IIBF-Certificate Examination in Foreign Exchange Facilities for Individuals

          The primary objective this IIBF course is to make the branch officials familiar with the FEMA provisions that impact their day to day functioning at the branch level.    

This exam is being introduced pursuant to the recommendation of a committee of RBI.

          Normally foreign exchange transactions pertaining to individuals are handled at branches only and are not referred to specialised forex cells.

          The course covers ‘Foreign Exchange Facilities for individuals under FEMA1999’

RBIs FAQs’ on Forex Facilities for Residents (Individuals)

(updated up to November 21, 2014)

For full details refer to Reserve Bank of India website:

Introduction :

1. The legal framework for administration of foreign exchange transactions in India is provided by the Foreign Exchange Management Act, 1999. Under the Foreign Exchange Management Act, 1999 (FEMA), which came into force with effect from June 1, 2000, all transactions involving foreign exchange have been classified either as capital or current account transactions.
2. All transactions undertaken by a resident that do not alter his / her assets or liabilities, including contingent liabilities, outside India are current account transactions.
3. In terms of Section 5 of the FEMA, persons resident in India1 are free to buy or sell foreign exchange for any current account transaction except for those transactions for which drawal of foreign exchange has been prohibited by Central Government, such as remittance out of lottery winnings, remittance of income from racing/riding, etc., or any other hobby, remittance for purchase of lottery tickets, banned / proscribed magazines, football pools, sweepstakes, etc., payment of commission on exports made towards equity investment in Joint Ventures/ Wholly Owned Subsidiaries abroad of Indian companies, remittance of dividend by any company to which the requirement of dividend balancing is applicable, payment of commission on exports under Rupee State Credit Route, except commission up to 10% of invoice value of exports of tea and tobacco and payment related to “call back services” of telephones. Foreign Exchange Management (Current Account Transactions) Rules, 2000 - Notification [GSR No.381(E)] dated May 3, 2000, as amended from time to time, is available in the Official Gazette as well as, as an Annex to our Master Circular on Miscellaneous Remittances from India–Facilities for Residents available at our website www.mastercirculars.rbi.org.in.

I. Guidelines on Travel Related Matters

Q. 1. Who are authorized by the Reserve Bank to sell foreign exchange for travel purposes?

Ans. Foreign exchange can be purchased from any authorised person, such as Authorised Dealer (AD) Category-I bank and AD Category II. Full-Fledged Money Changers (FFMCs) are also permitted to release exchange for business and private visits.

Q. 2. Who is an Authorized Dealer?

Ans. An Authorised Dealer is any person specifically authorized by the Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities (the list of ADs is available on www.rbi.org.in) and normally includes banks.

Q. 3. How much foreign exchange can one buy when traveling abroad on private visits to a country outside India?

Ans. For private visits abroad, other than to Nepal and Bhutan, viz., for tourism purposes, etc., any resident can obtain foreign exchange up to an aggregate amount of USD 10,000, from an Authorised Dealer, in any one financial year, on self-declaration basis, irrespective of the number of visits undertaken during the year. This limit of USD 10,000 or its equivalent per financial year for private visits can also be availed of by a person who is availing of foreign exchange for travel abroad for any purposes, such as, for employment or immigration or studies.

No foreign exchange is available for visit to Nepal and/or Bhutan for any purpose.

A resident Indian is allowed to take INR of denomination of Rs.100 or lesser denomination to Nepal and Bhutan without limit.

Q. 4. How much foreign exchange is available for a business trip?

Ans. For business trips abroad to countries, other than to Nepal and Bhutan, a person can avail of foreign exchange up to USD 25,000 per visit. Visits in connection with attending of an international conference, seminar, specialised training, study tour, apprentice training, etc., are treated as business visits. Release of foreign exchange exceeding USD 25,000 for business travel abroad (other than to Nepal and Bhutan), irrespective of the period of stay, requires prior permission from the Reserve Bank.

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.

Investments in Bhutan are permitted in Indian Rupees as well as in freely convertible currencies. If investment is made in freely convertible currency/ies, sale/winding up proceeds are required to be repatriated to India in freely convertible currencies.

