Pending issue of further directions by rbi
authorised dealers may be guided by following provisions of Exchange Control
Manual [ecm]*
Chapter
|
Paragraph No. |
Subject-matter |
|
of ECM |
of ECM |
|
|
1 |
1.4 |
Authorised dealers in foreign exchange |
|
|
1.5 |
Authorised Co-operative/Commercial Banks (These banks will now be
permitted to also maintain NRSR Accounts) |
|
|
1.6 |
Authorised Money Changers |
|
|
1.7 |
Revocation of licences/authorisation granted by Reserve Bank |
|
|
1.16 |
Marking of documents |
|
|
1.17 |
Organisation of Exchange Control Department |
|
|
1.22 |
Breach of regulations by Non-resident branches/corres-pondents of
authorised dealers |
|
|
1.24 |
Employment of Brokers |
|
2 |
2.1 |
Permitted currencies |
|
|
2.2 |
Authorised dealers’ responsibility in regard to other currencies |
|
|
2.3 |
Choice of contracting currencies in international transactions |
|
|
2.4 |
Authorised dealers’ foreign currency accounts |
|
|
2.7 |
Payment in approved/conforming manner |
|
|
2.8 |
Asian clearing union |
|
|
2.9 |
Memorandum of Procedure (ACM) |
|
|
2.10 |
Channelling through ACU obligatory |
|
3* |
3A.1 |
Purchase of TTs, MTs, etc., from Public |
|
|
3A.5 |
Foreign Inward Remittance Payment System |
|
|
3A.6 |
Issue of bank certificate |
|
|
3A.7 |
Refund of inward remittance |
|
|
3B.3(i) |
Procedure for making applications |
|
|
3B.3(iii) |
-do- |
|
|
3B.5 |
Manner of payment of rupees against sale of foreign exchange |
|
|
3B.10 |
Undertaking/Certificate regarding payment of Income-tax |
|
4 |
4.1 to 4.8 |
Provisions relating to authorised dealer’s dealings with Reserve Bank |
|
5 |
|
Accounts of Non-resident Banks & Inter bank dealings -
See AP
(DIR Series) (2001-2002) Circular No. 19, dated 24-1-2002 |
|
6 |
|
Export of goods, software, etc. - See AP (DIR Series)
(2000-2001) Circular No. 12, dated 9-9-2000 |
|
7 |
|
Import of goods, currency, etc., merchanting trade &
other related matters - See AP (DIR Series) (2000-2001) Circular No. 9, dated
24-8-2000 |
|
8 |
|
Foreign Travel & Miscellaneous Remittances - See Master circular of
16-7-2002 (Sub-Chapter
5.156) |
|
|
|
See also AP (DIR Series) (2002-2003) Circular No. 54, dated
25-11-2002 |
|
13 |
13B.25 |
Statement of Operations on NRE A/c1 |
|
14 |
14B.10 |
Statement of inflow, outflow & outstanding Deposit under FCNR
Accounts (Banks) Scheme2 |
|
16 |
16.1 to
16.9 |
Returns and Statements (including Guide to authorised dealers for
compilation of ‘R’ returns) |
Relevant Forms
|
Form A1 |
Application for remittance in Foreign Currency (White Paper) |
|
Form A1 |
Application for transfer of Indian Rupees to the Account of a
Non-resident Bank (Blue Paper) |
|
Form A1 |
Application for payment through Asian Clearing Union (Yellow Paper) |
|
Form A2 |
Application for Remittance Abroad |
|
Form A3 |
Transfer of rupees from/to the account of a Non-resident Bank other
than transactions with public in India (White Paper) |
|
Form BAL |
Statement of foreign currency balances held abroad by authorised
dealers and balances held in Non-resident rupee/ACU Dollar accounts of
overseas branches and correspondents as at the end of ..... |
|
Form BCI |
Certificate of Foreign Inward Remittance |
|
Form CIR |
Statement showing remittance of income/interest allowed to NRIs/OCBs
on investments/deposits, etc., held by them in India on non-repatriation
basis during the half-year ended .... |
|
Form DBS |
Statement of operations on Diplomatic Bond store accounts for the
month of ...... |
|
Form DSP |
Sale of shares/bonds/debentures of Indian companies by Non-residents
of Indian nationality/origin and overseas bodies predominantly owned by such
persons and disposal of sale proceeds thereof in terms of permissions granted
by the Reserve Bank of India Statement for the quarter ended ...... |
|
Form EBW |
Statement showing particulars of export bills permitted to be written
off in terms of paragraph 6C.14 of the Exchange Control Manual for the
half-year ended 30th June/31st December ... |
|
Form ECF |
Encashment Certificate |
|
Form ECR |
Encashment Certificate |
|
Form ECT |
Application for permission for export of commodities on elongated
credit terms beyond 180 days |
|
Form EFC |
Application for opening foreign currency account with a bank in India
or abroad by exporters |
|
Form ENC |
Statement of Export Bills negotiated/sent for collection during
fortnightly period from ...to... (to cover all exports under outright sales,
consignment exports, exports under deferred payment arrangement or any other
arrangement) |
|
Form ETX |
Application for permission to extend the period for realisation of
export proceeds |
|
Form FXT |
Statement showing the details of turnover of foreign exchange business
done on all-India basis by |
|
Form LEC (FIIs) |
Statement showing company-wise details of total purchases and sales of
equity shares/convertible debentures made by designated branch of ADs under
portfolio investment scheme on behalf of their NRI/OCB clients |
|
Form LEC |
Statement showing company-wise details of total purchases and sales |
|
(NRIs) |
of equity shares/convertible debentures made by designated branches of
............(name of the bank) on ...... through stock exchange in India on
behalf of Non-residents of Indian nationality/origin and overseas bodies
predominantly owned by such persons |
|
Form ORA |
Particulars of approvals granted for opening of trading/non-trading
office, posting of representative abroad during the month of ...... |
|
Form POS |
Statement of positions for the week ended .......................... |
|
Form RBM 1 |
Offer for spot sale of U.S. dollars to the Reserve Bank of India
(Duplicate) |
|
Form RBM 2 |
Offer for purchase of U.S. dollars from Reserve Bank of India
(Triplicate) |
|
Form REC |
Statement showing position of unreconciled entries in Nostro Accounts
as on 31st March/30th September............ |
|
Form RRD |
Special report on rupee dealings with overseas banks for the month of.... |
|
Form R-Return |
Return of transactions for the fortnight ended |
|
(NOSTRO) |
|
|
Form R-Return |
Return of operations of VOSTRO Accounts for the fortnight |
|
(VOSTRO) |
ended |
|
Form R-Supple- |
Supplementary statement of Non-Export Receipts equivalent of |
|
mentary Return |
Rs. 1,00,000 and above (Duplicate) |
|
Form SCH 1 |
Schedule of remittances effected for/credits afforded to Vostro A/c
towards payments of imports (Duplicate) |
|
Form SCH 2 |
Schedule of remittances effected for purposes other than imports
(Duplicate) |
|
Form SCH 3 |
Schedule giving particulars of GR/PP/SOFTEX forms where full payment
has been received |
|
Form SCH 4 |
Schedule giving particulars of GR/PP/SOFTEX forms where part payment
has been received |
|
Form SCH 5 |
Schedule giving details of full export proceeds received in advance |
|
Form SCH 6 |
Schedule giving details of part export proceeds received in advance |
|
Form STAT 5 |
Statement showing inflow/outflow of deposits under Foreign Currency
(Non-resident) Accounts (Banks) Scheme for the month of .......... |
|
Form STAT 6 |
Statement showing purchase of exchange in the form of travellers
cheques, currency notes and coins and drawings under inward travellers
letters of credit during the quarter ended.... |
|
Form STAT 8 |
Statement showing inflow/outflow of deposits under Non-residents
(External) Rupee (NRE) Accounts Scheme for the month of... |
|
Form STAT 9 |
Statement showing inflow/outflow of deposits under Non-resident
(Non-repatriable) Rupee Deposit (NRNR) Scheme for the month of... |
|
Form STAT 10 |
Statement showing inflow/outflow of deposits under Resident Foreign
Currency (RFC) Accounts Scheme for the month of ................ |
|
Form VP/COD |
Declaration required from exporter before sending goods by post on
VP/COD basis to countries outside India other than Nepal and Bhutan |
|
Form XOS |
Statement of particulars of export bills outstanding beyond the
prescribed period/due date of realisation as at 30th June/31st December ... |
|
Memorandum RLM |
|
|
Memorandum FLM |
|
|
Memorandum PEM |
|
|
Memorandum GIM |
|
|
Memorandum LIM |
|
|
Memorandum ACM |
|
relevant provisions of exchange control manual
Authorised dealers in foreign exchange
Authorisations in the form of licences to deal in
foreign exchange are granted to banks which are well equipped to undertake
foreign exchange transactions in India. Authorisations have also been granted
to certain financial institutions to undertake specific types of foreign
exchange transactions incidental to their main business. A list of such banks
and institutions is given in Annex to this Chapter.
Authorised co-operative/commercial banks
Authorisations have also been issued to certain State
Co-operative/Urban Co-operative banks and Scheduled Commercial banks to open
and maintain Ordinary Non-Resident Rupee Accounts (NRO Accounts) and
Non-Resident (External) Rupee Accounts (NRE Accounts), on behalf of
non-resident individuals of Indian nationality/origin.
Authorised money-changers
In order to provide facilities for encashment of
foreign currency to visitors from abroad, especially foreign tourists, Reserve
Bank has granted licences to certain established firms, hotels and other
organisations permitting them to deal in foreign currency notes, coins and
travellers cheques subject to directions issued to them from time to time.
These firms and organisations who are generally known as ‘authorised
money-changers’ fall into two categories, viz. ‘Full-fledged
money-changers’ who are authorised to undertake both purchase and sale
transactions with the public and ‘Restricted money-changers’ who are authorised
only to purchase foreign currency notes, coins and travellers cheques, subject
to the condition that all such collections are surrendered by them in turn to
an authorised dealer in foreign exchange/full-fledged money-changer.
Revocation of licence/authorisation granted by Reserve Bank
Reserve Bank may revoke the licence/authorisation
granted by it to an authorised dealer, co-operative/commercial bank or
money-changer at any time if the holder of the licence/authorisation is found
to have failed to comply with any condition subject to which it was granted or
to have contravened any provision of FERA 1973 or of any Rule, Notification,
Direction or Order made thereunder.
Marking of Documents
Authorised dealers should mark all documents submitted
by their constituents in support of applications made to them for any purpose
such as remittances to non-residents, etc., under their stamp as evidence of
the documents having passed through their medium. Authorised dealers must
ensure, before returning any documents to their constituents, that they have
been marked in this manner.
Organisation of Exchange Control Department
(i)
Powers conferred upon Reserve Bank by FERA 1973 and Central Government
Notifications issued under the Act are exercised by the Exchange Control
Department of Reserve Bank. The Department has its Central Office at Mumbai and
Offices at other centres with jurisdiction as indicated below :
|
Office |
Jurisdiction |
|
Ahmedabad |
State of Gujarat |
|
Bangalore |
State of Karnataka |
|
Bhopal |
State of Madhya Pradesh |
|
Bhubaneshwar |
State of Orissa |
|
Calcutta |
States of Sikkim and West Bengal and Union Territory of Andaman and
Nicobar Islands |
|
Chandigarh |
States of Haryana (excluding the districts of Faridabad, Gurgaon and
Sonepat), Himachal Pradesh and Punjab and Union Territory of Chandigarh |
|
Chennai |
State of Tamil Nadu and Union Territory of Pondicherry |
|
Kochi |
State of Kerala and Union Territory of Lakshadweep |
|
Guwahati |
States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram,
Nagaland and Tripura |
|
Hyderabad |
State of Andhra Pradesh |
|
Jaipur |
State of Rajasthan |
|
Kanpur |
State of Uttar Pradesh excluding New Okhla Industrial Development Area
(NOIDA) in Ghaziabad district. |
|
Mumbai |
State of Maharashtra, Union Territory of Dadra and Nagar Haveli and
Union Territory of Daman and Diu |
|
New Delhi |
Union Territory of Delhi, the districts of Faridabad, Gurgaon and
Sonepat of State of Haryana and New Okhla Industrial Development Area (NOIDA)
in Ghaziabad district of State of Uttar Pradesh |
|
Panaji |
State of Goa |
|
Patna |
State of Bihar |
|
Jammu/ |
State of Jammu and Kashmir. |
|
Srinagar |
|
(ii) Nagpur Office of
Reserve Bank will deal with applications from persons, firms and companies
resident in the districts of Akola, Amravati, Bhandara, Buldhana, Chandrapur,
Gadchiroli, Nagpur, Wardha and Yeotmal of the State of Maharashtra, for travel
and sundry remittances outlined in Annex I to Chapter 8 which are beyond the
powers delegated to authorised dealers.
(iii) Reference to
Reserve Bank should be made to the office of Exchange Control Department (ECD)
within whose jurisdiction the applicant person, firm or company resides or
functions unless otherwise indicated. If for any particular reason, a firm or a
company desires to deal with a different office of ECD, it may approach the
office within whose jurisdiction it functions for necessary approval.
Breach of Regulations by Non-resident Branches/Correspondents of Authorised Dealers
If any non-resident branch or correspondent of an
authorised dealer is found to have contravened or attempted to contravene any
of the Exchange Control regulations in force in India, all rupee transfers on
its account may be made subject to prior permission of Reserve Bank or totally
prohibited.
Employment of Brokers
There is no objection to employment of brokers, but in
all cases their principals as well as the brokers must comply with the
requirements of the Exchange Control. Exchange brokers are, however, not
authorised to deal in foreign exchange and hence they should not purchase or
sell foreign exchange from/to public.
Annexure
List of banks and other institutions to whom
licences have been issued to deal in
foreign exchange
A. Banks and others
holding full-fledged licences
ABN AMRO Bank N.V.
Abu Dhabi Commercial Bank Ltd.
Allahabad Bank
American Express Bank Ltd.
Andhra Bank
ANZ Grindlays Bank Ltd.
Arab Bangladesh Bank Ltd.
Bank Internasional Indonesia
Bank of America National Trust and
Savings Association
Bank of Baharain and Kuwait B.S.C.
Bank of Baroda
Bank of Ceylon
Bank of India
Bank of Madura Ltd.
Bank of Maharashtra
1[Bank of Muscat International S.A.O.G.]
Bank of Nova Scotia
Bank of Punjab Ltd.
Bank of Rajasthan Ltd.
Bank of Tokyo-Mitsubishi Ltd.
Banque Nationale De Paris
Barclays Bank p.l.c.
Benares State Bank Ltd.
Bharat Overseas Bank Ltd.
Bombay Mercantile Co-operative Bank
Ltd.
The British Bank of the Middle East
Canara Bank
Catholic Syrian Bank Ltd.
Central Bank of India
Centurion Bank Ltd.
The Chase Manhattan Bank
Chinatrust Commercial Bank
Cho Hung Bank
Citibank N.A.
City Union Bank Ltd.
1[***]
Commerzbank A.G.
Corporation Bank
Credit Agricole Indosuez
Credit Lyonnais
Dena Bank
Deutsche Bank Aktiengesellschaft
The Development Bank of Singapore
Ltd.
Development Credit Bank Ltd.
Dhanalakshmi Bank Ltd.
Dresdner Bank A.G.
Federal Bank Ltd.
The Fuji Bank Ltd.
Global Trust Bank Ltd.
1[***]
HDFC Bank Ltd.
The Hongkong and Shanghai Banking
Corporation Ltd.
ICICI Banking Corporation Ltd.
IDBI Bank Ltd.
Indian Bank
Indian Overseas Bank
IndusInd Bank Ltd.
Internationale Nederlanden Bank (ING
Bank)
Jammu and Kashmir Bank Ltd.
2[K.B.C. Bank NV]
Karnataka Bank Ltd.
Karur Vysya Bank Ltd.
Krung Thai Bank Public Company Ltd.
Lakshmi Vilas Bank Ltd.
Maharashtra State Co-operative Bank
Ltd.
Mashreq Bank p.s.c.
2[Morgan Guarantee Trust Co. of New York]
Nedungadi Bank Ltd.
Oman International Bank S.A.O.G.
Oriental Bank of Commerce
Oversea-Chinese Banking Corporation
Ltd.
Punjab National Bank
Punjab and Sind Bank
The Sakura Bank Ltd.
Sangli Bank Ltd.
Sanwa Bank Ltd.
Saraswat Co-operative Bank Ltd.
SBI Commercial and International
Bank Ltd.
The Siam Commercial Bank Ltd.
Societe Generale
Sonali Bank
South Indian Bank Ltd.
Standard Chartered Bank
State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of India
State Bank of Indore
State Bank of Mauritius Ltd.
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra
State Bank of Travancore
The Sumitomo Bank Ltd.
Syndicate Bank
Tamilnad Mercantile Bank Ltd.
Thomas Cook (India) Ltd.
1[***]
The Toronto Dominion Bank
UCO Bank
Union Bank of India
United Bank of India
United Western Bank Ltd.
UTI Bank Ltd.
Vijaya Bank
Vysya Bank Ltd.
B. Institutions holding restricted authorisation to deal in foreign exchange
Export-Import Bank of India
Industrial Credit & Investment
Corporation of India Ltd.
Industrial Development Bank of India
Industrial Finance Corporation of
India
SBI Factors and Commercial Services
Pvt. Ltd.
Small Industries Development Bank of
India
Permitted Currencies and
Methods of Payment
Permitted
Currencies
This Chapter sets out the regulations governing
permitted currencies and methods of payment to be used for settlement of
financial transactions between residents and non-residents through authorised
dealers. The expression ‘permitted currency’ is used in the Manual to indicate
a foreign currency which is freely convertible, i.e., a currency which
is permitted by the rules and regulations of the country concerned to be
converted into major reserve currencies like U.S. Dollar, Pound Sterling and
for which a fairly active market exists for dealings against the major
currencies. Accordingly, authorised dealers may maintain balances and positions
in any permitted currency. Authorised dealers may also maintain positions in 1[Euro of the European
Currency Area].
Authorised Dealers’ responsibility in
regard to other currencies
Authorised dealers should exercise care and
circumspection while accepting payments offered by exporters and others in
currencies not generally known as freely convertible currencies and ensure by
proper enquiry with their overseas branches/correspondents that the currency
qualifies to be treated as a permitted currency, in order that the foreign
exchange so acquired does not become immobilised or is otherwise not subject to
restrictions imposed in the foreign country on its use for international
payments.
Choice of Contracting Currencies in
International Transactions
Authorised dealers may sometimes be approached by
their customers who are engaged in export/import trade, consultancy services,
etc., for advice regarding choice of currencies besides Indian rupee, SDR or 2[Euro] for the purpose of
contracting with their overseas counterparts. Authorised dealers may advise
their customers that while there are no restrictions from the Exchange Control
viewpoint on any foreign currency being chosen, Exim Policy stipulates that all
export contracts and invoices (except those for which payments are required to
be received through the Asian Clearing Union) shall be denominated only in a
freely convertible foreign currency. They may also be advised that settlement
of payments in terms of the contracts will eventually have to take place in a
‘permitted currency’ and they will be well advised to choose one of such
currencies even for contracting purposes. Additionally, although authorised
dealers are allowed in terms of para 3C.1 to provide forward cover to residents
in any ‘permitted currency’, the absence of a forward exchange market in India
or in an overseas centre for covering the exchange risk of authorised dealers
in even some of the permitted currencies, may result in residents being unable
to protect themselves against exchange risk in case of need. The choice of
currencies for the purpose of contracting should, therefore, be made after
proper assessment of these factors.
Note : In case of countries
(excluding Nepal) which are members of the Asian Clearing Union, provisions of
the Memorandum of Procedure (ACM) dealing with obligatory routing of eligible
current transactions between members would be relevant.
Authorised Dealers’ Foreign Currency
Accounts
Authorised dealers may freely open and maintain
accounts in any permitted currency with their branches and correspondents
abroad. A report should be sent to the office of Reserve Bank to whom R Returns
are submitted by authorised dealers, as soon as a new account is opened abroad
giving the name and address of the foreign branch or correspondent with whom
the account has been opened.
Payment in Approved/Conforming Manner
The expression ‘payment in an approved manner’ and
‘payment in a conforming manner’ used in the Manual will mean that the payment
should be received or made in one of the permitted methods of payment laid down
in paras 2.5 and 2.6 respectively.
Asian Clearing Union
The Asian Clearing Union (ACU) is only a mechanism for
settlement of payments between participating countries. Until 31st December,
1995, the settlement of transactions was being made in Indian rupees or in the
currency of the other participating country or in AMU. Effective January 1,
1996, payments are required to be made/received through ACU dollar accounts maintained
with authorised dealers in India in the names of their correspondent banks in
ACU countries or ACU dollar accounts maintained by authorised dealers with
their branches/correspondents abroad. The Exchange Control regulations laid
down in this Manual will govern the payments and receipts cleared through the
Union.
Memorandum of Procedure (ACM)
All authorised dealers in India are permitted to
handle transactions to be cleared through the Asian Clearing Union. The
Agreement establishing the Union and the ACU (Procedure) Rules setting out the
procedure to be followed for settlement of transactions by the participating
countries as also the memorandum of procedure drawn up by the Reserve Bank to
be followed by the authorised dealers for handling the transactions to be
cleared through ACU are given in the Memorandum ACM.
Channelling through ACU Obligatory
(i) All eligible
payments, except those indicated in sub-paragraph (ii) below should be
compulsorily settled through the ACU mechanism. While there is no bar on any
contract, letter of credit, invoice, etc., being denominated in U.S. dollar or
in any other permitted currency, it should invariably stipulate a condition
that the actual payment shall be made in ACU dollar.
(ii) The following types of payments are to be
settled outside the ACU mechanism :
(a) All payments between India and Nepal.
(b) Payments relating to travel between
India and all other countries in ACU.
(c)
Export/Import transactions financed out of loans from international
financial institutions like
World Bank, Asian Development Bank and under bilateral
lines of credit.
1(d) Import of sugar, fertilisers and
pulses.
Foreign Exchange
Transactions with Public
Purchase of TTs, MTs, etc., from public
Authorised dealers may freely purchase from the public
in India TTs, MTs, drafts, bills, etc., drawn in any foreign currency against
rupees.
Foreign Inward Remittance Payment System (FIRPS)
[FIRP System withdrawn vide AP (DIR Series)
(2003-2004) Circular No. 78, dated 13-3-2004.]
Issue of Bank Certificates
(i) Authorised
dealers should issue certificates in Form BCI against receipt of inward
remittances or realisation of foreign exchange on security paper if the amount
exceeds Rs. 15,000 in value, bearing distinctive serial numbers and reference
numbers. In case the amount of inward remittance or realisation of foreign
exchange is upto Rs. 15,000 certificates in Form BCI with serial numbers and
reference numbers may be issued on the letter-head of the authorised dealer
(with their ‘Logo’ printed on it). Since inward remittances received for
opening of or credit to Non-resident (External) accounts/FCNR accounts can be
repatriated freely, authorised dealers should not issue certificates against
such remittances.
(ii) Authorised
dealers may also be required to issue bank certificates to exporters in the
prescribed form for submission to the Director General of Foreign Trade
immediately after negotiation of documents, but prior to realisation of export
proceeds. Such certificates cannot contain the value actually realised and date
of realisation of export proceeds. Hence while issuing such certificates
authorised dealers may merely indicate the FOB value under column 14 of the
certificate without certifying that the amount has been actually realised.
Authorised dealers should make a specific remark on such certificates that it
is not an export realisation certificate.
(iii) Authorised
dealers may also issue certificates of inward remittances in Form 10H1 to assessees for submission
to Income-tax Authorities alongwith the Return of Income. The format of Form
10H has been prescribed in terms of section 80RRA of the Income-tax Act read
with rule 29A of the Income-tax Rules and is similar to Form BCI.
Refund of Inward Remittances
Authorised dealers may comply with requests received
from their overseas correspondents for cancellation of inward remittances in
foreign exchange and refund the amounts without reference to Reserve Bank
after satisfying themselves that the refunds are not being made in cover of
transactions of a compensatory nature, resulting in remittances which should
have normally accrued to India being either lost to the country or used by
residents in India other than the original beneficiaries.
Procedure for making applications
(i) Applications by
persons, firms and banks other than authorised dealers for remittances in any
foreign currency to a beneficiary abroad must be made to an authorised dealer
on Form A1 bearing the legend ‘Application for remittance in foreign currency’,
if the purpose of remittance is import of goods into India and on Form A2
bearing a similar legend in every other case.
(iii) If the
remittance is for an approved purpose and is otherwise within the powers of
authorised dealers, the authorised dealer may sell the foreign exchange applied
for, provided he has satisfied himself as to the bona fides of the
application.
Note : Sub-paragraphs (iii)
and [(iv)] also apply, mutatis mutandis, to remittances made to
foreign countries otherwise than by direct sale of a foreign currency.
Manner of payment of Rupees against sale of Foreign Exchange
(i) It is a basic
understanding that when any person applies to an authorised dealer or to
Reserve Bank for sale of foreign exchange to him, the foreign exchange is
required for meeting his own commitments abroad or for his own use. The rupee
funds against sales of foreign exchange should, therefore, be provided by the
applicants themselves. Authorised dealers should, however, ensure that in all
cases of sale of foreign exchange/remittance in foreign exchange equivalent to
Rs. 20,000 or more, irrespective of whether remittances are made under powers
delegated to authorised dealers or against Reserve Bank permits, the relative
payment is received from the applicant only by a crossed cheque drawn on the
applicant’s bank account or on the bank account of the firm/company. Authorised
dealers may also accept payment in the form of a Banker’s Cheque/Pay Order
and/or Demand Draft. In no circumstances should payment in respect of such sale
of foreign exchange/remittance in foreign exchange be accepted in cash.
(ii) As an exception
to the above rule, authorised dealers may sell foreign exchange equivalent to
amount not exceeding Rs. 50,000 for travel abroad for business, BTQ, etc.,
purposes against payment in cash. Where the sale of foreign exchange to
residents for the visits abroad exceeds the amount equivalent to Rs. 50,000,
the payment must be received only by a crossed cheque drawn on the applicant’s
bank account or on the bank account of the firm/company sponsoring business
visit of the applicant. Authorised dealers may also accept payment in the form
of Bankers’ Cheque/Pay Order/Demand Draft in above cases.
(iii) Where the rupee
equivalent for drawing foreign exchange exceeds Rs. 50,000 either for any
single instalment or for more than one instalment reckoned together for a
single journey/visit it should be paid by the traveller by means of a cross
cheque/demand draft/pay order as stated above.
Note : 1[(i)] This provision will also apply in the
case of payments made in rupees by credit to accounts of non-resident banks or
through ACU.
1[(ii) Where the rupee equivalent of foreign
exchange drawn in a single transaction for studies abroad is Rs. 50,000 or
more, it should be paid by means of a crossed cheque/demand draft/pay order as
stated above.]
Undertaking/Certificate regarding payment of Income-tax
[K17](i) Certain types of remittances are being
allowed by Reserve Bank or by authorised dealers under the powers delegated to
them subject, inter alia, to production of Income-tax clearance
certificate/NOC from Income-tax authorities. Under the revised procedure
notified by the Government of India,
Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, New
Delhi, vide their Circular No. 759, dated 18th November, 1997,
it will be in order for authorised dealers to allow such remittances without
insisting on tax clearance certificate/NOC from Income-tax authorities,
provided the person making the remittance furnishes an undertaking (in
duplicate) addressed to the Assessing Officer accompanied by a certificate from
an accountant (other than an employee) as defined in the Explanation below
section 288 of the Income-tax Act, 1961 in the form prescribed by Government. A
copy of CBDT’s Circular dated 18th November, 1997 and the specimen forms of
undertaking to be furnished by the remitter and that of the certificate to be
furnished by the accountant are given in Annexure I to this Chapter.
Authorised dealers should, before allowing the remittance, obtain the aforesaid
undertaking/certificate from the remitter/accountant for compliance with the
income-tax provisions, where necessary.
(ii) Authorised
dealers should after making the remittance (irrespective of whether the
remittance has been made against Reserve Bank permit or under the powers
delegated to them) immediately forward a copy of the applicant’s undertaking
together with a copy of the accountant’s certificate, to the Assessing Officer
of the Income-tax Department as indicated in the undertaking. The other copy
each of the undertaking and the certificate should be kept on record for
verification by the Internal Auditors of the authorised dealer/Inspecting
Officers of Reserve Bank.
1 [Annexure I]
CBDT’s circular No. 759, dated 18-11-1997
Remittance to a non-resident - Deduction of tax at source -
Submission of No Objection Certificate- Dispensing with - Regarding
1. Section
196 of the Income-tax Act, 1961 provides that any person responsible for paying
to a non-resident any sum chargeable under the Act shall, at the time of credit
of such income to the account of the payee or at the time of payment thereof in
cash or by cheque or draft or any other mode, whichever is earlier, deduct
income-tax thereon at the rates in force.
2. The
Reserve Bank of India have provided in their Office Manual that no remittance
shall be allowed unless a No Objection Certificate has been obtained from the
Income-tax Department. It has since been decided that henceforth remittances
may be allowed by the Reserve Bank of India without insisting upon a No
Objection Certificate from the Income-tax Department and on the person making
the remittance furnishing an undertaking (in duplicate) addressed to the
Assessing Officer accompanied by a certificate from an Accountant (other than
an employee) as defined in the Explanation below section 288 of the Income-tax Act, 1961 in the form annexed
to this circular. The person making the remittances shall submit the
undertaking along with the said certificate of the accountant to the Reserve
Bank of India, who in turn shall forward a copy thereof to the Assessing
Officer.
Form of
Undertaking and accountant’s certificate regarding payment of income-tax to be submitted
to authorised dealers while making remittances to non-residents
vide CBDT Circular No. 759, dated 18th November, 1997
Undertaking
To...........................................
(Designation of the Assessing Officer)
I/We
................................................................... (Name, address and Permanent
Account Number) propose to make a
remittance of......................... (Amount) being...................
(Nature
of payment) to......................................................................... (Name and complete address
of the person to whom the remittance has been made) after deducting a sum of Rs. ........................
being the tax @ ......................., which is the appropriate rate of tax
deductible at source on the said amount of remittance.
2. A certificate from the
Accountant as defined in Explanation below section 288 of the
Income-tax Act certifying the nature and amount of income, amount of tax
payable and the amount actually paid, is also annexed.
3. In case it is found that
the tax actually payable on the amount of remittance made has either not been
paid or has not been paid in full, I/we undertake to pay the said amount of tax
alongwith interest found due in accordance with the provision of the Income-tax
Act.
4. I/We will also
be subject to the provisions of penalty and prosecution for the said default as
per the Income-tax Act.
5. I/We also undertake to
submit the requisite documents, etc., for enabling the Income-tax Department to
determine the nature and amount of income and tax, interest, penalty, etc.,
payable thereon.
.........................................................................
(Name & Signature)
Date :
Place
:
(The
undertaking shall be signed by the person authorised to sign the return of
income of the person making the payment).
I/We
have examined the books of account of
M/s............................................................................................................ (Name, address and
Permanent Account Number of person making
the remittance) for
ascertaining the nature of the remittance,
of................................................................ (Amount of
remittance) to........................................................(Name and complete address
of the person to whom the remittance is being made) and the rate at which the tax is deductible at source
thereon and hereby certify that a sum of
Rs............................................ has been deducted as tax at the appropriate rate and has been
paid to the credit of the Government.
.................................
Accountant
Place
:
Date :
Authorised dealers’
dealings with reserve bank1
General
(i) Authorised
dealers have recourse to Reserve Bank to sell/buy U.S. dollars to the extent
the latter is prepared to transact in the currency at a given point of time.
(ii) Reserve Bank
will buy/sell only U.S. dollar. It will not ordinarily buy/sell any other
currency from/to authorised dealers.
(iii) Reserve Bank
will quote its spot buying rate for US dollar to any authorised dealer who
makes a specific request to Reserve Bank Dealing Room in the Department of
External Investments & Operations (DEIO), Central Office, Mumbai. The rate
quoted by the Dealing Room will hold good only for the specific transaction and
is subject to change unless deal is concluded immediately.
Note : Funding of or absorbing excess liquidity in ACU
dollar account is arranged by Reserve Bank in accordance with the procedure
laid down in Memorandum ACM.
Settlement of Rupee Leg
The settlement of Rupee leg of the transactions can be
effected at the request of authorised dealer at any of the Reserve Bank Offices
(Deposit Accounts Department) at Ahmedabad, Bangalore, Calcutta, Chennai,
Kanpur, Mumbai, Nagpur and New Delhi. While concluding the deal, the authorised
dealer should clearly indicate the office of Reserve Bank at which settlement
of the Rupee leg is desired.
