode of
transportation.

CIP - Carriage and Insurance Paid To -- Title and risk pass to buyer when delivered to carrier by
seller who pays transportation and insurance cost to destination. Used for any mode of transportation.

DAT – Delivered at Terminal - Risk transfer from the seller to the buyer when the goods have been
delivered at the named terminal and unloading charges to Seller. Buyer is responsible for import
clearance and inland transport.

DAP – Delivered At Place - Risk transfer from the seller to the buyer when the goods have been
delivered at the named place and unloading charges to Seller. Buyer is responsible for import
clearance.

DDP – Delivered Duty Paid – Title and risk pass to buyer when seller delivers goods to named
destination point cleared for import. Used for any mode of transportation.
 FOREIGN EXCHANGE REMITTANCES

Current Account Vs Capital Account Transactions

Current Account Transactions

 Current Account Transactions are normal trade & services transactions

 These Transactions will not change the asset & liabilities position of the remitter
 They do not generate further obligations
 FOREIGN EXCHANGE MANAGEMENT (Current Account Transactions) Rules, 2000 made by the
Central Government in consultation with RBI

Capital Account Transactions

 Capital account transactions alter the asset & liabilities position

 Investments, Purchase of immovable properties, Shares, securities, Mutual funds etc
 There is possibility of further transactions through capital account transactions
 RBI – through AP (DIR Series) circulars under FOREIGN EXCHANGE MANAGEMENT ACT

CURRENT ACCOUNT TRANSACTIONS

 Transactions other than Capital Account transactions

 Any person may draw or sell for Current Account
 Transactions are regulated by Government of India in consultation with RBI
 FOREIGN EXCHANGE MANAGEMENT (Current Account Transactions) Rules, 2000 made by the
Central Government in consultation with RBI

FOREIGN EXCHANGE MANAGEMENT (Current Account Transactions) Rules, 2000

Explicitly prohibited for transactions or travel to Nepal & Bhutan. For others as per schedule

1) Schedule – I Prohibited Drawl of Foreign Exchange

2) Schedule – II Permitted with the approval of Govt of India
3) Schedule – III Permitted with the approval of RBI

Schedule – I Prohibited

x Remittance out of lottery winnings, races, other hobbies

x Remittance for Purchase of Lottery tickets, banned/proscribed magazines, etc
x Commission on exports made towards equity investment in
x Joint Ventures
x Wholly owned subsidiaries abroad of Indian Companies
x Commission on exports under Rupee State Credit
x Charges of ‘Call Back Services’ (telephones)
x Interest income on Non-Resident Special Rupee (A/c) Scheme( Scheme since withdrawn)

SCHEDULE-II Government of India’s Approval

 Cultural Tours
 Advertisement in foreign print media for purposes other than the following:
 Promotion of tourism
 Foreign investments
 International bidding (exceeding USD 10,000) by State Govt & its PSU
 Remittance of freight of vessel chartered by a PSU
 Payment of import by a Govt. Department or PSU on CIF basis (other than FOB/FAS)
 Payment by Multi Modal transport operators to their agents abroad
 Hiring of transponders by TV Channels
 Remittance of freight of vessel chartered by a PSU
 Payment of import by a Govt. Department or PSU on CIF basis (other than FOB/FAS)
 Payment by Multi Modal transport operators to their agents abroad
 Remittance of container detention charges exceeding rate prescribed by Director General of
Shipping
 Royalties for technical collaborations where payment exceeds….
 5% on local sales or
  8% on exports or
 a Lump sum amount of USD 2 million
 Prize money / sponsorship of sports activity abroad by a person other than International / National
/ State level sport bodies, if the amount exceeds USD 1,00,000

SCHEDULE III – Approval of RBI

The Authorised dealers are permitted to entertain remittances to the extent of the ceilings below
the specific approval limits. Specific approvals are to be obtained in the following cases.