Q. 5. How much foreign currency can be taken while buying foreign exchange for travel abroad?

Ans. Travellers going to all countries other than (a) and (b) below are allowed to purchase foreign currency notes / coins only up to USD 3000. Balance amount can be carried in the form of travellers cheque or banker’s draft. Exceptions to this are (a) travellers proceeding to Iraq and Libya who can draw foreign exchange in the form of foreign currency notes and coins not exceeding USD 5000 or its equivalent; (b) travellers proceeding to the Islamic Republic of Iran, Russian Federation and other Republics of Commonwealth of Independent States who can draw entire foreign exchange in the form of foreign currency notes or coins. For travellers proceeding to the Haj/Umrah pilgrimage, full amount of BTQ entitlement in cash or up to the cash limit specified by the Haj Committee of India, may be released by the ADs and FFMCs.

Q. 6. How much foreign exchange can be drawn for medical treatment abroad?

Ans. AD Category I banks and AD Category II, may release foreign exchange up to USD 100,000 or its equivalent to resident Indians for medical treatment abroad on self declaration basis, without insisting on any estimate from a hospital/doctor in India/abroad. A person visiting abroad for medical treatment can obtain foreign exchange exceeding the above limit, provided the request is supported by an estimate from a hospital/doctor in India/abroad.

An amount up to USD 25,000 is allowed for maintenance expenses of a patient going abroad for medical treatment or check-up abroad, or to a person for accompanying as attendant to a patient going abroad for medical treatment/check-up.

The amount of USD 25,000 allowed to the patient going abroad is in addition to the limit of USD 100,000 mentioned above.

Q. 7. What are the facilities available to students for pursuing their studies abroad?

Ans. For studies abroad the estimate received from the institution abroad or USD 100,000, per academic year, whichever is higher, may be availed of from an AD Category I bank and AD Category II. Students going abroad for studies are treated as Non-Resident Indians (NRIs) and are eligible for all the facilities available to NRIs under FEMA, 1999. Educational and other loans availed of by students as residents in India can be allowed to continue. A student holding NRO account may withdraw and repatriate up to USD 1 million per financial year from his NRO account. The student may avail of an amount of USD 10,000 or its equivalent for incidental expenses out of which USD 3000 or its equivalent may be carried in the form of foreign currency while going for study abroad.

Q. 8. What are the documents required for withdrawal of Foreign Exchange for the above purpose?

Ans. Documentation may be done as advised by the Authorised Dealer.

Q. 9. How much foreign exchange is available to a person going abroad on employment?

Ans. A person going abroad for employment can draw foreign exchange up to USD 100,000 from any Authorised Dealer in India on the basis of self-declaration.

Q. 10. How much foreign exchange is available to a person going abroad on emigration?

Ans. A person going abroad on emigration can draw foreign exchange from AD Category I bank and AD Category II up to the amount prescribed by the country of emigration or USD 100,000. He can draw foreign exchange up to USD 100,000 on self- declaration basis from an Authorised Dealer in India This amount is only to meet the incidental expenses in the country of emigration. No amount of foreign exchange can be remitted outside India to become eligible or for earning points or credits for immigration. All such remittances require prior permission of the Reserve Bank. If requirement exceeds USD 100,000, the person requires to obtain the prior approval from the Reserve Bank.

Q. 11. Is there any category of visit which requires prior approval from the Reserve Bank or the Government of India?

Ans. Dance troupes, artistes, etc., who wish to undertake cultural tours abroad, should obtain prior approval from the Ministry of Human Resources Development (Department of Education and Culture), Government of India, New Delhi.

Q. 12. Whether permission is required for receiving grant/donation from abroad under the Foreign Contribution Regulation Act, 1976?

Ans. The Foreign Contribution Regulation Act, 1976 is administered and monitored by the Ministry of Home Affairs whose address is given below:

Foreigners Division, Jaisalmer House, 26, Mansingh Road, New Delhi-110011

No specific approval from the Reserve Bank is required in this regard.

Q. 13. How many days in advance one can buy foreign exchange for travel abroad?

Ans. Permissible foreign exchange can be drawn 60 days in advance. In case it is not possible to use the foreign exchange within the period of 60 days, it should be immediately surrendered to an authorised person. However, residents are free to retain foreign exchange up to USD 2,000, in the form of foreign currency notes or TCs for future use or credit to their Resident Foreign Currency (Domestic) [RFC (Domestic)] Accounts.