Value Date
The contract for purchase/delivery of U.S. dollar will
be entered into by Reserve Bank on days on which the dealing room (DEIO) of
Reserve Bank is open for business. No transaction in foreign currency will be
entered into by Reserve Bank on Saturdays. The value date for spot as well as
forward delivery should be in conformity with the national and international practice
in this regard.
Reporting of Transactions
All transactions with Reserve Bank should be reported
in R Return. Form A2 need not be completed in respect of sale of foreign
currency to Reserve Bank.
Minimum and Multiple Requirements
The purchase and sale of U.S. dollar will be made by
Reserve Bank ordinarily in multiple of U.S. $ 5,00,000 with the minimum of U.S.
$ 1 million.
Confirmation of Purchase/Sale from/to
Reserve Bank
Confirmation of the sale and purchase of U.S. dollar
to/from the Reserve Bank may be sent immediately in the Forms RBM 1 and RBM 2
respectively to the Back-up Section of DEIO, Central Office, Reserve Bank of
India, Mumbai. The confirmation may be sent by hand delivery, telex or fax.
Payment of Rupee Value against Sale of
Foreign currencies to Reserve Bank
The payment of the rupee value will be made by the
concerned office of Reserve Bank (cf. para 4.2) to the current account of the
authorised dealer on the appropriate value date without waiting for the credit
intimation from Reserve Bank’s overseas correspondent. If the foreign currency
amount is not delivered to the overseas correspondent of Reserve Bank on the
value date, interest will be charged at the Reserve Bank Rate on the rupee
value credited to the account of the authorised dealer for the number of days
of default. In order that the overdue interest may be recovered in such cases
automatically by debit to their account with the concerned office of Reserve
Bank, authorised dealers should lodge a suitable standing authority with
Reserve Bank. Cases of undue delay will attract penalties, apart from overdue
interest.
Submission of information about principals
by Authorised Dealers’ Overseas Correspondents
Authorised dealers should
leave standing instructions with their overseas correspondents to indicate
clearly the name of the principal (i.e., the name of the Indian
office/branch of the authorised dealer) on whose behalf the U.S. dollar amount
is delivered to Reserve Bank’s account with the Federal Reserve Bank of New
York, New York.
Rupee Accounts of
non-residents other than banks
Part B - Non-Resident (External) Rupee Accounts (NRE
Accounts)
1[Statement
of Operations on NRE Accounts
A monthly statement in Form STAT 8 for the bank as a
whole may be forwarded to the Chief General Manager, Exchange Control
Department (Central Statistical Division), Reserve Bank of India, Central
Office, Mumbai-400001 so as to reach him by 10th of the month following the
month to which it relates.]
Foreign Currency Accounts
in India
Part B
- Foreign Currency (Non-Resident) Accounts (Banks) Scheme [FCNR (B)]
Statement of Inflow, Outflow and Outstanding Deposits under FCNR Accounts (Banks) Scheme
Authorised
dealers should submit a monthly statement for the bank as a whole, in Form STAT
5 showing the inflow, outflow and outstanding deposits under the Foreign
Currency (Non-Resident) Accounts (Banks) Scheme during the month, so as to
reach the Reserve Bank before the 10th day of the month following that to which
it relates.
General
Returns and statements prescribed in the Manual are
used in the Reserve Bank for compiling very valuable data relating to the
country’s financial transactions with the external world as well as for
exercising supervision over the operations of authorised dealers. Authorised
dealers should, therefore, maintain proper internal organisation both in their
controlling offices as well as operating branches so that the
returns/statements and other data prescribed in the Manual or prescribed by
separate instructions are prepared accurately in a systematic manner and
submitted to Reserve Bank within the prescribed time schedule. The work of
compilation of returns and statements should be entrusted in the controlling
offices and operating branches to personnel possessing requisite knowledge and
experience of foreign exchange operations. Authorised dealers must undertake
periodic reviews of the arrangements for compilation and submission of data to
Reserve Bank to see that they are adequate and the requisite manpower and other
resources continue to be available.
Submission of Returns
(i) Unless
specifically indicated otherwise, all returns/statements should be submitted to
the office of Reserve Bank under whose jurisdiction the concerned office/branch
of authorised dealer is situated. If in any period, there are no transactions
to report, the ‘NIL’ position may be advised by letter within the prescribed
period. Authorised dealers should ensure that the returns and statements
submitted to Reserve Bank reflect correctly and completely all the relevant
transactions undertaken by them during the relevant period and all the
supporting forms have been correctly filled up and annexed.
(ii) Section 73A of
FERA, 1973 empowers Reserve Bank to impose fine on an authorised dealer for
contravention of Reserve Bank’s directions or for failure to file returns as
specified by Reserve Bank. Reserve Bank will, therefore, take a serious view of
the failure of any branch of an authorised dealer to furnish returns and
statements regularly or promptly as well as of any irregularities detected in
their compilation and where it deems fit, it may impose financial penalty as
provided in section 73A of FERA, 1973 or even direct the authorised dealer
concerned to refrain from transacting foreign exchange business at the branch
concerned.
Maintenance of Records
Authorised dealers should maintain proper records of
all purchases and sales of foreign currencies made by them and also of all
transactions relating to foreign exchange business including those on
non-resident accounts and foreign currency accounts held in their books.
Authorised Dealers’ Code Numbers
Every office or branch of an authorised dealer must
indicate the complete fourteen digit code number allotted by Reserve Bank to
the office/branch at the top of all its returns/statements submitted,
irrespective of the office/department to which the returns are submitted as
also on each remittance form and all copies of GR/PP/SOFTEX forms enclosed to
or forwarded with Returns.
Offices/Branches of Authorised Dealers
handling Foreign Exchange Business
(i) The
Head/Principal Office of each authorised dealer should furnish an up-to-date
list (in triplicate) of all its offices/branches which are authorised to
transact foreign exchange business, as at the end of December every year giving
their addresses and code numbers to the Chief General Manager, Exchange Control
Department (Central Statistical Division), Reserve Bank of India, Central
Office, Mumbai-400 001, so as to reach by 15th January of the following year.
The lists should be completed showing the distribution of offices/branches
area-wise, i.e., according to area of jurisdiction of Reserve Bank
offices and classified as under :
Category A : Offices and branches maintaining independent
foreign currency accounts in their own names.
Category B : Offices and branches not maintaining
independent foreign currency accounts but having powers of operating on the
accounts maintained abroad by their Head/Principal Office or any other link
office (The name of the latter office should also be indicated).
Category C : All other offices and branches handling
foreign exchange business through other offices or branches in category A or B
(The name of the latter office should also be indicated).
(ii) While forwarding the
above lists to Reserve Bank, the Head/Principal Office of authorised dealer
should also enclose a summary statement (in triplicate) in the following form :
Name and address of the authorised dealer :
|
Name of Reserve Bank office |
No. of branches
under category
|
||
|
|
A |
B |
C |
|
Ahmedabad |
|
|
|
|
Bangalore |
|
|
|
|
etc. |
|
|
|
|
Total |
|
|
|
(iii) Authorised
dealers should promptly report to Reserve Bank, any change in the status (i.e.,
category) of their offices/branches included in the above lists. As and when a
new office/branch is opened with powers to handle foreign exchange business or
an existing office/branch is delisted, same should be advised promptly to
Reserve Bank (both to the Central Office as well as the Regional Office of
Reserve Bank having jurisdiction over the concerned authorised dealer’s
office/branch).
(iv) While designating
and categorising offices/branches for undertaking foreign exchange business,
authorised dealers should ensure that branches have adequate business and are
fully equipped to handle foreign exchange business and to meet various
requirements of Reserve Bank including timely submission of proper
returns/statements. They should also undertake a review every year to ensure
that the branches which do not satisfy the criteria are delisted/reclassified.
R-Returns
(i) Authorised
dealers should report all transactions made by them through their Nostro
Accounts abroad and Vostro Accounts maintained with them in appropriate R
Return, i.e., R Return (NOSTRO) and R Return (VOSTRO) respectively, as
laid down in the Guide to authorised dealers for compilation of R Returns (see
Annexure at the end of the Chapter) twice a month, at the
close of business on 15th and the last day of calendar month so as to reach
Reserve Bank within seven calendar days from the close of reporting period to
which they relate. If the 15th or the last day of the month is a holiday, the
return should be submitted as at the close of business on the preceding working
day.
(ii) Each
office/branch of an authorised dealer in categories A and B (C category
branches are not required to submit R Return) submitting R Returns to Reserve
Bank should ensure that they use correct format of R Return as applicable to
transactions and write in bold letters the currency name and currency
code (SWIFT Code) on the relative R Return. Incomplete R Returns (i.e.,
where the required information, data, certification, etc., are not furnished
and/or any of the required enclosures are not properly completed and
submitted), will be regarded as non-submission of the Return and will attract
penal provisions of section 73A of FERA, 1973.
Earnings from Tourism
The Head/Principal Office of each authorised dealer
should submit to the Chief General Manager, Exchange Control Department (Central
Statistical Division), Reserve Bank of India, Central Office, Mumbai-400 001, a
quarterly statement in Form STAT 6 giving details of all purchases,
irrespective of the amount of the transaction, of foreign currency travellers
cheques, notes and coins purchased by them from the public, as also payments
made by them during the quarter against travellers letters of credit opened by
their overseas branches/correspondent. The statement should be forwarded on or
before 10th of the month following the quarter to which it relates.
Turnover of Foreign Exchange Business
1[** ** **]
2[Other
Periodic Statements
Authorised dealers are required to submit to Reserve
Bank the following periodic statements in terms of instructions contained in
various Chapters of the Manual :
|
|
Description |
Manual paragraph |
Form |
Periodicity |
|
1. |
Special
Report on Rupee dealings with overseas banks |
*5A.16 |
RRD |
Monthly |
|
2. |
Statement
of positions of authorised dealers |
*5B.1(ii) |
POS |
Weekly |
|
3. |
Statement regarding maturity of position |
*5B.1(iii) |
MAP |
Monthly |
|
4. |
Statement of foreign currency balances of authorised dealers
and rupee balances of non-resident
banks |
*5B.2(ii) |
BAL
|
Monthly |
|
5. |
Statement showing
the position of unreconciled
entries in foreign currency accounts abroad |
*5B.2(iv) |
REC |
Half
yearly |
|
6. |
Statement
regarding interest rates sensitivity |
*5B.9(iii) |
SIR |
Quarterly
|
|
7. |
Statement
of particulars of outstanding export bills |
**6C.12(ii) |
XOS |
Half
yearly |
|
8. |
Export bills allowed to be written off |
**6C.14(ii) |
EBW |
Half yearly |
|
9. |
Statement showing details
of imports for which documentary evidence of import has not been received
from importers |
+7A.20(v) |
BEF |
Quarterly |
|
10. |
Statement
of permission granted for opening of trading/non-trading offices/posting of
representative abroad |
+9B.1(iii) |
ORA |
Monthly |
|
11. |
Statement of
purchases/sales of
shares/debentures made on behalf of FIIs under Portfolio Investment Scheme |
+10B.4(ii) |
LEC(FII) |
Daily |
|
12. |
Statement of
purchases/sales of
shares/debentures made on behalf of NRIs/OCBs under Portfolio Investment
Scheme |
+10C.23(i) |
LEC(NRI) |
Daily
|
|
13. |
Statement showing
remittance of income/interest
to NRIs/OCBs on investments /deposits held on non-repatriation basis |
+10C.24A(iii) |
CIR |
Half
yearly |
|
14. |
Statement regarding sale through
stock exchange/s of shares/bonds/debentures by authorised dealers acquired by
NRIs/OCBs under the Direct Investment Schemes |
+10C.27(iii) |
DSP |
Quarterly |
|
15. |
Statement of
operations on Diplomatic Bond
Stores Accounts+ |
+11B.5(e) |
DBS |
Monthly |
|
16. |
Statement
of operations on Non-resident
(External) Rupee Accounts |
13B.25 |
STAT
1 |
Monthly |
|
17. |
Summary of operations on Blocked accounts |
13D.6
and 8 |
STAT
2 |
Annual |
|
18. |
Deposits under
Foreign Currency
(Non-resident) Accounts Scheme |
Deleted |
STAT
3 |
— |
|
19. |
Summary of operations on Foreign Currency (Non-resident) Accounts |
Deleted |
STAT
4 |
— |
|
20. |
Statement showing inflow
and outflow of deposits under Foreign Currency (Non-resident - Banks Scheme)
[FCNR(B)] Accounts |
14B.10 |
STAT
5 |
Monthly |
|
21. |
Statement of earnings from Tourism |
16.7 |
STAT 6 |
Quarterly |
|
22. |
Summary
statement of operations in EEFC accounts |
+14D.10 |
STAT
7 |
Quarterly |
|
23. |
Statement showing
details of NRE Accounts |
13B.25 |
STAT
8 |
Monthly |
|
24. |
Statement
showing details of NRNR Accounts |
+13C.6 |
STAT
9 |
Monthly |
|
25. |
Statement showing
details of RFC Accounts |
+14E.10 |
STAT
10 |
Monthly |
|
26. |
Statement showing turnover
of foreign exchange business of authorised dealer |
16.8 |
FXT |
Annual.]
|
Annexure
Guide to Authorised Dealers For Compilation of R-Returns
The
information about the inflows and outflows of foreign exchange is of immense
importance to the Government of India (GOI) and Reserve Bank of India (RBI) for
making important policy decisions. The major source of this information is the
financial transactions with the outside world that take place through banks, i.e.,
Authorised Dealers (ADs) in foreign exchange and reported by them in R-Returns.
In addition, as a member of International Monetary Fund (IMF) India have an
obligation to present the quarterly Balance of Payments (BoP) statistics to the IMF. GOI have
accepted Special Data Dissemination Standards (SDDS) prescribed by the IMF
which, inter alia, require that the publication of BoP data should be
made within three months from the closure of the quarter. The BoP statistics
are the source for the outside world to know about the country’s transactions
relating to trade in merchandise, services, assets and liabilities with the
outside world that take place during the quarter. ADs are, therefore, required
to submit the information pertaining to the transactions put through their
Nostro accounts maintained by them with correspondents/branches/head office
abroad and Vostro accounts (of non-resident banks) maintained with them, in
R-Returns, accurately and strictly adhering to the prescribed time schedule.
Objective and scope of the Guide
This
Guide has been prepared to facilitate correct compilation of R-Returns by the
staff attending to the work in AD offices/branches and its provisions are
supplementary to the provisions of Chapter 16 of Exchange Control Manual. The correct manner of reporting
certain transactions where errors in reporting have been noticed frequently,
has been explained. The various checks AD should exercise before forwarding
R-Returns and other documents to RBI are also listed. ADs should ensure that
the dealing officers and staff in their offices/branches are fully conversant
with the provisions of the Guide. They may approach RBI for any clarification
they need in this regard.
Types of R-Returns
Every
transaction which causes inflow of
foreign exchange into India or outflow of foreign exchange from India and
affects the position of foreign currency assets or liabilities, is required to
be reported to RBI. As these transactions take place by way of debits and
credits to the Nostro accounts maintained by the ADs and Vostro accounts of
non-resident banks maintained with the ADs, every debit and every credit to
these accounts (and only every debit and every credit to these accounts) are
required to be reported. [Exceptions to this rule are (i) sale/purchase
of foreign currency notes and coins where sales (outflows) and purchases
(inflows) are to be shown as such and (ii) the transactions relating to
export bills negotiated, purchased or discounted as mentioned in para 18
below.] Thus there are two types of R-Returns, viz., R-Return (NOSTRO)
and R-Return (VOSTRO). A separate R-Return (NOSTRO) and a separate R-Return
(VOSTRO) for each currency is required to be submitted irrespective of number
of accounts operated upon in that
currency.
Printing of R-Return forms
Authorised
Dealers should themselves arrange to have their requirements of R-Returns
printed as per the specifications and formats prescribed by RBI. Care should be
taken to indicate the name of currency in bold letters. The size of the
paper should be ‘foolscap’ for R-Return (NOSTRO) and ‘double foolscap’ for
R-Return (VOSTRO). The size of the paper for the various other formats should
also be either foolscap or double foolscap. Quality of the paper should be
such that it is capable of sustaining repeated handling.
Time limit for submission of R-Returns
R-Returns
should be submitted twice a month as at the close of business on 15th and the
last day of the month. The Returns are to be sent so as to reach RBI within 7
calendar days from the close or period to which they relate. AD branches
submitting R-Returns should, however, make all efforts to submit them as
quickly as possible, without waiting
for the last day of submission, in order to avoid inconvenience to
themselves and RBI as well.
Who should submit R-Returns (NOSTRO)
Offices/Branches
of ADs in categories A and B should submit
R-Return (NOSTRO) in the same format, independently, to RBI together
with the required documents as indicated in paragraph 15 below. Under no
circumstances category B Offices/Branches of ADs should forward the supporting
documents to the category A offices/branches on whose Nostro accounts they
operate, for onward transmission to RBI.
Who should not submit R-Returns (NOSTRO)
Offices/Branches of ADs in category C should not submit their R-Returns
(NOSTRO) independently to RBI. Their
transactions will be reflected in the Returns of the Office/Branch in category
A or B through whom their transactions are booked. Accordingly, Forms A1, A2
and Forms GR/PP/SOFTEX should be sent to that Office/Branch for onward
submission to RBI alongwith relative R-Returns submitted by that Office/Branch.
Who should submit R-Returns (VOSTRO)
Offices/Branches
of ADs maintaining accounts of non-resident banks (including banks from ACU
member countries) as also private exchange houses (i.e., VOSTRO
accounts) in their books, should report operations thereon to RBI in R-Return
(VOSTRO) duly supported by Forms A1, A2, A3 pertaining to all the transactions
including the transactions relating to other branches/other AD branches routed
through such accounts.
Who should not submit R-Returns (VOSTRO)
Offices/Branches of ADs in category C should not submit any R-Return
(VOSTRO). Offices/Branches of ADs who do not maintain VOSTRO accounts should
also not submit R-Returns (VOSTRO).
However, in support of the transactions put through by them in VOSTRO Account
maintained by another AD/branch/office, they should certify duly completed
Forms A1 and A2 and forward them immediately to the concerned reporting AD/branch/office, i.e.,
AD/branch/office maintaining the relative VOSTRO Account for submission to RBI
as mentioned in paragraph 8 above.
To whom R-Returns should be submitted
R-Returns
should be submitted to the Regional Office of Exchange Control Department of
RBI under whose jurisdiction the concerned Office/Branch of the Authorised
Dealer is situated.
Periodical check by category A branches
Since
Offices/Branches of ADs in category B will be submitting R-Returns alongwith
necessary enclosures directly to RBI, the offices in category A who will be
reporting sale and purchase transactions in respect of category B branches
against items I.G and II.G respectively, should periodically tally them with
the sales and purchases actually reported to RBI in the R-Returns submitted
directly by the category B branches.
Submission of Form A1
Every
credit to Mirror (of Nostro)
account and every credit to Vostro account
for payment towards imports into India, including advance payment for imports,
should be supported by an application in Form A1 made by the remitter
(importer) and duly certified by the AD. It should be ensured that commodity
description and code number under Harmonised Coding System (HSITC) devised by
DGFT as also I/E code number are filled in by the importer applicant. The
concerned AD office/branch should also ensure that an appropriate item in the
AD’s certificate is properly ticked as indicated in Form A1.
Submission of Form A2
Every
credit to Mirror (of Nostro) account and every
credit to Vostro account (except those mentioned in para 14
below), for payment towards purposes other than imports into India but
including imports under intermediary trade, should be supported by an
application in Form A2 made by the remitter and duly certified by the AD.
Submission of Form A3
Every
credit and debit to Vostro account towards transfer of funds between accounts
of non-resident banks, transactions relating to funding of/withdrawal from the
Vostro account or the transactions by the account holder non-resident bank with
RBI should be supported by Form A3 duly completed by the AD.
Documents to be submitted alongwith R-Returns+
The
following documents/statements/schedules (as per formats enclosed) relating to
payments from and receipts in both Nostro and Vostro accounts during the period
under report should accompany the respective
R-Returns :
(i) Forms A1 and A2/statement of travel
transactions in lieu of Forms A2 (in Form TRA) together with covering schedules
duly segregated as under, statement of sales to overseas banks/branches and
Forms A3 (in the case of Vostro account):
(ii) SCH 1 *(a) for
Forms A1 relating to payments below the equivalent to Rs. 5,00,000 towards
imports into India.
(b) for Forms A1 relating to payments
equivalent to Rs. 5,00,000 and above towards imports into India.
(iii) SCH 2 *(a) for
Forms A2 relating to payments below the equivalent to Rs. 5,00,000 towards
purposes other than imports.
(b) for Forms A2 relating to payments
equivalent to Rs. 5,00,000 and above towards purposes other than imports.
(iv) ENC relating
to physical exports, bills in respect of which were negotiated, purchased,
Statement discounted or sent for
collection during the reporting period.
(v) GR/PP/ relating to
exports where full
export value has
been realised, with invoices/
SOFTEX accounts sales, etc., as
enclosures to SCH 3/SCH 5.
Forms
(vi) SCH 3 for
exports where full value has been realised.
(vii) SCH 4 for
exports where part value has been realised.
(viii) SCH 5 for exports where full value has been received in
advance.
(ix) SCH 6 for
exports where part value has been received in advance.
(x) Supplementary statement of receipts, i.e.,
debits to Mirror (of NOSTRO) accounts or VOSTRO accounts, for purposes other
than exports, involving amounts equivalent of Rs. 1,00,000 and above.+
(xi) Exchange Control copies of import licences
which have been fully utilised/expired, under a covering schedule giving
licence numbers and dates.
(xii) Selected large branches of ADs (critical branches) who have been
advised to submit the data relating to sale and purchase transactions with
public duly classified purposewise, on a floppy, should submit the floppy
alongwith R-Returns.
Uniform code number allotted to AD branches
Part
I (7 digits) of the uniform code number allotted to the reporting Office/Branch
of AD should be indicated on the top of the R-Returns, as well as on all the
enclosures. As and when new branches are authorised ADs should apply to the
Director, Banking Statistics Division, Department of Statistical Analysis and
Computer Services, Reserve Bank of India, C-8/9 Bandra Kurla Complex, Post Box
No. 8128, Bandra (East), Mumbai-400051 through their Head Office for allotment
of code number irrespective of whether the branch intends transacting foreign
exchange business immediately or not. Any existing branch having a code number
but which is not transacting foreign exchange business may use the number
allotted to it as and when it starts transacting such business at a future
date.
What should be reported in R-Returns
All
credits and debits to Mirror (of NOSTRO) account and to VOSTRO account,
pertaining to the reporting period only, should be reported in R-Returns. In
other words, from a set of vouchers pertaining to any transaction, only Mirror
(of NOSTRO) account voucher or VOSTRO account voucher qualifies for reporting.
Sales and purchases of foreign currency notes and coins should also be shown as
sales (payments) and purchases (receipts.)
Suspense Account
As
per the guidelines for compilation of BoP statistics, export receipts are
required to be included as inflows when (constructive) ownership is passed on
from the exporters. As such when the
export bills are negotiated, purchased or discounted, the bill amounts should
be shown as export receipts. This is an exception to what is stated in para
17 above. Pending realisation of such bills the bill amounts are debited
to a Suspense Account. On realisation
of export bills the bill amounts are debited to Mirror (of Nostro) Account and
credited to the Suspense Account to reverse the earlier debit entries. This
Mirror (of Nostro) Account debit should not be reported. Thus, this Suspense
Account, in a way, is regarded as a part of Mirror Account and hence the
balance in that account is included in Opening and Closing Balances. This
Suspense Account is also operated upon in the case of transactions initiated
locally, pending actual debit or credit in NOSTRO Account.
What should not be reported in R-Returns
Debit
or credit to any account, other than those mentioned at paras 17 and 18
above, should not be reported in R-Returns for any reason whatsoever.
Similarly, as exception, debits/credits
pertaining to transfer between any two accounts [cash (Mirror), suspense,
deposit, treasury bills, treasury
deposit, securities, shares, foreign currency loan, etc., accounts] mentioned
in items III and IV of R-Return (NOSTRO) should not be reported as they get
reflected by increase in balance in one and corresponding decrease in balance
in the other.
Revised R-Return to be submitted by ADs
Back data, if any, pertaining
to earlier reporting periods should not be reported in R-Returns for the current period. Instead,
a revised R-Return for the relevant earlier period, should be submitted, duly
superscribed as “REVISED R-RETURN”. Similarly, in the event of any wrong
reporting in R-Return noticed later, a revised R-Return should be submitted.
Amounts in R-Returns
No decimal places should be reported. Only foreign currency amounts, in
rounded whole units of the currency,
should be reported in all R-Returns (NOSTRO) and R-Returns (VOSTRO) in ACU
Dollars. Similarly, only rounded whole Rupee amounts should be reported in
R-Returns (VOSTRO) in Indian Rupees.
Important major items of the R-Return (NOSTRO)
The
following are the important major items to be reported in the R-Returns
(NOSTRO):
I. Sales
II. Purchases
III. Opening
balances
IV. Closing balances
V. Aggregate balances in customers’
accounts which are in the nature of foreign currency liability of the AD.
These
are followed by the certificate to be given by the AD branch submitting the
Returns. The individual item headings are self explanatory. Care should be
taken to ensure that the Opening balances shown in the Return are exactly the same as the Closing balances shown
in the previous period’s Return. It should also be ensured that the Return
balances arithmetically, i.e., Item III + Item II - Item I = Item IV.
Important major items of R-Returns (VOSTRO)
The
following are the important major items to be reported in the R-Returns
(VOSTRO):
Col. 2 Opening Balance
Cols. 3, 4 and 5 Credits
Col. 6 Total Credits
Cols. 7, 8 and 9 Debits
Col. 10 Total Debits
Col. 11 Closing Balance
These
are followed by the certificate to be given by the AD branch submitting the
Returns. The individual column headings are explicit and self explanatory. Care
should be taken to ensure that the Opening Balances shown in the Return are
exactly the same as the Closing Balances shown in the previous period’s Return.
It should also be ensured that the Return balances arithmetically, i.e.,
Col. 2 + Col. 6 - Col.10 = Col. 11.
Items in R-Return (NOSTRO)
The
following are brief clarifications of the various items to be reported in
R-Return (NOSTRO):
|
|
Item No. |
What should be
filled in against the item |
|
Sales for
imports below equivalent of Rs. 5,00,000 |
I.A. (i) |
Aggregate amount of
sales of foreign currency to public towards all payments individually below
the equivalent of Rs. 5,00,000 for imports into India including remittances
towards advance payments indicating the number of Forms A1 enclosed. Duly completed Form A1 for each
transaction should be enclosed. These Forms A1 should be separately bunched
together and listed in SCH 1 (a). |
|
Sales for imports
equivalent of Rs. 5,00,000 and above |
I.A. (ii) |
Aggregate amount of
sales of foreign currency to public towards all payments individually
equivalent of Rs. 5,00,000 and above for imports into India including
remittances towards advance payments indicating the number of Forms A1 enclosed.
Duly completed Form A1 for each transaction should be enclosed. These Forms
A1 should be separately bunched together and listed in SCH 1 (b). |
|
Sales for imports
under intermediary trade |
I.B. |
Aggregate amount of
sales of foreign currency to public for intermediary trade indicating number
of Forms A2 enclosed. Duly completed Form A2 for each transaction should be
enclosed. These Forms A2 should be separately bunched together. |
|
Sales for non-imports
below equivalent of Rs. 5,00,000 |
I.C. (i) |
Aggregate amount of
sales of foreign currency to public towards all payments individually below the equivalent of Rs.
5,00,000 for purposes other than imports, including bank charges due on
import transactions where remitted separately as also commission, reduction
of value, etc., deducted from export proceeds. Duly completed Form A2 for
each transaction should be enclosed, except in cases where a statement in lieu of Forms A2 is enclosed, such as in the case of payments relating to travel
abroad, etc. These Forms A2 and statements in lieu thereof should be
separately bunched together and listed in SCH 2 (a). |
|
Sales for non-imports
equivalent of Rs. 5,00,000 and above |
I.C. (ii) |
Aggregate amount of
sales of foreign currency to public towards all payments individually
equivalent of Rs. 5,00,000 and above for purposes other than imports,
including bank charges due on import transactions where remitted separately
as also commission, reduction of
value, etc., deducted from export proceeds realised. Duly completed Form A2
for each transaction should be enclosed, except where a statement in lieu of
Forms A2 is enclosed, such as in the case of payments relating to travel
abroad, etc. These Forms A2 and
statements in lieu thereof should be separately bunched together and listed
in SCH 2 (b). |
Sales to other ADs, FFMCs
|
I.D. |
Aggregate amount of
sales of foreign currency |
|
|
(a) |
to other Authorised
Dealers |
|
|
(b) |
to the
reporting AD’s other
branches in India maintaining independent position |
|
|
(c) |
to ADs on account of conversion into another
currency |
|
|
(d) |
to FFMCs in the
Form of TCs, notes and coins. |
|
|
|
No form is required
to be completed for these transactions. |
|
Sales to RBI |
I.E. |
Aggregate amount of
sales of foreign currency to RBI. |
|
|
|
No form is required
to be completed |
|
Sales to overseas
banks and branches |
I.F. |
Aggregate amount of
sales of foreign currency to overseas banks and branches. No Form is required
to be completed. However, a statement in the prescribed Form enclosed with
A.D. (M.A. Series) Circular No. 36, dated 11 September, 1997 should be
submitted. |
|
Sales reported
by category B branches |
I.G. |
Aggregate amount of
sales of foreign currency to public at category B branches, operating on the
account maintained by the reporting category A branch. These sales should
correspond to the sales independently reported by those category B branches
to RBI. |
|
Notional sales
relating to reversal of purchases |
I.H. |
Aggregate amount of
notional sales of foreign currency
arising out of reversal of entries relating to purchases of export bills due
to delinking of foreign currency. The amount should be shown only in the
inner column. |
|
|
|
No Form is required
to be completed. |
|
Purchases
relating to export bills - NPD |
II.A. (i)(a) |
Aggregate amount in
foreign currency relating to all export bills negotiated under letters of
credit, export bills purchased and export bills discounted. |
|
Purchases relating to
bills sent for collection and undrawn
balances |
II.A. (i)(b) |
Aggregate amount of
realisation of foreign currency relating to export bills sent for collection
earlier and undrawn balances against exports made earlier. |
|
Purchases of
advance export receipts |
II.A. (ii) |
Aggregate amount of
purchases of foreign currency from public representing advance receipts for
exports. |
|
Purchases under
intermediary trade |
II.B. |
Aggregate amount of
purchases of foreign currency from public relating to proceeds under
intermediary trade, which are not covered by Forms GR/PP/SOFTEX. |
|
Purchases of
non-export receipts below equivalent of Rs. 1,00,000 |
II.C. (i) |
Aggregate amount of
purchases of foreign currency from public for purposes other than exports,
individually below the equivalent of Rs. 1,00,000. |
|
Purchases of
non-export receipts equivalent of Rs. 1,00,000 and above |
II.C. (ii) |
Aggregate amount of
purchases of foreign currency from public for purposes other than exports,
individually equivalent of Rs. 1,00,000 and above. A supplementary statement
in the prescribed proforma giving details of the transactions should be
submitted. |
|
Purchases from
other ADs, FFMCs |
II.D. |
Aggregate amount of
purchases of foreign currency from |
|
|
|
(a) other
ADs |
|
|
|
(b) the
reporting AD’s other branches in India maintaining independent position |
|
|
|
(c) other
ADs on account of conversion into another currency |
|
|
|
(d) FFMCs in
the form of TCs, notes and coins |
|
|
|
No Form is required
to be completed. |
|
Purchases from
RBI |
II.E. |
Aggregate amount of
purchases of foreign currency from RBI. No Form is required to be completed. |
|
Purchases from
overseas banks and branches |
II.F. |
Aggregate amount of
purchases of foreign currency from overseas banks and branches. No Form is
required to be completed. |
|
Purchases
reported by category B branches |
II.G. |
Aggregate amount of
purchases of foreign currency from public at category B branches, operating
on the account maintained by the reporting category A branch. These
purchases should correspond to the purchases independently reported by those
category B branches to RBI. |
|
|
|
No Form is required
to be submitted. |
|
Notional purchases
relating to purchases reversed earlier |
II.H. |
Aggregate amount of
notional purchases of foreign currency
relating to realisations against export bills delinked as at item No.
