The Foreign Exchange Management Act, 1999 (FEMA) empowers the Reserve Bank of India (RBI) to frame regulations to restrict, regulate and prohibit the maintenance of deposits between a person resident in India (PRI) and a person resident outside India (PROI). These regulations are known as Foreign Exchange Management (Deposit) Regulations, 2016 notified under Notification No. FEMA 5(R)/2016-RB of April 1, 2016, (FEMA 5(R)) as amended from time to time which also prescribes maintenance of accounts in India by PROI.
(Explanation: ‘Deposit’ includes deposit of money with a bank, company, proprietary concern, partnership firm, corporate body, trust or any other person)
No PRI shall accept any deposit from, or make any deposit with, a person resident outside India except as provided under FEMA and Foreign Exchange Management (Deposit) Regulations, 2016.
Nothing contained in these Regulations shall apply to the following:
An authorised dealer/ authorised bank can accept deposits from persons resident outside India in following accounts:
|Particulars||Non-Resident (External) Rupee Account Scheme
|Foreign Currency (Non-Resident) Account (Banks) Scheme [FCNR (B) Account]||Non-Resident Ordinary Rupee Account Scheme [NRO Account]|
|Who can open an account||NRIs and PIOs
Individual/entities of Pakistan and Bangladesh shall require prior approval of the Reserve Bank of India
|Same as NRE Account
Note: Remittances from outside India for opening of or crediting to these accounts should be made in the designated currency in which the account is desired to be opened/ maintained, else swap of currency other than designated to designated is allowed.
|Any person resident outside India for putting through bonafide transactions in rupees.
Individuals/ entities of Pakistan nationality/ origin and entities of Bangladesh origin require the prior approval of the Reserve Bank of India.
Post Offices in India may maintain savings bank accounts in the names of PROI and allow operations on these accounts subject to the same terms and conditions as are applicable to NRO accounts maintained with an authorised dealer/ authorised bank.
|Joint account||May be held jointly in the names of two or more NRIs/ PIOs.
NRIs/ PIOs can hold jointly with a resident relative on ‘former or survivor’ basis (relative as defined in Companies Act, 2013). The resident relative can operate the account as a Power of Attorney holder during the life time of the NRI/ PIO account holder.
|Same as NRE Account||May be held jointly in the names of two or more NRIs/ PIOs.
May be held jointly with residents on ‘former or survivor’ basis.
|Type of Account||Savings, Current, Recurring, Fixed Deposit||Term Deposit only||Savings, Current, Recurring, Fixed Deposit|
|Permissible Credits||1. Inward remittance from outside India
2. Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques
3. Proceeds of foreign currency/ bank notes tendered by account holder during his temporary visit to India
4. Interest accruing on the account
5. Interest on investment
6. Transfer from other NRE/ FCNR(B) accounts
7. Maturity or sale proceeds of investments, Refund of share/ debenture subscriptions to new issues of Indian companies, Refund of application/ earnest money/ purchase consideration made for purchase of residential/ commercial property (if such investments/subscriptions were made from this account or through inward remittance).
8. Current income like rent, dividend, pension, interest etc.
|Same as NRE Account||1. Inward remittances from outside India
2. Legitimate dues in India
3. Transfers from other NRO accounts
|Permissible Debits||Local disbursements, remittance outside India, transfer to other NRE/ FCNR(B) accounts and investments in India.||Same as NRE Account||Local payments, transfers to other NRO accounts or remittance of current income abroad.|
|Interest||Interest bearing||Interest bearing||Interest bearing|
Apart from the above 3 types, deposits can be accepted by Authorised dealer/banks through following accounts from Person Resident Outside India:
1. SNRR Account:
Any person resident outside India, having a business interest in India, can open a Special Non-Resident Rupee Account (SNRR account) with an authorised dealer for the purpose of putting through bona fide transactions in rupees which are in conformity with the provisions of the Act, rules and regulations made thereunder. The features of the SNRR account are:
2. Escrow Account
a. Resident or non-resident corporate/ acquirers of shares/ convertible debentures may open Escrow account in INR.
b. Transactions shall be in accordance with the Foreign Exchange Management (Transfer or Issue of Security by a person resident Outside India) Regulations, 2000 and relevant regulations of the Securities and Exchange Board of India.
c. The accounts shall be non-interest bearing.
3. Other Accounts / Deposits
a. A deposit made by an Authorised Dealer with its branch, head office or correspondent outside India, and vice-versa will be governed by the directions issued by the Reserve Bank in this regard.
b. 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. The credits permitted to such accounts are only freight or passage fare collections in India or by inward remittances through banking channels from its office outside India.
c. 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 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.
d. Opening of such accounts by companies/ entities of Pakistan/ Bangladesh ownership/ nationality would require the prior approval of the Reserve Bank.
(Person of Indian Origin (PIO) for the above purpose shall mean 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:
Explanation: for the purpose of this sub-regulation, the expression ‘Person of Indian Origin’ includes an ‘Overseas Citizen of India’ cardholder within the meaning of Section 7(A) of the Citizenship Act, 1955.))
(The author of this article is a Practicing Company Secretary and can be reached at email@example.com)
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