 Private visit(s) to any country (except Nepal & Bhutan) payment or Remittance exceeding USD
10,000 p.a.
 Business Travel – Payment or Remittance exceeding USD 25,000 per visit
 Medical expenses – Payment or Remittance exceeding USD 1,00,000 / more to the extent of
Estimates by Doctor
 Education – Remittance exceeding USD 100,000 per academic year
 Employment – Remittance exceeding USD 100,000 per individual / one time
 Emigration – Remittance exceeding USD 100,000 or amount prescribed by country of emigration
 Consultancy charges – Remittance exceeding USD 100,000 per remittance
 Commission to agents abroad for sale of residential / commercial plots in India Remittance exceeding
USD 25,000 or 5% of inward remittance per transaction whichever is higher
 Gift / Donation Remittances exceeding USD 5,000 per remitter/donor p.a
 Maintenance of close relatives abroad Exceeding net salary of person who is resident (not
permanent) and is a citizen of foreign state (excluding Pakistan) or citizen of India who is on
deputation (period < 3 years) to office/branch/subsidiary in India
 Remittances for miscellaneous purposes increased to USD 25,000 per financial year

INTERNATIONAL CREDIT CARDS/ ATM / DEBIT CARDS

 Rules in Schedule-III exempted to the extent of limit of the Card while the person is outside India on a
visit
 ICC can be used on internet for purchases subject to purposes prescribed under FEMA Rules
 Resident individuals are free to obtain ICC if they have F.C. A/c with AD/Bank abroad
 Charges incurred against ICC either in India or abroad can be met out of funds held in F.C. A/c or by
remittance directly to the Card Issuing Agency abroad
 Credit limit on ICC fixed by card issuing banks. No monetary ceiling is fixed by RBI

LIBERALISED REMITTANCE SCHEME OF USD 250,000

10. Resident individuals only eligible

11. Upto USD 250,000 for any purpose per calendar year
12. Both Current & Capital Account transactions
13. In addition to normal scheme
14. Subject to Schedule I, II & III

USD 250,000 – REQUIREMENTS

 AD to follow KYC norms
 Remitter to maintain A/c for one year
 New A/c holder – Due Diligence
 Remittance by debit to account of remitter
 To be reported in ‘R’ Return
 No. of applicants and total amount to be reported to RBI, Mumbai quarterly
 Remitter to submit application letter – cum – declaration
 Remitter to designate a branch of AD and should route all remittances through that branch only
 AD to ensure against remittance to countries identified by FATF (Financial Action Task Force) or
entities involved with terrorism as advised by RBI

IMPORTS Advance Remittances –

 Advance payments upto USD 10,00,000 if the AD is satisfied with the bonafides of the transaction
 FOR GOVT DEPARTMENTS/ PSUs - USD 1,00.000 (Maximum)
 The Advance remittance in excess of – USD 1,00,000 is permitted against a bank guarantee or
stand by LC, if obtained from the beneficiary of the remittance
 Waiver of obtaining such BG or stand by LC has to be approved by ministry of finance
SURRENDER OF FOREX
*0 Unused on account of not going abroad - to be returned within 180 days
*1 Unspent brought back to India to be returned within 180 days. Foreign Currency as well as TCs to
be surrendered within 180 days.
*2 Currency / TCs upto USD 2000 can be retained / held in RFC (Domestic) A/c

Authorised Dealer’s RESPONSIBILITY

 Seek declaration & information that will reasonably satisfy
 If information is not given, refuse the transaction
 If there is reason to believe that the transaction contravenes the Act, report to RBI

SUMMARY OF FOREIGN EXCHANGE TO RESIDENT INDIANS WITHOUT RBI APPROVAL

Quantity of foreign exchange a resident can procure from a dealer on declaration - without
approval

(For Countries other than Bhutan & Nepal)

1. Foreign Exchange for Donations / Gifts (Covered under LRS) p.a. USD 250,000 per Remitter
2. For Travel for the purpose of Tourism USD 10,000 Per annum
3. Business Trip / Seminar / Conference / Training / Study tour USD 25,000 Per Trip
4. Visit abroad for Medical Check-up USD 25,000 Per Trip
5. Visit abroad for Medical Treatment USD 100,000 Once
6. For Education Purposes USD 100,000 Per academic
Yr.
7. Proceeding on employment abroad USD 100,000 One time
8. Going abroad on emigration USD 100,000 Per person
9. Sending Gift Articles from India Rs. 500,000 per Donor
10. Advertisement in Foreign Print Media USD 10,000 per annum