I.H. No Form is required to be submitted. |
|
Opening Cash Balance |
III.A. |
Balance as at the
opening of the reporting period in the Mirror (of NOSTRO) accounts. If the
reporting Office/Branch is maintaining more than one NOSTRO (Current) account
abroad, the total of balances in the corresponding Mirror accounts should be
shown. Physical cash balance in the form of foreign currency notes and coins
should be included in the cash balance. |
|
|
|
Branches in
Category B should maintain a separate Inter branch account for each foreign
currency they are dealing in, to book foreign currency transactions and
should report the balance as at the opening
of the reporting
period in that account, against this item. Physical
cash balance, as above, should also be included. |
|
Opening balance in
suspense account |
III.B. |
Balance as at the
opening of the reporting period in the Suspense account maintained, as an
intermediate arrangement, to park the transactions initiated by the reporting
category A branch (or by the category B branches operating on the NOSTRO account maintained by the reporting A
category branch), in their NOSTRO account. Such transactions generally include export bills negotiated/purchased/discounted
pending realisation, drafts drawn by overseas correspondents pending receipt
of cover funds, etc. |
|
Opening balances in
other asset/liability accounts in foreign currency |
III.C III.D III.E III.F III.G |
Balances as at the
opening of the reporting period in the respective accounts as per local books against respective items. |
|
Opening balances in
foreign currency loan accounts |
III.H. |
Balances as at the
opening of the reporting period in the account of foreign currency loans
extended by the AD and outstanding as per local books. |
|
Closing balances |
IV.A to H |
Balances as at the close
of the reporting period in the same manner as in the case of opening balances
at III.A to III.H. |
|
Balances
in foreign exchange liability a/cs. |
V. |
Aggregate of balances in
each type of accounts mentioned at sub-items A to F. These are the deposit
accounts where AD has liability in foreign exchange towards residents or
non-residents. |
|
|
|
|
Items in R-Return (VOSTRO)
The
following are brief clarifications of the various columns in R-Returns
(VOSTRO).
|
|
Column No. |
What should be filled
in against the item |
Identification of the account
|
Col. 1 |
Name, place and country
of the VOSTRO account holder non-resident bank/branch/correspondent/private
exchange house. |
|
Opening balances |
Col. 2 |
Balances as at the
opening of the reporting period in the relative accounts. Care should be
taken to ensure that they are exactly same as the closing balances in Return
for the preceding reporting period. |
|
Credits towards
imports below equivalent of Rs. 5,00,000 |
Col. 3 (a) |
As in Item I.A.(i)
of R-Return (NOSTRO), “aggregate amount of credits” instead of “aggregate
amount of sales of foreign currency”. |
|
Credits Towards imports
equivalent of Rs. 5,00,000 and above |
Col. 3 (b) |
As in Item I.A(ii)
of R-Return (NOSTRO), “aggregate amount of credits” instead of “aggregate
amount of sales of foreign currency”. |
|
Credits towards
non-imports below equivalent of Rs. 5,00,000 |
Col. 4 (a) |
As in Item I.C.(i)
of R-Return (NOSTRO), “aggregate amount of credits” instead of “aggregate
amount of sales of foreign currency”. Credits towards imports under
intermediary trade should also be included. |
|
Credits towards
non-imports equivalent of Rs. 5,00,000 and above |
Col. 4 (b) |
As in Item I.C.(ii)
of R-Return (NOSTRO), “aggregate amount of credits” instead of “aggregate
amount of sales of foreign currency”. Credits towards imports under
intermediary trade should also be included. |
Credits towards funding
|
Col. 5 |
Aggregate amount of
credits on account of |
|
|
|
(i) funding of
the account by account-holder bank [there should be corresponding purchase of
foreign currency in the appropriate R-Return (NOSTRO)] and |
|
|
|
(ii) transfer
from another account of the same or other non-resident bank with the same or
another AD. |
|
|
|
Forms A3 should be
enclosed. |
Debits towards exports
|
Col. 7 |
As in Item Nos. II.A.(i)(a),
II.A.(i)(b) and II.A.(ii) of R-Return (NOSTRO),
“aggregate amount of debits” instead of “aggregate amount of purchases of
foreign currency” in the case of Vostro Account in Rupees. In the
case of Vostro Account in ACU
$ reimbursement towards
exports made to other ADs/branches should not be included. |
Debits towards non-exports below
equivalent of Rs. 1,00,000
|
Col. 8 (a) |
As in Item II.C.(i)
of R-Return (NOSTRO), “aggregate amount of debits” instead of “aggregate
amount of purchases of foreign currency”. Debits towards exports under
intermediary trade should also be included. |
Debits towards non-exports equivalent of
Rs. 1,00,000 and above
|
Col. 8 (b) |
As in Item II.C.(ii)
of R-Return (NOSTRO), “aggregate amount of debits” instead of “aggregate
amount of purchases of foreign currency”. Debits towards exports under
intermediary trade should also be included. |
Debits towards withdrawals
|
Col. 9 |
Aggregate amount of
debits on account of |
|
|
|
(a) withdrawals
by the account-holder bank [there should be corresponding sale of foreign
currency in the appropriate R-Return (NOSTRO)] and |
|
|
|
(b) transfer to
another account of the same or another non-resident bank with the same or another AD. |
|
|
|
Forms A3 should be
submitted |
|
|
|
In the case of Vostro Account in ACU $,
reimbursement made to other ADs/branches should be included in this column.
No Form is required to be submitted for this purpose. |
Closing balances
|
Col. 11 |
Balances as at the close
of the reporting period in the relative accounts. |
Reporting of certain transactions
All
ADs are expected to follow uniform procedure for reporting the transactions in
R-Returns. The following clarifications are provided for reporting of certain
transactions in which reporting errors are observed commonly:
Export bills NPD
(i) As already explained in para 18
above, value of export bills negotiated, purchased or discounted (NPD) should
be reported against item II.A(i)(a) of R-Return (NOSTRO)
although, it is debited to Suspense Account instead of Mirror (of NOSTRO)
Account pending actual realisation. In ENC statement, however, full invoice
value of relative exports should be reported.
Export bills sent for collection
(ii) While
only the amounts realised against export bills sent for collection earlier
should be included in item II.A(i)(b) of R-Return (NOSTRO), as
explained against the item, full invoice value of the relative export bills
should be reported in the relative ENC statement at the time of sending the
bills for collection.
Non-payment of export bills NPD
(iii) When export bills negotiated, purchased or discounted are
dishonoured and are taken on collection basis, the purchases earlier reported
as at (i) above have to be reversed. Reporting of such a reversals has
to be made by reporting equivalent amount against item I.C(i) or I.C(ii).
Duly completed Form A2 indicating GR/PP/SOFTEX Form number, amount of bill,
period of R-Return in which purchase was reported and reason for reversal,
should be enclosed.
Export bills realised in another currency
(iv) When
an export bill is realised in the currency other than that of the bill earlier
purchased and reported as in (i) above, it has to be reversed as
indicated at (iii) above. Purchase of the currency actually realised
should be reported in R-Return pertaining to that currency.
Short realisation of export bills
(v) When
the amount realised against an export bill is short of the actual bill amount
reported earlier as in (i) above, on account of discount, reduction
allowed or commission deducted, etc., the difference should be reported as sale
against item I.C.(i) or I.C.(ii). Duly completed Form A2
indicating the details such as GR/PP/SOFTEX Form number, bill amount, etc.,
should be enclosed.
Export bills under LC restricted to another AD
(vi) When
a forward purchase contract is booked by an AD (Exporter’s AD) against an
export bill under letter of credit (LC) negotiated with another AD (LC
Negotiating AD) to whom the LC is restricted, the LC Negotiating AD should
follow the reporting procedure as in (i) above, at the time of
negotiating by reporting the amount as purchase in R-Return and full invoice
value in ENC statement, and as in (v) above, at the time of receipt of
the foreign currency by reporting short realisation, if any. When the foreign
currency amount is paid by the LC Negotiating AD to the Exporter’s AD in
settlement of the forward contract both the ADs should report the transaction
as an interbank transaction against items I.D and II.D respectively. Exporter’s
AD should immediately pass on the relative GR/PP/SOFTEX Form to the LC
Negotiating AD for submission to RBI alongwith the latter’s R-Return.
Payments for imports under deferred
guarantees/loans/credits
(vii) Payment for imports under deferred guarantees/loans/credits or
other suppliers’ credits (whether short, medium or long term) should be
reported against item I.C.(i) or I.C.(ii). Form A2 duly completed
and certified by the AD indicating the purpose of remittance with details such
as, break-up of the amount towards principal and interest, RBI/GOI
approval/registration No., if any, etc.
Credits to EEFC/RFC Accounts
(viii) The credits to the EEFC/RFC Accounts have to be out of
realisation/receipt of foreign currency amounts. As explained in paras 17 and
19 above all such receipts being debited to Mirror (of NOSTRO) Account
have to be reported as purchases against appropriate item in relative R-Return
(NOSTRO). As the credits to EEFC/RFC Accounts are corresponding domestic part
of the transactions, they should not be reported in any manner in any R-Return
nor should any form be enclosed, for any reason whatsoever. Even the interest,
if any, payable on the balance in the account and credited, should not be
reported, as there is no corresponding effect on Mirror (of NOSTRO) Account.
Debits to EEFC/RFC accounts
(ix) Debits
to the EEFC/RFC Accounts for payments in Rupees in India should be treated
exactly in the same manner as credits, as explained in (viii) above.
Debits for payments abroad for any approved purposes should be reported as
sales against item I.A.(i) or I.A.(ii) or I.C.(i) or I.C.(ii)
in appropriate R-Return (NOSTRO) because there is corresponding credit to
Mirror (of NOSTRO) Account. Forms A1/A2 duly completed by the remitter and
certified by the AD indicating requisite details, should be submitted.
Foreign currency received for credit to FCNR(B)/RFC A/cs
(x) When
foreign currency amount is received for credit to FCNR(B), RFC Accounts, Mirror
(of NOSTRO) Account is debited and hence the same should be reported as
purchase against item No. II.C. (i) or II.C.(ii) giving
appropriate purpose in the supplementary statement.
Submission of R-Returns
All
R-Returns should be submitted in two sets as detailed below :
Set
I: (i) All R-Returns (originals)
(ii) All SCH I and SCH II (originals)
(iii) All Supplementary Statements of non-export receipts (originals)
(iv) All (a) Enc
statements (originals and duplicates)
(b) SCH 3, SCH 4, SCH 5 & SCH 6
(originals & duplicates)
(c) duplicates of GR/PP/SOFTEX Forms.
Set
II: (i) All R-Returns (duplicates)
(ii) All SCH I and SCH II (duplicates) along with Forms A1, A2, & A3
(iii) All Supplementary Statements of non-export receipts (duplicates)
(iv) Fully utilised/expired import licences and those having meagre balances
together with a list giving serial numbers of licences surrendered.
Both
the sets should be sent in the same cover.
AMC - Memorandum
of Instructions to Authorised Money Changers
AP (DIR Series) (2002-2003)
Circular No. 43, dated 12-11-2002
Memorandum of Instructions to
Authorised Money Changers (AMCs)
Attention of the Full Fledged Money Changers (FFMCs) and Restricted
Money Changers (RMCs) is invited to the Memorandum FLM and Memorandum RLM
containing the procedural instructions issued to FFMCs and RMCs respectively.
2. The Reserve Bank has now brought out the
Memorandum of Instructions to Authorised Money Changers (AMCs) i.e. Full
Fledged Money Changers and Restricted Money Changers, containing procedural
instructions issued to authorised money changers, for adherence while
undertaking money changing transactions. A copy of the Memorandum AMC is
enclosed.
3. The
directions contained in the Memorandum AMC, supercede the instructions
contained in the existing Memorandum FLM/RLM issued in June 1999, as amended
from time to time.
4. FFMCs/RMCs may, however, continue to
maintain the same set of books/registers as hitherto. A revised FLM 8 designed
to capture data relating to purchases from franchisees is at Annexure.
5. Authorised dealers may bring the
contents of this circular to the notice of their constituents concerned.
6. The directions contained in this
circular have been issued under section 10(4) and section 11(1) of the Foreign
Exchange Management Act, 1999 (42 of 1999).
ANNEXURE
FLM 8
Summary statement of purchases and sale of foreign currency
notes during the month of…………………………., 200
|
Name and address of money changer |
RBI Licence No. .................... |
|
|
US $ |
Ł |
EURO |
JY etc. |
|
A. Opening balance |
|
|
|
|
|
Purchase of foreign currency notes from (a)Public (b)RMCs/FFMCs/ADs including imports (c) Franchisees |
|
|
|
|
|
B. Total Purchases (a) + (b) |
|
|
|
|
|
Sales of foreign
currency notes under |
|
|
|
|
|
(a)BTQ (b)Business Visits (c)Sales to other FFMCs/ADs including exports |
|
|
|
|
|
C. Total Sales [(a) + (b) + (c)] |
|
|
|
|
|
Closing balance (A + B - C) |
|
|
|
|
We hereby
certify that the statement is a true account of all transactions undertaken
during the month in accordance with the Exchange Control Regulations.
Place :
(Signature
of Authorised Official)
Stamp
Date : Name
: ....................................
Designation
: ............................
AMC MEMORANDUM OF
INSTRUCTIONS TO AUTHORISED MONEY CHANGERS
General
Authorised
Money Changers (AMCs) are entities licensed by the Reserve Bank under section
10 of the Foreign Exchange Management Act, 1999. An AMC may either be a Full
Fledged Money Changer (FFMC) or a Restricted Money Changer (RMC). FFMCs are
authorised to purchase foreign exchange from residents and non-residents
visiting India, and to sell foreign exchange for certain approved purposes.
RMCs are authorised only to purchase foreign exchange from residents and
non-residents. FFMCs may appoint franchisees to undertake purchase of foreign
currency as per the Scheme announced by the Reserve Bank. A copy of the Scheme
is given in the Annexure.
Note :- RMCs and franchisees of
FFMCs functioning within 10 kms. from the borders of Pakistan and Bangladesh
may also sell the currency of the bordering country, with the prior approval of
the Reserve Bank.
Scope
of Memorandum
(i) This Memorandum
contains directions which AMCs should strictly observe in their dealings.
Amendments to the Memorandum will be circulated in the form of A.M. (F.L.
Series) circulars.
(ii) Directions
contained in this Memorandum have been issued under section 11(1) of Foreign
Exchange Management Act, 1999 (42 of 1999).
Bringing
in and taking out of Foreign Exchange
(i) Foreign exchange
in any form can be brought into India freely without limit provided it is
declared on the Currency Declaration Form (CDF) on arrival to the Custom
Authorities. When foreign exchange brought in the form of currency notes or
travellers cheques does not exceed US $ 10,000 or its equivalent and/or the
value of foreign currency notes does not exceed US $ 5,000 or its equivalent,
declaration thereof on CDF is not insisted upon.
(ii) Taking out
foreign exchange in any form, other than foreign exchange obtained from an
authorised dealer or a money changer is prohibited unless it is covered by a
general or special permission of Reserve Bank. Non-residents, however have
general permission to take out an amount not exceeding the amount originally
brought in by them subject to compliance with the provisions of sub-para (i)
above.
Purchases
of Foreign Currency from Public
(i) AMCs/franchisees
may freely purchase foreign currency notes, coins and travellers cheques from
residents as well as non-residents. Production of passport need be insisted
upon only while encashing travellers cheques tendered by non-residents. Where
the foreign currency was brought in by declaring on form CDF, the tenderer
should be asked to produce the same. The production of the form may, however,
be waived if for any reason, the tenderer is unable to produce it.
(ii) AMCs may sell
Indian rupees to foreign tourists/visitors against International Credit Cards
and take prompt steps to obtain reimbursement through normal banking channels.
Encashment
Certificate
(a) AMCs may issue
certificate of encashment when asked for in cases of purchases from the public.
These certificates bearing authorised signatures should be issued on the letter
head of the money-changer and proper record maintained.
(b) In
cases where encashment certificate is not issued, attention of the customers
should be drawn to the fact that unspent local currency held by non-residents
will be allowed to be converted into foreign currency only against production
of a valid encashment certificate.
Purchases
from other FFMCs and Authorised Dealers
FFMCs may
purchase from other FFMCs,RMCs and authorised dealers any foreign currency
notes, coins and encash travellers cheques tendered in the normal course of
business. Rupee equivalent of the amount of foreign exchange purchases should
be paid only by way of crossed account payee cheque/Demand Draft.
Sale
of foreign exchange
(I)
Private Visits
FFMCs may sell
exchange upto the prescribed ceiling in the form of foreign currency
notes/coins and travellers cheques to eligible resident Indian citizens for
undertaking one or more private visits to any country abroad (except Nepal and
Bhutan). Exchange for such visits may be released on the basis of declaration
given by the traveller regarding the amount of foreign exchange availed of
during a calendar year. Foreign nationals permanently resident in India are
also eligible to avail of this quota for private visits provided the applicant
is not availing of facilities for remittance of his salary, savings etc. abroad
in terms of the existing Exchange Control regulations.
(II)
Business visits :
FFMCs may sell
exchange in the form of foreign currency notes/coins and traveller cheques to
eligible travellers for business travel or for attending conference or
specialised training.
Quantum
of Exchange :
Amount
prescribed by Reserve Bank from time to time.
Conditions
(i) The sale of foreign exchange should be
made only on personal application and identification. While issuing travellers’
cheques, the condition for issue stipulated by the issuing company should be
scrupulously observed and acknowledgement for receipt of travellers cheques
duly obtained.
(ii) Payment in excess of Rs. 50,000 towards
foreign exchange sold should be received only by account payee cheque/demand
draft. For this purpose, sales in instalments, should be reckoned as a single
drawal for the journey.
(iii) The sale of foreign currency/notes and
coins within the overall entitlement of foreign exchange, should be restricted
to the limits prescribed by Reserve Bank from time to time.
Sales
against Reconversion of Indian Currency
FFMCs may
convert into foreign currency, unspent Indian currency held by non-residents at
the time of their departure from India, provided a valid Encashment Certificate
is produced.
Note : FFMCs may convert at
their discretion, unspent Indian currency up to Rs.10,000 in the possession of
non-residents if, for bona fide reasons, the person is unable to produce an Encashment Certificate
after ensuring that the departure is scheduled to take place within the
following seven days.
Cash
Memo
FFMCs may issue
a cash memo, if asked for, on official letterhead to travellers to whom foreign
currency is sold by them. The cash memo may be required for production to
emigration authorities while leaving the country.
Rates
of Exchange
AMCs may put
through transactions relating to foreign currency notes and travellers cheques
at rates of exchange determined by market conditions.
Display
of Exchange Rate Chart
AMCs should
display at a prominent place in or near the public counter, a chart indicating
the rates for purchase/sale of foreign currency notes and travellers cheques.
Foreign
Currency Balances
(i) FFMCs
should keep balances in foreign currencies at reasonable level and avoid build
up of idle balances with a view to speculating on currency movements.
(ii) RMCs/franchisees
should surrender collection of foreign currency notes, coins and travellers
cheques to an authorised dealer or to a FFMC within seven working days.
(iii) The
transactions between authorised dealers, FFMCs and RMCs should, however, be
settled by way of account payee crossed cheques/demand drafts. Under no
circumstances should settlement be made in cash.
Replenishment
of Foreign Currency Balances
(i) FFMCs may obtain
their normal business requirements of foreign currency notes from other AMCs
(including RMCs)/authorised dealers in foreign exchange in India, against
payment in rupees made by way of account payee crossed cheque/Demand Draft.
(ii) Where FFMCs are
unable to replenish their stock in this manner, they may make an application to
the Central Office, Reserve Bank through an authorised dealer for permission to
import foreign currency into India. The import should take place through the
designated authorised dealer through whom the application is made.
Export/Disposal
of surplus Foreign Currency Notes/Travellers Cheques
FFMCs may export
surplus foreign currency notes/encashed travellers cheques to an overseas bank
through the medium of designated authorised dealer in foreign exchange for
realisation of the value through the latter. FFMCs may also export surplus
foreign currency to private money changers abroad subject to the condition that
either the realisable value is credited in advance to the A.D.’s nostro account
or a bank guarantee is issued by an international bank of repute covering the
full amount of the foreign currency notes/coins to be exported.
Write-off
of fake foreign currency notes
In the event of
foreign currency notes purchased being found fake/forged subsequently, AMCs may
write- off upto USD 2000 per year after approval of their Top Management after
exhausting all available options for recovery of the amount. Any write-off in
excess of the above amount, would require the approval of the concerned
Regional Office of the Reserve Bank.
Registers
and Books of Account of Money-changing Business
(i) AMCs
shall maintain such registers and books of account as prescribed by the Reserve
Bank from time to time
(ii)
All registers and books should be
kept up-to-date, cross-checked and balances verified daily.
(iii) Transactions
not pertaining to money-changing business of the AMC should not be mixed up
with money-changing transactions. In other words, the registers and books of
account should show clearly the trail of transactions pertaining to
money-changing business.
(iv) Separate
registers should be maintained for each establishment, if the AMC maintains
more than one place of business.
Submission
of Statement to Reserve Bank
(i) FFMCs
should submit to the office of Reserve Bank which has issued the
licence/unified licence, a monthly consolidated statement for all its offices
in form FLM 8 so as to reach Reserve Bank not later than the 10th of the
succeeding month.
(ii) Similarly
RMCs should submit to the office of Reserve Bank under whose jurisdiction they
are functioning, a quarterly statement in form RLM 3. The statement duly
certified by the Authorised Dealer/FFMC should reach Reserve Bank not later
than the 10th day of the month following the quarter. In case the collections
of foreign currencies are surrendered to different authorised dealers/FFMCs,
separate quarterly statements should be prepared to facilitate independent
certification by each such authorised dealer/FFMC.
(iii) AMCs
should submit to the Reserve Bank a monthly statement indicating details of
receipt/purchase of US $ 10,000/its equivalent and above per transactions
within 10 days of the close of the month. FFMCs should include transactions of
their franchisees in their statement.
Inspection
of Transactions of AMCs
Section 12(1) of
Foreign Exchange Management Act, 1999, empowers any officer of Reserve Bank
specially authorised in this behalf to inspect the books and accounts and other
documents of AMCs. AMCs should provide all assistance and co-operation to
Inspecting Officers in carrying out their inspection. Failure to produce any
books of account or other document or to furnish any statement or information
or to answer any question relating to the money-changing transactions to the
Inspecting Officers, shall be deemed to be a contravention of the provisions of
the Act.
Concurrent
Audit
(i) FFMCs should put in place a system of
Concurrent Audit of the transactions undertaken by them.
(ii) All single
branch FFMCs having a turnover of more than USD 100,000 or equivalent per month
and all multiple branch FFMCs should institute a system of monthly audit. Single
branch FFMCs having turnover of less than USD 100,000 or its equivalent may
institute a system of quarterly audit.
(iii) Appointment/selection
of auditors is left to the discretion of the FFMCs. The auditors should check
all the transactions of the FFMCs. The Statutory Auditors would be required to
certify that the Concurrent Audit and the internal control systems are working
satisfactorily.
Renewal
of Licence
AMCs should
apply for renewal of licence at least 3 months in advance of the expiry of the
current licence to the Regional Office of Reserve Bank in whose jurisdiction
their Head Office is situated.
Temporary Money-changing Facilities
AMCs are
authorised to transact money-changing business only at the location or
locations specifically indicated in the licence. If it is intended to provide
money-changing facilities on a temporary basis on certain special occasions, a
separate application should be made for the purpose to the concerned Regional
Office of Reserve Bank giving full details such as period for which the
exchange counter will be operated, volume of business expected, manner of
accounting of the transactions, letter from organisers making available venue
for the money changing facilities, etc.
Revocation
of Licence
Reserve Bank may
revoke the licence granted to an AMC at any time for reasons of public interest
or if the AMC has not complied with any of the conditions of the money-changing
licence issued by Reserve Bank or has made any false declaration or has not
conducted the business in accordance with the provisions of this Memorandum
read with the amendments issued from time to time or has contravened any of the
Exchange Control regulations.
Annexure
SCHEME FOR AUTHORISED DEALERS AND FULL-FLEDGED MONEY CHANGERS APPOINTING
AGENTS/FRANCHISEES FOR UNDERTAKING RESTRICTED MONEY CHANGING
Objective
The objective of
the Scheme is to provide easier conversion facilities for travellers and
tourists, including NRIs, by enlarging the network of money changing facilities
in the country. It is expected that the new facility given below, will enable
banks and full-fledged money changers to provide such facilities at all tourist
centres and major cities for extended hours and on holidays.
Proposed
Scheme
Under the
proposed Scheme, in addition to the existing facilities, RBI would freely
permit Banks i.e. ADs and FFMCs to enter into agency/franchising
agreements at their option with entities for the purpose of carrying on
Restricted Money Changing business i.e. conversion of foreign currency
notes, coins or travellers cheques into rupees.
Franchisee
A franchisee can
be any entity who has a place of business and whose bona fides are acceptable to the
AD/FFMC. These franchisees would undertake only restricted money changing
business.
Existing
RMCs
Existing RMCs
who are licensed by the Reserve Bank are free to undertake money changing under
this scheme as a franchisee of the AD/FFMC on surrendering the existing RBI
licence. Those who do not opt for operation under this Scheme may continue to
undertake existing money changing business until further notice.
Procedure
for application
The Franchiser i.e.
an AD or an FFMC would need to apply to the Reserve Bank in Form RMC-F for
putting in place arrangements under this Scheme. The application should be
accompanied by a declaration that while selecting the franchisees adequate due
diligence has been carried out and that such entities have undertaken to comply
with all the provisions of the franchising agreement/prevailing RBI regulations
regarding money changing. Approvals would be issued by the Reserve Bank on a
one time basis. Thereafter, as and when new agency/franchise agreements are
entered into, these would have to be reported to the Reserve Bank on a post
facto basis along with similar declaration as indicated above.
Agency/Franchise
Agreement
Franchisers are
free to decide on the tenor of the arrangement as also the commission or fee
through mutual agreement with the franchisee.
The
Agency/Franchise agreement to be entered into by an AD/FFMC should, however,
include the following salient features :
(a) The display of exchange rates by the
franchisee. Exchange Rate of foreign currency into rupees should be the same or
close to the daily exchange rate charged by the ADs/FFMC at its branches.
(b) The surrender of collections by the
franchisee to the franchiser or other authorised persons, as may be agreed
upon, within 7 days.
(c) The maintenance of proper record of
transactions by the franchisee.
(d) The on-site inspection of premises and
records of the franchisee by the franchiser at least once a year.
Reporting and Inspection
The franchisers i.e.
ADs/FFMCs would be expected to put in place adequate arrangements for reporting
of transactions by the franchisees to ADs/FFMCs in a simple format to be
prescribed by them on a regular basis, say at monthly intervals.
Form RMC - F
1. Name of the AD/FFMC
2.Name and address of the franchisees
Details of locations
(i)
(ii)
(iii)
etc.
3. Arrangements in place to surrender the foreign
exchange
4. Reporting and Inspection arrangements.
Authorised
Signatory
Date:
|
MEMORANDUM AMC |
|
|
MEMORANDUM OF INSTRUCTIONS TO AUTHORISED MONEY CHANGERS |
|
RESERVE BANK OF INDIA, NOVEMBER 2002
Preface
This Memorandum
(AMC) contains procedural instructions issued to authorised money changers for
adherence while undertaking money changing transactions. The directions
contained herein have been issued under section 10(4) and section 11(1) of
Foreign Exchange Management Act, 1999 (42 of 1999).
Pem - Memorandum of Instructions on Project Exports and
Service Exports*
Introduction
Export of engineering goods on deferred payment terms and execution of
turnkey projects and civil construction contracts abroad are collectively
referred to as ‘Project Exports’. Project export contracts are generally of
high value and exporters undertaking them are required to offer competitive
credit terms to be able to secure orders from foreign buyers in the face of
stiff international competition. Indian exporters offering deferred payment
terms to overseas buyers in respect of export of goods and those who have been
awarded turnkey, civil construction contracts by overseas parties have to
secure prior approval at post award stage from various institutions such as Authorised
Dealer/Exim Bank/Working Group/Reserve Bank of India as the case may be for
credit terms to be offered, third country imports etc. Regulations relating to
Project Exports and Service Exports are laid down in this Memorandum which is
divided into the following parts:
|
Part A |
- |
General
|
|
Part B |
- |
Project Exports |
|
Part C |
- |
Export of Services |
|
Part D |
- |
Other matters connected with Project Exports & Service Exports |
Scope of Memorandum
(i) This
memorandum contains directions to be observed by the exporters engaged in
project exports and service exports as also Export Import Bank of India and
authorised dealers while dealing with cases of project/service exports.
(ii) Directions
contained in this Memorandum have been issued under Section 10(4) and Section
11(1) of Foreign Exchange Management Act, 1999 (42 of 1999).
Part
A - General
Constitution of Working Group
(i) Exporters
who have secured orders for undertaking supply contracts on deferred payment
terms or those who have secured turnkey/civil construction contracts abroad
require approval/assistance of different institutions like Reserve Bank (ECD),
Exim Bank and ECGC besides their own bankers. With a view to obviating the need
for exporters to approach each institution separately for such approvals and to
avoid delays, a Working Group has been constituted with representation from
Reserve Bank (ECD), Exim Bank and ECGC for the purpose of giving package
approval for proposals submitted by exporters who have secured orders for
execution of overseas contracts. In case of contracts of high value,
representatives of Government of India are also invited to participate in the
meetings of the Working Group. In order to obtain immediate clarifications for
speedy clearance of proposals by the Working Group, the concerned exporters and
their bankers are also associated with the meetings. With the same objective,
participation of the main sub-suppliers, sub-contractors or other associates
and their bankers in such meetings is also encouraged, particularly in respect
of proposals for high value contracts.
(ii) The Working
Group also considers proposals for export of services in the area of
management, technical consultancy, etc. where execution of the contracts
involves grant of fund-based and/or non-fund-based facilities from the Indian
banking system or where deferred payment terms are to be offered.
Criteria
for consideration of Proposals by Working Group
(i) The Working Group
will mainly examine, among others, the following aspects while considering
grant of package approval for proposals for export of engineering goods on
deferred payment terms or for undertaking turnkey/construction contracts
abroad:
(a) Period of deferred credit offered vis-a-vis
foreign competition, moratorium, rate of interest, adequacy of advance and
down payment provided for as well as requirement of foreign exchange for
execution of contract (viz. imports from third countries, agency
commission, freight, etc.) and overall economics of the proposal.
(b) Nature of security obtainable from the
foreign buyers against payments due and nature and extent of various
bonds/guarantees required to be offered by the exporter (including those for
procuring third country supplies).
(c) Nature of escalation, force majeure and
arbitration clauses provided in the contract and penalty/damages payment
provisions.
(d) Extent of fund-based and non-fund-based
facilities required in India including pre-shipment and post-shipment credit
and/or bridge finance requirement.
(e) In case of turnkey contracts, economic and
technical viability thereof as well as special features relating to erection,
supervision and commissioning of the contract.
(ii) As regards civil
construction contracts, the Working Group will consider proposals only from
contractors who are on the approved list of Ministry of Commerce and Industry,
Government of India in order to ensure that only contractors having the
necessary competence and capability undertake overseas construction contracts.
While considering proposals, the Working Group will endeavour to promote,
wherever possible, the idea of high value construction contracts being
undertaken on a consortium basis. Apart from examination of special features
relevant to the proposal under consideration and the factors enumerated in
sub-paragraph (i) above, the Working Group will also take into account the
following aspects while considering grant of package approval for construction
contracts abroad:
(a) Availability of infrastructural
facilities in the importer country like transport, water, construction
material, skilled/unskilled labour, etc. and nature of laws governing civil
matters, labour usages, etc.
(b) Estimated monthly/quarterly cash flows
for the entire duration of the contract and arrangements between prime
contractor and associate/sub-contractors for timely execution of the contract
in case of consortium arrangement.
(c) Whether the contract would need any
bridge finance facility abroad to meet temporary cash flow deficits in working
capital, if so, the manner of raising the bridge finance and its full repayment
with interest.
(iii) In
regard to service contracts, the Working Group will, inter alia, take
into account relevant factors like size of the contract, nature of services to
be rendered, overall economic condition of the importer country, extent of
international competition and potential and prospects for further export of
services, goods or turnkey projects from India.
(iv) The
Working Group may suitably relax the above criteria at its discretion where
warranted by merits of the proposal. While considering proposals, the Working
Group may also make such suggestions or tender such advice as may be necessary
to avoid inter se competition and to promote, as far as possible, exports in
such a way that the foreign exchange benefit for the country is maximised.
