FOREIGN EXCHANGE MANAGEMENT

With the transition to a market-based system for determining the external value of the Indian rupee the foreign exchange market in India gained importance in the early reform period.

Information pertaining to Foreign Exchange Department


RIA No Information Sought Reply given/ Information provided Date of Reply

1
RIA 422/05-06
FED

RBI permission for carrying samples while proceeding on business promotion tours abroad.

No permission or approval of the Reserve Bank of India is required for carrying samples as baggage, while traveling abroad. However, applicant may check with Customs Authorities regarding applicability of Customs Baggage Rules

April 9, 2006

2
229/06-07
FED

1. Eligibility of borrower under Automatic Route of ECB for the purpose of importing capital goods (Fishing Vessels).

2. Whether terms with the lender (Foreign supplier of Equipment) related to debt servicing are in conformity with RBI guidelines.

3. Can any department or Ministry of Government of India other than RBI or Ministry of Finance set additional conditions in this matter? Has RBI delegated any authority to any other Ministry to interfere in this procedure or only RBI is the sole authority in this matter?

Eligibility of borrower is laid down in A.P. (DIR Series) Circular No.5 dated August 1, 2005 which is available on our website www.rbi.org.in at the link http://rbidocs.rbi.org.in/rdocs/notification/PDFs/65065.pdf

Terms of debt have to be in conformity with A.P. (DIR Series) Circular No.5 dated August 1, 2005.

External Commercial Borrowing (ECB) Policy is framed by Government of India in consultation with Reserve Bank of India. Government of India, Ministry of Finance has delegated authority to administer ECB Policy to Reserve Bank of India. ECB can be raised for end-uses specified in the policy. However, transactions like import are governed by the respective policies e.g. Foreign Trade Policy of the Directorate General of Foreign Trade. In other words, if further approval or permission is required from any other regulatory authority or Govt under the relevant laws/regulations, the applicant should take the necessary approval of the concerned agency before effecting the transaction.

Sept 20, 2006.

3
378/07-08
FED

Whether any permission / approval / registration is required from RBI in case of royalty to a Foreign company by an Indian company in consideration of a Trade mark / Franchise Agreement ? If yes, what are the terms and conditions for the same?

Whether there is any notification / regulation governing the payment of royalty to a Foreign Company by an Indian Company to acquire the trademark rights of the foreign company?

Whether there is any restriction on the payment of royalty to the parent foreign companies and payment of royalty for use of TRADE MARK and brand name / Franchise rights without technology transfer under the automatic route of Reserve Bank of India?

Permission from Reserve Bank of India is not required.

The instructions/clarification on purchase of Trademarks for use in India/ payment of Royalty is given in terms of the AP Circular No 14 dated November 28, 2006 and item number 8 of Sch. II to FEM (CAT) Rules, 2000. AP (DIR Series) Circular No. 76 dated February 24, 2004 is placed on our website at the link http://rbidocs.rbi.org.in/rdocs/notification/PDFs/74403.pdf and http://rbidocs.rbi.org.in/rdocs/notification/PDFs/51521.pdf respectively.

Sept 21, 2007

4
495/07-08
FED

RBI guidelines to Indian Residents for purchase of residential property abroad

RBI guidelines on whether Banks operating in India are allowed to give Housing loan for such transactions

The revised guidelines are , the Indian Residents can purchase an immovable property outside India up to a ceiling limit of USD 2,00,000 per financial year under Liberalised Remittance Scheme (LRS).

In terms of paragraph 4 of A.P.(Dir.Series) circular no.51 dated May 8, 2007,
(available on our website at http://rbidocs.rbi.org.in/rdocs/notification/PDFs/77185.pdf )
Authorised Dealers (Banks in India) are not allowed to extend any kind of credit facilities to Resident Individuals to facilitate remittances under the LRS.

Oct 5, 2007

5
RIA 200/07-08
FED

After returning to India after three years, whether an NRI can maintain, hold and operate the foreign currency accounts, which were opened abroad during his stay abroad

Whether such an NRI, during his stay abroad for three years, can open a foreign account abroad jointly along with a close relative such as his mother, who is a resident of India.

Whether such an NRI person after return to India can transfer and make remittance abroad, from his foreign currency accounts held abroad.