Q. 14. Can one pay by cash full rupee equivalent of foreign exchange being purchased for travel abroad?

Ans. Foreign exchange for travel abroad can be purchased from an authorized person against rupee payment in cash only up to Rs.50,000/-. However, if the Rupee equivalent exceeds Rs.50,000/-, the entire payment should be made by way of a crossed cheque/ banker’s cheque/ pay order/ demand draft/ debit card / credit card / prepaid card only.

Q. 15. Is there any time-frame for a traveller who has returned to India to surrender foreign exchange?

Ans. On return from a foreign trip, travellers are required to surrender unspent foreign exchange held in the form of currency notes and travellers cheques within 180 days of return. However, they are free to retain foreign exchange up to USD 2,000, in the form of foreign currency notes or TCs for future use or credit to their Resident Foreign Currency (Domestic) [RFC (Domestic)] Accounts.

Q. 16. Should foreign coins be surrendered to an Authorised Dealer on return from abroad?

Ans. The residents can hold foreign coins without any limit.

Q. 17. How much foreign exchange can a resident individual send as gift / donation to a person resident outside India?

Ans. Any resident individual, if he so desires, may remit the entire limit of USD 125,000 in one financial year under LRS as gift to a person residing outside India or as donation to a charitable/educational/ religious/cultural organization outside India. Remittances exceeding the limit of USD 125,000 will require prior permission from the Reserve Bank.

Q. 18. Is it permitted to use International Credit Card (ICC)/ATM/Debit card for undertaking foreign exchange transactions?

Ans. Use of International Credit Cards (ICCs) / ATMs/ Debit Cards can be made for travel abroad in connection with various purposes and for making personal payments like subscription to foreign journals, internet subscription, etc. The entitlement of foreign exchange on International Credit Cards (ICCs) is limited by the credit limit fixed by the card issuing authority only. With ICCs one can (i) meet expenses/make purchases while abroad (ii) make payments in foreign exchange for purchase of books and other items through internet in India. If the person has a foreign currency account in India or with a bank overseas, he/she can even obtain ICCs of overseas banks and reputed agencies. However, use of International Credit Cards/ATMs/Debit Cards is NOT permitted for prohibited transactions indicated in Schedule -1 of FEM (CAT) Rules 2000 such as purchase of lottery tickets, banned magazines etc,.

Use of these instruments for payment in foreign exchange in Nepal and Bhutan is not permitted.

Q. 19. How much Indian currency can a person carry while going abroad?

Ans. Residents are free to take outside India (other than to Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs. 10,000 - per person. They may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.

Explanation : 'Commemorative Coin' includes coin issued by Government of India Mint to commemorate any specific occasion or event and expressed in Indian currency.

Q. 20. How much Indian currency can be brought in while coming into India?

Ans. A resident of India, who has gone out of India on a temporary visit may bring into India at the time of his return from any place outside India (other than Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.10,000 A person can take or send out of India to Nepal or Bhutan, currency notes of Government of India and Reserve Bank notes, in denominations not exceeding Rs.100.

Q. 21. How much foreign exchange can be brought in while visiting India?

Ans. A person coming into India from abroad can bring with him foreign exchange without any limit. However, if the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in exceeds USD 10,000 or its equivalent and/or the value of foreign currency alone exceeds USD 5,000 or its equivalent, it should be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.

Q. 22. Is it required to follow complete export procedure when a gift parcel is sent outside India?

Ans. A person resident in India is free to send (export) any gift article of value not exceeding Rs.5,00,000 provided export of that item is not prohibited under the extant Foreign Trade Policy and the exporter submits a declaration that goods of gift are not more than Rs.5,00,000 in value.

Export of goods or services up to Rs.5,00,000 may be made without furnishing the declaration in Form GR/ SDF/ PP/ SOFTEX, as the case may be.

Q. 23. How much jewellery can be carried while going abroad?

Ans. Taking personal jewellery out of India is as per the Baggage Rules, governed and administered by Customs Department, Government of India. While no approval of the Reserve Bank is required in this case, approvals, if any, required from Customs Authorities may be obtained.

