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Foreign Exchange Facilities for Residents (As on June 30, 2004)

Introduction

The legal framework for administration of exchange control in India is provided by the Foreign Exchange Management Act, 1999. Under the Act, freedom has been granted for buying and selling of foreign exchange for undertaking current account transactions. However, the Central Government has been vested with powers in consultation with Reserve Bank to impose reasonable restrictions on current account transactions. Accordingly, the Government has issued Notifications GSR.381(E) dated May 3, 2000, and S.O. 301(E) dated March30, 2001, imposing certain restrictions on current account transactions in public interest.

These details are available on the Bank’s website besides with the authorised dealers and regional offices of the Exchange control Department. Our experience so far has been that the residents like to get information on several matters relating to various current account transactions and other incidental issues. This pamphlet contains answers to all such questions in simple language. While preparing replies to questions, special care has been taken to ensure that the replies are drafted in simple words and reference to technical details are avoided.

The Foreign Exchange Management Act,1999 (FEMA), has come into force with effect from June 1, 2000. With introduction of the new Act (in place of FERA) certain structural changes have been introduced and now all transactions involving foreign exchange have been classified either as Capital or Current Account transactions. All transactions undertaken by a resident that do not alter his assets or liabilities outside India are current account transactions. In terms of Section 5 of the FEMA, persons are free to buy or sell foreign exchange for any current account transaction except for those transactions on which Central Government has imposed restrictions, vide its Notification No.G.S.R.381(E) dated May 3, 2000 (as amended from time to time). Full text of the said Notification is available in the Official Gazette. Incidentally, no release of foreign exchange is admissible for any kind of travel to Nepal and Bhutan or for any transaction with persons resident in Nepal and Bhutan.

Some of the commonly or frequently asked questions by residents in connection with foreign exchange facilities or restrictions have been answered in following paragraphs.

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1. How much exchange is available for a business trip?
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Authorised dealers can release foreign exchange up to US$25,000 for a business trip to any country other than Nepal and Bhutan. Release of foreign exchange exceeding US$25,000 for a travel abroad (other than Nepal and Bhutan) for business purposes, irrespective of period of stay, requires prior permission from Reserve Bank. Visits in connection with attending of an international conference, seminar, specialised training, study tour, apprentice training, etc., are treated as business visits. Visit abroad for medical treatment and/or check up also falls within this category.

Q.1 What is direct investment outside India ? +

Direct investment outside India means investment by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity but does not include portfolio investment.

EXCHANGE CONTROL DEPARTMENT NON RESIDENT FOREIGN ACCOUNTS DIVISION

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1. Can foreign tourists open a bank account in India during their short visit ? +

Yes, foreign tourists during their short visit to India can open a Non-Resident (Ordinary) Rupee (NRO) account with any bank dealing in foreign exchange .

1. Does QA 22 Account continue under Foreign Exchange Management Act, 1999 ? +

No. With the introduction of Foreign Exchange Management Act, 1999, the accounts opened by foreign nationals who are resident in India are treated as resident accounts. Such accounts are at par with other resident Rupee accounts.

Who is eligible to advertise on Foreign Satellite Channels? +

Exporters whose export earnings are Rs.10 lakhs or more during each of the preceding two years, or where the payment is to be made out of funds held in RFC or EEFC account of the remitter, are permitted by authorised dealers to make remittance for advertisement on foreign television, in terms of Foreign Exchange Management (Current Account Transactions) Rules, 2000 made by Government of India, vide Notification G.S.R.381(E) dated May 3, 2000. All other cases need to be referred by the authorised dealer to the Reserve Bank of India, for prior approval, before effecting any remittance.

Q.1. What is an NBFC-Infrastructure Finance Company (NBFC-IFC)?

Ans. An NBFC-IFC is a non-deposit taking NBFC which has a minimum of 75% of its total assets deployed towards infrastructure lending. For this purpose, the term ‘infrastructure lending’ means a credit facility extended by an NBFC to a borrower, by way of term loan, project loan subscription to bonds/ debentures/ preference shares/ equity shares in a project company acquired as a part of the project finance package such that subscription amount to be “in the nature of advance” or any other form of long term funded facility for exposure in the infrastructure sub-sectors as notified by the Department of Economic Affairs, Ministry of Finance, Government of India, from time to time.

1. What is the ATS ? +

The ATS is an Application Tracking System, hosted on the public website of the Reserve Bank of India (RBI), which has been developed for members of the public to submit any individual application to RBI and keep track of the status of its disposal thereafter.

Circular dated April 11, 2023 on ‘Framework for acceptance of Green Deposits’

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1. Is it mandatory for the regulated entities (REs) to raise green deposits?

It is not mandatory but in case REs intend to raise green deposits from their customers they should follow the framework prescribed therein.

Q1. What is the Asian Clearing Union (ACU)? +

Ans. The Asian Clearing Union (ACU) was established with its head-quarters at Tehran, Iran, on December 9, 1974 at the initiative of the United Nations Economic and Social Commission for Asia and Pacific (ESCAP), for promoting regional co-operation. The main objective of the clearing union is to facilitate payments among member countries for eligible transactions on a multilateral basis, thereby economizing on the use of foreign exchange reserves and transfer costs, as well as promoting trade among the participating countries.

Q.1. What is RBI-EFT System? +

Ans RBI EFT is a Scheme introduced by Reserve Bank of India (RBI) to help banks offering their customers money transfer service from account to account of any bank branch to any other bank branch in places where EFT services are offered.