As per Sub-section (4) of Section 6 of Foreign Exchange Management Act, 1999, a person resident in India may 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.

As regards holding such foreign account jointly with resident of India, it is not permissible as the pre-condition for opening such foreign account is that the account is opened when the person was resident outside India.

Same as (a) above.

May 16, 2008

6
RIA 1450/07-08
FED

(a) "Is it essential for a Foreign citizen availing "Home Loan" from any Bank / Commercial Bank within India to obtain a permission / No-Objection Certificate from the Reserve Bank of India?"

(b) "What are the other rules / regulations imposed by the Reserve Bank of India for them to avail of Home loans from any Bank /commercial Bank within India?

(If the citizen under consideration is an Indian Resident)."

Foreign nationals of non-Indian origin and resident outside India require specific prior approval of the Reserve Bank of India for acquisition of immovable property. Further, it may be mentioned that under the general permission available, the following categories can freely purchase immovable property in India:

i) Non-Resident Indian (NRI)- that is a citizen of India resident outside India

ii) A foreign national of Indian Origin or Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who

a. at any time, held Indian passport, or

b. who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land / plantation property / farm house in India.

(b) If the applicant is a 'person resident in India' in terms of Section 2 (v) of Foreign Exchange Management Act, 1999, he/she does not require the Reserve Bank of India approval from Foreign Exchange Management Act angle for purchase of immovable property in India. 

Instructions/guidelines/documentation regarding availing Home loan are decided by the commercial bank granting loan. 

 

APPEAL 453/ RIA 1873/07-08
FED

" Can a NRI open a foreign account during his stay abroad, initially in his single name and then add his family member's name"

In terms of Regulation 3 of FEMA Notification No.10/2000-RB dated May 3, 2000, no person resident in India shall open or hold or maintain a foreign currency account, provided further that the Reserve Bank of India(RBI) may on an application made to it, permit a person resident in Ida to open or hold or maintain a foreign currency account subject to such terms and conditions as may be considered necessary. Accordingly, the resident in India will have to approach RBI for our specific approval for our opening/holding/maintaining a foreign currency account with a NRI outside India. As such a resident in India requires RBI approval to open a foreign currency account outside India along-with an NRI.

June 26, 2008

RIA 2388-07-08
FED

Do banks signing contracts for derivatives trade in foreign currency with foreign banks, require RBI permission?

Are banks authorised to trade in derivative product in foreign currency without having written a derivative contract for Corporate or SMEs?

Are Banks to Banks derivatives contracts permitted by RBI without permission?

Is it mandatory for banks to inform RBI for the amount hedged in foreign currency in derivative trade written within stipulated period. Is it mandatory to inform about the nature of Derivative product written?

Any guidelines issued by RBI for foreign currency derivatives contract or agreements.

Can a Corporate/ SMEs be allowed to enter into agreement for sell of foreign currencies without permission from RBI? Are banks permitted to buy foreign currency from corporate/SMEs?

If without any underlying a derivative is written by Indian Banks with Foreign banks, can it be termed Speculative Trade in foreign currencies or not?

If any records submitted to RBI by the following banks, relating to Foreign exchange transaction written by them under Derivatives…

No. Inter bank foreign exchange dealings are permitted freely subject to Board approved policy and limits for treasury functions of which open position and aggregate gap limits are required to be approved by RBI.
Yes.

Yes. Inter bank transactions are permitted without Reserve Bank of India permission.

No. It is not mandatory to report back to back trades in foreign currency.

The guidelines for foreign currency derivative contracts are outlined in the Master Circular 'Risk Management and Inter Bank Dealings" dated July 1, 2008, available on our website: www.rbi.org.in under 'Notification'. However, if you desire to obtain a hard copy of the circular, you may arrange to pay Rs.102/-(Rs.2/- X 52 pages) towards photocopying charges by DD/Bankers' Cheque/PO drawn in favour of Reserve Bank of India(RBI)or deposit cash, at any of the RBI offices.

Yes. A corporate /SME may sell/buy foreign currency in respect of a transaction permitted under the Foreign Exchange Management Act, 1999.

No. Because Authorised Dealer banks are free to undertake forex transactions with banks overseas for adjustment of own position or for initiating trading positions in the overseas markets.