Procedural Parameters for Foreign Exchange Transactions

1 Purchase of foreign currency for going abroad USD 3,000 Per Trip
2 Cash Transactions for foreign Exchange Purchase up to Rs. 50,000
3 Foreign Exchange - How many days in advance 60 Days
4 In case the Exchange is not unused for going abroad 180 days of purchase
5 On return - Surrender Foreign Currency Notes – within 180 Days
6 On return - Surrender Foreign Travelers Cheques – within 180 Days
7 How much retention of Foreign Exchange permitted on return USD 2,000
8 How much foreign exchange can be brought in without declaration USD 10,000
9 How much foreign Currency Notes can be brought in without declaration USD 5,000
10 How much foreign exchange can be brought in WITH (CDF) declaration No LIMIT

Liberalized Remittance Scheme - For Resident Indians

(Other than Bhutan, Nepal, Mauritius & Pakistan)

1. How much can be remitted under the scheme USD 250,000 Per annum
2. Purpose - Current account or capital account transactions Investments

Remittance Facilities for NRIs & POIs

1. How much can be repatriated or remitted abroad by NRIs / PIOs USD 1,000,000 per year
2. Remittance of Sale proceeds of immovable property self-acquired Restricted to Two Properties
3. Remittance of Sale proceeds of immovable property inherited No Lock -in period
 NON-RESIDENT INDIANS DEPOSIT SCHEMES & LOAN FACILITIES

Who is NRI (Sec 2 of FEMA)

A person who fulfils all the three conditions and any one of the approved purposes will be accorded an
NRI status by the Bankers

To fulfill all the 3 conditions

4) Persons of Indian Origin - Passport
5) Gone Abroad
6) For an Indefinite Period

Any one of the following purposes

 For Business
 For Employment
 For Vocation
 For Education

Indian Students studying abroad having regard to the circumstances stated as under:
a) Their stay abroad for more than 182 days in the preceding financial year end
b) Their intention to say outside India for an uncertain period when they go abroad for their studies

Facilities for students

Students going abroad for studies are treated as NRIs and are eligible for all the facilities available to
NRIs under FEMA. They will be eligible to receive remittances from India up to USD 100,000 from close
relatives in India on self declaration towards maintenance, which could include remittances towards their
studies also and up to USD One Million per financial year, out of sale proceeds of assets/balances in their
account maintained with an AD Bank in India.
All other facilities available to NRIs under FEMA are equally applicable to the students.

A citizen who leaves India in any year for employment, or leaves India as a member of the crew of an
Indian ship is not treated as a resident in that year unless he has been in India for 182 days or more.

When a person resident in India leaves India for Nepal and Bhutan for taking up employment or for
carrying on business or vocation or for any other purpose indicating his intention to stay in Nepal and
Bhutan for an uncertain period, his existing account will continue as a resident account. Such account
should not be designated as Non-resident (Ordinary) account.

Non Resident Indian vs. Person of Indian Origin & Overseas Corporate Bodies

NRI – Non Resident Indian

 Citizen of India
 Indian Pass Port Holder
 Residing abroad for an indefinite period
 With an approved purpose

PIO – Persons of Indian Origin

 Citizen of any other country (except Nepal, Pakistan, Bangladesh Afghanistan, Bhutan)
 At any time held Indian Passport or
 Either of his parents or Grand parents was a citizen of India by virtue of Constitution of
India or Citizenship Act 1955

OCB – Overseas Corporate Bodies

 Companies / firms & Trusts
 Incorporated Outside India
 60% Share capital held by NRI / POI
 Treated as NRIs
 Deleted from the NRI Cover (Since 16th Sept 2003)
What is Repatriation?