Q. 24. Can a resident extend local hospitality to a non-resident?

Ans. A person resident in India is free to make any payment in Indian Rupees towards meeting expenses, on account of boarding, lodging and services related thereto or travel to and from and within India, of a person resident outside India, who is on a visit to India.

Q. 25. Can residents purchase air tickets in India for their travel not touching India?

Ans. Residents may book their tickets in India for their visit to any third country. For instance, residents can book their tickets for travel from London to New York, through domestic/foreign airlines in India itself.

Q. 26. Can a resident open a foreign currency denominated account in India?

Ans. Persons resident in India are permitted to maintain foreign currency accounts in India under the following three Schemes:

a. Exchange Earners Foreign Currency Accounts:-

All categories of resident foreign exchange earners can credit up to 100 per cent of their foreign exchange earnings, as specified in the paragraph 1 (A) of the Schedule to Notification No. FEMA 10/2000-RB dated 3rd May, 2000 and as amended from time to time, to their EEFC Account with an Authorised Dealer in India. Funds held in EEFC account can be utilised for all permissible current account transactions and also for approved capital account transactions as specified by the extant Rules/Regulations/ Notifications/ Directives issued by the Government/RBI from time to time. The account is maintained in the form of a non-interest bearing current account.

b. Resident Foreign Currency Accounts : -

A person resident in India may open, hold and maintain with an Authorised Dealer in India a Resident Foreign Currency (RFC) Account to keep their foreign currency assets which were held outside India at the time of return can be credited to such accounts. The foreign exchange received as (i) pension of any other superannuation or other monetary benefits from the employer outside India; (ii) received or acquired as gift or inheritance from a person referred to sub-section (4) of section 6 of FEMA, 1999 or (iii) referred to in clause (c) of section 9 of the Act or acquired as gift or inheritance there from or (iv) received as the proceeds of life insurance policy claims/maturity/ surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority; may also be credited to this account.

RFC account can be maintained in the form of current or savings or term deposit accounts.

The funds in RFC account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment outside India.

c. Resident Foreign Currency (Domestic) Account:-

A resident Individual may open, hold and maintain with an Authorized Dealer in India, a Resident Foreign Currency (Domestic) Account, out of foreign exchange acquired in the form of currency notes, Bank notes and travellers cheques, from any of the sources like, payment for services rendered abroad, as honorarium, gift, services rendered or in settlement of any lawful obligation from any person not resident in India. The account may also be credited with/opened out of foreign exchange earned abroad like proceeds of export of goods and/or services, royalty, honorarium, etc., and/or gifts received from close relatives (as defined in the Companies Act) and repatriated to India through normal banking channels. The account shall be maintained in the form of Current Account and shall not bear any interest. There is no ceiling on the balances in the account. The account may be debited for payments made towards permissible current and capital account transactions.

Q. 27. Can a person resident in India hold assets outside India?

Ans. In terms of sub-section 4, of Section (6) of the Foreign Exchange Management Act, 1999, a person resident in India is free 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 by such person when he was resident outside India or inherited from a person who was resident outside India. (Please also refer to the Liberalised Remittance Scheme of USD 125,000 discussed below).

II. Liberalised Remittance Scheme (LRS) of USD 125,000

Q. 28. What is the Liberalised Remittance Scheme of USD 125,000 ?

Ans. Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 125,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. The limit was reduced from USD.200,000 to USD.75,000 with effect from August 14, 2013 but was subsequently increased to USD 125,000 w.e.f June 3, 2014

.

Q. 29. Please provide an illustrative list of capital account transactions permitted under the scheme.

Ans. Under the Scheme, resident individuals can acquire and hold shares or debt instruments or any other assets including immovable property outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India for carrying out transactions permitted under the Scheme.