Procedure
for Clearance of Proposals
(i) All applications
to the Working Group are required to be submitted by the exporters through
their bankers (who must be authorised dealers in foreign exchange) in the
prescribed form in the required number of copies sufficiently in advance to
enable the Working Group to hold a meeting of its members for consideration of
the proposal. When a proposal is approved by the Working Group, a package
clearance is granted by Exim Bank, on behalf of all the members of the Working
Group and conveyed to the exporters’ bankers through whom the proposal was
received. The Working Group’s clearance will ordinarily be given within a
period of seven days from the date of receipt of the application, provided it
is complete in all respects.
(ii) Exporters
desiring to submit bids for execution of projects abroad including service
contracts will not be required to obtain clearance for submission of bids from
the authorised dealer/Exim Bank/Working Group. However, exporters in such cases
are required to ensure that the conditions as laid down in the Memo PEM are
complied with.
(iii) On the basis of
experience gained over the years and in order to enable the exporters to
expeditiously obtain clearance for contracts for supply of engineering goods on
deferred payment terms, turnkey contracts and civil construction contracts,
powers have been delegated to authorised dealers and Exim Bank to grant
post-award clearances in cases where the contract value does not exceed U.S.
Dollar 100 Million. Proposals for undertaking such export contracts up to the
value of U.S. Dollar 100 Million will, therefore, be cleared by authorised
dealers/Exim Bank. Proposals for undertaking such contracts exceeding U.S.
Dollar 100 Million in value will need to be cleared by the Working Group.
(iv) In the case of
contracts for export of services on cash payment terms requiring fund-based
and/or non-fund based facilities, as also those involving deferred payment
terms, authorised dealers and Exim Bank have been empowered to grant clearance
upto the value of U.S. Dollar 100 Million. Proposals for undertaking such
export contracts will, therefore, be cleared by authorised dealers/Exim Bank
upto the value of U.S. Dollar 100 Million. Proposals for undertaking such
contracts exceeding U.S. Dollar 100 Million in value will need to be cleared by
the Working Group.
(v) Proposals for
deferred payment export or turnkey projects against Buyers’ Credits as well as
for export of managerial/technical consultancy services on deferred payment
terms as also those on cash payment terms involving grant of any fund-based
and/or non-fund based facilities in excess of the monetary limits mentioned in
sub-paragraph (iv) above will need the prior approval of the Working Group.
Declaration
of the Exports and Handling of GR/SDF/PP Forms
(i) The regulations
notified under Notification No.FEMA 23/2000-RB dated 3rd May 2000 and the
directions issued vide A.P. (DIR Series) Circular No. 12, dated 9th
September 2000 relating to declaration of export of goods on GR/SDF/PP Forms
and other matters apply mutatis mutandis, to project exports. In order
to facilitate maintenance of proper record of exports made on deferred payment
terms, exporters should prominently superscribe both copies of relative
GR/SDF/PP Forms with the name of export contract for which supplies are being
made and the number and date of the approval granted by the approving authority
(viz. Authorised Dealer, Exim Bank and Working Group) noted on the
GR/SDF/PP Form in the space provided therefor. The duplicate copies of the
forms should be retained by authorised dealers duly certified after realisation
of the last instalment together with interest from overseas buyers. Similar
procedure should be followed by sub-suppliers also while declaring their
exports on GR/SDF/PP Forms.
(ii) In connection
with execution of projects, exporters may sometime be required to export
‘consumables’ such as tools, tackles, machinery spares etc. for which separate
payments will not be made by the overseas buyers. Such consumables will have
also to be declared on GR/SDF/PP Forms in the same manner as exports of
machinery, materials, etc. which are separately paid for. In such cases,
authorised dealer may, on application, permit exporters to raise invoices
against their own site offices abroad, send the shipping documents direct to
those offices and realise the value due thereon in convenient instalments out
of the progress payments for the contracts. The application to authorised
dealer may be accompanied by a declaration by the exporter that the consumables
are being exported for execution of the project export contract which has been
approved by the authorised dealer/Exim Bank/Working Group as the case may be.
The number and the date of approval for the project export contract granted by
the approving authority may be indicated on GR/SDF/PP Form.
Part B - Project Exports
Extension
of deferred payment Terms
Contracts for
export of goods against payment to be received partly or fully beyond the
period statutorily prescribed for realisation of export proceeds are treated as
deferred payment exports. Ordinarily, contracts providing for deferred payment
terms will be allowed only for export of engineering goods (capital goods and
consumer durables). Turnkey projects involve rendering of services like
designing, civil construction and erection and commissioning of plant/factory
along with supply of machinery, equipment and materials. Execution of civil
construction contracts abroad involves mainly erection and civil construction
work and supply of construction materials and equipment going into the civil
works. Payment in respect of goods supplied under both turnkey and civil
construction contracts may be received on ‘cash’ basis but sometimes exporters
are required to offer deferred payment terms in respect of such supplies
depending on the nature and size of the project. The terms and conditions
governing extension of deferred credit terms are set out in the following
paragraphs.
Nature
of Credit
Contracts for
export of goods on deferred payment terms may be financed either under
supplier’s credit or buyer’s credit. Under supplier’s credit the exporter
extends credit directly to the overseas buyer. Buyer’s credits are credits
extended to the foreign buyers by authorised dealers or financial institutions
in India (including a consortium of authorised dealers or financial
institutions in India) and the exporters realise the export value in Indian
rupees from the institution/s concerned straightaway. As repayments under
deferred payment arrangements are spread over a long period of time, exporters
extending supplier’s credit as well as those desiring to undertake exports to
be financed under buyer’s credit may seek the advice of Exim Bank or ECGC in regard
to various risks inherent in extension of such long-term credits and ways and
means of protecting themselves against these risks.
Eligible
Goods
An illustrative
List (in two parts, A and B) of engineering goods in respect of which
commercial export credit may be offered by exporters to prospective buyers
abroad is given in Annexure I. The list is subject to revision from time to
time. Inclusion of goods in the lists does not imply that their exports may be
made only on deferred payment terms. Exporters should always endeavour to
secure the best possible terms from their buyers so that foreign exchange
accrues to the country as early as possible. The discretion to include new
items in or exclude the existing items from the list is vested in the Working
Group on Project Exports functioning with Exim Bank as the nodal agency.
Period
of Deferred Credit
The periods for
which credit may be offered for export of goods, consumer durables, turnkey
contracts and civil construction contracts will depend on merits of individual
case and may be determined by the exporter and his banker in mutual
consultation on the basis of commercial judgment. However, consumer durables
and miscellaneous engineering goods (Part B of List) should ordinarily be
exported on cash terms. Four major factors viz. anticipated life of the
goods to be exported, extent of foreign competition, nature of the foreign
market and the contract value constitute the criteria for determining the
overall terms of credit.
Conditions
necessary for Clearance of proposals by Authorised Dealers/Exim Bank
While it is not
necessary for exporters to obtain prior approval for submission of bids/offers
for execution of contracts, authorised dealer/Exim Bank should, while granting
post-award clearance, ensure that the export proposals satisfy, inter alia,
the following conditions:
(a) Moratorium or grace period applicable to
repayment of principal (and not to payment of interest) should not exceed one
year in respect of export of capital or producer goods. In the case of turnkey
contracts, the moratorium should not exceed two years. No moratorium should be
permitted in respect of export of consumer durables. Interest should be payable
even during the period of moratorium.
(b) In case of supply contracts, deferred receivables
should be received in equal half-yearly instalments over the agreed period with
relation to mean date of shipment (i.e. the date by which 50 per cent
supplies in terms of value will be completed) or the date of respective
shipment. In case of turnkey projects, instalments should be related to either
date of contract or the mean date of shipment or commissioning as agreed upon
between the parties.
(c) The rate of interest on deferred
receivables should be such that taking into account the cost of deferred credit
in India the overall profitability is ensured.
(d) Ordinarily, down payment together with
advance payment or mobilisation advance should not be less than 15 per cent of
the contract value. In exceptional cases, this may be reduced to 5 per cent of
the contract value. In the case of civil construction contracts, it should not
ordinarily be less than 5 per cent.
(e) Down payments and deferred instalments
receivable should be secured by a letter of credit/acceptable bank guarantee.
In case the overseas importer/project authority is a Government department or a
public sector undertaking, a guarantee from the foreign Government and/or a
promissory note from the foreign Government/public sector undertaking will
suffice.
(f) As far as possible, turnkey projects
and civil construction contracts should be self-financing. However, bridge
finance required for meeting temporary shortfalls in working capital should not
normally exceed 25 per cent of the contract value. However, authorised
dealer/Exim Bank/Working Group may clear proposals involving bridge finance in
excess of 25% of contract value also wherever they are satisfied that such
finance is necessary.
(g) Ordinarily, deferred payment terms in
respect of the services segment of a turnkey contract may be offered only if
the competitors of the exporter from other countries are known to have offered
similar terms. In such cases, other terms for the deferred receivables towards
services like period of credit, rate of interest and security should be the
same as offered for the supply portion of the contract.
Note : Authorised dealer/Exim Bank
may relax conditions at (d) and (e) above, if necessary, based on their
commercial judgment.
Cases where
exporters desire to offer, due to local conditions, commercial credit not
exceeding one year in respect of goods specified in Annexure I may be
considered by the authorised dealers/Exim Bank as per powers delegated to them.
Post-award
Clearance of Proposals
(i) Within fifteen
days of entering into contract, the exporter should submit to his bankers an
application in form DPX-1 (in respect of turnkey and deferred payment supply
contracts) or in form PEX-1 (in respect of civil construction contracts), as
the case may be, in six copies along with six copies of the contract.
Authorised Dealers should deal expeditiously with all applications made by
exporters in connection with project exports. In cases where the proposal is
within the powers delegated to him, authorised dealer may grant post-award
approval for the terms and conditions of the contract, provided the contract
basically satisfies the conditions laid down in para B.5. Copies of the
approval letter along with copies of the application and the contract may be
forwarded by the authorised dealer to the office of the Reserve Bank of India
(Exchange Control Department) within whose jurisdiction the Head Office of the
exporter is situate, as also to ECGC, Mumbai and Exim Bank where their
participatory interest by way of funded/non-funded facilities, insurance/risk
cover, etc. is involved.
(ii) Authorised
dealers/Exim Bank may grant post-award clearance to the project proposal
provided the value of the contract does not exceed U.S. Dollar 100 Million. If
the authorised dealer desires participation of Exim Bank in the financial
arrangements and/or guarantee facilities, concurrence of Exim Bank should be
obtained before granting post award clearance. In case, the authorised dealer
is unable for any reason to grant post award clearance, he should forward four
copies of the application to Exim Bank for consideration within two days
indicating, inter alia, the extent upto which his bank would be prepared
to take a share in the fund-based and/or non-fund based facilities required by
the exporter for execution of the overseas contract. Exim Bank will consider
project proposals for post-award clearance where the value of contract is upto
U.S. Dollar 100 Million or such proposals as referred by authorised dealer.
Exim Bank may also receive directly applications for project export proposals
of the value upto U.S. Dollar 100 Million, without being routed through an
authorised dealer provided (i) all facilities required for execution of
the project are being extended by Exim Bank, (ii) Exim Bank makes
necessary arrangement with an authorised dealer to handle exchange control
matters like GR formality, etc. in connection with execution of the project and
the details of the arrangement made in this regard are advised to the concerned
Regional Office of Exchange Control Department and (iii) Exim Bank
monitors such projects cleared by them till their completion and ensures
compliance with the requirements of completed projects as per paragraph B.10 of
Memorandum PEM. In approved cases, Exim Bank will forward a copy of its
approval to the Regional Office of Exchange Control Department under whose
jurisdiction the applicant is functioning. Proposals exceeding U.S. Dollar 100
Million in value will need to be considered by the Working Group.
(iii) In all cases
mentioned at (ii) above, authorised dealers/Exim Bank have to consult
ECGC in advance if counter-guarantees of the Corporation are required and/or
insurance cover is desired to be obtained from it. In cases where ECGC agrees
to extend counter-guarantees/insurance cover, the authorised dealer/Exim Bank
should, while granting clearance, advise the exporter that they will become
effective only after the guarantee commission/deposit premium as prescribed by
the Corporation is paid to it.
(iv) While according
package approval, authorised dealers/Exim Bank should specifically indicate in
the approval letter, the terms of clearance giving, inter alia, the
break-up of contract value with details of Indian, third country and local
supplies and services, payment terms, currency of payment, rate of agency
commission, amount of overseas borrowings, funded and non-funded facilities
with respective shares of different agencies therein, the value of plant,
machinery, equipment etc. to be exported on reimport basis and the extent of
ECGC cover guarantee.
(v) If there
are any Indian sub-contractors, they should be advised by the prime contractor
to submit similar applications to the bankers of the prime contractor for
obtaining approval for the portion of the contract entrusted to each
sub-contractor. The institution which will consider the application of the
prime contractor at the post-award stage will also clear applications of all
the sub-contractors.
(vi) In cases
where the value of the contract proposal exceeds U.S. Dollar 100 Million, the
authorised dealer should immediately forward copies of the application together
with copies of the contract and Banker’s comments in Form DPX 2/PEX 2 as the
case may be, to various institutions listed in paragraph B.7(i) as also to
Central Office of Reserve Bank of India, Exchange Control Department, Mumbai.
Exim Bank will convene a meeting of the Working Group within a week of the
receipt of the application to consider the final terms and conditions of the
contract and to grant a package post-award clearance for the contract. Copies
of the letter of approval issued by Exim Bank will be forwarded to all members
of the Working Group, concerned Regional Office of Reserve Bank of India and
exporter’s bankers for necessary action.
(vii) Payment terms
approval to be conveyed will form part of package of approval granted for the
proposal by authorised dealer/Exim Bank/Working Group as the case may be.
(viii) Export
of Goods (Pure Supply Contracts) - The procedure outlined in the preceding
sub-paragraphs for post-award clearance will not apply to exports of goods
(pure supply contracts) where at least 90% of the export value will be realised
within the prescribed period i.e. six months from the date of export and
the balance amount within a maximum period of two years from the date of
export, provided the exporter does not require/avail of any funded or
non-funded facility for such exports, from authorised dealers.
Appointment
of Sub-contractors
In the case of
large value contracts, applicant firms/companies normally take the assistance
of other contractors. In such cases the applicant firm/company will be treated
as the prime contractor while other contractors will be treated as
sub-contractors. The prime contractor will be accountable to the various
authorities in India for compliance with the requirements laid down by them and
will at the same time be equally responsible to the overseas buyer for proper
and timely completion of the contract. The prime contractor should accordingly
enter into suitable inter se arrangement with the sub-contractors after
satisfying himself about the capacity and competence of the latter. Credit
reports on sub-contractors and confirmation of financial arrangement proposed
to be made by them in respect of their portion of the contract should be
obtained by the prime contractor from their bankers and furnished along with
the application. Overseas financial requirements of the sub-contractors will
have to be met by the prime contractor. Appointment of all sub-contractors
and/or any subsequent change in sub-contractors will require prior clearance of
the concerned approving authority.
Follow-up
of Turnkey/Construction Contracts
Exporters and
all their Indian sub-contractors executing turnkey contracts or civil
construction contracts abroad should furnish progress reports in form DPX 3 on
a half-yearly basis (June and December) to concerned approving authority viz.
authorised dealer/Exim Bank/Working Group as the case may be, and the
concerned Regional Office of the Reserve Bank through their bankers within one
month from the date of expiry of the relative half-year. Copy of the report may
however invariably be sent to ECGC/Exim Bank in all cases where their
risk/guarantee cover participation in the funded/non-funded facilities has been
obtained. However, in the case of project export proposals approved at the
level of the Working Group, report in Form DPX 3 may be sent to Exim Bank/ECGC
and the concerned Regional Office of the Reserve Bank. The final Report in Form
DPX 3 should clearly indicate the fact of completion of the project and full
compliance with the requirements relating to completed projects as laid down in
paragraph B.10.
Requirements
relating to Completed Projects
(i) Exporters executing
turnkey/construction contracts abroad should take the following steps after
completion of the contracts:
(a) close the foreign currency accounts and transfer the
balances to India;
(b) wind up site and liaison offices opened abroad;
(c) ensure that the guarantees for
performance of the contract and other guarantees issued are cancelled and
returned to exporters;
(d) liquidate fully overseas
borrowings/overdrafts obtained, if any and cancel counter-guarantees;
(e) make suitable provision for payment
of taxes, customs and other statutory obligations in the country of project;
(f) dispose of the equipment,
machinery, vehicles, etc. purchased abroad and/or to arrange their import into
India. [In case the machinery etc. is to be used for another overseas project,
the market value (not less than book value) should be recovered from the
project to which equipment/machinery has been transferred]
(g) recover funds, if any, transferred to other overseas
project/s and repatriate them to India.
(ii) A report giving
full account of the various steps taken should be sent by the exporter through
his bankers to the concerned authorised dealer/Exim Bank as the case may be
depending upon the authority, which had granted post-award approval for the
project contract within one month from the completion of the project. Such
report should also invariably be sent to Exim Bank/ECGC where their
participation in funded/non-funded facilities, risk sharing is involved. Where
the project export proposal was approved at the level of the Working Group, the
report may be sent to Exim Bank and ECGC. The following documents should also
be forwarded alongwith such report:
(a) A completion or final handing over certificate
(b) A certificate from the overseas bank regarding closure of
the account held with it.
(c) A statement of remittances made to
India. Bank certificates about repatriation of funds to India should be
enclosed.
(d) Tax clearance certificate/No tax liability certificate
about the overseas project.
(e) Bills of Entry for re-import of machinery, etc.
(f) Statements of income and
expenditure and profit and loss account of the project duly certified by a
Chartered Accountant/Project Manager.
Buyer’s
Credit Scheme of Exim Bank
(i) Buyer’s credit is
extended under a scheme by Exim Bank known as ‘Buyer’s Credit Scheme’ which envisages
grant of credit by Exim Bank in participation with commercial banks in India to
foreign buyers in connection with export of capital goods and turnkey projects
from India. The Scheme provides for payments being made to exporters out of
buyer’s credit on a non-recourse basis on their fulfilling the commercial terms
of the export contracts to be financed under the Scheme. All offers for
deferred payment exports or turnkey projects against buyer’s credit require
specific prior approval of the Exim Bank/Working Group. Exim Bank has been
authorised to extend Buyer’s Credit under the Scheme upto the limit of U.S.
Dollar 20 Million and proposals exceeding this limit will be considered by the
Working Group. The procedure for clearance of proposals as set out in paragraph
B.7 shall apply, mutatis mutandis, to such proposals. Exporters should
not ordinarily negotiate with overseas buyers credit terms requiring financing
against buyer’s credits without prior consultation with their bankers and Exim
Bank. To assist Indian exporters in carrying out negotiations with importers,
Exim Bank will be prepared to indicate its willingness, in principle, in
suitable cases, to provide the credit. The following principal factors will
weigh with Exim Bank while considering proposals under the Buyer’s Credit
Scheme:
(a) Competence and capability of the exporter in executing the
proposed contract.
(b) Commercial justification for the contract.
(c) Economic viability of the overseas project for which the
credit is required to be offered.
(d) Creditworthiness, standing and
financial position of foreign borrower and general economic conditions of
buyer’s country.
(ii) Since payments to
exporters in India in respect of exports financed under buyer’s credit will be
made on behalf of non-resident buyers, permission of Reserve Bank under
Regulation 3 of Notification No. FEMA 3/2000-RB dated 3rd May 2000 [Foreign
Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations,
2000] should be obtained by banks in India before agreeing to extend buyer’s
credit to importers abroad. The necessary applications for the purpose should
be made by authorised dealers to Reserve Bank in form DPX 4 after the proposal
is cleared in principle by the Working Group. Where two or more authorised
dealers are participating with Exim Bank, the application should be made by the
principal participating bank (Process Agent). The banks are also required to
comply with the instructions issued by Department of Banking Operations and
Development, Reserve Bank of India in this regard from time to time.
(iii) Since exporter will
be receiving payments for the goods and services on a non-recourse basis from
the financing institutions in India, the exchange risk will fall on the
institutions extending the credit. To meet the situation, the exporter will
either have to provide in the contract itself for the exchange fluctuation risk
to be borne by the importer or to bear the cost of the appropriate exchange
risk cover to be taken by the financing institutions in India. It will,
however, be the responsibility of the financing bank to receive the repayments
of the loan and interest thereon from the overseas buyer. The lending
institution (Process Agent in the case of consortium credits) should,
therefore, take necessary steps to realise the instalments on due dates. If for
any reason, instalments are not received on due dates, the institution
concerned should promptly bring the matter to the notice of Reserve Bank and
Exim Bank indicating steps, if any, taken or proposed to be taken to recover
the instalments.
Part C - Export Of
Services
General
(i) Contracts for
export of consultancy, technical and other services by Indian companies/firms
generally fall in the following categories:
(a) Preparation of project/feasibility reports, drawings,
designs, etc.
(b) Supply of technical know-how/engineering services in
different fields.
(c) Operation, maintenance and
supervision of manufacturing plants, buildings and structures, etc.
(d) Management contracts for commercial concerns.
Export of
services may also involve supply of some associated mechanical wherewithals,
consumables and spares e.g. contractors may generally have to procure
tools and instruments for their own personnel for performing their jobs. They
may sometimes be called upon to give performance guarantees but the scope of
such guarantees would be limited to their own work, i.e. satisfactory
performance of the personnel provided and/or technical etc. services rendered.
(ii) Indian exporters
of services have normally to undertake overseas contracts on “cash” terms.
Overseas service contracts undertaken on “cash” terms do not require prior
clearance of Reserve Bank or the Working Group if no facilities are required.
Resident individuals, firms and companies may, therefore, freely provide
consultancy/technical/management services to overseas clients subject to the
condition that the income earned abroad minus expenses will be promptly
repatriated to India through normal banking channels. Individuals/firms/companies
executing service contract in computer software should, however, repatriate to
India income equivalent to at least 30% of contract value and the balance
income upto 70% of contract value could be retained for meeting
contract-related expenses abroad. Indian companies/firms executing service
contracts abroad, requiring facilities like opening of foreign currency bank
accounts and site offices abroad, etc. will need approval from Authorised
Dealer/Exim Bank/Working Group at the post-award stage. In the case of
exporters executing software service contracts abroad, authorised dealers may
permit remittances towards maintenance expenses of the persons deputed abroad
to execute such contracts, out of receipts of advance/down payments in respect
of the contract from the overseas client and on submission of a declaration by
the exporter that the aggregate exchange facilities already availed of/to be
availed of for execution of the contract would be within the overall ceiling of
project related expenses viz. 70% of the contract value.
Service
Contracts Requiring Authorised Dealers’/ Exim Bank’s/Working Group’s Approval
In some cases
service contractors may be required to furnish a performance guarantee to the
overseas employer in respect of the project as a whole especially for contracts
in the field of erection/installation of plant and machinery as well as
services like electrical or air-conditioning installations associated with
civil construction work. Such service contracts often involve high contract
values and some are as complex in character as contracts for turnkey or civil
construction projects. They also involve direct and indirect foreign exchange
liabilities by way of execution of performance/advance payments guarantees,
counter-guarantees for loans/overdrafts raised from banks abroad and even
considerable expenditure in foreign exchange on purchase of
instruments/equipment of third country origin, which necessitates recourse to
fund-based and/or non-fund-based facilities from Indian commercial banks, Exim
Bank and ECGC apart from a variety of Exchange Control approvals. Such
contracts are treated on par with turnkey/construction projects and therefore
require clearance at post-award stage of authorised dealers/Exim Bank/Working
Group depending on the value of contracts. All Service contracts involving
deferred payment (DP) terms also require post-award clearance of authorised
dealers/Exim Bank/Working Group depending on the value of the contract.
Pre-requisites
for Consideration of Proposals of Service Contracts Involving Cash Payment
Terms
Before granting
clearance to the exporters who have secured Service Contracts abroad,
authorised dealers/Exim Bank should ensure that the proposals satisfy, inter
alia, the following broad guidelines/conditions:
(a) Contract should be technically feasible and economically
viable.
(b) Ordinarily, exporters should secure
mobilisation advance to the extent of 15 per cent of the contract value.
Exporters should not undertake any responsibility for organising supplies of machinery/equipment
and/or materials going into the project. In case, contracts involve purchase of
materials/machinery/equipments from third countries, such purchases should be
financed directly by employers.
(c) ECGC may be consulted in advance for
its commercial and/or political risk cover/guarantees etc., if required.
(d) Ratio of the currencies of payment
for the contract should be appropriately stipulated in order to avoid a surplus
being generated in a non-repatriable local currency.
Note : Condition at (b) above
regarding mobilisation advance may be relaxed by authorised dealer/Exim Bank on
merits of each case on the basis of their commercial judgment.
Pre-requisites
for consideration of proposals of Service Contracts on DP terms
The periods for
which credit may be offered in respect of a service contract will depend on
merits of each individual case and may be determined by the exporter and his
banker in mutual consultation on the basis of commercial judgment. The
moratorium will be available only for the principal amount and not interest and
should not exceed one year. The authorised dealers/Exim Bank/Working Group will
consider proposals for clearance of service contracts abroad on DP terms at
post-award stage subject, inter alia, to the fulfilment of the following
conditions in addition to those at paragraph C.3(a), (c) & (d).
(a) The rate of interest on deferred
receivables should cover fully the cost to the exporter of export credit to be
availed of from the Indian banking system. Periodicity of repayment of
principal and payment of interest should not exceed half-yearly intervals.
(b) Ordinarily, payment terms should
provide for advance payment upto 25 per cent of the contract value. In
exceptional cases, the advance payment may be reduced to 5 per cent of the
contract value. In any case advance/progress payment should cover fully the
foreign exchange outgo as well as wages and salaries of personnel employed on
the project.
(c) Payment of instalments should be
secured by letters of credit and/or acceptable bank guarantees. In case the
overseas employer is a Government department or a public sector undertaking, a
guarantee from the Government and/or promissory notes from the Government or
public sector undertaking concerned may be accepted. An undertaking from the
Central Bank of the importer country indicating that necessary foreign exchange
would be made available on due dates for payment of instalments including
interest should be obtained, where stipulated by the Working Group.
(d) If services of an agent are
considered necessary for ensuring smooth execution of the contract every effort
should be made to keep the rate of agency commission as low as possible.
Note : Authorised dealer/Exim Bank
may relax conditions at (b) and (c) above, if necessary, based on their
commercial judgment.
Clearance
of Proposals at Post-award Stages
(i) Within 15 days
of entering into contract for rendering managerial, technical, consultancy
services to overseas employers, the exporter should submit to his bankers an application
in form TCS 1 in six copies alongwith six copies of contract for necessary
post-award clearance. Where value of the contract is U.S. Dollar 100 Million or
less authorised dealers/Exim Bank should examine the proposals in the light of
nature and scope of the services to be rendered, terms of payment, period
available for completion of the project/assignment, penalty provisions, etc.
and grant clearance provided the proposal satisfies the conditions listed in
paragraphs C.3/C.4.
(ii) Exim Bank may also
receive directly applications for export of services of the value upto U.S.
Dollar 100 Million, without being routed through an authorised dealer provided
(i) all facilities required for execution of the contract are being
extended by Exim Bank, (ii) Exim Bank makes necessary arrangement with
an authorised dealer to handle exchange control matters like GR formality, etc.
in connection with execution of the contract and the details of the arrangement
made in this regard are advised to the concerned Regional Office of Exchange
Control Department and (iii) Exim Bank monitors such contracts cleared
by them till their completion and ensures compliance with the requirements of
completed contracts as per paragraph B.10 of Memorandum PEM. In approved cases,
Exim Bank will forward a copy of its approval to the Regional Office of
Exchange Control Department under whose jurisdiction the applicant is
functioning.
(iii) Proposals for
values in excess of U.S. Dollar 100 Million are required to be referred to the
Working Group for clearance. In the case of proposals exceeding the value of
U.S. Dollar 100 Million, detailed comments and recommendations on the proposals
may be communicated by authorised dealers in form TCS 2 to Exim Bank.
(iv) The procedure
outlined in paragraph B.7 in respect of project export proposals should be
followed, mutatis mutandis, by authorised dealer/Exim Bank while
granting post-award clearance/referring the proposals to Exim Bank/Working
Group.
Follow-up
of Service Contracts
Exporters executing
service contracts abroad should furnish progress reports at half yearly
intervals ending June and December of each year to institutions concerned in
the same manner as stated in paragraph B.9 through their bankers.
Requirements
relating to Completed Projects
Exporters should
comply with the requirements laid down in paragraph B.10 in regard to
submission of reports, statements and documentary evidence after completion of
the service contracts abroad.
Part D - Other Matters
Connected with Project Exports and Service Exports
Foreign
Currency Accounts/Site Offices Abroad/ Agency Commission/Financial Requirements
(i) Project/Service
exporters may avail of facilities such as opening of foreign currency accounts,
temporary site offices, payment of agency commission and availing of temporary
overseas borrowings subject to the conditions as may be stipulated by the Exim
Bank on behalf of the Working Group on project exports or Exim Bank/authorised
dealer under the powers delegated to them. The project exporters may also be
permitted to open temporary liaison offices overseas in connection with the
execution of the contract abroad by the authority approving the relative
project export proposal subject to the conditions as may be specified by the
said authority. Exim Bank/authorised dealers may convey to the exporters, at
the post-award stage, the detailed conditions subject to which the various
facilities have been granted by the authority which grants the post award
approval. A set of standard conditions are given in Annexure II. In the case of
pure supply contracts on deferred payment terms where the exporter does not
maintain any foreign currency account abroad, authorised dealers may remit
commission in accordance with the terms and conditions set out in the letter of
approval issued by them/Exim Bank at the post award stage subject to the
conditions stipulated in Annexure III. The exporter, if he so desires, may
maintain a single foreign currency account for more than one project being
executed in the same country subject to the conditions as may be stipulated by
the authorised dealer/Exim Bank/Working Group. It will, however, be necessary
in such cases, for the exporter to submit project-wise statement of accounts
duly certified by a Chartered Accountant to the project monitoring
authority/authorised dealer. Conditions mentioned at A(i) in Annexure II may be
suitably amended by Authorised Dealer/Exim Bank in case the exporter desires to
maintain a single foreign currency account for more than one project being
executed in the same country. It may be noted that even if the exporter opts
for maintaining a single foreign currency account for more than one project it
will be necessary for the exporter to comply with the instructions on
inter-project transfer of funds.
It will be in
order for the approving authority of the overseas contract i.e. Authorised
Dealer/Exim Bank/Working Group as the case may be, to approve, the proposal of
exporter, to open, hold and maintain foreign currency account in India subject
to terms and conditions indicated at A(ii) in the Annexure II. The following
will however need to be noted in this regard by the concerned Authorised
dealer:
(a) Exporter will have to open, hold and
maintain separate foreign currency account for each project under execution
abroad.
(b) Authorised dealers shall not avail of
rupee loan against the security of balances held in such account and no
overdraft in the account shall be permitted.
(c) The balance in the account will be
subject to SLR/CRR requirement as prescribed by Reserve Bank (DBOD) from time
to time.
Approving
authority may on request allow such of the project/service exporters, as have
been permitted to open foreign currency account in India, to pay their Indian
suppliers/service providers in foreign currency from foreign currency account
subject to the following conditions :
(a) Project/service exporter should not
claim export benefit on the payment made to Indian supplier/service provider.
(b) Indian supplier of goods/services
should comply with export procedure as per provisions/requirements of Foreign
Exchange Management Act, 1999.
(ii) In cases where
adequate advance payment or an overdraft/loan abroad cannot be arranged,
authorised dealer monitoring the project on an application by the project exporter,
may allow remittance from India provided such remittance has been approved by
the authorised dealer/Exim Bank/Working Group granting clearance to the project
export proposal at the post award stage. Authorised dealer may allow such
remittances after obtaining an undertaking from the project exporter that the
amount remitted will be repatriated to India within a period stipulated by the
authorised dealer/Exim Bank/Working Group. Compliance of the condition
regarding repatriation of the funds so remitted within the period determined by
the approving authority should be monitored by the concerned authorised dealer
who allows remittance and who is also required to monitor the project.
It will be in
order for authorised dealer/Exim Bank/Working Group while considering proposals
at post award stage, against an undertaking to repatriate the amount of
remittance, to approve initial remittance upto a limit deemed necessary on the
basis of inflow/outflow of payments concerning the project, where adequate advance
payment or an overdraft/loan abroad can not be arranged by the exporter. The
period of repatriation of the amount sought to be remitted may also be
determined by the authorised dealer/Exim Bank/Working Group as the case may be.