Repatriation is a provision available to NRIs for converting the balance in the domestic currency account
into foreign currency account or remit the amount from the account to foreign country without any specific
approval.
For opening / Depositing into such repatriable accounts the credits / deposits should come from foreign
inward remittances or proceeds of such domestic investments which were originally invested / remitted
through a Foreign Inward remittance.
Due to availability of the repatriable rights in NRI accounts Bankers are required to exercise due care not
only in withdrawals in the account but also in putting credits in the account
ADs may open and maintain NRE / FCNR (B) Accounts of persons resident in Nepal and Bhutan who are
citizens of India or of Indian origin, provided the funds for opening these accounts are remitted in free
foreign exchange.
Interest earned in NRE / FCNR (B) accounts can be remitted only in Indian rupees to NRIs and PIO
resident in Nepal and Bhutan

Foreign tourists during their short visit to India can open a Non-Resident (Ordinary) Rupee (NRO) account
with any bank dealing in foreign exchange. Such account can be opened up to a maximum period of 6
months.

Banks have been allowed to convert the balance in the account at the time of departure of the tourists into
foreign currency provided the account 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.

To repatriate the proceeds of an account that has been maintained for more than six months applications
for repatriation of balance may be made on plain paper to the concerned Regional Office of Reserve
Bank.

Diplomatic Missions, diplomatic personnel and non-diplomatic staff of foreign embassies, nationals of the
concerned foreign countries, holding official passport can open foreign currency deposit accounts.

Opening accounts of Foreign Nationals Resident in India.

a) Foreign nationals who are resident in India are treated as resident accounts. Such accounts are at par
with other resident Rupee accounts.
b) Foreign nationals resident in India can open and maintain resident Rupee account in India.
c) Foreign students studying in India would be considered as Person Resident in India and can open
Rupee Account after observing Normal KYC procedure.

Deposit Schemes for NRI/PIO

NRE - Rupee Accounts

 Deposits can be held in SB/RD/TDR/CA
 Deposits are repatriable with interest
 Interest Rates on Term Deposits may differ from interest rates on domestic Deposit (but
are not tagged to LIBOR Rates)
 Interest Rates on SB @ par with domestic deposits (since 17/11/2005)
 Period of Time Deposits 12-120 months
 Rate of Interest on Demand Loans/OD against Term Deposits is linked to rate of interest
on term deposits
 Credits – FIRs or proceeds of repatriable Deposits (FCNR/NRE)
 No Local credits
 Transfer from NRO Account within overall limit of USD 1 million
(permitted from NRO for repatriation) for financial year subject to
Payment of taxes as applicable.
 No Income Tax or TDS as of Now
 Joint Accounts – Each holder should be NRI – Relaxation by RBI by allowing to open
Joint Accounts along with resident but mode of operation should be ‘F’ or ‘S’

NRO - Rupee Deposits

 It can be held jointly with other non-residents or residents
 The deposit can be opened in Savings Bank/ Current Accounts and Term Deposits
 Accounts can be withdrawn for making local payments in Rupees.
 Investment in shares/securities/immovable properties on non-repatriation basis with general or
specific permission from RBI.
Repatriation from NRO A/c is permitted up to an amount not exceeding USD 1 million per financial year,
subject to payment of the applicable taxes/undertaking/certificate from Chartered Accountant.
FCNR (B) Deposits – Features
 Term Deposits - only for NRIs
 Can be opened jointly with another Non resident
 Can be opened jointly with a resident – Mode of operation ‘F’ or ‘S’
 US Dollar, Canadian Dollars & Australian Dollars, Pound Sterling, EURO & Japanese Yen
 Our Bank opend FCNR(B) deposits in five currencies excluding Japanese Yen
 Period 12- 60 months only
 Deposits are repatriable with interest
 No interest is payable if the deposit is closed within a year.
 Premature payments will attract swap costs

Salient features (FCNR & NRE)

 Conversion of FCNR(B) to NRE Deposits and vice versa is permitted
 Such conversion of premature deposits will attract penal interest provisions
 Proceeds of NRNR deposits can be credited to NRE accounts on maturity but not to FCNR(B)
Accounts
 Proceeds of premature NRNR deposits should be credited to NRO accounts only

Returning NRIs/ PIO

May continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable
property situated outside India, if such currency, security or property was acquired, held or owned when
resident outside India.