Q. 30. What are the prohibited items under the Scheme?

Ans. The remittance facility under the Scheme is not available for the following:

i) Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery tickets/sweep stakes, proscribed magazines, etc.) or any item restricted under Schedule II of Foreign Exchange Management (Current Account Transactions) Rules, 2000;

ii) Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty;

iii) Remittances for purchase of FCCBs issued by Indian companies in the overseas secondary market;

iv) Remittance for trading in foreign exchange abroad;

v) Remittances directly or indirectly to Bhutan, Nepal, Mauritius and Pakistan;

vi) Remittances directly or indirectly to countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and territories”, from time to time; and

viii) Remittances directly or indirectly to those individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately by the Reserve Bank to the banks.

Q. 31. Whether LRS facility is in addition to existing facilities detailed in Schedule III under remittances?

Ans. The facility under the Scheme is in addition to those already available for private travel, business travel, studies, medical treatment, etc., as described in Schedule III of Foreign Exchange Management (Current Account Transactions) Rules, 2000. The Scheme can also be used for these purposes.

However, gift and donation remittances cannot be made separately and have to be made under the Scheme only. Accordingly, resident individuals can remit gifts and donations up to USD 125,000 per financial year under the Scheme.

Further, a resident individual can give rupee gifts to his visiting NRI/PIO close relatives [means relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque/electronic transfer within the overall limit of USD 125,000 per financial year for the resident individual and the gifted amount should be credited to the beneficiary’s NRO account. An individual resident can lend money by way of crossed cheque /electronic transfer to a Non resident Indian (NRI)/ Person of Indian Origin (PIO) close relative [means relative as defined in Section 6 of the Companies Act, 1956] within the overall limit of USD 125,000 per financial year under the Liberalised Remittance Scheme, to meet the borrower’s personal or business requirements in India, subject to conditions. The loan should be interest free and have a maturity of minimum one year and cannot be remitted outside India.

Q. 32. Are resident individuals under this Scheme required to repatriate the accrued interest/dividend on deposits/investments abroad, over and above the principal amount?

Ans. The investor can retain and reinvest the income earned on investments made under the Scheme. At present, the residents are not required to repatriate the funds or income generated out of investments made under the Scheme.

Q. 33. Are remittances under the Scheme on gross basis or net basis (net of repatriation from abroad)?

Ans. Remittance under this scheme is on a gross basis.

Q. 34. Can remittances under the facility be consolidated in respect of family members?

Ans. Remittances under the facility can be consolidated in respect of family members subject to the individual family members complying with the terms and conditions of the Scheme.

Q. 35. Can one use the Scheme for purchase of objects of art (paintings, etc.) either directly or through auction house?

Ans. Remittances under the Scheme can be used for purchasing objects of art subject to the provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of India.

Q. 36. Is the AD required to check permissibility of remittances based on nature of transaction or allow the same based on remitters declaration?

Ans. AD will be guided by the nature of transaction as declared by the remitter and will certify that the remittance is in conformity with the instructions issued by the Reserve Bank, in this regard from time to time.

Q. 37. Can remittance be made under this Scheme for acquisition of ESOPs?

Ans. The Scheme can also be used for remittance of funds for acquisition of ESOPs.

Q. 38. Is this scheme in addition to acquisition of ESOPs linked to ADR/GDR (i.e USD 50,000/- for a block of 5 calendar years)?

Ans. The remittance under the Scheme is in addition to acquisition of ESOPs linked to ADR/GDR.

Q. 39. Is this Scheme is in addition to acquisition of qualification shares (i.e. USD 20,000 or 1% of paid up capital of overseas company, whichever is lower)?

Ans. The remittance under the Scheme is in addition to acquisition of qualification shares.

Q. 40. Can a resident individual invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes, etc., under this scheme?

Ans. A resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt securities, promissory notes, etc. under this Scheme. Further, the resident can invest in such securities out of the bank account opened abroad under the Scheme.

Q. 41. Can an individual, who has availed of a loan abroad while as a non-resident Indian repay the same on return to India, under this Scheme as a resident?

Ans. This is permissible.

Q. 42. Is it mandatory for resident individuals to have PAN number for sending outward remittances under the Scheme?

Ans. It is mandatory to have PAN number to make remittances under the Scheme.

Q. 43. In case a resident individual requests for an outward remittance by way of issuance of a demand draft (either in his own name or in the name of the beneficiary with whom he intends putting through the permissible transactions) at the time of his private visit abroad, whether the remitter can effect such an outward remittance against self declaration?