Third
Country Purchases
(i) While granting
package approval for turnkey/civil construction contracts involving purchase of
machinery/equipment/materials from third country sources, the authorised dealer
or Exim Bank will indicate the extent upto which such purchases may be made.
Ordinarily, the third country purchases should be paid for separately by the
overseas project authority or by the Indian exporter out of advance/down
payment received from the project authority. Where the payments for the
contract are receivable on deferred payment basis, the exporter should, as far
as possible, try to secure matching deferred payment terms in respect of third
country purchases required for the project to avoid a net outlay of funds in
foreign exchange. Authorised dealers may, however, as far as possible open
letters of credit in such cases in favour of the third country suppliers on a
back-to-back basis, provided the amount for which the credit is to be opened
from India in favour of the third country supplier does not exceed the amount for
which a credit has been opened by the project authority in favour of the Indian
exporter. Where however, the exporter is unable to provide security of a letter
of credit opened by buyer, authorised dealer may open a letter of credit in
favour of third country suppliers even if it is not on a back-to-back basis
provided the amount of such letter of credit does not exceed the value of third
country imports approved by the approving authority while according post-award
clearance to the project export proposal and payments under such letters of
credits are made out of project receipts.
(ii) In respect of
third country purchases by the exporter for execution of the project/service
contract abroad, which are directly transported by the overseas supplier to the
project site and for which payment is proposed to be made under letter of
credit opened with banks in India, authorised dealer on an application made by
the exporter, may grant waiver for submission of the exchange control copy of
the bill of entry subject to the conditions that (a) the third country
purchases have been approved by the concerned approving authority while
according post-award approval to the project/service export proposal and (b)
the exporter submits the invoice raised on him by the overseas supplier in
respect of the goods supplied by him direct to the project site as also
documentary evidence for having received the goods at the project site.
Inter-project
transfer of funds
Requests from
the project exporters executing turnkey/construction/service contracts abroad
for temporary inter-project transfer of funds to meet cash flow deficits should
be submitted to the exporter’s banker monitoring the project, together with the
cash-flow statements in respect of the borrowing and lending projects. The
authorised dealer may consider the application on merits taking into account
the overall funds-flow position of both the projects and permit such temporary
transfers. In case the banker to the lending project is other than the banker
of the borrowing project, consent of the former should be obtained. The
exporter should be advised to retransfer the funds to the lending project as
soon as the funds-flow position of the borrowing project improves. The transfer
of surplus funds of completed overseas project to another ongoing project of
the same project exporter is not permitted since such surplus becomes
repatriable to India as soon as the project is completed and provisional
completion certificate is issued.
Copies of such
applications, together with the approval accorded by the authorised dealer,
should be forwarded to the approving authority which had cleared the project
export contract and the banker of the lending project. Copies may also be
forwarded to Exim Bank/ECGC in all cases where their participation in
funded/non-funded facilities, risk sharing is involved in the concerned project
export contracts. However, in the case of project export proposals approved by
the Working Group, copies of the application, etc. may be forwarded to Exim
Bank/ECGC.
Construction
etc. Equipment
(i) Exporters
executing turnkey/construction/service contracts abroad should normally take
from India construction and other equipment required for performance of the
contracts. Authorised dealer may permit, on application, export of equipment
from India on the condition that it will be re-imported into India on
completion of the contract and if let out/sold, the full hire charges/sale
proceeds will be promptly repatriated to India. Applications may be made to the
authorised dealer by letter citing a reference to the post-award package
approval granted by authorised dealer/Exim Bank/Working Group and enclosing a
set of GR forms duly completed for the export together with an undertaking in
form PEX3 regarding re-import of such equipment into India. Requisite GR/SDF
Form approval may be granted by authorised dealer. Authorised dealer will need
to monitor the compliance of the undertaking furnished by the exporter to him.
(ii) Exporters will
also be permitted to purchase construction etc. equipment abroad, where
necessary. Approval will be given by approving authority, provided the
equipment will be paid for fully out of payments to be received for the
services segment of the contract. Full details of such purchases should be reported
in the half-yearly statements of foreign currency accounts supported by
documentary evidence. Similarly, some exporters may be required to purchase
abroad motor vehicles necessary for execution of their contract. Requests for
permission to purchase vehicles abroad will be considered by the approving
authority on merits of each case.
(iii) Exporters may
also obtain construction etc. equipment abroad on hire against payment of hire
charges out of foreign currency receipts in respect of service segments of
their contracts.
(iv) Exporters may
freely use the equipment for performing any other contract secured by them in
the same or any nearby country. They may, if they so wish, also sell the
equipment or give it on hire to other contractors abroad, provided the full
amount of sale proceeds or hire charges, as the case may be, is repatriated to
India promptly through normal banking channels. Documentary evidence showing
repatriation of full amount realised should be produced to the authorised
dealer monitoring the project.
Import
of Equipment/Machinery/Motor Vehicles Purchased Abroad
Exporters may
sometimes desire to import the used equipment/machinery or motor vehicles into
India after completion of the overseas contract unless they are disposed of
abroad. Import of such items into India will be governed by the prevailing
Import Policy of Government of India.
Foreign
Travel in connection with Execution of Contracts Abroad
Firms/companies
executing turnkey/construction/service contracts abroad have to depute their
technical and managerial personnel abroad for supervising construction,
erection, commissioning of the projects, etc. Expenses of such personnel should
ordinarily be met out of payments receivable towards erection and commissioning
services which are retained abroad in foreign currency accounts opened with
permission of Authorised Dealer/Exim Bank/Working Group, unless such expenses
are to be met by the overseas employers in terms of the contract. Passage fares
for sending such personnel abroad will also have to be met in a similar manner.
Accordingly, wherever such fares are paid in India in rupees, an equivalent
amount in foreign exchange should be repatriated to India promptly.
Bid
Bonds and Guarantees against Project Exports
(i) Authorised
dealers may consider and furnish, without prior permission of Reserve Bank, all
types of guarantees required to be furnished in connection with execution of
project/contract abroad, in cases where they have been authorised to approve
proposals of exporters to undertake contracts abroad. Authorised dealer may
also consider/furnish bid bonds/tender guarantees in connection with
bids/offers being submitted by exporters for execution of contracts abroad.
Authorised dealers should satisfy themselves before furnishing the
bond/guarantee that the exporter is in a position to fulfil his contractual
obligations and the bid/contract satisfies the conditions stipulated in
paragraph B.5/C.3/C.4. In other cases, authorised dealers should issue the
guarantees after package approval has been secured from Exim Bank either under
powers delegated to it in this behalf or on behalf of the Working Group.
(ii) Exporters
desiring to submit bids for execution of projects abroad including service
contract may furnish their own Corporate Guarantee in lieu of Bid Bond
Guarantee, if they so desire, subject to the condition that the amount of such
guarantee shall not exceed 5% of the contract value. Exporters, however, have
to ensure that provisions contained in Memorandum PEM and other instructions
issued by Reserve Bank from time to time for submission of bids are complied
with.
(iii) In terms of
Reserve Bank Notification No. FEMA 8/2000-RB, dated 3rd May 2000,
project/service exporters, have been granted general permission to furnish
their own Corporate guarantees for performance of the contract or for availing
of fund-based and/or non-fund based facilities from banks/financial
institutions abroad for the purpose of execution of projects abroad subject to
approval of approving authority at post award stage. The details of guarantee/s
issued as above should be reported by the project/service exporters to the
concerned Regional Office of Reserve Bank (ECD) as also to the concerned
authorised dealer/Exim Bank who had cleared the proposal and to all the members
of the Working Group, where the proposal was cleared by Working Group, within
15 days from the issue of such guarantee/s.
Guarantees
for Borrowings Abroad
In all cases
where exporters executing turnkey/civil construction/service contracts abroad
are granted an approval by the approving authority to raise foreign currency
loans/overdrafts abroad against counter guarantees of their bankers in India,
for bridging temporary short-falls in the cash-flows, the authorised dealer
concerned may issue the requisite guarantee in favour of the overseas bank from
which the loan/overdraft is to be raised.
Project
Exports to Nepal/Bhutan
All project export proposals
to Nepal and Bhutan require the clearance of the concerned authorities like the
authorised dealer/Exim Bank/Working Group on Project Exports depending upon the
value and other terms and conditions of the contract at post-award stage.
Provisions of para. D1(i) regarding opening of foreign currency bank account,
temporary site office, liaison office and availing of temporary overseas
borrowings etc.are applicable, mutatis mutandis, in respect of project
exports to Nepal and Bhutan.
Annexure I
List of
goods in respect of which commercial export credit may be offered by Indian
exporter
A. Capital and
producer goods
1. Air
compressors
2. Air conditioning, heating, cooling,
fume extraction, dust collection, humidification and ventilation equipment for
industrial use including blowers and exhaust fans
3. Alcohol
and brewery plant
4. Aluminium
plant and equipment
5. Asbestos
cement machinery
6. Cement
machinery
7. Cinematographic
equipment for motion picture and television studios
8. Chemical
and pharmaceutical plant and machinery
9. Cigarette
making machinery
10. Coffee
processing machinery
11. Coke
oven plant and equipment
12. Coke
oven refractories
13. Control
and Process Instruments including X-Ray equipment for Industrial Applications
14. Copper
Ore concentration machinery
15. Dairy
equipment and animal feed plant
16. Earth
moving equipment like crawler tractors, shovels, excavators, loaders, dumpers
etc.
17. Edible
Oil Mill machinery and oil expellers
18. Electric
motors and pumps
19. Electronic
Data Processing equipment
20. Fertilizer
plant and equipment
21. Flour,
rice and dal mill machinery
22. Food
processing plant
23. Foundry equipment including mould
making machinery, Sand and Shot blasting equipment
24. Freight
containers
25. Garage
equipment
26. Gas
and air separation plants
27. Glass
and Ceramic machinery
28. Heat
Exchangers
29. Integrated Steel Plants (complete or
in parts), mini steel plants (electric arc and reduction furnaces). Re-heating
and heat treatment furnaces, Rolling Mills and other finishing lines for
ferrous and non-ferrous metals.
30. Ice-making
machinery
31. Industrial
boilers
32. Industrial
furnaces
33. Industrial
switchboards, Control panels, circuit breakers, air break switches
34. Jute
machinery
35. Leather
tanning and processing machinery
36. Machine
tools
37. Machinery for manufacturing air
conditioners, bicycles, corks, electrical goods, enamel-ware, hard board, metal
containers, radios, razor blades, refractories and bricks, sewing machines,
shoes, steel furniture, wire-ropes and cables etc.
38. Machinery for manufacturing any product
figuring in Part B of this List, not specified separately in this Part
39. Material handling equipment like fork
lifts, electric lifts, cranes, hoists etc. and conveyor systems
40. Metal
working machinery
41. Mining
machinery
42. Motor
vehicles and chassis, including three-wheelers
43. Oil
drilling rigs
44. Oil
refinery equipment
45. Packaging
and weighing machinery
46. Pile
foundation machinery
47. Plastic
machinery
48. Power generation, transmission and
distribution equipment including boilers, generators, transformers,
switchgears, transmission line towers, conductors, cables, sub-station
equipment and protective equipment
49. Power
line carrier communication equipment
50. Power station structures, hydraulic
structures like penstocks, gates and gearings, sub-station structures
51. Pressure
vessels
52. Printing
and book-binding machinery
53. Pulp
and Paper Mill machinery
54. Railway
electrification equipment and structures and railway signalling equipment
55. Railway
rolling stock including locomotives, wagons, coaches and trolleys
56. Rubber
machinery
57. Refractories for use in hot blast
stoves, hot blast main bustle pipes and blast furnace proper
58. Road and construction equipment
including road rollers, tar boilers, continuous batch plants, stone crushers,
asphalt mixers, concrete mixers and vibrators
59. Ships,
boats, trawlers, steamers, launches, barges
60. Solvent
extraction machinery
61. Spraying
equipment
62. Steam,
diesel and petrol engines
63. Steel
fabrication for bridges, factories etc.
64. Steel rails and railway track
equipment including sleepers, fishplates, points and crossings.
65. Steel
shuttering and scaffolding materials
66. Steel
tanks
67. Sugar
(including Khandsari) machinery
68. Telecommunication
and signalling equipment including Telecom cables
69. Textile
machinery
70. Tractors
and Trailers
71. Vending
machines
72. Water supply equipment including
pumping plant, large diameter fabricated steel pipes, C.I. spun pipes and
storage tanks, water treatment and sewage treatment plant
73. Weigh
bridges
74. Welding
machinery
75. Wood
working machinery
B. Other goods
76. Agricultural
implements.
77. Auto
parts
78. Bicycles,
motorcycles, scooters, mopeds and parts
79. Construction materials including
sanitaryware, tiles and precast cement products, false ceiling, flooring
materials, pipes, decorative laminates, fittings, electricals and
steel/aluminium doors and windows, provided they are exported as separate items
and not as items forming part of civil construction/turnkey projects.
80. Agricultural
chemicals and industrial chemicals.
81. Pressure cookers, watches and clocks,
knitting/sewing machines, vacuum flasks, cutlery, plastic moulded luggage.
82. Domestic
electric appliances
83. Drugs
and pharmaceuticals
84. Electrical equipment including low
tension insulators, batteries and accumulators, parts of electrical machinery
and lamps fuses and electrodes for industrial application.
85. Electronic
components.
86. Electronic goods including radios,
TV, public address systems, record players, tape recorders.
87. Fibreglass,
PVC and plastics based products including pipes and tubes, tyre cord.
88. Ferrous/non-ferrous
castings, forgings, stampings, extrusions and rolled products.
89. Ferrous/non-ferrous
pipes, tubes, sheets, strips, foils, rods, wires, wire ropes
90. Heating
and cooling equipment including air conditioners, refrigerators, water coolers.
91. Industrial rubber products including
tyres and tubes, cots and aprons, conveyor belts, rubber rollers, hose pipes.
92. Instruments
for measurement, scientific survey and for surgical applications.
93. Industrial
fasteners, bearings, valves, gears and gaskets.
94. X-ray
and other electro-medical and other hospital equipments
95. Office
equipments including typewriters, calculators, duplicators, teleprinters.
96. Metal
and plastic furniture
97. Hand
tools, cutting tools, grinding wheels, moulds dies.
98. Gas cylinders, fire fighting
equipment, photographic equipment, helmets, including fibreglass helmets.
Note : The Working Group on
Project Exports functioning at Exim Bank may consider proposals to include new
items to or exclude existing items from the list.
Annexure
II
Standard
conditions to be stipulated by Exim Bank/authorised dealers for various facilities
at the time of conveying post-award approval for projects/service contracts
A(i). Opening of foreign currency bank
accounts abroad
(a) The exporter is permitted to
open..................................................................(no.
of accounts). foreign currency accounts in
......................................................................................(Places
where accounts are to be opened) for the purpose
of execution of contract.
(b) The exporter shall within 15 days
from the date of opening of such accounts furnish the details thereof viz. account
number, name of the bank, place and country where such account is opened, to
the Authorised Dealer concerned.
(c) Credits representing payments by the
project authorities to the Indian contractor under the contract may be made
freely. In case payments made in respect of supplies of materials/equipment
made from India have to be temporarily credited to the account, the amount
representing value of such supplies should be repatriated to India soon
thereafter.
(d) Debits representing disbursements to
be made in country of execution of contract and for purchase of
materials/equipments from third country/Indian sources in connection with
execution of the contract to the extent approved by the Working Group/Exim
Bank/authorised dealer as the case may be at post-bid stage viz. not
exceeding................................................
(value of such supplies)may be made freely.
(e) Credits representing accrued interest
and debits representing remittances to India and bank charges may be made
freely.
(f) All other credits/debits will require prior approval of
the Reserve Bank.
(g) A half-yearly statement of operations
on the bank account(s) as in the following format duly supported by the transcripts
together with brief note explaining each debit and credit exceeding US$ 10,000
or its equivalent shall be submitted to the authorised dealer concerned within
one month from the close of relevant half-year.
Format
Statement showing
summary of transactions routed through the foreign currency account maintained
with
.............................................................................................. (name & address of the
bank) in
................................................... (currency) during the half-year ended
1. Name & address of the exporter:
2. Name & address of the buyer :
3.
Name of the project :
|
Particulars |
As per last Report
|
during the quarter |
Total
|
A. Receipts
1. Opening balance
2. Receipts from buyer towards (advance/down/progress
payments)
(a) Supplies from India
(b) Third country local supplies
(c) Services
(d) Reimbursable expenses
(e) Extra claims
(f) Others (if any)
3. Remittances from India
4. Inter project transfers
5. Transfers from other accounts (short-term
deposits/other foreign currency accounts)
6. Others
7. Total of (A):
B. Expenditure
1. Third country/local supplies/Indian
supplies
2. Site office expenses
3. Taxes/duties
4. Freight/insurance
5. Purchase of construction
equipment/Machinery/tools/tackles etc.
6. Agency commission
7. Short term deposits
8. Inter project transfer
9. Repatriation to India
10. Others
11. Total of (B)
12. Closing balance (A-B)
(Note :
Separate statement should be furnished for each account maintained in local/foreign
currency)
(h) The balance in the account in excess
of normal requirements should be repatriated to India periodically. If,
however, exporters have been permitted to raise foreign currency borrowings
abroad for execution of the project, the balance in the account should first be
utilised for progressive repayment of such loans/overdrafts and surplus
available thereafter should be repatriated to India.
(i) The account(s) shall be closed
immediately after the contract is completed and the entire balance transferred
to India under advice to the concerned authorised dealer together with bank
certificate/s evidencing repatriation of the amount to India.
(j) If the bank account is in the
nature of overdraft account, which was permitted in principle while granting
post-award clearance by Exim Bank/authorised dealer, the overdraft should be
fully liquidated from out of payments received in respect of contract
(excluding the value of Indian supplies which is required to be repatriated to
India) within the validity of the bank guarantee issued by bank(s) in India.
(k) Project funds in the foreign
currency account temporarily rendered surplus may be invested in short term
deposits, not exceeding one year, and on maturity they should be transferred to
the foreign currency account opened in connection with the project in question.
However, such investments are not permitted when the foreign currency
borrowings/overdrafts raised by the project exporter are outstanding. The
maturity period of the fixed deposit should not in any case, go beyond the date
of completion of the project in question.
(l) The Reserve Bank reserves the right
to go into details of any specific transaction and call for such documentary
evidence like Chartered accountant’s Certificate, bills/vouchers, etc. as it
may consider necessary.
A(ii). Opening of Foreign Currency
bank account in India.
(a) The exporter is permitted to open foreign
currency account in
............................................................(Name of
the foreign cuency) with
................................................ (Name of the bank)..
............................................ (Place) for
the purpose of the execution of contract. (The account can be maintained in any
convertible foreign currency).
(b) Credits representing payment by the
project authorities to the Indian contractor under the contract may be freely
made.
(c) Interest earned on surplus funds parked in short term
deposits may also be credited.
(d) Debits representing payment for
purchase of material/equipment from overseas suppliers in connection with
execution of the contract to the extent approved by the Working Group/Exim
Bank/Authorised dealer as the case may be, at post-award approval stage viz.
not exceeding .............................................................................................................. (Value of
such supplies) may be made freely.
(e) Debits representing transfer of funds
to the project site, bank charges and project related expenses in rupees may
also be made freely.
(f) Debits for transfer of funds to
rupee account in case payment made by the client for supply of
material/equipment from India has to be temporarily credited to the account and
for conversion of balance in the account into Indian rupees at the end of the
contract may be made freely.
(g) All other credits/debits will require
prior approval of approving authority/Reserve Bank of India.
(h) The account shall be closed
immediately after completion of the project and the entire balance should be
transferred to rupee account and/or EEFC account as the case may be as per
prevailing guidelines.
(i) Project funds temporarily rendered
surplus may be invested in short term deposits, not exceeding one year and on
maturity, they should be transferred to the project foreign currency account.
However, maturity period of the fixed deposit should not, in any case, go
beyond the date of completion of the project in question.
(j) No forward cover facility would be available on the
balances held in the account.
B. Establishment of temporary
site/liaison offices
(a) The project exporter is permitted to set up site
offices/liaison office at the following places :
(i) .........................................
(ii) .........................................
(iii) ........................................
(b) The exporter shall, within 15 days of
opening of such site office/liaison office furnish to the authorised dealer the
details regarding places where site office/s/liaison office have been opened.
(c) Expenses of the site office/s/liaison
office shall be met out of payments receivable for the services segment of the
contract and no remittance from India will be allowed for maintenance of such
office/s.
(d) A half-yearly statement of
expenditure of the site office/s/liaison office shall be submitted to the
authorised dealer concerned with suitable documentary evidence, within one
month from the close of relevant half-year.
(e) The temporary site office/s/liaison
office shall be closed as soon as the project in question is completed, under
advice to the concerned authorised dealer.
Note : Exim Bank/authorised dealers
may also agree to opening and maintenance of site office/s/liaison office by
the Indian associates and sub-contractors of prime contractors with foreign
exchange made available to them by the prime contractors subject to the above
terms and conditions, provided opening of such site office/s/liaison office has
been approved while granting post-award clearances.
C. Payment
of agency commission to overseas agents
(a) It will be in order for the project
exporter to pay agency commission not exceeding.............................
.............................................................
(to be specified)* of the contract value to
the....................................................................................
(Name and address of the agent)
*as indicated in the payment
terms conveyed in the letter of approval.
(b) The agency commission shall be paid
at the approved rate by debits to the foreign currency bank account/s opened in
connection with execution of the contract.
(c) Payment of agency commission shall
not be made by credit to a numbered account where the identity of the recipient
is not known or to a third person/party.
(d) The commission payments shall be
reflected in the half-yearly statement of operations on the bank account/s
submitted to the authorised dealer.
Note : The above general permission
is not available to the sub-contractors of Indian prime contractors.
D. Raising
of Foreign Currency Loans/Overdrafts Abroad against Bank Guarantees from India
for bridging temporary shortfall in cash flow
(a) It will be in order for the
project/service exporter to arrange to raise foreign currency borrowings
overdraft etc. from a bank abroad not exceeding..................in value. The
exporter should, however, within 15 days from the date of grant of financial
accommodation furnish to the authorised dealer details of the account number,
name of the bank, place and country where such account is maintained for the
purpose of raising loan/overdraft.
(b) Overdraft/loan limit shall be
operated in accordance with the approved cash flow statement and the
outstanding balance should not at any time exceed the limit sanctioned by the
Working Group/Exim Bank/authorised dealer, as the case may be, while granting
post-bid clearance.
(c) The entire amount of overdraft/loan
together with interest will have to be liquidated out of payments to be
received from the overseas employer on account of the services segment of the
contract and no remittance from India will normally be allowed either for
repayment of the overdraft/loan or for payment of interest.
(d) The export value of goods supplied
from India and declared on GR/SDF forms in the usual manner shall be
repatriated to India in the normal course and shall not be utilised for
repayment of the overdraft/loan.
(e) A certified half-yearly statement of
the operations in the overdraft/loan account duly supported by transcripts of
the account and a brief note explaining each debit and credit exceeding the
equivalent of US$ 10,000 shall be submitted to the authorised dealer, within
one month from the close of relevant half-year.
(f) Liquidation of overseas borrowings
(including interest) shall be given preference over liquidation of rupee
overdrafts and other rupee liabilities in India and no funds received out of
the service segment of the contract shall be brought to India until overseas
borrowings (including interest) are fully liquidated.
(g) The full amount of overdraft/loan (with
accrued interest) shall be liquidated within the validity period of the bank
guarantee issued from India.
(h) The finance raised abroad for a
particular project shall be utilised only for that project and for the
purpose/s for which it was authorised, and for no other purpose/project.
(i) Interest due on the overseas
overdraft/loan shall be paid on due dates from the project receivable relating
to the services segment and no roll-over for the amount of interest for a
further period shall be allowed, without prior approval of Reserve Bank.
Notes : (i) In case
borrowings are proposed to be raised by the exporter in a country other than
the country in which the contract is being executed, the exporter should be
advised to ensure that the authorities in country where contract is being
executed will be prepared to allow remittances out of local currency payments
made to the exporter on service segment of the contract.
(ii) The
permission for raising loans/overdrafts should not be granted to
sub-contractors of Indian prime contractors and that they should be advised to
approach the Indian prime-contractors for necessary financial requirements in
foreign exchange.
E. Conditions
relating to Payment Terms approval
Exporter will not be required to approach
Reserve Bank for obtaining Payment Terms approval. He should however note the
following:
1. Any matter for which specific Exchange
Control approval is required, a specific application will have to be made to
RBI at the appropriate time. The approval accorded by the Approving Authority
does not bind the Exim Bank/ECGC/Import Trade Control authorities regarding
grant of Exim Bank financial assistance/ECGC cover/import replenishment/third
country imports as these are to be dealt with by the respective authorities.
2. The following procedure in respect of
the exports to be made under the approval should be observed scrupulously:
a. All copies of GR forms covering exports
under the contract should be prominently superscribed in Red Ink as under:
Exports
under Deferred Payment Arrangements. Approving Authority’s approval No.
................. dated .......................... .
In all
communications with the Reserve Bank/Approving Authority, the number and date
of the approval should invariably be cited.
b. Exporter should submit to Reserve Bank of
India and the Approving Authority, a quarterly statement showing the total
value of shipment effected as also advance payment/deferred instalments
received etc. as per Annexure AB, within ten days from the close of the quarter.
This statement should be submitted till all the payments are fully realised. In
case there is no transaction to report for a particular quarter a “Nil”
statement should be submitted.
Annexure
‘AB’
Quarterly
statement showing value of shipments effected and advance/deferred instalments
received in respect of exports under Deferred Payment Arrangements
(To be completed by
the exporter and submitted to the concerned Regional Office of
Reserve Bank and Approving authority every calendar quarter)
For the quarter ended —
1. No.
& date of approval of the Approving
Authority for the deferred payments :
:
|
2. Country |
Amount |
|
|
|
Foreign Currency |
Rs. |
I.(a) Value of shipments effected during the :
quarter
(b) Of which deferred payment portion :
II. Advance
payment, if any received during :
the quarter
|
III. |
Deferred Credit instalments realised during
the quarter |
Principal |
|
Interest |
|
|
|
|
Foreign |
Rs. |
Foreign |
Rs. |
|
|
|
currency |
|
currency |
|
3. Details of amounts fallen due
(a) Total amount due but not received
(b) Amount pending beyond six months
(c) Reasons for non-payment of
instalments/interest which have fallen due and efforts made to realise the
overdues
....................................................................
(Signature
of authorised official)
Name:
......................................................
Date:
..................... Designation:
..........................................
Name
and Address ............................
of
Exporter ...........................................
Note : The statement may be
submitted regularly within 10 days of the close of the quarter to which it
relates.
Annexure
III
Conditions
subject to which remittance of agency commission in respect of pure
supply contracts may be effected by authorised dealers
The authorised dealers may effect
remittances of agency commission in accordance with the terms and conditions as
set out in the letters of approval issued by him/Exim Bank/Working Group at the
post award stage subject to the following conditions :
I. The remittance may be effected
only by the branch of the bank monitoring the supply contract (on deferred
payment terms).
II. The
agency commission shall be paid at the approved rate.
III. The commission payments should not
be made for credit to a numbered account where the identity of the recipient is
not known.
IV. Where project receivables are
received in non-convertible Indian Rupees and the agency commission is desired
to be made in freely convertible currency, such applications should be referred
to the concerned Regional Office of Reserve Bank for approval.
Note: This facility is not
available to the sub-contractors of Indian prime contractors.
ACM - Memorandum of procedure for
channelling transactions through Asian Clearing Union*
Introduction
This Memorandum
details the revised procedure to be followed by authorised dealers for handling
transactions which are to be cleared through Asian Clearing Union (ACU),
consequent on switchover to a dollar denominated trade with effect from 1st
January, 1996.
All transactions
to be cleared through the ACU will be handled by authorised dealers in the same
way as other normal foreign exchange transactions. All authorised dealers in
India have been permitted to handle ACU transactions. Authorised dealers may
freely enter into correspondent arrangements with banks in the other countries
participating in the Clearing Union.
Eligible
Instruments of Payment
The Asian
Monetary Unit is the common unit of account of ACU and is equivalent in value
to one U.S. dollar. The Asian Monetary Unit may also be denominated as U.S.
dollar. All instruments of payment shall be denominated in Asian Monetary Unit.
Settlement of such instruments may be made by authorised dealers through
operation on ACU dollar Accounts.
ACU
Dollar Accounts
(i) The
essence of the procedure for settlement of eligible transactions through the
ACU is that as large a part of the transactions as possible should be settled
directly through the accounts maintained by authorised dealers with banks in
the other participating countries and vice versa ; only the
spill-overs in either direction being required to be settled by the Central
Banks in the countries concerned through the Clearing Union.
(ii) Authorised
dealers are permitted to settle commercial and other eligible transactions in
much the same way as other normal foreign exchange business. The procedure for
opening letters of credit, negotiation of documents, etc. in respect of trade
in convertible currencies is applicable for trade routed through the ACU
mechanism.
(iii) To
facilitate settlement of transactions through the ACU in this manner,
authorised dealers may freely open with their branches/correspondents ‘ACU
dollar accounts’. These may be kept distinct from U.S. dollar accounts, if any,
maintained for settlement of transactions taking place outside the Clearing
Union. The term ACU dollar is specifically being used in order to identify the
use of U.S. dollar in relation to ACU transactions. Otherwise there is no
distinction value-wise between ACU dollar and the U.S. dollar.
(iv) Authorised
dealers should ensure that at all times the balances maintained in the ACU
dollar accounts are commensurate with the requirements of their normal exchange
business and funds rendered surplus should be repatriated to India regularly.
Mechanism
for settlement through the Union
(i) Effective
1st January, 1996, the Reserve Bank of India will undertake to receive and pay
U.S. dollars from/to authorised dealers for the purpose of funding or for
repatriating the excess liquidity in the ACU dollar accounts maintained by the
authorised dealers with their correspondents in the other participating
countries. Similarly, the Reserve Bank of India will also receive and deliver
U.S. dollar amounts for absorbing liquidity or for funding the ACU dollar
(vostro) accounts maintained by the authorised dealers on behalf of their
overseas correspondents.
(ii) Funding
of an ACU dollar account maintained with a correspondent bank in another ACU
participant country will be effected by Reserve Bank only after receiving an
intimation that equivalent amount of U.S. dollar is being credited to its
account with the Federal Reserve Bank of New York, New York by the authorised
dealer on the value date. Similarly, Reserve Bank will arrange for payment of
U.S. dollar from its account with the Federal Reserve Bank of New York to the
account of the correspondent of the authorised dealer in New York, in case it
has received intimation of surrender of surplus funds to the other participant central bank on behalf of the authorised dealer in India.
(iii) In
the case of funding of ACU dollar accounts maintained by foreign commercial
banks with the authorised dealers in India, Reserve Bank on receipt of an
advice from participant central bank will arrange to credit U.S. dollar
amounts to the Nostro Accounts of the authorised dealers in New York. The
authorised dealers will credit the U.S. dollar amounts to the ACU dollar
accounts of the foreign commercial banks of the participating countries
concerned on the value date. Similarly, the authorised dealers will receive
instructions from their overseas correspondents to surrender excess liquidity
in their ACU dollar accounts to Reserve Bank. In such cases the authorised
dealers will have to actually remit the U.S. dollar amounts to the account of
Reserve Bank with the Federal Reserve Bank of New York, New York on the value
date and Reserve Bank will arrange to advise the other participant Central
Banks to make available the U.S. dollar amounts to the Commercial Banks in
their countries.
Applicability
of Exchange Control Regulations
Operations
conducted in and through the ACU dollar Accounts will be subject to compliance
with all the Exchange Control regulations and the specific provisions of this
Memorandum.
Eligible
Payments
Transactions
that are eligible to be made through ACU are payments :
(a) from a resident in the territory of
one participant to a resident in the territory of another participant
(b) for current international transactions
as defined by the Articles of Agreement of the International Monetary Fund
(c) permitted by the country in which
the payer resides
(d) not declared ineligible under
paragraph 6 of this Memorandum, and
(e) for export/import transactions
between ACU member countries on deferred payment terms.
Ineligible
Payments
The following
payments are not eligible to be settled through ACU —
(a) Payments between Nepal and India
(b) Payments which
are not on account of current international transactions as defined by the
International Monetary Fund, except to the extent mutually agreed upon between
Reserve Bank and the other participants
(c) Such other
payments as may be declared by the Asian Clearing Union to be ineligible for
being channelled through the clearing facility.
