On July 3, 2024, the Reserve Bank of India (RBI) issued a new directive under the A.P. (DIR Series) Circular No. 13, bringing significant changes to the regulations governing the release of foreign exchange for miscellaneous remittances. This new circular supersedes previous directives, aiming to streamline regulatory compliances and operational procedures for cross-border remittances.
Detailed Analysis
The RBI has historically permitted Authorized Dealers (ADs) to release foreign exchange for current account transactions up to an upper limit of USD 25,000 or its equivalent, based on a simple letter containing basic information. This was outlined in the A.P. (DIR Series) Circulars No. 16 (September 12, 2002), No. 55 (December 23, 2003), and No. 118 (May 7, 2012). These directives allowed the transactions to proceed without the need for additional documentation, including Form A2, provided the payment was made via a Demand Draft or cheque drawn on the applicant’s bank account.
However, in the latest circular dated July 3, 2024, the RBI has mandated that ADs must now obtain Form A2 in either physical or digital form for all cross-border remittances, regardless of the transaction value. This significant change aims to enhance regulatory compliance and ensure thorough documentation of all foreign exchange transactions.
Key Changes and Implications:
1. Mandatory Form A2 Submission:
- ADs are now required to collect Form A2 for every cross-border remittance.
- This requirement is irrespective of the transaction amount, thereby removing the previous threshold of USD 25,000.
2. Withdrawal of Previous Circulars:
- The directives issued under A.P. (DIR Series) Circular No. 16, 55, and 118 are now withdrawn.
- This withdrawal is effective immediately, marking a shift in the regulatory framework.
3. Compliance with FEMA:
- ADs must continue to ensure compliance with Section 10(5) of the Foreign Exchange Management Act (FEMA), 1999.
- This involves verifying that the transactions do not contravene any provisions of FEMA.
4. Operational Procedures:
- ADs are instructed to bring the contents of this circular to the attention of their constituents.
- The circular is issued under Sections 10(4) and 11(1) of FEMA and remains in line with any other required permissions or approvals under different laws.
The decision to enforce the collection of Form A2 for all transactions is aimed at strengthening the documentation process and ensuring that all cross-border transactions are thoroughly vetted. This change may initially seem burdensome to some, but it is expected to bolster the integrity and transparency of foreign exchange operations in India.
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Reserve Bank of India
RBI/2024-25/47
A.P. (DIR Series) Circular No. 13 Dated: July 03, 2024
To,
All Authorised Dealers in Foreign Exchange
Madam / Dear Sir,
Release of foreign exchange for Miscellaneous Remittances
In terms of the direction issued under the A.P.(DIR Series) Circular No. 16 dated September 12, 2002, A.P.(DIR Series) Circular No. 55 dated December 23, 2003 and A. P. (DIR Series) Circular No.118 dated May 07, 2012, Authorised Dealers are permitted to release foreign exchange for any current account transaction, on the basis of a simple letter containing basic information and subject to an upper limit of USD 25,000 or its equivalent. It was also advised that Authorised Dealers need not obtain any other documents, including Form A2, and that the payment was to be made by the applicant through Demand Draft or a cheque drawn on his / her bank account.
2. With a view on streamlining the regulatory compliances and operational procedures, it is now decided that Authorised Dealers shall obtain Form A2 in physical or digital form for all cross-border remittances irrespective of the value of transaction. Consequently, the above-mentioned circulars stand withdrawn with immediate effect. Authorised Dealers shall continue to take necessary steps, in terms of Section 10(5) of Foreign Exchange Management Act, 1999, to assure themselves that such transactions do not involve any contravention of the provisions of FEMA.
3. Authorised Dealers may bring the contents of this circular to the notice of their constituents.
4. The directions contained in this circular have been issued under sections 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,
(N. Senthil Kumar)
General Manager