Ans. Such outward remittance in the form of a DD can be effected against the declaration by the resident individual in the format prescribed under the Scheme.

Q. 44. Are there any restrictions on the frequency of the remittance?

Ans. There is no restriction on the frequency. However, the total amount of foreign exchange purchased from or remitted through, all sources in India during a financial year should be within the cumulative limit of USD 125,000.

Q. 45. What are the requirements to be complied with by the remitter?

Ans. The individual will have to designate a branch of an AD through which all the remittances under the Scheme will be made. The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the remittance. If the applicant seeking to make the remittance is a new customer of the bank, Authorised Dealers should carry out due diligence on the opening, operation and maintenance of the account. Further, the AD should obtain bank statement for the previous year from the applicant to satisfy themselves regarding the source of funds. If such a bank statement is not available, copies of the latest Income Tax Assessment Order or Return filed by the applicant may be obtained. He has to furnish an application-cum-declaration in the specified format regarding the purpose of the remittance and declare that the funds belong to him and will not be used for purposes prohibited or regulated under the Scheme.

Q. 46. Can an individual, who has repatriated the amount remitted during the financial year, avail of the facility once again?

Ans. Once a remittance is made for an amount up to USD 125,000 during the financial year, he would not be eligible to make any further remittances under this scheme, even if the proceeds of the investments have been brought back into the country.

Q. 47. Can remittances be made only in US Dollars?

Ans. The remittances can be made in any freely convertible foreign currency equivalent to USD 125,000 in a financial year.

Q. 48. In the past resident individuals could invest in overseas companies listed on a recognised stock exchange abroad and which has the shareholding of at least 10 per cent in an Indian company listed on a recognised stock exchange in India. Does this condition still exist?

Ans. Investment by resident individual in overseas companies is subsumed under the Scheme of USD 125,000. The requirement of 10 per cent reciprocal shareholding in the listed Indian companies by such overseas companies has since been dispensed with.

III. Guidelines for Financial Intermediaries offering special schemes, protection under the Scheme.

Q. 49. Are intermediaries expected to seek specific approval for making overseas investments available to clients?

Ans. Banks including those not having operational presence in India are required to obtain prior approval from Reserve Bank for soliciting deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company.

Q. 50. Are there any restrictions on the kind/quality of debt or equity instruments an individual can invest in?

Ans. No ratings or guidelines have been prescribed under the Liberalised Remittance Scheme of USD 125,000 on the quality of the investment an individual can make. However, the individual investor is expected to exercise due diligence while taking a decision regarding the investments which he or she proposes to make.

Q. 51. Whether credit facilities in Indian Rupees or foreign currency would be permissible against security of such deposits?

Ans. No. The Scheme does not envisage extension of credit facility against the security of the deposits. Further, the banks should not extend any kind of credit facilities to resident individuals to facilitate remittances under the Scheme.

Q. 52. Can bankers open foreign currency accounts in India for residents under the Scheme?

Ans. No. Banks in India cannot open foreign currency accounts in India for residents under the Scheme.

Q. 53. Can an Offshore Banking Unit (OBU) in India be treated on par with a branch of the bank outside India for the purpose of opening of foreign currency accounts by residents under the Scheme?

Ans. No. For the purpose of the Scheme, an OBU in India is not treated as an overseas branch of a bank in India.

Q. 54. Are individuals resident in India permitted to include non-resident close relatives as joint holder(s) in their resident bank accounts?

Ans. Individuals resident in India are permitted to include non-resident close relative(s) (relatives as defined in Section 6 of the Companies Act, 1956) as joint holder(s) in their resident bank accounts on ‘former or survivor’ basis. However, such non-resident Indian close relatives shall not be eligible to operate the account during the life time of the resident account holder.

Q. 55. Can a Non-Resident Indian (NRI) open NRE/FCNR (B) account with their resident close relative?

Ans. Non-Resident Indian (NRI), as defined in FEMA Notification No. 5/ 2000-RB dated May 3, 2000 may be permitted to open NRE/FCNR(B) account with their resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor’ basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the life time of the NRI/PIO account holder.