1[*(d) Import of sugar,
fertilisers and pulses.]
Rate
of Exchange for U.S. dollar
Under the
revised procedure, the Bank will receive and pay U.S. dollar from/to the
authorised dealers in respect of transactions described in paragraph 5 above and
there will be no corresponding payment/receipt of Indian rupees. In other
words, no exchange rates will be announced for the purpose of putting through
the transactions relating to the ACU with effect from 1st January, 1996.
Hours
of business
The hours for
receiving applications for funding of ACU dollar accounts in overseas
participant countries or surrendering of surplus liquidity in the ACU dollar
accounts of their overseas correspondents maintained in India will be the
regular business hours of the Bank. No application will be received on
Saturdays.
Minimum
and Multiple amounts for transactions with Reserve Bank
The minimum
amounts and the multiples in which Reserve Bank will receive and pay will be :
|
Currency |
Minimum
|
Multiple
|
|
US Dollar US $ |
25,000 |
1,000 |
|
2[Myanmar Kyat M. Kyats |
20,000 |
1,000 |
|
Iranian Rial I. Rials |
50,00,000 |
5,00,000] |
Procedure
for business with Reserve Bank3
(i) Reserve
Bank’s Deposit Accounts Departments at Bombay, Calcutta, New Delhi, Madras,
Bangalore and Kanpur will undertake ACU transactions.
(ii) Requests
from authorised dealers for funding of their ACU dollar accounts with
commercial banks in participating countries should be made in Form ACU-1 in
duplicate to the concerned office of Reserve Bank. The acceptance of the offer
will be conveyed on the duplicate copy of the letter of offer. Such offers
should be accompanied by confirmation that equivalent amount of dollar is being
credited to Reserve Bank’s account with Federal Reserve Bank of New York, New
York on the value date. Reserve Bank will advise the Central Bank in the
concerned participating country by telex or cable to deliver the contracted
amount on the value date to the correspondent bank indicated by the authorised
dealer. To obviate the possibility of delay in putting through the transaction,
authorised dealers may inform their correspondents of the particulars of the
transactions such as expected amount, value date, etc.
(iii) Authorised
dealers may wish to repatriate the excess liquidity in their ACU dollar accounts
maintained with their branches/correspondents in other participating countries.
They will arrange through their branches/correspondents for surrendering of
such liquidity to the participant central
bank. Upon receipt of an advice
from the participant central bank, the concerned office of Reserve
Bank will make available U.S. dollar on the value date through the Federal
Reserve Bank of New York, New York to the New York correspondent of the
authorised dealer.
Transactions
between Authorised Dealers and Reserve Bank for Account of Correspondent Banks
(i) Banks
in the other participating countries may fund their accounts with authorised
dealers in India by transfer of U.S. dollars through their Central Banks. On
receipt of transfer instructions by telex, cable, etc. from the concerned
Central Bank. Reserve Bank will arrange to transfer the amount indicated in the
transfer instruction from their account with Federal Reserve Bank of New York,
New York to the correspondent of the authorised dealer in New York. The
authorised dealer may then arrange to credit the ACU dollar account of its
correspondent bank on the value date.
(ii) Correspondent
banks of authorised dealers may also request authorised dealers to transfer
amounts from their ACU dollar accounts to Reserve Bank for account of the
Central Bank in the participating country. Requests from authorised dealers for
repatriation of these surplus funds should be made in Form ACU-2 in duplicate
to the concerned office of the Reserve Bank. The acceptance of the offer will
be conveyed on the duplicate copy of the letter of offer. Such offers should
also be accompanied by confirmation that equivalent amount of dollar is being
credited to Reserve Bank account with Federal Reserve Bank of New York, New
York on the value date. Reserve Bank will advise the participant central bank
to provide equivalent amount of dollars to the concerned bank in that country.
(iii) The
authorised dealers must ensure that deliveries of U.S. dollar amounts are duly
made on the value date to the account of Reserve Bank of India with Federal
Reserve Bank of New York, New York in respect of transactions of funding their
ACU dollar account or repatriation of excess liquidity from the ACU dollar
vostro accounts maintained with them. If the U.S. dollar amount is not
delivered on the due date, interest will be charged at the appropriate penal
rate for the number of days of default.
Overdrafts in ACU dollar Accounts
(i) Authorised
dealers may permit overdrafts in the ACU dollar accounts maintained with them
by their branches/correspondents in the other participating countries upto the
ceilings and subject to the conditions as indicated in paragraph 5A.15 of
Exchange Control Manual (ECM).
(ii) Authorised
dealers may likewise avail of temporary overdrafts in the ACU dollar accounts
maintained by them with their branches/correspondents in the countries
concerned (cf. 5B.8 of ECM).
Forward
Facilities for Customers
Authorised
dealers may extend forward cover facilities to exporters, importers, etc. in
the usual manner subject to compliance with the normal Exchange Control
regulations laid down in the Exchange Control Manual.
(as amended by the Board of Directors during various meetings up to
September 1995)
The central banks and monetary authorities of regional members and
associate members of the United Nations Economic and Social Commission for Asia and the
Pacific (ESCAP).
Desiring to establish a facility to
settle payments for current international transactions within the ESCAP region
on a multilateral basis,
Recognizing that such a facility would
contribute to the expansion of trade and the promotion of monetary co-operation
among their countries,
Recognizing further that a facility
designed to promote the use of the participants’ currencies would reduce the
use of extra-regional currencies to settle current international transactions
within the regions and thereby effect economies in the use of foreign exchange
and reduce the cost of making payments for such current international
transactions,
Realizing that a region-wide clearing
facility could co-exist and function in co-operation with sub-regional or less
than regional arrangements in Asia and the Pacific,
Convinced that the regional clearing
facility must be established and operated in a manner that will not prejudice
the principles of multilateral trade and payments,
On whose behalf this Agreement has been signed, have agreed as follows :
General provisions
Article I - Asian Clearing Union
The Central
Banks and other monetary authorities on whose behalf the present Agreement is
signed, hereinafter referred to as “participants”, agree to establish a system
for clearing payments among their respective countries on a multilateral basis,
hereinafter referred to as the “Asian Clearing Union”, which shall be governed
by the provisions of this Agreement and by the rules, regulations and decisions
agreed within its framework.
Article II - Purposes
The purposes of
this Agreement are :—
(a) To provide a
facility to settle, on a multilateral basis, payments for current international
transactions among the territories of participants;
(b) To promote the
use of participants’ currencies in current transactions between their
respective territories and thereby effect economies in the use of the
participants’ exchange reserves;
(c) To promote
monetary co-operation among the participants and closer relations among the
banking systems in their territories and thereby contribute to the expansion of
trade and economic activity among the countries of the ESCAP region; and
(d) To provide for
currency swap arrangement among the participants so as to make Asian Monetary
Units available to them temporarily.
Article III - Participation
Section 1 - Eligibility to participate
(a) Participation
in the Asian Clearing Union shall be open to the Central Bank or monetary
authority of each regional member or associate member of ESCAP.
(b) Participation
in another clearing group or arrangement is not precluded by participation in
the Asian Clearing Union.
Section 2 - Original Participants
Original
participants shall be those central
banks or monetary authorities
that are eligible to participate in and which sign this Agreement not later
than three months from the date this Agreement has been signed by the duly
authorized representatives of five such central
banks or authorities. Each shall
become a participant on the date this Agreement enters into force.
Section 3 - Other participants
A Central Bank
or monetary authority that is eligible to participate and is not an original
participant may apply to the Board of Directors to become a participant and be
admitted as a participant if the Board so decides by a two-thirds vote of all
of the Directors and upon such central
bank or monetary authority
signing this Agreement and accepting the rules, regulations and decisions of
the Board of Directors. The Chairman of the Board shall determine the date on
which the payments and transfers with respect to such a participant shall be
included in the clearing facility.
Operations
Article IV - Unit of Account
(a) The accounts
of the Asian Clearing Union shall be kept in a common unit of account hereby
designated as the “Asian Monetary Unit”, which may be referred to in the
abbreviated form as “AMU”.
(b) The value of
one Asian Monetary Unit shall, with effect from 1-1-1996, and until such time
as it is changed by the Board of Directors in terms of the sub-clause (c)
of the Article, be equivalent in value to one US Dollar. The Asian Monetary
Unit may also be denominated as ‘ACU dollar’.
(c) The Board of
Directors may change the value of the Asian Monetary Unit at any time by a
unanimous vote of all the Directors.
(d) In the event
of a change in the value of the Asian Monetary Unit by the Board of Directors,
the outstanding net debtor and creditor positions as of the date of this change
including accrued interest shall be settled on the basis of the value of the
Asian Monetary Unit preceding such change.
Article V - Clearing of Individual Payments and Transfers
Section 1 - Rules for individual payments and transfers
(a) The Board of
Directors, after consultation with participants, shall prescribe by appropriate
rules consistent with this Agreement the procedures to effect the financial
settlement of eligible payments and transfers through the clearing facility. In
particular, these rules and regulations shall specify the procedures to be
followed by persons, Commercial Banks, and Central Banks or monetary
authorities. The Board shall prescribe the information to be supplied to the
General Manager for the operation of the clearing facility.
(b) Each
participant, in so far as its monetary and exchange system permits, shall take
all steps necessary to put into effect in its territories the procedures
prescribed by the Board of Directors and to supply the information required by
the Board for the operation of the clearing facility.
Section 2 - Eligible payments and transfers
(a) The payments that are eligible to be
made through clearing facility are payments :
(i) from a resident
in the territory of one participant to a resident in the territory of another
participant;
(ii) for current
international transactions as defined by the Articles of Agreement of the
International Monetary Fund;
(iii) permitted by the country in which the
payer resides; and
(iv) not declared ineligible under (b) or (c) below.
(b) The Board of
Directors may declare specified payments to be ineligible to be channelled
through the clearing facility and may terminate such ineligibility.
(c) A
participant, at the time it signs this Agreement, may declare that payments for
specified transactions are ineligible to be made by and to residents in its
territories through the clearing facility. The participant shall consult with
the Board of Directors with a view to the relaxation and eventual removal of
this ineligibility as soon as circumstances permit.
Section 3 - Duty to complete payment
Each participant
undertakes that all eligible payments made through the clearing facility to
residents in its territory will be accepted and completed.
Section 4 - Use of the clearing facility
(a) A participant
may require residents to make payments through the clearing facility, but such
a requirement shall not be enforced in a manner that will restrict or delay the
making of payments for current international transactions or create a
discriminatory currency arrangement.
(b) Except to the
extent that a participant requires its residents to make payments through the
clearing facility in accordance with (a) above, the use of the clearing
facility shall be optional.
(c) In order to
promote the use of the clearing facility, participants may adopt measures
designed to provide incentives to make payments for individual transactions
through the clearing facility, provided such measures shall be consistent with
the participant’s undertakings under the Articles of Agreement of the
International Monetary Fund. Thus, for this purpose, participants may allow the
conversion of their currencies into Asian Monetary Units or into those of other
participants in respect of payments or receipts at rates which are more
favourable than those for dealings outside the clearing facility.
Section 5 - Instruments of payment
The Board of
Directors shall specify in its rules and regulations the types of instrument of
payment that may be used and how each is to be used to make payment through the
facility. Only instruments of payment denominated in Asian Monetary Units or
the US dollar may be used to make payment through the clearing facility. A
participant, after consultation with the Board may prohibit the use of
particular instruments of payment by its residents for making payments through
the clearing facility, but shall notify the General Manager of such prohibition
who shall notify all other participants.
Article VI - Settlement of Balances among Participants
Section 1 - Periodical settlement
(a) Settlement
shall be made of net positions and accrued interest at the end of each two
monthly settlement period. Settlements shall be made in accordance with section
3 of this article.
(b) The Board of
Directors may change the length of the settlement period by a decision taken by
a unanimous vote of all of the Directors.
Section 2 - Interest
(a) Interest shall
be paid by net debtors and transferred to net creditors on daily balances
outstanding between settlement dates. The accrued interest shall be included in
the calculation of the net amounts to be paid and received at the end of each
settlement period and shall be notified at the end of each settlement period
along with the net position of each participant.
(b) The Board of
Directors shall determine, from time to time, the rate of interest, which shall
be the same for both net creditor and net debtor positions, on the basis of the
return on balances held on similar availability in major financial centres.
Section 3 - Notifications and Payments
(a) The General
Manager shall notify each participant of its net position, including accrued
interest, and of the amounts it shall pay to, or receive from, other
participants at the end of each settlement period.
(b) Each debtor
participant, within four working days of the receipt from the General Manager
of the notice of the amounts to be paid, shall make the payments in
international reserve assets specified by the Board of Directors for the
purpose. Payments may also be made in the currency of the creditor subject to
its specific consent.
Article VII - Maintenance of Value and Non-settlement of
Balances
Section 1 - Value of payments and transfers
The value of any
instrument of payment or transfer of a currency for the purpose of the amount
to be settled through the clearing facility shall be the amount in Asian
Monetary Units or ACU dollars, as well as in the case of a transfer of
currency, be equivalent in Asian Monetary Units or ACU dollars determined as of
the date the transfer is considered to be made under the rules prescribed by
the Board of Directors. The values of payments and transfers made and received
with respect to participants and the resulting positions of participants shall
be recorded by the General Manager in Asian Monetary Units.
Section 2 - Delayed payments
If a participant
fails to make any payment notified to it by the General Manager under article
VI within the time required, interest shall be payable by the participant on
the amount due at such rate as may be determined by the Board of Directors.
Section 3 - Default
(a) In the event
the payment referred to in section 2 above remains unpaid after fifteen days
from the date on which it was due in terms of Article VI, section 3(b),
the participant shall be deemed to have defaulted and the General Manager shall
immediately notify the Directors and all participants. Thereafter no payments
with respect to residents in the territory of the defaulting participant can be
made through the clearing facility until the default has been fully discharged
and the participant restored to full participation in accordance with (c)
below.
(b) Unless the
defaulting participant, within seven days of the date of default agrees with
the participants to which it is obliged to make any payments due under article
VI on arrangements to make the payments, with interest, its participation in
the Asian Clearing Union shall be suspended.
(c) After the
default has been fully discharged, the Board of Directors may restore the
defaulting participant to full participation in the Asian Clearing Union
subject to any special terms and conditions that the Board may deem
appropriate, or may require the defaulting participant to withdraw from
participation. If the defaulting participant does not agree to continue
participation on the terms and conditions specified by the Board within thirty
days of the decision of the Board on this matter, it shall be deemed to have
withdrawn. The special terms and conditions may be revoked at any time by the
Board.
(d) In addition,
the Board of Directors shall consider, in consultation with participants, other
means by which the amount of the default may be recovered, and participants
shall take such further measures as the Board deems appropriate in order to
recover the amount of the default in the shortest possible time.
Article VIIA - Currency Swap Arrangement
The Board of
Directors may provide for a Currency Swap Arrangement among the participants
and specify in the rules the eligibility criteria, the terms including the rate
of interest and the period for which the facility should be extended, the
manner in which the participants should contribute and such other relevant
conditions and procedures as are considered necessary.
Organization and
Administration
Article VIII - Organization
Section 1 - Joint action
Representatives
of the participants shall meet from time to time for the purpose of giving
effect to those provisions of this Agreement which involve joint action and,
generally, with a view to facilitating the operation and furthering the
objectives of this Agreement. Whenever reference is made in this Agreement to
the participants acting jointly, they are designated as the Board of Directors.
Section 2 - The Board of Directors
(a) Each
participant shall appoint one Director and one Alternate Director to represent
it on the Board of Directors. Each Director and alternate Director shall be
appointed for a term of two years, may be reappointed, and may be replaced at
any time during the term of his appointment. Each Director shall have one vote.
An Alternate Director may attend the meetings but may vote only when his
principal is not present or when his principal is acting as the Chairman. The
Board shall elect a Chairman from among its members to serve for a period of
one year, and a Vice-Chairman to serve in the absence or inability of the
Chairman during the same period.
(b) The Board of
Directors shall meet at least once in a calendar year. In addition, meetings of
the Board shall be called by the Chairman when requested by two Directors or
when the Chairman considers a meeting necessary.
(c) A quorum for
any meeting of the Board of Directors shall be the Chairman or Vice-Chairman
and two-thirds of the Directors.
(d) All decisions
of the Board of Directors shall be taken by a majority of the votes of all the
Directors unless a special majority is required by this Agreement. The votes of
“all of the Directors” means the votes of all the Directors and not merely of
those Present and Voting. When both a Director and his Alternate are not
present at a meeting of the Board, the Director, in accordance with rules
established by the Board, may authorise another Director to present his views
and to cast his vote. The Chairman shall have no vote, except in the case of an
equal division when he shall cast the deciding vote.
(e) The Board of
Directors may establish a procedure whereby the Chairman may obtain the votes
of the Directors on a specific question without calling a meeting of the Board.
(f) The Board of
Directors may adopt such rules and regulations as are necessary for the
organization and operation of the Asian Clearing Union.
(g) The
remuneration and expenses of a Director and Alternate Director shall be borne
by the participant appointing them.
Section 3 - General Manager and Staff
(a) The Board of
Directors, by a two-thirds majority of all of the Directors, shall select and
appoint the General Manager, who shall not be a Director, for a term of three
years. The Boards shall establish the remuneration and other terms of the
contract of service of the General Manager. The General Manager may be
reappointed and shall cease to hold office when the Board so decides by a
two-thirds vote of all of the Directors.
(b) The General
Manager, under the direction of the Board of Directors shall conduct the
ordinary business of the Asian Clearing Union. He shall be the head of the
staff and, subject to the general rules of the Board, organize, appoint and dismiss
members of the staff. He shall exercise such other powers as are assigned to
him by the Board.
(c) The General
Manager shall prepare and submit to the Board the documents necessary for its
work, particularly the financial statements, the proposed annual budget and the
draft annual report.
(d) The General
Manager shall act as the representative of the Board of Directors within the
limits prescribed by the Board.
(e) The General
Manager and the staff members, in the discharge of their official functions,
shall owe their duty entirely to the Board of Directors and to no other
authority. Each participant in the Asian Clearing Union shall respect the
international charter of this duty and shall refrain from all attempts to
influence any of the staff in the discharge of his functions.
Article IX - Agent
The Board of
Directors may make arrangements with a Central Bank or monetary authority of a
participant or with the Asian Reserve Bank when it is established to provide
the necessary services and facilities for the operation of the clearing
facility. The agreement establishing these arrangements with an Agent must be
approved by a vote of two-thirds of all of the Directors.
Article X - Relations with other Organizations and Clearing
Arrangements
The Board of
Directors may make arrangements to co-operate with other general, regional or
sub-regional international organizations, or other clearing arrangements among
countries within or outside the ESCAP region. Any such arrangements shall not
apply to a participant which does not consent.
Article XI - Interpretation
(a) Any question
of interpretation of this Agreement or of any rules, regulations or decisions
of the Board of Directors arising between the General Manager and a participant
or between participants shall be decided by the Board whose decision shall be
final.
(b) Should any
disagreement arise between the Board of Directors and a participant which has
withdrawn from the Asian Clearing Union or has been required to withdraw, and
if efforts to settle the controversy by negotiation fail, such disagreement
shall be submitted to arbitration by a Tribunal of three arbitrators, the first
appointed by the Board, the second by the participant and the third designated
by the first two arbitrators. If they fail to reach agreement, the third
arbitrator shall be appointed by the Executive Secretary of ESCAP. The third
arbitrator shall be empowered to decide all matters of procedure whenever the
other two arbitrators disagree with respect to such a question.
Article XII - Reports and Assessments
Section 1 - Reports
The Board of
Directors shall publish an annual report on its activities and the operations
of the Asian Clearing Union. The report shall contain an audited statement of
accounts and of the clearing operations. The Board may publish such other
reports as it deems desirable.
Section 2 - Operating expenses
(a) The Board of
Directors shall approve the annual budget and determine the formula under which
expenses shall be apportioned among participants, on the basis of the actual
use made of the Asian Clearing Union and of the services rendered to them.
(b) The Board
shall specify the currencies or other means in which the assessments shall be
paid by members as well as the schedule of payments for each fiscal year.
(c) The Board of
Directors may request the Agent to make an advance to the Asian Clearing Union
on behalf of the participants when such action becomes necessary to meet
expenses, but the Board shall promptly make an assessment to meet the amount
borrowed.
(d) All the
decisions taken by the Board of Directors in accordance with this section shall
require the affirmative vote of two-thirds of all of the Directors.
Miscellaneous
Provisions
Article XIII - Withdrawal from Participation
Section 1 - Voluntary withdrawal
Any participant
may withdraw from this Agreement at any time by transmitting a notice in
writing to the General Manager. Withdrawal shall become effective three
business days from the date such written notice is received by the General
Manager unless a later date is indicated by the participant in the notice. The
General Manager shall notify all other participants as promptly as possible.
Section 2 - Compulsory withdrawal
If a participant
fails to fulfil any of its obligations under this Agreement, and if, after
consultations between the Board of Directors and the participant concerned, the
participant fails to correct the situation, the Board may require such
participant to withdraw from participation. The participant shall be deemed to
have withdrawn on the date of the decision of the Board or such later date as
the Board may specify.
Section 3 - Settlement of accounts
(a) A participant
shall remain liable for and shall meet all its obligations to other
participants arising from its participation under the Agreement until the final
settlement of accounts with it has taken place.
(b) Only
instruments of payments for the settlement of transactions involving residents
in the territory of the withdrawing participant issued on or before the date of
its withdrawal shall be settled thereafter through the clearing facility.
Settlements shall normally be made at the regular settlement dates until all
outstanding instruments of payments have been cleared. The Board of Directors
shall determine any further procedures needed to effect the final settlement of
accounts with the withdrawing participant.
Article XIV - Amendment
(a) This Agreement
may be amended by a decision of the Board of Directors taken by a vote of
two-thirds of all the Directors.
(b) Notwithstanding
the provisions of the preceding paragraph, the affirmative vote of each
Director on the Board shall be required to approve an amendment to modify the
provisions of :
(i) Article III on participation;
(ii) Article IV(c) on the modification of
the parity of the Asian Monetary Unit;
(iii) Article V, Section 2(b), on specified
ineligible payments;
(iv) Article VI, Section 1(b), on the
change of the settlement period;
(v) Article VII, Section 1, on the value of
payments and transfers;
(vi) Article XII, Section
2(a), on the formula under which expenses shall be apportioned among
participants;
(vii) Article XIII, Section
1, on the right of a member to withdraw voluntarily from this Agreement at any
time; and
(viii) Article XIV on the amendment of this Agreement.
The absence or
abstention of a Director shall be considered to be a negative vote.
(c) Any proposal
to amend this Agreement shall be communicated to the Chairman of the Board of
Directors who shall place the proposal before the Board for discussion. When an
amendment has been adopted by the Board, the Chairman shall so certify in an
official notice addressed to all participants and to the Executive Secretary of
ESCAP. Amendments shall enter into force one month after the date of despatch
of the official communication unless the Board specifies a different date.
Article XV - Suspension and Liquidation
(a) The Board of
Directors may suspend operations by a decision of the Board taken by a vote of
two-thirds of all of the Directors. All participants shall be notified
immediately and no instrument of payment issued after the date of notice shall
be settled through the clearing facility.
(b) After a
decision under sub-section (a), if the Board of Directors does not
decide to resume operations within six months, all operations and other
activities shall be suspended, except those necessary for the orderly
liquidation and the final settlement of accounts among participants as
determined by the Board.
Final Provisions
Article XVI - Signature and Custody
(a) The Executive
Secretary of Escap shall be the
depository of this Agreement and shall send certified copies of this Agreement
and any amendments to it, to all regional members and associate members of
ESCAP. Any amendments to this Agreement, as certified by the Chairman of the
Board of Directors under the provisions of Article XIV(c), shall be
appended to its text.
(b) This Agreement
shall be open for acceptance by signature by duly authorized representatives of
Central banks or monetary
authorities of regional members or associate members of ESCAP at the United
Nations Economic and Social Commission for Asia and the Pacific. Each Central
Bank or monetary authority on whose behalf this Agreement is signed shall
deposit with Executive Secretary, before signature, an instrument setting forth
that it has full legal authority to accept this Agreement and to carry out all
its obligations under it.
Article XVII - Entry into Force
This Agreement
shall enter into force when it has been signed and the instruments provided in
Article XVI(b) have been deposited by duly authorized representatives of
at least five Central Banks or monetary authorities of regional members or
associate members of ESCAP but not before the date determined by Article III,
section 2.
Article XVIII - Commencement of operations
(a) As soon as
this Agreement enters into force, each participant shall appoint a Director and
Alternate Director, and the Executive Secretary of ESCAP shall call the
inaugural meeting of the Board of Directors.
(b) At its inaugural meeting, the Board
shall :
(i) elect the Chairman and Vice-Chairman; and
(ii) make arrangements to proceed with the
preparatory work necessary to commence operations of the clearing facility.
(c) The Chairman
of the Board shall notify the participants of the date of the commencement of
operation of the clearing facility.
Article XIX - Notification
The Executive
Secretary of ESCAP shall notify signatories and all regional members and
associate members of ESCAP of :
(i) all signatures to this Agreement,
and
(ii) the date on which this Agreement
enters into force.
DONE in a single
copy in the English language.
These rules have
been adopted by the Board of Directors of the Asian Clearing Union in terms of
Article VIII, Section 2(f), of the Agreement establishing the Asian
Clearing Union and shall be called the Asian Clearing Union (Procedure) Rules.
These rules
shall come into force on such date as may be notified by the Board of Directors
of the Asian Clearing Union.
Definitions
In these rules,
unless there is anything repugnant in the subject or context :
(a) ‘Agent’ means
the participant Central Bank or monetary authority with whom the Board has
arranged to provide the necessary services and facilities for the operation of
the clearing facility;
(b) ‘Agreement’ means the Agreement
establishing the Asian Clearing Union;
(c) ‘Asian
Monetary Unit’ (AMU) means the common unit of account of the Clearing Union
referred to in Article IV of the Agreement.
(d) ‘Board’ means
the Board of Directors of the Asian Clearing Union referred to in Article q VIII, Section I, of the Agreement.
(e) ‘Clearing Union’ means the Asian
Clearing Union;
(f) ‘General
Manager’ includes the officer who is designated by the Agent to perform the
functions of the General Manager for the time being;
(g) ‘Participant’
means any central bank or monetary authority which is a
signatory to the Agreement and
(h) ‘Currency
swap’ arrangement means an arrangement among the participants under which a
participant becomes eligible to draw Asian Monetary Units from other
participants in specified proportion and in specified circumstances for
settling imbalances in clearing.
Ineligible
payments
The following payments shall not be eligible to be
made through the clearing facility :
(i) payments between Nepal and India;
(ii) payments
which are not current international transactions as defined by the Articles of
Agreement of the International Monetary Fund, except to the extent mutually
agreed upon between two or more participants.
Eligible
instruments of payment and the currency in which they are to be denominated
All instruments
of payment denominated in AMUs or U.S. dollars, may be used to effect payment
through the clearing facility. Settlement of such instruments will be made by
the Commercial Banks through operations of the accounts referred to in Rule 6.
Clearing
Operations
(a) The
participants will permit the banks in their respective countries to maintain
ACU dollar accounts with their correspondent banks in the other participating
countries. All payments other than ineligible payments will be settled by the
banks concerned through these accounts. The operations on these accounts shall
be governed by the prevailing Exchange Control Regulations and such other
directions, rules, regulations or guidelines as the participants may issue or
specify from time to time.
1[(b) When a Commercial Bank desires to fund its
ACU dollar account with its correspondent bank in another participating country,
it may purchase the required amount of ACU dollar either from a local
Commercial Bank having a surplus in that participating country or from its central bank. In the latter case, it will surrender equivalent amount
of U.S. dollars or, at the option of the central
bank, the equivalent in the local
currency to its own central bank for remittance through the ACU
mechanism. The participant receiving the amount will advise the participant in
the country concerned to make available the amount in U.S. dollars to the
concerned bank in that country. After making the payment, the second
participant will advise the General Manager of the ACU to credit its account by
debit to the first participant’s account.
(c) When
a Commercial Bank desires to repatriate funds from its ACU dollar account with
its correspondent bank in another participating country, it may sell the
desired amount of ACU dollar either to a local Commercial Bank which desires to
fund its ACU dollar account in that participating country, or to its Central
Bank. In the latter case, it will request that bank to effect the remittance
through the ACU mechanism. The correspondent bank will surrender equivalent
amount of U.S. dollars to its own Central Bank for remittance. The participant
receiving the amount will advise the participant in the country concerned to
make available the equivalent amount to the concerned bank in that country. The
Central Bank may, at its option, make the payment in U.S. dollar or in local
currency. After making the payment the second participant will advise the
General Manager of the ACU to credit its account by debit to the first
participant’s account.]
(d) On
receipt of the advices referred to in sub-rules (b) and (c)
above, the Clearing Union shall effect the necessary transfers under advice to
both the participants.
Currency
swap arrangement
A participant
desirous of availing of the swap facility as defined in Rule 3(h) should
request the General Manager in such format as he prescribes. The nature and
scope of swap arrangement will be as described hereunder :
(a) Eligibility
- Subject to sub-rule (d) of this rule any participant in deficit at the
end of a settlement period shall be eligible to avail of the facility.
Participants whose countries have special payment arrangements between
themselves will not be eligible to avail of this facility from each other.
(b) Entitlement
- Every eligible participant shall be entitled to the facility from every other
participant up to 20% of the average gross payments made by it through the ACU mechanism
to other participants during the three previous calendar years. A participant
shall not, however, draw more than its overall deficit at the end of a
settlement period. The drawal by each participant from each other participant
shall be in the same proportion as its overall deficit bears to its maximum
entitlement.
(c) Rate of
interest - The rate of interest chargeable on each drawal should be equal
to LIMEAN on U.S. dollars for the period of 2 months. The reference LIMEAN will
be of Barclay’s Bank, London, at 11.00 a.m. applicable for the concerned value
date. If the rate is not available from Barclay’s Bank, the General Manager
shall ascertain it from any other London clearing bank at his discretion and if
it is not available from any such bank, the rate of Barclay’s Bank applicable
for the immediately preceding value date will apply.
(d) Other
conditions - A participant may draw under the swap arrangement for a period
of two months at a time. Such a participant shall not be entitled to draw under
the arrangement at the time of the next following settlement.
Accounts
kept by the Clearing Union
The Clearing
Union shall maintain an account in AMUs for each participant to which the
payments advised by the participants will be debited or credited. Interest will
be payable by the participants on the net debit balances and receivable on the
net credit balances, calculated at the interest rate referred to in Rule 9, on
the daily balances outstanding.
Interest
(a) Interest
on the net debit and net credit balance will be calculated by the Clearing
Union on the daily outstanding by the product method, taking a year as
comprising 360 days and shall be debited or credited to the participants’
accounts at the end of each settlement period. The rate of interest applicable
for a settlement period will be the closing rate on the first working day of
the last week of the previous calendar month offered by the Bank for
International Settlements for one month Euro-dollar deposits. In the event that
the Bank for International Settlements does not quote rates for such deposits,
the last available rate will apply until such rates become available. However,
the Board may decide upon a substitute rate if necessary.
(b) In
the case of delayed payments referred to in Article VII section 2 of the
Agreement and default referred to in section 3 of the same Article, interest
for the period of delay or default shall be calculated by the Clearing Union at
:
(1) one per cent per annum over the rate for the
relevant settlement period or periods under sub-rule (a), or
(2) one per cent per annum over the rate
applicable on the day of default under sub-rule (a), whichever is
higher.
Notification
of net position at the end of settlement period
At the end of
each settlement period, the General Manager shall notify each participant by
telex or cable of its net position and accrued interest, and of the amounts it
shall pay to or receive from other participants.
Settlement
of balances
(a) Each
debtor participant, within four working days of the receipt from the General
Manager of the notice of the amounts to be paid, shall make the payment in U.S.
dollar or in any other mutually acceptable currency, under telex or cable
intimation to the General Manager.
(b) If
settlement is desired to be effected in a currency other than the US dollar,
the participants shall, by mutual agreement, decide on the exchange rate to be
made applicable for such settlement.
Obligation
to accept net position advised by the General Manager
The net position
at the end of the settlement period, as notified by the General Manager shall
be accepted by every participant as correct and settlement shall be made
accordingly. The participants shall, however, have the right to bring any
discrepancy detected in such position to the notice of the General Manager as
soon as possible thereafter for eventual rectification and further settlement,
if necessary. Such rectification shall be made at the same rate of exchange at
which the original settlement was made.