RESIDENT FOREIGN CURRENCY ACCOUNTS

NRIs returning to India for permanent settlement can open RFC accounts.

Permissible Credits
Balance in NRE/FCNR accounts on arrival in India (Fixed deposits can be closed prematurely without
penalty or held till maturity and then credited to RFC a/c.
To maintain outside earnings in convertible foreign exchange.
All NRIs who had been resident outside India for a continuous period for 1 year eligible.
Remittances from abroad being sales proceeds of assets held abroad or income earned abroad.
Proceeds of foreign currency notes /Travellers cheques brought into India.
RFC accounts are at present opened in USD only. Can be opened by PIOs/NRIs returning to India after
staying abroad.
Maintained in USD in Savings Bank/Current account or Term Deposit of 12/36 months duration.
No cheque book issued for RFC - SB /Current Account.
Interest payable in USD – can be drawn in India rupees on conversion.
Joint holding with another person eligible to open RFC Account is permitted.
Can be opened jointly with close resident relative - Mode of operation ‘F’ or ‘S’

Funds can be used to make bonafide payments abroad.

Withdrawals can be made for making payments in India and are permitted in Rupees only.
 ADVANCES TO NRIS

 Potential available & unexploited

 Since Sept-2004, RBI has permitted other advances to NRIs in addition to Housing loans
& Mortgage Loans
 FEMA deals with Purpose of Advance, Repayment mode and Supervision & follow-up
 RBI has permitted the Banks to design products within the parameters of FEMA
guidelines

Who can borrow against TDRs?

 A Power of Attorney holder can borrow on behalf of the borrower for loans in Rupee
 For availing a loan in Foreign Currency the borrower has to avail himself
 Advances against FCNR/NRE deposits should not exceed Rs.100 Lacs

Loans & Advances to NRI

Permitted Purposes
 For Personal Purposes
 House
 Education
 Vehicle
 liquidity mismatch
 For carrying on Business activities
Prohibited purposes
 Re lending purposes
 Investment in Chit Fund Business
 Investment in Nidhi Company
 Agricultural & plantation activities
 Investment in real estate business
 Investment in Transferable Development Rights
 Investment in capital market including margin trading & derivatives

Foreign Currency Loans to NRIs

 FC loans are permitted only against Deposits

 FC loans are permitted to the Depositor only
 Documents are to be executed by the depositors (PoAs not permitted)
 Loan repayment programme should be within the maturity period of Deposit
 Purposes for investment outside India
 Repayment by fresh inward remittances or proceeds of the deposit
 Banks are allowed to formulate FC loan to NRI scheme with proper monitoring & Policy of
the Bank’s Board

Rupee Loans for NRI’s requirement in India

Excepting the aforesaid prohibited purposes the Banks are permitted to lay down their lending policies
with the approval of the board stipulating the rate of interest, Repayment programme, margins in tune
with the relevant directives of the DBOD, RBI.

Advances for NRIs

 Advances against FCNR (B) Deposits

 Advances against NRE Accounts
 Advances against NRO Accounts
 Total Advances to NRI against Term Deposits not to exceed Rs. 1 crore
 Advances for Housing purposes
 Advances against mortgage of Property
 Advances for purchase of Car
 Advances by pledge of Jewellery
 Advances for education for wards of NRIs
 Advances for general purposes - Personal Loans
Housing Loans to NRIs

15. For acquisition of residential accommodation in India only

16. Loan in Rupee Amount only
17. Amount of Loan, Repayment & margin money will on par with the resident borrowers
18. Loan amount shall not be credited to NRE / FCNR accounts of the borrower
19. Equitable mortgage of the house acquired should be obtained
20. Repayments through debit to NRE / FCNR or NRO accounts (FIRs as well as income derived in
India from the House property)
21. Close Relatives can also repay by debit to their account and credit to borrower’s loan account