Q. 56. Can a resident individual make a rupee gift to a NRI/PIO who is a close relative of resident individual by of crossed cheque/ electronic transfer?

Ans. A resident individual is permitted to make a rupee gift to a NRI/PIO who is a close relative of the resident individual {close relative as defined in Section 6 of the Companies Act, 1956} by way of crossed cheque/ electronic transfer. The amount should be credited to the Non-Resident (Ordinary) Rupee Account (NRO) Account of the NRI/ PIO and credit of such gift amount may be treated as an eligible credit to NRO account. The gift amount would be within the overall limit of USD 125,000 per financial year as permitted under the Liberalised Remittance Scheme (LRS) for a resident individual. It would be the responsibility of the resident donor to ensure that the gift amount being remitted is under the LRS and all the remittances under the LRS during the financial year including the gift amount have not exceeded the limit prescribed under the LRS.

Q. 57 Are resident individuals permitted to lend to a Non-resident Indian (NRI)/ Person of Indian Origin (PIO)?

Ans. A resident individual may now lend to a Non resident Indian (NRI)/ Person of Indian Origin (PIO) close relative [means relative as defined in Section 6 of the Companies Act, 1956] by way of crossed cheque /electronic transfer, subject to the following conditions:

(i) the loan is free of interest and the minimum maturity of the loan is one year;

(ii) the loan amount should be within the overall limit under the Liberalised Remittance Scheme of USD 125,000 per financial year available for a resident individual. It would be the responsibility of the lender to ensure that the amount of loan is within the Liberalised Remittance Scheme limit of USD 125,000 during the financial year;

(iii) the loan shall be utilised for meeting the borrower's personal requirements or for his own business purposes in India;

(iv) the loan shall not be utilised, either singly or in association with other person, for any of the activities in which investment by persons resident outside India is prohibited, namely;

(a) the business of chit fund, or (b) Nidhi Company, or (c) agricultural or plantation activities or in real estate business, or construction of farmhouses, or (d) trading in Transferable Development Rights (TDRs).

Explanation: For the purpose of item (c) above, real estate business shall not include development of townships, construction of residential / commercial premises, roads or bridges.

(v) The loan amount should be credited to the NRO a/c of the NRI /PIO. Credit of such loan amount may be treated as an eligible credit to NRO a/c;

(vi) the loan amount shall not be remitted outside India; and

(vii) repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the Non-resident Ordinary (NRO)/ Non-resident External (NRE) / Foreign Currency Non-resident (FCNR) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.

Q. 58 Can the loans of Non-resident be repaid by resident close relatives? Can the loans of Non-Resident be repaid by close relatives who are resident in India?

Ans. Where an authorised dealer in India has granted loan to a non-resident Indian in accordance with Regulation 7 of the Notification No. FEMA 4/2000-RB dated May 3, 2000 such loans may also be repaid by resident close relative (relative as defined in Section 6 of the Companies Act, 1956) of the Non-Resident Indian by crediting the borrower’s loan account through the bank account of such relative.

Q. 59 Is meeting of medical expenses of NRIs’ close relatives by Resident Individuals permitted?

Ans. Where the medical expenses in respect of NRI close relative (relative as defined in Section 6 of the Companies Act, 1956) are paid by a resident individual, such a payment being in the nature of a resident to resident transaction may be covered under the term “services related thereto” under Regulation 2(i) of Notification No.FEMA16/2000-RB dated May 3, 2000.

General Information : For further details/guidance, please approach any bank authorised to deal in foreign exchange or contact Regional Offices of the Foreign Exchange Department of the Reserve Bank.

1 A 'person resident in India' is defined in Section 2(v) of FEMA, 1999 as :

A person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include

(A) a person who has gone out of India or who stays outside India, in either case -

for or on taking up employment outside India, or

for carrying on outside India a business or vocation outside India, or

for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

(B) a person who has come to or stays in India, in either case, otherwise than

for or on taking up employment in India ,or for carrying on in India a business or vocation in India, or

for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period any person or body corporate registered or incorporated in India,

an office, branch or agency in India owned or controlled by a person resident outside India,

an office, branch or agency outside India owned or controlled by a person resident in India