Default
In the event that
a participant fails to make any payment notified to it by the General Manager
under Rule 11 within the time specified, the provisions of Article VII, section
3, of the Agreement shall apply.
Amendment
Unless otherwise provided in the Agreement, these
rules may be amended by a decision of the Board taken by a majority of the
votes of all the Directors.
GIM - Revised
instructions under GIM*
Attention of
authorised dealers is invited to the Notification No. FEMA 12/2000-RB dated 3rd
May, 2000 viz. Foreign Exchange Management (Insurance) Regulations,
2000. The Memorandum of Exchange Control Regulations relating to General
Insurance in India (GIM) since brought out is enclosed. The major changes in
procedure as per the Memorandum are summarised in the Annexure.
Authorised
dealers may bring the contents of this circular to the notice of their
constituents concerned.
The Directions
contained in this circular have been issued under section 10(4) and section
11(i) of the Foreign Exchange Management Act, 1999 (42 of 1999).
Major changes proposed in the revised GIM
Sr. No
|
Subject matter |
Changes |
|
1. |
Scope
of Memorandum |
The earlier
instructions of GIM covered only public sector general insurance companies.
The present instructions contained in the Memorandum are applicable to public
sector general insurance companies as well as general insurance companies
which are registered with IRDA. |
|
2. |
Reinsurance
Arrangement |
The
reinsurance arrangement of public sector general insurance companies
registered with IRDA are to be decided by the respective Boards of the
insurance companies and IRDA is to be kept informed. ADs designated by these
insurance companies are now permitted to make remittances falling under such
approved reinsurance arrangements without reference to the Bank. |
|
3. |
Remittance
of Reinsurance Premia
by local brokers |
ADs have been
permitted to allow remittance of reinsurance premia by local brokers of
insurance companies after verifying debit notes from the overseas insurance
company, statement of account and CA’s certificate of broker certifying the
sum etc. |
|
4. |
Foreign
currency accounts abroad |
Public sector
general insurance companies and general insurance companies registered with
IRDA are permitted to open, maintain and hold a foreign currency bank account
with a bank outside India for the purpose of facilitating transactions and
expenses relating/incidental to general insurance business undertaken in
foreign countries. |
|
5. |
Settlement
of claims in foreign
currency |
For settlement
of claims in foreign currency in respect of policies issued in foreign
currency, insurance companies are now permitted to make remittances subject
to certain condition as stipulated in the Memorandum, without reference to
Reserve Bank as required in the past. |
GIM Memorandum of exchange
control regulations relating to general insurance in india
Introduction
General
insurance business in India is undertaken by insurance companies which are
registered with Insurance Regulatory and Development Authority (IRDA).
Scope
of Memorandum
(i) Exchange Control
Regulations governing general insurance business written in India are set out
in this Memorandum.
(ii) Directions
contained in this Memorandum have been issued under section 10(4) and section
11(1) of Foreign Exchange Management Act, 1999 (42 of 1999).
Definitions
For the purpose
of this Memorandum, the terms “Person resident in India” and “Foreign Currency”
will have the same meaning as defined under Foreign Exchange Management Act,
1999.
Bank
Encashment Certificates
Where Insurers have
been permitted to issue policies expressed in foreign currency against premium
payable in foreign currency, they should insist on submission of suitable
document to satisfy themselves that the premium has been received by foreign
exchange remittance through banking channels or in rupees derived by sale of
foreign exchange to an authorised dealer in foreign exchange or an authorised
money-changer.
Direct
Insurance outside India by Residents
Persons, firms,
companies etc. resident in India are not permitted to take insurance cover of
any kind with insurance companies in foreign countries without the prior
permission of Reserve Bank. Besides, permission of Government of India under
General Insurance Business (Nationalisation) Act, 1972, is also required to be
taken in such cases.
Transaction
in Nepal and Bhutan
Indians,
Nepalese and Bhutanese resident in Nepal and Bhutan as well as offices and
branches of Indian, Nepalese and Bhutanese firms, companies or other
organisations in these two countries are treated as resident in India for
purposes of transactions in Indian rupees. Payment of claims to such persons
against marine or non-marine policies may be freely made in rupees. Payments in
foreign currency towards claims under marine or non-marine policies will
require prior approval of Reserve Bank, except where premiums thereon were also
collected in foreign currency.
The Memorandum
is divided into four parts as under
|
|
PART A |
- |
MARINE INSURANCE |
|
|
PART B |
- |
NON-MARINE INSURANCE |
|
|
PART C |
- |
REINSURANCE |
|
|
PART D |
- |
FOREIGN CURRENCY ACCOUNTS AND |
|
|
|
|
INVESTMENTS ABROAD |
MARINE
INSURANCE
Currency
in which Marine Policies may be issued
(i) Marine insurance policies on coastal
shipments may be issued only in Indian rupees.
(ii) Marine insurance
policies on shipments between India and other countries as also between two
points outside India may be issued in rupees or in any foreign currency.
Premiums
on Marine Policies covering Exports
Payment of
premium on a marine insurance policy on exports from India may be accepted in
rupees provided exporter furnishes to the insurer a certificate to the effect
either (a) that insurance charges on the shipment in question have to be borne
by him in terms of contract with overseas buyer and that he is not making the
payment on behalf of any non-resident or (b) that he is defraying insurance
charges on the shipment in question on account of overseas buyer of the goods
and he undertakes to add the amount on the invoice and recover the payment so
made from the buyer in an approved manner.
NOTES: A.
Overseas buyers may sometimes approach Insurers directly or through their
overseas offices/agents for extension of cover for additional risks or for
extended transit risks necessitated by circumstances not envisaged when the
marine insurance was originally covered in India with the Insurers. Such
extensions may be made by Insurers provided the additional premiums are
collected from overseas buyers in foreign currency.
B. Certain
countries operate restrictions requiring importers in their countries to obtain
marine insurance cover from local insurers, settlement under which may not be
possible in the event of cargo getting lost before reaching port of destination
due to Exchange Control Regulations governing remittances against imports into
those countries. Insurers may issue in such cases, contingency marine insurance
policies to exporters to protect their interest till goods are paid for. The
policies should be issued with a condition that they will not be assignable to
overseas buyer or any other non-resident party. Claims on such policies should
be paid only to exporters in India.
Premiums
on Marine Policies covering Imports
(i) Payment of
premium on a marine insurance policy on imports into India may be accepted in
rupees provided importer furnishes to the insurer a certificate to the effect
that (a) the insurance charges are required to be borne by him in terms
of the contract with the overseas seller and (b) where the import is
made against an Import Licence, he undertakes to ensure that the amount of
insurance premium is endorsed on the import licence in due course.
(ii) In case of
imports by the public sector (viz. Central Government, any State
Government, Statutory or public bodies and Government undertakings), payment of
insurance premium in rupees may be freely accepted.
(iii) In all other
cases, where payment of premium in respect of imports is offered in rupees,
prior approval of Reserve Bank will be required. Applications for the purpose
should be made by letter (in duplicate) furnishing full particulars.
Premiums
on Marine Policies covering Shipments between Countries outside India
(i) Premiums on
marine insurance policies covering shipments between countries outside India
must ordinarily be received in foreign currency, but payment in rupees may be
accepted provided a certificate from an authorised dealer in foreign exchange
is produced to show that the rupees are derived by a remittance from abroad in
an approved manner.
NOTE : Overseas
offices of the Insurers may grant marine insurance cover for trade between
China and third countries and receive premium/settle claims through foreign
currency accounts maintained by their overseas offices without prior approval
of Reserve Bank.
(ii) Sometimes, firms
and companies in India finance merchanting trade i.e. goods shipped from
one foreign country to another and financed by an intermediary in India. In
some of these cases goods may be purchased on f.o.b./c.& f. terms and/or
sold on c.i.f. terms, the marine insurance cover being arranged by the
intermediary in India. Insurance companies registered with IRDA may issue
policies covering transit risks between the loading and the destination ports
in rupees or in any foreign currency in such cases, against payment of premium
in rupees by the intermediary, after satisfying themselves that the contract
provides for marine insurance being taken by the intermediary.
Claims
against Marine Policies
Claims against
marine insurance policies, when payable to persons, firms or companies in India
should be paid only in rupees, irrespective of the currency in which relative
policies had been issued. Where claimant is not a resident of India, Insurers
may settle the claim out of foreign currency balances held by them, provided
they are satisfied that ownership of the goods lost, damaged etc., vests in
such claimant and that the latter is not making the claim merely as agent of
the real owner of the goods in India.
Remittance
of Claims on Exports
(i) In the case of
marine claims against exports, remittances of claim will be permitted by
authorised dealers in foreign exchange on application on form A2 provided the
Insurer has satisfied himself that the ownership of the goods on which claim
has arisen vests in the non-resident claimant. Applications should be supported
by following documents:
(a) Statement of claim duly certified by an
official authorised by the insurance company registered with IRDA for this
purpose.
(b) Insurance policy.
(c) Survey report or other customary proof of
loss.
(d) Bill of lading/Airway bill.
(e) Certified copy of invoice.
(f) Any other documents ordinarily required to
support the claim.
Where original
documents are not available for any reason, photo copies may be produced to
authorised dealer together with reasons for non-availability of the original
documents. This provision does not apply to remittances for replenishment of
foreign currency balances which will require specific approval of Reserve Bank.
NOTE : Insurers
may settle claims in rupees in favour of Indian exporters even in cases where
title to the goods has passed to foreign buyer, if a request to that effect has
been made by the non-resident claimant. A certificate indicating full
particulars of the transaction including number of relative GR/PP Form and
amount paid in settlement of claim should be issued to the exporter to enable
the latter to obtain necessary approval from Reserve Bank for making
replacement shipments.
(ii) Claims against
marine insurance policies covering exports may also be settled through the
overseas claims settling agents, if so desired by Insurers. Authorised dealers
have been permitted to open revolving letters of credit in favour of
established claims-settling agents abroad and reimburse claims under the credit
on verification of the necessary documentary evidence viz. statement of
claim, survey report or other documentary evidence of loss/damage, original
policy or certificate of insurance etc.
Payment
in Foreign Currency of certain Import Claims
Although it is a
basic rule that marine claims on imports should be settled locally in rupees in
favour of importer in cases where ownership of the goods lost, damaged, etc.
vests in the importer, Insurers may settle claims from their foreign currency
balances in favour of overseas suppliers in the following categories of
imports, in order to facilitate early replacement of the lost, damaged, etc.
goods, on request being received in this regard from importers:
(a) Imports by Government Departments and
public sector undertakings
(b) Imports by
private sector undertakings against foreign credits provided the terms of the
foreign credit require that insurance cover should be taken in foreign currency
for replacement of lost/damaged goods.
(c) In all other cases, where the
ownership of the goods lost/damaged, etc. vests with the overseas supplier and
no payment has been made towards any part of the cost of the goods.
These provisions
are applicable not only to marine policies, but also to marine-cum-erection
policies, whether issued separately or combined.
Claims
on Policies Covering Merchanting Trade
Claims arising
from marine insurance policies covering merchanting trade financed through
India may be settled by Insurers from their foreign currency balances
only if—
(a) the ownership of the goods vests with
the overseas party and
(b) where the
claim is proposed to be settled in favour of the overseas supplier, payment for
the goods has not been made to the supplier and where claim is proposed to be
settled in favour of the overseas buyer, payment for the goods has been
received by the Indian intermediary from the buyer.
NON-MARINE
INSURANCE
Assets
in India
Insurance cover
on risks inside India (including All Risks Insurance) on assets in India owned
by residents of India may be issued only in rupees. This is also applicable to
assets of Indian branches/offices of foreign companies, banks, etc.
Assets
outside India
Non-marine risks
in respect of assets outside India owned by residents of India may be covered
in rupees or in foreign currency provided that in respect of immovable property
held outside India by Indian nationals, permission of Reserve Bank for holding
the property had been obtained, (where necessary). Settlement of claims under
such policies should be made only in rupees locally. Foreign currency policies
providing for payment of claims in foreign currency in the foreign country may,
however, be issued only if the premiums are paid in foreign currency out of
eligible foreign currency assets held by Indian nationals/persons of Indian
origin who have returned to India from abroad after a minimum continuous stay
abroad for at least one year or out of funds held in their RFC accounts with
authorised dealers in India. Issue of foreign currency policies in other cases
will require prior approval of Reserve Bank.
Policies
in foreign currency approved by Reserve Bank- Settlement of claims
(i) Request for
issue of policies in foreign currency which are not covered by the above
guidelines are examined on merits by RBI. For such requests where RBI grants
specific approval for issue of policy in foreign currency, acceptance of
premium in foreign currency and settlement of claim in foreign currency,
insurers may approach A.D. for remittance of claims under policies subject to
the following conditions :—
(a) the policy has been issued in foreign
currency with specific approval of RBI;
(b) the claim has been admitted by the
competent authority of the insurance company;
(c) the claims
has been settled as per the surveyors report and other substantiating
documents;
(d) claims on
account of reinsurance are being lodged with the reinsurers and will be
received as per reinsurance agreement;
(e) the remittance
is being made to the non-resident beneficiary under the policy. For resident
beneficiaries the claim may be settled in Rupee equivalent of foreign currency
due. Under no circumstances payment in foreign currency be made to a resident
beneficiary.
(ii) Insurers
may submit, to the Regional Office of RBI under whose jurisdiction it operates,
a report on quarterly basis of the claims settled in foreign currency along
with supporting documents of each claim settled by them. These reports may be
submitted within 15 days from the end of each quarter of the calendar year.
Baggage
and Valuables in transit
(i) Insurance cover
on baggage or valuables in transit between India and other countries or between
two countries outside India may be issued in rupees or in foreign currency.
(ii) Premiums on such
policies may be collected in rupees only if the owner of the baggage or other
valuables is either an Indian national or is normally resident in India. In
other cases, premiums should be received in foreign currency or in rupees
derived by surrender of foreign currency to an authorised dealer in foreign exchange
or authorised money-changer; such payments should be supported by a certificate
from the authorised dealer/money-changer in the prescribed form.
(iii) Claims on such
policies may be paid only in rupees in India except where the policy holder is
a person normally resident outside India and premiums against the policy had
been collected either in foreign currency or in rupees derived by surrender of
foreign currency. Remittances of claims in foreign currencies in other cases
will require prior approval of Reserve Bank.
(iv) Remittances
towards claims on personal baggage reshipped from India by foreign nationals on
completion of their assignments in India may be allowed by insurers, if they
are eligible for or have been accorded remittance facilities at the time of
retirement from India.
War
etc. Risks Insurance on Marine Hulls
Insurance on
Indian marine hulls covering All Risks against war and other allied risks
arising out of civil commotion, political or labour disturbances etc. are
required to be obtained from the Insurers in India only.
Personal
Accident Insurance
Personal
accident policies may be issued only in rupees and claims thereon settled only
in rupees, in case of Indian nationals and persons of Indian origin normally
resident in India. In other cases, personal accident policies may be issued in
foreign currency, provided premiums thereon are paid either in foreign currency
or in rupees derived by surrender of foreign currency to an authorised dealer
or authorised money-changer. Claims in these cases may be settled in currency
of the policy or in rupees as desired by the policy holder.
NOTE : Indian
companies executing construction and turnkey contracts in foreign countries may
at times desire to obtain personal accident cover from Indian Insurers for the
workmen and technical staff actually engaged in the overseas contracts
providing for settlement of claims in foreign currency. Insurers may permit
such insurance being taken provided premiums will be paid by remittances in
foreign currency from out of the foreign currency earnings generated by the
contracts. Claims in such cases may be settled in foreign currency or if so
desired, in rupees locally.
Overseas
Medical Insurance Scheme for Indians Travelling Abroad
Policies may be
issued in India under the Overseas Medical Insurance Schemes as approved by
Reserve Bank to Indian residents travelling abroad for any approved visits viz.
business, study tour, specialised training, conferences, employment or
higher studies. Premiums on such policies, other than for visits for
employment, may be collected in rupees and for employment in foreign currency.
Insurers may also open a revolving letter of credit with an Indian bank in
London for settlement of its share in the claims that may eventually arise
under the policies.
Miscellaneous
(i) Insurers may
issue product liability policies for exports and Errors and Omissions Policy in
respect of computer software exports in foreign currency against receipt of
premium in rupees and settle claims if any in foreign currency in respect of
such policies.
(ii) Claims arising
outside India against policies issued under Workmen’s Compensation Act and
Merchant Shipping Act may be paid in appropriate foreign currency. Remittances
will be allowed for meeting specific claims on application by the Insurers
furnishing full details of the claims.
REINSURANCE
As per the
extant Govt. of India’s instructions, reinsurance arrangements of the insurance
companies registered with IRDA are to be decided by the companies themselves on
an annual basis, which is to be approved by the respective insurance company’s
Boards in consultation with IRDA. Authorised dealer, designated by these
insurance companies may allow remittances falling due under such approved
reinsurance arrangements, by the insurers in accordance with the terms and
conditions laid down by their Boards.
Remittance
of Reinsurance Premia by Local Brokers
Wherever local
brokers arrange the reinsurance on behalf of insurers, local brokers may remit
the premia through the branch of the authorised dealer designated by the
insurance company in terms of para c.1 above subject to the production of
undernoted documents:
(i) Relative debit notes from overseas
insurance company.
(ii) Detailed statement of premia settled by the
individual insurance company, along with a certificate to the effect that the
amount of reinsurance business is within the overall limit approved by the
insurance company’s Board and that the risks covered under the reinsurance
arrangements are within the scope of the Reinsurance Programme, approved by the
insurance company’s Board in consultation with IRDA.
(iii) A certificate from the Chartered Accountant
of the local broker, prepared on the basis of certificates and statements
obtained from the insurance companies, to the effect that the proposed
remittance of reinsurance premia sought, is in agreement with the various
statements/certificates obtained from the insurance company/companies.
FOREIGN
CURRENCY ACCOUNTS AND INVESTMENTS ABROAD
Foreign
Currency Accounts Abroad
Insurers may
open, hold and maintain with a bank outside India foreign currency accounts for
facilitating transactions and expenses relating/incidental to general insurance
business undertaken in foreign countries in accordance with regulations laid
down in this Memorandum. Insurers should endeavour to keep in their foreign
currency accounts only the minimum balances required for normal business and
transfer to India regularly all surplus funds held at foreign centres.
Investments
abroad
Renewal of
existing investments, reinvestment of redemption proceeds of existing
investments and fresh investment out of funds abroad, in
Government/semi-Government securities and bank deposits may be made by Insurers
freely without prior approval of Reserve Bank, provided they are for meeting statutory
requirements in the foreign country concerned. All other investments will
require prior approval of Reserve Bank of India.
GIM - Memorandum of
exchange control regulations relating to general insurance in India as outlined
in exchange control manual*
Introduction
General
insurance business in India is the monopoly of General Insurance Corporation of
India (GIC) and its four subsidiaries functioning with their Head Offices as
indicated below :
(i) New India Assurance Co. Ltd.,
Bombay
(ii) National Insurance Co. Ltd.,
Calcutta
(iii) Oriental Insurance Co. Ltd., New
Delhi
(iv) United India Insurance Co. Ltd.,
Madras
Note : Reference to Insurer in the Memorandum should be
taken to mean GIC and its four subsidiaries as well.
Scope
of Memorandum
(i) Exchange Control
regulations governing general insurance business written in India are set out
in this Memorandum.
(ii) Directions
contained in this Memorandum have been issued under section 73(3) of Foreign
Exchange Regulation Act, 1973 and any contravention or non-observance thereof
is subject to the penalties prescribed under the Act.
Definitions
The meanings
assigned to some of the terms used in this Memorandum are explained
below :
(i) Person resident in India - A ‘person
resident in India’ is a person as defined in section 2(p) of Foreign
Exchange Regulation Act, 1973. By virtue of the provisions in section 73(1)(c)
and (d) of the Act, firms, companies, etc., in India are also treated as
persons resident in India. A ‘non-resident’ is a person other than a ‘person
resident in India’. Firms, companies, etc., resident outside India are also
treated as persons resident outside India.
Note : The following persons, firms, etc., are, however,
treated as ‘resident’ for the purpose of transactions in Indian rupees :
(a) Indians, Nepalese and Bhutanese resident in Nepal and Bhutan.
(b) Offices and branches of Indian, Nepalese and Bhutanese firms,
companies and other organisations in Nepal and Bhutan.
(ii) Foreign Currency
- ‘Foreign currency’ means any currency other than the currencies of India,
Nepal and Bhutan.
Ban
on Remittances to certain Foreign Countries
No remittances
are permissible to China and Pakistan (except in either case to the extent generally
or specially authorised by Reserve Bank from time to time) nor should any
transactions be entered into with persons, firms, etc., resident in these
countries or with nationals of any of these countries except to the extent
specifically permitted in this Memorandum. All transactions with these
countries or with nationals of these countries should be referred to Reserve
Bank.
Bank
Encashment Certificates
Where Insurers
have been permitted to issue policies expressed in foreign currency against
premium payable in foreign currency, they should insist on submission of
certificates in any of the three prescribed forms
(BCI, ECF and ECR as the case may be) to satisfy themselves that the premium
has been received by foreign exchange remittance through banking channels or in
rupees derived by sale of foreign exchange to an authorised dealer in foreign
exchange or an authorised money-changer.
Note : In case of certificates issued in form ECR by restricted money-changers,
only the balance amounts indicated against Part C of the certificates should be
deemed to be available for payment.
Jurisdiction
of Offices
The areas under
the jurisdiction of various Offices of Reserve Bank are as follows :
|
Office |
Jurisdiction |
|
Ahmedabad |
State of
Gujarat |
|
Bangalore |
State of
Karnataka |
|
Bhopal |
State of
Madhya Pradesh |
|
Bhubaneswar |
State of
Orissa |
|
Bombay |
State of
Maharashtra, Union Territory of Dadra and Nagar Haveli and Union Territory of
Daman and Diu |
|
Calcutta |
States of
Sikkim and West Bengal and Union Territory of Andaman and Nicobar Islands |
|
Chandigarh |
States of
Haryana (excluding the districts of Faridabad, Gurgaon and Sonepat), Himachal
Pradesh and Punjab and Union Territory of Chandigarh |
|
Kochi |
State of
Kerala and Union Territory of Lakshadweep |
|
Guwahati |
States of
Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura |
|
Hyderabad |
State of
Andhra Pradesh |
|
Jaipur |
State of
Rajasthan |
|
Kanpur |
State of Uttar
Pradesh excluding New Okhla Industrial Development Area (NOIDA) in Ghaziabad
district |
|
Madras |
State of Tamil
Nadu and Union Territory of Pondicherry |
|
New Delhi |
Union
Territory of Delhi, the districts of Faridabad, Gurgaon and Sonepat of State
of Haryana and New Okhla Industrial Development Area (NOIDA) in Ghaziabad
District of State of Uttar Pradesh |
|
Panaji |
State of Goa |
|
Patna |
State of Bihar |
|
Jammu/Srinagar
|
State of Jammu
and Kashmir |
The Memorandum is divided into five parts as under :
|
Part A |
- |
Marine
Insurance |
|
Part B |
- |
Non-Marine
Insurance |
|
Part C |
- |
Reinsurance |
|
Part D |
- |
Foreign
currency accounts and investments abroad |
|
Part E |
- |
Submission of
statements to Reserve Bank |
Part
A - Marine Insurance
Direct
Insurance outside India by Residents
Persons, firms,
companies, etc., resident in India are not permitted to take marine insurance
cover with insurance companies in foreign countries without prior permission of
Reserve Bank. Besides, permission of Government of India under General
Insurance Business (Nationalisation) Act, 1972, is required to be taken in such
cases.
Currency
in which Marine Policies may be issued
(i) Marine insurance policies on coastal
shipments may be issued only in Indian rupees.
(ii) Marine insurance
policies on shipments between India and other countries as also between two
points outside India may be issued in rupees or in any foreign currency.
Premiums
on Marine Policies covering Exports
Payment of
premium on a marine insurance policy on exports from India may be accepted in
rupees provided exporter furnishes to insurer a certificate to the effect
either (a) that insurance charges on the shipment in question have to be
borne by him in terms of contract with overseas buyer and that he is not making
the payment on behalf of any non-resident or (b) that he is defraying
insurance charges on the shipment in question on account of overseas buyer of
the goods and he undertakes to add the amount on the invoice and recover the
payment so made from the buyer in an approved manner.
Notes :
A. Overseas
buyers may sometimes approach Insurers directly or through their overseas
offices/agents for extension of cover for additional risks or for extended
transit risks necessitated by circumstances not envisaged when the marine
insurance was originally covered in India with the Insurers. Such extensions
may be made by Insurers provided the additional premiums are collected from
overseas buyers in foreign currency.
B. Certain
countries operate restrictions requiring importers in their countries to obtain
marine insurance cover from local insurers, settlement under which may not be
possible in the event of cargo getting lost before reaching port of destination
due to Exchange Control regulations governing remittances against imports into
those countries. Insurers may issue in such cases, contingency marine insurance
policies to exporters to protect their interests till goods are paid for. The
policies should be issued with a condition that they will not be assignable to
overseas buyer or any other non-resident party. Claims on such policies should
be paid only to exporters in India.
Premiums
on Marine Policies covering Imports
(i) Payment of
premium on a marine insurance policy on imports into India may be accepted in
rupees provided importer furnishes to the insurer a certificate to the effect
that (a) the insurance charges are required to be borne by him in terms
of the contract with the overseas seller and (b) where the import is
made against an Import Licence, he undertakes to ensure that the amount of
insurance premium is endorsed on the import licence in due course.
(ii) In case of
imports by the public sector (viz. Central Government, any State
Government, statutory or public bodies and Government undertakings), payment of
insurance premium in rupees may be freely accepted.
(iii) In all other
cases, where payment of premium in respect of imports is offered in rupees,
prior approval of Reserve Bank will be required. Applications for the purpose
should be made by letter (in duplicate) furnishing full particulars.
Premiums
on Marine Policies covering Shipments between Countries outside India
(i) Premiums on
marine insurance policies covering shipments between countries outside India
must ordinarily be received in foreign currency, but payment in rupees may be
accepted provided a certificate from an authorised dealer in foreign exchange
is produced to show that the rupees are derived by a remittance from abroad in
an approved manner.
Note : Overseas offices of the Insurers may grant marine
insurance cover for trade between China and third countries and receive
premiums/settle claims through foreign currency accounts maintained by their
overseas offices without prior approval of Reserve Bank.
(ii) Sometimes, firms
and companies in India finance merchanting trade i.e. goods shipped from
one foreign country to another and financed by an intermediary in India. In
some of these cases, goods may be purchased on f.o.b./c.& f. terms and/or
sold on c.i.f. terms, the marine insurance cover being arranged by the
intermediary in India. GIC and its subsidiaries may issue policies covering
transit risks between the loading and the destination ports in rupees or in any
foreign currency in such cases, against payment of premium in rupees by the
intermediary, after satisfying themselves that the contract provides for marine
insurance being taken by the intermediary.
Claims
against Marine Policies
Claims against
marine insurance policies, when payable to persons, firms or companies in India
should be paid only in rupees, irrespective of the currency in which relative
policies had been issued. Where claimant is not a resident of India, GIC and
its subsidiaries may settle the claim out of foreign currency balances held by
them, provided they are satisfied that ownership of the goods lost, damaged
etc., vests in such claimant and that the latter is not making the claim merely
as agent of the real owner of the goods in India. In cases where insurer’s
holdings of foreign currency other than those earmarked for other purposes are
inadequate to meet a claim, settlement will have to be made by remittances from
India with prior approval of Reserve Bank except to the extent provided in
paragraph A.7 regarding claims on exports.
Note : Indians, Nepalese and Bhutanese resident in Nepal
and Bhutan as well as offices and branches of Indian, Nepalese and Bhutanese
firms, companies or other organisations in these two countries are treated as
resident in India for purposes of transactions in Indian rupees. Payment of
claims to such persons against marine policies may be freely made in rupees.
Payments in foreign currency towards claims under marine policies will require
prior approval of Reserve Bank, except where premiums thereon were also
collected in foreign currency.
Remittance
of Claims on Exports
(i) In the case of
marine claims against exports, remittances of claim will be permitted by
authorised dealers in foreign exchange on application on form A.2 provided the Insurer has
satisfied himself that the ownership of the goods on which claim has arisen
vests in the non-resident claimant. Applications should be supported by following
documents :
(a) Statement of
claim (form GIM 1) duly certified
by an official authorised by GIC or its subsidiary for this purpose
(b) Insurance policy
(c) Survey report or other customary
proof of loss
(d) Bill of lading/Airway bill
(e) Certified copy of invoice
(f) Any other documents ordinarily
required to support the claim
Where original
documents are not available for any reason, photocopies may be produced to
authorised dealer together with reasons for non-availability of the original
documents. This provision does not apply to remittances for replenishment of
foreign currency balances which will require specific approval of Reserve Bank.
Note : Insurers may settle claims in rupees in favour of
Indian exporters even in cases where title to the goods has passed to foreign
buyer, if a request to that effect has been made by the non-resident claimant.
A certificate indicating full particulars of the transaction including number
of relative GR/PP form and amount paid in settlement of claim should be issued
to the exporter to enable the latter to obtain necessary approval from Reserve
Bank for making replacement shipments.
(ii) Claims against
marine insurance policies covering exports may also be settled through the
overseas claims settling agents, if so desired by insurers. Authorised dealers
have been permitted to open revolving letters of credit in favour of
established claims-settling agents abroad and reimburse claims under the credit
on verification of the necessary documentary evidence viz. statement of
claim, survey report or other documentary evidence of loss/damage, original
policy or certificate of insurance, etc.
Payment
in Foreign Currency of certain Import Claims
Although it is a
basic rule that marine claims on imports should be settled locally in rupees in
favour of importer in cases where ownership of the goods lost, damaged, etc.
vests in the importer, Insurers may settle claims from their foreign currency
balances in favour of overseas suppliers in the following categories of imports,
in order to facilitate early replacement of the lost, damaged, etc. goods, on
requests being received in this regard from importers :
(a) Imports by Government Departments and
public sector undertakings.
(b) Imports by
private sector undertakings against foreign credits provided the terms of the
foreign credit require that insurance cover should be taken in foreign currency
for replacement of lost/damaged goods.
(c) In all other
cases, where the ownership of the goods lost/damaged, etc. vests with the overseas
supplier and no payment has been made towards any part of the cost of the
goods.
These provisions
are applicable not only to marine policies, but also to marine-cum-erection
policies, whether issued separately or combined.
Claims
on Policies covering Merchanting Trade
Claims arising
from marine insurance policies covering merchanting trade financed through
India may be settled by Insurers from their foreign currency balances only if —
(a) the ownership of the goods vests with
the overseas party and
(b) where the
claim is proposed to be settled in favour of the overseas supplier, payment for
the goods has not been made to the supplier and where claim is proposed to be
settled in favour of the overseas buyer, payment for the goods has been
received by the Indian intermediary from the buyer.
Part
B - Non-marine insurance
Direct
Insurance outside India by Residents
Persons, firms,
companies, etc. resident in India are not permitted to take insurance cover of
any kind with insurance companies in foreign countries without prior permission
of Reserve Bank. Besides, permission of Government of India under General
Insurance Business (Nationalisation) Act, 1972, is also required to be taken in
such cases.
Assets
in India*
Insurance cover
on risks inside India (including All Risks Insurance) on assets in India owned
by residents of India may be issued only in rupees. This is also applicable to
assets of Indian branches/offices of foreign companies, banks, etc.
Assets
outside India+
Non-marine risks
in respect of assets outside India owned by residents of India may be covered
in rupees or in foreign currency provided that in respect of immovable property
held outside India by Indian nationals, permission of Reserve Bank for holding
the property had been obtained under section 25 of Foreign Exchange Regulation
Act, 1973 (where necessary). Settlement of claims under such policies should be
made only in rupees locally. Foreign currency policies providing for payment of
claims in foreign currency in the foreign country may, however, be issued only
if the premiums are paid in foreign currency out of eligible foreign currency
assets held by Indian nationals/persons of Indian origin who have returned to
India from abroad after a minimum continuous stay abroad for at least one year
or out of funds held in their RFC accounts with authorised dealers in India.
Issue of foreign currency policies in other cases will require prior approval
of Reserve Bank.
Baggage
and Valuables in transit
(i) Insurance cover
on baggage or valuables in transit between India and other countries or between
two countries outside India may be issued in rupees or in foreign currency.