Trade by trade transactions are not reported to Reserve Bank of India by the banks. However, the Foreign Turnover Data reported by banks, contains forwards and swaps and is reported on a weekly basis in the Weekly Statistical Supplement which is published on our website: www.rbi.org.in under Publications< Weekly.

July 9, 2008.

RIA 3307/08-09 FED

Guidelines/ Rules framed by Reserve Bank of India regarding sale of property by the Non-Resident of India at India in lieu of sale consideration and information is required whether N.R.I. Sells his property in India in consideration of money then he require permission of the R.B.I. and also has to pay tax and procedure for taking the sale consideration amount out of India and when sale consideration is above Rs. 10 Lacs.

Non – Resident Indians have been granted general permission under Regulation 3 of Notification No FEMA 21/2000 – RB dated May 3, 2000, for acquisition / transfer of immovable property other than agriculture land, farmhouse, plantation – property in India provided the same is in terms of the aforesaid Regulations. For repatriation / remittance of sale proceeds you may please refer to Regulation 6 of Notification ibid read with Notification No FEMA 13/ 2000 – RB dated May 3, 2000. This information is available on our website www.rbi.org.in (Homepage > Notification > FEMA > Notification).

July 20, 2009
2251/13-14 FED

NRI/ PIO have following two options for their current income:

1. Remit outside India
2. Transfer/ credit to NRE A/c

Whereas in case of balance held in NRO A/c- only remittance outside India is permitted and transfer / credit to NRO A/c is not permitted.

May I know the reasons recorded for the same?
In terms of para 4 of Schedule 3 to Notification No. FEMA 5/ 2000-RB dated May 3, 2000, balances in NRO accounts are not eligible for remittance outside India without the approval of Reserve Bank. Funds received by way of remittances from outside India in foreign exchange which have not lost their identity as remittable funds will only be considered by Reserve Bank for remittance outside India. Where an account (current / savings) is opened by a foreign tourist visiting India, with funds remitted from outside India in a specified manner or by sale of foreign exchange brought by him to India, authorized dealers may convert the balance in the account at the time of departure of the tourist from India into foreign currency for payment to the account holder 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. However, in terms of A.P.(DIR Series) Circular No. 67 dated January 13, 2003, AD banks may allow remittances up to USD one million from the NRO account of NRIs / PIO subject to conditions. In view of the above, transfer of funds from NRO account to NRO account is not permissible. November 26, 2013

4537/
13-14
FED

Please inform, is an exporter allowed to sell goods on:

(A) 360 days credit from the date of Bill of Lading.

And

(B) If not then, up to 180 days credit from the date of bill of lading of such exports.

In terms of Section 8 of FEMA 1999 any amount of foreign exchange due or accrued is required to be realized and repatriated to India within such period and in such manner as may be specified by the Reserve Bank. Further, in terms of Notification No. FEMA 176 / 2008-RB dated July 23, 2008 (Export of Goods and Services) the period of realization / repatriation is 12 months from the date of export (copy enclosed).

The present instructions are as under;

(i) Units located in Special Economic Zones (SEZs) – period of realization / repatriation is 12 months from the date of export in terms of A. P. (DIR. Series) Circular No.108 dated June 11, 2013 (copy enclosed).

(ii) Goods exported to a warehouse established outside India – period of realization / repatriation is 15 months in terms of Regulation 9 of Notification No. FEMA 23 / 2000–RB dated May 03, 2000 (Export of Goods and Services) (copy enclosed).

(iii)  Status Holder Exporters – period of realization / repatriation is 12 months in terms of A. P. (DIR. Series) Circular No.35 dated April 01, 2002 (copy enclosed).

(iv) 100% Export Oriented Units and units set up under EHTPs / STPs / BTPs – period of realization / repatriation is 12 months in terms of A. P. (DIR. Series) Circular No.25 dated November 01, 2004 (copy enclosed).

(v) In cases where exporters not falling within the above categories have to realize and repatriate the export proceeds within a period of 9 months from the date of export in terms of A. P. (DIR. Series) Circular No. 105 dated May 20, 2013 read with A. P. (DIR. Series) Circular No.14 dated July 22, 2013 (copies enclosed).

March 07, 2014

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