(ii) Premiums on such
policies may be collected in rupees only if the owner of the baggage or other
valuables is either an Indian national or is normally resident in India. In
other cases, premiums should be received in foreign currency or in rupees
derived by surrender of foreign currency to an authorised dealer in foreign
exchange or authorised money-changer; such payments should be supported by a
certificate from the authorised dealer/money-changer in the prescribed form.
(iii) Claims on such
policies may be paid only in rupees in India except where the policy holder is
a person normally resident outside India and premiums against the policy had
been collected either in foreign currency or in rupees derived by surrender of
foreign currency. Remittances of claims in foreign currencies in other cases
will require prior approval of Reserve Bank. Remittances towards claims on
personal baggage reshipped from India by foreign nationals on completion of
their assignments in India will be allowed by Reserve Bank, if they are
eligible for or have been accorded remittance facilities at the time of
retirement from India.
War
etc., Risks Insurance on Marine Hulls
Insurance on
Indian marine hulls covering All Risks against war and other allied risks
arising out of civil commotion, political or labour disturbances etc. are
required to be obtained from the Insurers in India only.
Personal
Accident Insurance
Personal
accident policies may be issued only in rupees and claims thereon settled only
in rupees, in case of Indian nationals and persons of Indian origin normally
resident in India. In other cases, personal accident policies may be issued in
foreign currency, provided premiums thereon are paid either in foreign currency
or in rupees derived by surrender of foreign currency to an authorised dealer
or authorised money-changer. Claims in these cases may be settled in the
currency of the policy or in rupees as desired by the policy holder.
Note : Indian companies executing construction and turnkey
contracts in foreign countries may at times desire to obtain personal accident
cover from Indian Insurers for the workmen and technical staff actually engaged
in the overseas contracts providing for settlement of claims in foreign
currency. Reserve Bank will be prepared to permit, on application, such
insurance being taken provided premiums will be paid by remittances in foreign
currency from out of the foreign currency earnings generated by the contracts.
Claims in such cases may be settled in foreign currency or if so desired, in
rupees locally.
Overseas
Medical Insurance Scheme for Indians Travelling Abroad
Policies may be
issued in India under the Overseas Medical Insurance Schemes as approved by
Reserve Bank to Indian residents travelling abroad for any approved visits viz.
business, study tour, specialised training, conferences, employment or higher
studies. Premiums on such policies, other than for visits for employment, may
be collected in rupees and for employment in foreign currency. GIC and its
subsidiaries may also open a revolving letter of credit with an Indian bank in
London for settlement of its share in the claims that may eventually arise
under the policies.
Miscellaneous
1[(i)] Claims arising
outside India against policies issued under Workmen’s Compensation Act and
Merchant Shipping Act may be paid in appropriate foreign currency. Remittances
will be allowed for meeting specific claims on application by the Insurers
furnishing full details of the claim.
1[(ii) GIC and/or its
subsidiaries may open letters of credit through an authorised dealer in favour
of their claim settling agents abroad providing for payments towards claims
arising on account of Product Liability Insurance policies for merchandise
exports and Errors of Omission Insurance policies in respect of computer
software exports subject to submission of statement of claims, survey reports
or other documentary evidence of loss/damages, original policy or certificate
of insurance, etc., in support of claim.]
Claims
arising in Nepal and Bhutan
For purposes of
transactions in Indian rupees, Indians, Nepalese and Bhutanese resident in
Nepal and Bhutan as well as offices and branches of Indian, Nepalese and
Bhutanese firms, companies or other organisations in these two countries are
treated as resident in India. Payment of claims to such persons against
non-marine policies may be freely made in rupees. Payments in foreign currency
towards claims under non-marine policies will require prior approval of Reserve
Bank, except where premiums thereon were also collected in foreign currency.
Part
C - Reinsurance
Reinsurance
2[Reinsurance arrangements of
GIC and its subsidiaries are reviewed annually and approved by the GIC Board.
Remittances falling due under approved reinsurance arrangements may be
permitted by authorised dealers in accordance with the terms and conditions
laid down by the GIC Board. GIC and its subsidiaries should accordingly submit
their applications for remittances to their bankers on Form A2 giving
particulars (in duplicate) of the approval of GIC Board, the amount already
remitted/to be remitted and balance available against the approval, etc.,
supported by documentary evidence in original.
Note : Applications for remittance of reinsurance premia
through local brokers of insurance companies should be made to Reserve Bank
with full particulars.]
Part
D - Foreign Currency Accounts and Investments Abroad
Foreign
Currency Accounts abroad
GIC and its
subsidiaries will be permitted, on application, by Reserve Bank, to maintain
foreign currency accounts in foreign countries for facilitating general
insurance business undertaken in foreign countries. It will be in order for
them to receive into foreign currency accounts, any payments due to them from
non-residents and also make payments out of such accounts towards their
liabilities, such as claims payable to non-residents, dues to non-resident
insurers on account of reinsurance arrangements and similar other payments
incidental to insurance business, in accordance with regulations laid down in
this Memorandum. GIC and its subsidiaries should endeavour to keep in their
foreign currency accounts only the minimum balances required for normal
business and transfer to India regularly all surplus funds held at foreign
centres.
Investments
abroad
Renewal of
existing investments, reinvestment of redemption proceeds of existing
investments and fresh investment out of funds abroad, in
Government/semi-Government securities and bank deposits may be made by GIC and
its subsidiaries freely without prior approval of Reserve Bank, provided they
are for meeting statutory requirements in the foreign country concerned.
Details of investments made should be reported to Reserve Bank in the quarterly
statements submitted in Form GIM 4. On receipt of the quarterly statements,
Reserve Bank will issue licence authorising GIC to hold foreign securities
under section 19(1)(e) of Foreign Exchange Regulation Act, 1973.
Investments other than in Government/semi-Government securities and
loans/advances to Municipalities, local bodies like Housing Corporations,
Indian Missions, Indian joint ventures, etc. abroad require prior approval of
Reserve Bank. While applying to Reserve Bank, justification for making the
proposed investments and reasons for not repatriating the surplus funds to
India should be explained.
Part
E - Submission of Statements to Reserve Bank
GIC and its
subsidiaries should maintain proper record of policies issued either in rupees
or in foreign currency and the sources of funds for making payment of premia by
policy holders. They should submit to the office of Reserve Bank under whose
jurisdiction they are functioning, the following quarterly, half-yearly and
annual statements in duplicate. Quarterly/half-yearly statements should be sent
so as to reach Reserve Bank by the end of the month following the
quarter/half-year covered by the statements and annual statements by the 31st August
every year :
(a) Quarterly statement of foreign
currency accounts maintained abroad in form
GIM 2.
(b) Quarterly statement of remittances
made and remittances received in form
GIM 3.
(c) Quarterly statement of foreign
investments made in form GIM 4.
(d) Quarterly
statement of claims settled in foreign currency in respect of imports by
Government Departments/public sector undertakings and by private sector
undertakings under foreign credits in form
GIM 5.
(e) Quarterly
statement of claims settled against exports by remittance in foreign currency
through an authorised dealer in foreign exchange in form GIM 6 (to be supported by documents listed in paragraph
A.7, for perusal and return, if individual claim exceeds U.S. $ 1,000 or its
equivalent).
(f) Annual
Revenue Account in form GIM 7
together with a Report on the operations in each country.
(g) Annual
statement giving particulars of reinsurance business done with non-residents in
form GIM 8.
(h) Half-yearly
statement of insurance premium collected under Overseas Medical Insurance
Scheme and their remittance abroad in form
GIM 9.
(i) Half-yearly
statement of claims settled against 20% share retained in India under Overseas
Medical Insurance Scheme in form
GIM 10.
Attention of
authorised dealers is invited to the Notification No. FEMA 12/2000-RB, dated
May 3, 2000* viz., Foreign
Exchange Management (Insurance) Regulations, 2000. The Memorandum of Exchange
Control Regulations relating to Life Insurance in India (LIM) since brought out
is enclosed. The major changes in procedure as per Memorandum are summarised in
the Annexure.
Necessary
amendments to the Foreign Exchange Management Regulations, 2000 are being
issued separately.
Authorised
Dealers may bring the contents of this circular to the notice of their
constituents concerned.
The directions
contained in this circular have been issued under section 10(4) and section
11(1) of the Foreign Exchange Management Act 1999 (42 of 1999).
ANNEXURE
Major changes proposed in the revised LIM
|
Sr.No. |
Subject
Matter |
Changes |
|
1. |
Scope of Memorandum |
The earlier instructions of LIM covered only LIC which was the only
institution permitted to undertake the business of Life Insurance. The
present instructions contained in the Memorandum are applicable to LIC as
well as Life Insurance Companies which are registered with IRDA. |
|
2. |
Re-insurance Arrangement |
The re-insurance arrangement of Life Insurance Companies registered
with IRDA are to be decided by the Company’s Board themselves and IRDA is to
be kept informed. Authorised Dealers designated by these insurance companies
are now permitted to make remittances falling due under such approved
re-insurance arrangements. |
|
3. |
Settlement of claims in foreign currency favouring residents and crediting the same to RFC Accounts. |
In the LIM issued under FERA, residents were not permitted to retain
any receipts in foreign currency as the same had to be surrendered to the
authorised dealer within 7 days. Under FEMA resident beneficiaries of foreign
currency life insurance policies are being permitted to retain the proceeds
in foreign currency in RFC Accounts. |
|
|
||
|
|
||
|
|
||
|
|
||
|
4. |
Permitting credit of foreign currency claims favouring non-residents to NRE/FCNR Accounts. |
In the revised LIM the proceeds of policies denominated in foreign
currency or the rupee policies for which premia are paid in foreign currency
or out of NRE/FCNR Accounts are now permitted to be credited to NRE/FCNR
Account of non-resident without prior approval of Reserve Bank. |
|
5. |
Restrictions on issue of rupee policies to foreign nationals |
The restrictions on issue of rupee policies maturing within 7 years to
foreign nationals not permanently resident in India have been withdrawn. |
|
6. |
Export of Policies |
The restrictions in regard to export of policies have been withdrawn
under revised LIM. |
|
7. |
Instructions addressing Exchange Control concerns |
The revised LIM is modified in such a manner whereby only issues of
exchange control concern are addressed. Other operational instructions not
relating to exchange control have been excluded. |
LIM Memorandum of Foreign Exchange Regulations
Relating to Life Insurance in India
Introduction
Life insurance
business in India can be undertaken by insurance companies registered with
Insurance Regulatory and Development Authority (IRDA) and as per the
regulations notified by Reserve Bank of India under Notifications No. 1 and
12/2000-RB, dated May 3, 2000.
Scope
of Memorandum
Exchange Control
Regulations governing issue of life insurance policies in rupees and foreign
currencies to non-residents, collection of premia, settlement of claims,
maintenance and operations of foreign currency accounts abroad, reinsurance,
investment of surplus funds abroad and allied matters are set out in this
Memorandum. The receipt and payment of foreign exchange shall be as per
Notification FEMA 14/2000-RB, dated May 3, 2000 i.e. Foreign Exchange
Management (Manner of Receipt and Payment) Regulations. For current account
transactions, insurers may be guided by the rules notified by Government of
India vide G.S.R. 381(E), dated May 3, 2000, as amended from time to
time and the various notifications issued under FEMA 1999 by Reserve Bank.
Definitions
For the purpose
of this Memorandum the terms “Person resident in India”, “Person resident
outside India” and “foreign currency” will have the same meaning as defined
under Foreign Exchange Management Act, 1999 (42 of 1999).
“Foreign
nationals” will have the same meaning as defined in Regulation 4 of FEMA
Notification No. 12/2000-RB, dated May 3, 2000.
“Person of
Indian Origin” will have the same meaning as defined in FEMA Notification No.
5/RB-2000, dated May 3, 2000.
Issue
of policies and collection of premia
(a)
Residents
(i) Policies may
be issued in foreign currency to resident persons of Indian nationality or
origin who have returned to India after being non-resident provided the premia
are paid out of remittances from foreign currency funds held by them abroad or
from their Resident Foreign Currency (RFC) account with authorised dealers in
India.
(ii) Policies
denominated in foreign currency or rupees may be issued to foreign nationals
not permanently resident in India provided the premia are paid out of foreign
currency funds or from their income earned in India or repatriable
superannuation/pension fund in India.
(iii) Conversion
of Rupee policies on the lives of persons resident in India into foreign
currency or transfer of records of such policies to a country outside India is
not permitted without prior approval of Reserve Bank.
(b)
Non-Residents
(i) Insurers may
issue policies denominated in foreign currency through their offices in India
or abroad to non-residents provided the premia are collected in foreign
currency from abroad or out of NRE/FCNR accounts of the insured or his family
members held in India.
(ii) For policies
denominated in rupees issued to non-residents, funds held in NRO accounts can
be accepted towards payment of premia.
(iii) Policies
issued to Indian nationals and persons of Indian origin resident abroad by
overseas offices of insurers may be transferred to Indian register, together
with the actuarial reserves held against the policies, on the policy-holders’
return to India. Foreign currency policies in such circumstances shall be
converted into rupee policies except in cases where the policy has been in
force for at least 3 years prior to policy-holder’s return to India and the
policy-holder wishes to retain and continue the foreign currency policy.
Requests received for payment in foreign currency towards premia on such
policies may be permitted by authorised dealers provided the policy-holder
undertakes to repatriate to India the maturity proceeds or any claim amounts
due on the policy through normal banking channels.
Settlement
of claims
(i) The basic rule
for settlement of claims on rupee life insurance policies in favour of
claimants resident outside India is that payments in foreign currency will be
permitted only in proportion in which the amount of premia paid in foreign
currency in relation to the total premia payable.
(ii) Non-resident
beneficiaries of insurance claims/maturity/surrender value settled in foreign
currency may be permitted to credit the same to NRE/FCNR account, if they so
desire.
(iii) Resident
beneficiaries of insurance claims/maturity/surrender values settled in foreign
currency may be permitted to credit the same to RFC accounts, if they so
desire.
(iv) Claims/maturity
proceeds/surrender value in respect of rupee life insurance policies issued to
non-resident Indians for which premia have been collected in non-repatriable
rupees may be paid only in rupees by credit to NRO account of the beneficiary.
This would also apply in cases of death claims being settled in favour of
non-resident assignees/nominees.
(v) Claims/maturity
proceeds/surrender value in respect of rupee policies issued to foreign
nationals not permanently resident in India may be paid in rupees or may be
allowed to be remitted abroad, if the claimant so desires.
Commission
to overseas Agents
Insurers may pay
commission to their agents who are permanently resident outside India
regardless of the fact that part of the business booked by them may be on the
lives of persons resident in India and relative premia are paid in rupees in
India. Remittances of commission from India to such agents abroad will be
governed by instructions contained in Government Notification No. G.S.R.
381(E), dated May 3, 2000 relating to Current Account transactions as amended
from time to time.
Reinsurance
In terms of the
existing instructions, reinsurance arrangements for the insurance companies
registered with IRDA are to be decided by the companies themselves on an annual
basis and approved by the respective insurance company’s Board in consultation
with IRDA. Authorised dealers, designated by these insurance companies may
allow remittances for the reinsurance arrangements in accordance with the terms
and conditions laid down by the respective Board of insurance companies.
Foreign
Currency accounts
Insurers may
open, hold and maintain with a bank outside India foreign currency accounts for
facilitating transactions and expenses relating/incidental to life insurance
business undertaken in foreign countries in accordance with regulations laid
down in the Memorandum. Insurers should transfer to India regularly all surplus
funds held at foreign centres and endeavour to keep in their foreign currency
accounts only minimum balances required for normal business.
Investments
abroad
Renewal of
existing investments, reinvestment of redemption proceeds of existing
investments and fresh investments out of funds held abroad, in
Government/Semi-Government securities and bank deposits may be made by insurers
freely without prior approval of Reserve Bank provided they are for meeting statutory
requirements in the foreign country concerned. All other investments will
require prior approval of Reserve Bank.
Utilisation
of Foreign Currency Funds
(i) Insurers may
freely use its foreign currency balances for meeting all the normal expenses of
its overseas offices inclusive of taxes and other dues in connection with
maintenance and upkeep of buildings and properties held by insurers in foreign
countries as well as purchase of cars for official use.
(ii) Insurers may
also freely use their overseas funds for settlement of provident fund, gratuity
and other retirement benefits to retiring employees of overseas offices.
(iii) Insurers may
grant loans, without prior permission of Reserve Bank, to employees of their
overseas offices (other than Indian nationals who had been deputed or posted
from India) against provident fund balances held in the country concerned
provided loan recoveries will be made in foreign currency.
Clarification One
Attention of
Authorised Dealers is invited to A.P. (DIR Series) Circular No. 72, dated
January 17, 2003 enclosing the Memorandum of Exchange Control Regulations
relating to Life Insurance in India (LIM). In terms of paragraph 5(iii)
of the Memorandum relating to settlement of claims, Authorised Dealers were
advised that Resident beneficiaries of insurance claims/maturity/surrender
value settled in foreign currency may be permitted to credit the proceeds
thereof to Resident Foreign Currency (RFC) Account, if so desired.
2. On a review, it has been
decided that :
(i) Resident
beneficiaries of the insurance claims/maturity/surrender value in foreign
currency may be permitted to open and credit the proceeds thereof to their RFC
(Domestic) Account instead of RFC Account as advised earlier.
(ii) Non-resident
India Policy Holders who are beneficiaries of insurance claims/maturity or
surrender value settled in foreign currency in respect of policies issued by
Insurance Companies in India and registered with Insurance Regulatory and
Development Authority to conduct insurance business may be permitted to credit
the proceeds to the RFC Account opened by them on their becoming residents.
3. Authorised Dealers may
bring the contents of this circular to the notice of their constituents
concerned.
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)
Source : AP (DIR Series) (2003-2004) Circular No. 51, dated
15-12-2003.
LIM - Memorandum of Exchange Control regulations relating to Life
Insurance in India*
Scope
of Memorandum
(i) Life insurance
business in India is the monopoly of Life Insurance Corporation of India (LIC).
Exchange Control regulations governing issue of life insurance policies in
rupees and foreign currencies to non-residents, collection of premiums,
settlement of claims, maintenance of and operations on foreign currency
accounts abroad, investment of surplus funds abroad and allied matters are set
out in this Memorandum.
(ii) Directions
contained in this Memorandum have been issued under section 73(3) of Foreign
Exchange Regulation Act, 1973 and any contravention or non-observance thereof
is subject to the penalties prescribed under the Act.
Definitions
The meanings
assigned to some of the terms used in this Memorandum are explained
below :—
(i) Non-resident
The term ‘non-resident’ is
used in this Memorandum to denote a person other than a ‘person resident in
India’, as defined in section 2(p) of Foreign Exchange Regulation Act,
1973.
Note : For the purpose of transactions
in Indian rupees, Indians, Nepalese and Bhutanese resident in Nepal and Bhutan
are treated as persons resident in India.
(ii) Foreign Nationals
not permanently resident in India
The expression ‘foreign
nationals not permanently resident in India’ is used in this Memorandum to
denote foreign citizens who are resident in India purely on account of their
employment, profession or business with a valid employment/business visa.
Note : Persons of Indian
origin holding foreign passports and resident in India are not to be treated as
foreign nationals not permanently resident in India unless they are residing in
India for employment of a specified duration (irrespective of the length
thereof) or for a specific job or assignment the duration of which does not
exceed three years.
(iii) Foreign Currency
The term ‘foreign currency’
denotes any currency other than the currencies of India, Nepal and Bhutan.
Jurisdiction
of Offices
The areas under
the jurisdiction of various Offices of Reserve Bank are as follows :
|
Office |
Jurisdiction |
|
Ahmedabad |
State of
Gujarat |
|
Bangalore |
State of
Karnataka |
|
Bhopal |
State of
Madhya Pradesh |
|
Bhubaneswar |
State of
Orissa |
|
Bombay |
State of
Maharashtra, Union Territory of Dadra and Nagar Haveli and Union Territory of
Daman and Diu |
|
Calcutta |
States of
Sikkim and West Bengal and Union Territory of Andaman and Nicobar Islands |
|
Chandigarh |
States of
Haryana (excluding the districts of Faridabad, Gurgaon and Sonepat), Himachal
Pradesh and Punjab and Union Territory of Chandigarh |
|
Kochi |
State of
Kerala and Union Territory of Lakshadweep |
|
Guwahati |
States of
Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura |
|
Hyderabad |
State of
Andhra Pradesh |
|
Jaipur |
State of
Rajasthan |
|
Kanpur |
State of Uttar
Pradesh excluding New Okhla Industrial Development Area (NOIDA) in Ghaziabad
district |
|
Madras |
State of Tamil
Nadu and Union Territory of Pondicherry |
|
New Delhi |
Union
Territory of Delhi, the districts of Faridabad, Gurgaon and Sonepat of State
of Haryana and New Okhla Industrial Development Area (NOIDA) in Ghaziabad
District of State of Uttar Pradesh |
|
Panaji |
State of Goa |
|
Patna |
State of Bihar |
|
Jammu/ |
|
|
Srinagar |
State of Jammu
and Kashmir |
The Memorandum
is divided into seven parts as follows :
|
Part A |
- |
Issue of
Policies |
|
Part B |
- |
Collection of
premiums |
|
Part C |
- |
Reinsurance |
|
Part D |
- |
Settlement of
claims etc. |
|
Part E |
- |
Supplemental
provisions |
|
Part F |
- |
Foreign
currency accounts, investment of surplus funds abroad and overseas offices |
|
Part G |
- |
Submission of
statements to reserve bank |
Part
A - Issue of policies
Currency
of Policies
(i) Residents
Policies on the lives
of persons resident in India may be issued only in rupees. Conversion of such
policies into foreign currency or transfer of records of such policies to a
country outside India is not permitted without prior permission of Reserve
Bank. Policies may, however, be issued in foreign currency on the lives of
persons who are foreign nationals not permanently resident in India, provided
the premiums are paid in foreign currency.
Note : See paragraph
A.2 regarding restrictions on the issue of certain types of policies in rupees
to foreign nationals not permanently resident in India.
(ii) Non-residents
Policies on the lives
of persons resident outside India may be issued in rupees or in foreign
currency provided premiums are paid in an approved manner. (See paragraphs
B.1, B.2 and B.5)
Notes :
A. LIC’s
overseas offices may issue foreign currency policies to non-residents including
Indian nationals and persons of Indian origin resident abroad provided premiums
are also collected in foreign currency.
B. Policies
issued to Indian nationals and persons of Indian origin resident abroad by
LIC’s overseas offices should be transferred to Indian register together with
the actuarial reserves held against the policies, on the policy holders’ return
to India. Foreign currency policies should be converted into rupee policies
except in cases where the policy has been in force for at least three years
prior to policy holder’s return to India and policy holder wishes to retain the
foreign currency policy. In the latter case, policy holder will have to declare
such policy to Reserve Bank and obtain a licence under section 19(1)(e)
of Foreign Exchange Regulation Act, 1973 for holding it. Remittances of premium
will be permitted on application by Reserve Bank in such cases provided they
undertake to repatriate to India the maturity proceeds or any claim amounts due
on the policy through an authorised dealer.
(iii) Returning
Indians
Persons of Indian
nationality or origin who have returned to India after being non-residents for
a minimum continuous stay of one year abroad have been granted general
permission, vide Reserve Bank Notification No. FERA 118/92-RB dated 7th
September 1992, for acquiring any foreign security (which includes insurance
policy) out of foreign exchange lawfully acquired by them while they were
resident outside India. Policies may, therefore, be issued to such persons in
India or abroad in foreign currency provided the premiums are paid out of
foreign currency funds held by them abroad or in their Resident Foreign
Currency (RFC) accounts with authorised dealers in India. [See paragraph
D.4(ii) regarding disposal of maturity proceeds or claim amounts in
respect of such policies]
Issue
of Rupee Policies to Foreign Nationals
(i) In views of
restrictions on transfer of capital out of India by foreign nationals not
permanently resident in India, Exchange Control views with disfavour the issue
to them of single premium endowment assurance policies which mature within a
period of seven years from the date of payment of the initial purchase price
and short-term endowment assurance policies which mature within a period of
seven years from the date of payment of the first annual premium. Issue of
single premium and short-term endowment assurance policies maturing within a
period of seven years requires prior approval of Reserve Bank.
(ii) Annuity policies
expressed in rupees against payment of consideration in one or more instalments
may be issued to foreign nationals not permanently resident in India only if
the policies are deferred annuities and the period of deferment is at least
seven years except where the annuity policies are issued against payment from a
recognised superannuation/pension fund. Prior approval of Reserve Bank must be
obtained for issue of deferred annuity contracts where period of deferment is
less than seven years.
Issue
of Annuities in Foreign Currencies to Foreign Nationals
As an exception
to the general rule contained in paragraph A.1(i), annuity policies
expressed in the currency of the country of permanent residence of the assured
may be issued to foreign nationals not permanently resident in India, provided
payment against the policies is received from a recognised
superannuation/pension fund. Before issuing such policies, LIC should verify
that they hold a valid employment/business visa.
In case of
foreign nationals who have been in employment in India with firms/companies,
LIC may accept a certificate from an authorised dealer in foreign exchange to
the effect that the foreign national concerned was availing of recurring
remittance facility. Cases which are not covered by these provisions should be
referred to Reserve Bank.
Part
B - Collection of premiums
Rupee
Policies on Non-resident Indians
(i) Premiums due on
rupee life insurance policies (held in Indian register) on the lives of
non-resident persons of Indian nationality or origin may be collected in any
one of the following methods :
(a) by direct
remittance from abroad in foreign currency through banking channels in an
approved manner or by remittance through postal channels like foreign money
orders;
(b) by rupees
derived by policy holder by sale of foreign exchange such as foreign currency
travellers cheques, demand drafts, etc. provided encashment certificate issued
by an authorised dealer in foreign exchange is produced;
(c) by
payment out of funds held in Non-resident (External) Rupee account or Foreign
Currency (Non-resident) account in the name of policy holder;
(d) by cheques
drawn by non-resident policy holder on bank accounts in India held in his own
name (either solely or jointly with another member of the family), whether or
not the account has been designated as non-resident;
(e) by cheque
drawn on account maintained by resident parent or spouse of policy holder in
their own name or joint names with other close relatives.
Note : It must be clearly
brought to the notice of policy holders that where premiums are paid from a
resident source as in (d) and (e) above, surrender value or any
claim on the policies will not qualify for remittance in foreign exchange from
India.
(ii) Prior approval
of Reserve Bank should be obtained by LIC if premium is to be paid in any other
manner such as—
(a) by cheques
drawn on the rupee account standing in the name of a firm even if policy holder
is partner or proprietor of the firm
(b) from Hindu Undivided Family funds
(c) in cash.
While applying
to Reserve Bank in such cases, the actual source of funds being applied for
payment of premiums should be explained. Application should be made in Form LIM
1.
Note : The foregoing rules are also applicable to arrears
of premiums, future premiums, interest on premiums, repayment of loans and
interest thereon and other dues payable by non-resident Indian policy holders
holding policies in Indian register.
Rupee
Policies on other Non-residents
Premiums due on
rupee policies (held in Indian register) on the lives of non-residents other
than persons of Indian nationality or origin should be collected either by
direct remittance from abroad in foreign currency through banking channels in
an approved manner or by remittance through postal channels like foreign money
order or by cheque drawn on the non-resident account of the policy holder with
an authorised dealer in foreign exchange in India.
Rupee
Policies on Foreign Nationals
Premiums due on
rupee policies issued on the lives of foreign nationals not permanently
resident in India may be collected from policy holder in rupees in India or in
foreign currency.
Foreign
Currency Policies on Foreign Nationals
Premiums due on
foreign currency annuity policies on the lives of foreign nationals not
permanently resident in India issued against payment from a recognised
superannuation/pension fund (paragraph A.3) may be collected in rupees.
Premiums on all other foreign currency policies must be collected from policy
holders in foreign currency.
Foreign
Currency Policies on Non-residents/Returning Indians
(i) Premiums due on
foreign currency policies (held in Indian register) on the lives of
non-residents, irrespective of their nationality or origin, should be collected
in the currency of the policy or by direct remittance from abroad in foreign
currency through banking channels in an approved manner.
(ii) Premiums due on
foreign currency policies on the lives of persons of Indian nationality/origin
who have returned to India for permanent settlement should also be collected
either by direct remittance from abroad in foreign currency through banking
channels in an approved manner or out of funds held in their Resident Foreign
Currency accounts (RFC accounts), maintained with authorised dealers in India
[cf. paragraph A.1(iii)].
Adjustment
of Excess Premiums/Rebates
Occasionally,
LIC may receive remittances in foreign currency from non-resident policy
holders which are in excess of actual dues from the latter towards premiums,
loan repayments, interest on premiums/loans or due to some concessions extended
like medical fee reimbursement, lower rate of accumulation of premium arrears
etc. LIC may adjust such excess against the next premium or loan instalment due
or refund the excess to nominees/relatives or representatives of policy holders
in India, as desired by the latter. Likewise, any rebates in premium such as
climatic rebate may also be adjusted.
Supplemental
provisions governing Collection of Premiums etc.
(i) Premiums may be
collected from non-resident policy holders of Indian nationality or origin by
cheques drawn on their bank accounts in India in payment of premiums on rupee
life insurance policies of their dependents as well, whether resident or
non-resident.
(ii) Premiums due on
policies issued to persons resident in India who have proceeded abroad on short
trips or to Indian students who have gone abroad for higher studies may be
collected in rupees out of the resident bank accounts in India or from any of
their representatives in India in cash or by cheque.
(iii) Premiums due on
rupee policies issued to Indian nationals resident in Burma may be accepted in
rupees in India from friends/relatives of the policy holders subject to the
condition that all payments under the policies will be made to the policy
holders only in rupees after their arrival in India for permanent settlement.
Policies
held on Foreign Register of LIC
Premiums on
foreign currency/rupee policies issued by overseas offices of LIC and held on
their foreign register should be collected only in foreign currency.
Part
C - Reinsurance
Reinsurance
arrangements of LIC are reviewed annually and approved by Government of India.
Remittances falling due under approved reinsurance arrangements will be
permitted by authorised dealers in accordance with the terms and conditions
laid down in the Government approval. LIC may accordingly make necessary
applications to its bankers on Form A2 together with the Government approval in
original with a certified copy thereof and stating particulars such as the
amount already remitted, the balance available against the sanction, the amount
of the proposed remittance, name of the beneficiary, etc.
Part
d - settlement of claims, etc.
General
The basic rule
for settlement of claims on rupee life insurance policies (held in Indian
Register) in favour of claimants resident outside India is that payment of
claims in foreign currency will be permitted only if—
(a) the claimants are permanently
resident outside India, and
(b) all premiums
on the policies have been paid in foreign currency or by remittance from abroad
through normal banking channels in an approved manner or in any other manner
which has resulted in accrual of foreign exchange to India such as payment from
policy holder’s Non-resident (External) Rupee or FCNR account with an
authorised dealer in India.
Where only some
premiums have been paid by remittance of foreign currency to India, settlement
in foreign currency will be permitted only in the proportion which the amount
of premiums paid by remittances from abroad bears to the total premiums paid.
The regulations are spelt out in the following paragraphs.
Claims
in favour of Non-resident Indians
(i) Payment of
maturity proceeds/surrender values in respect of rupee life insurance policies
issued to Indian nationals or persons of Indian origin resident outside India
may be freely made in India—
(a) to the policy holders themselves
during their temporary visits to India
(b) to the policy holder’s close
relatives resident in India
(c) by crediting
the amount to the policy holder’s account with an authorised dealer in India,
whether the account is designated as resident or ordinary non-resident and
whether the account is held singly or jointly with another member of the
family, provided actuarial reserves of the relative policies are held in India.
(ii) Death claims in
respect of rupee life policies issued to Indian nationals or persons of Indian
origin may be settled in favour of policy holder’s close relatives or their
assignees or nominees resident in India or in case they are resident outside
India, paid to them during their temporary visits to India or credited to the
ordinary non-resident rupee account maintained by the claimants with authorised
dealers in India, provided actuarial reserves of the relative policies are held
in India.
Note : Where the policies
were assigned to an overseas bank, credit of the maturity proceeds/surrender
values/death claims to the overseas assignee’s account with an authorised
dealer in India in rupees will require prior permission of Reserve Bank.
(iii) Credit of
maturity proceeds/surrender value to the Non-resident (External) Rupee
account/FCNR account of the policy holder will require Reserve Bank’s prior
approval. Approval will be granted provided all premiums have been paid by
debit to such accounts or by direct remittance from abroad through banking
channels in an approved manner and actuarial reserves of the relative policies
are held in India. Where only some of the premiums have been paid by debit to
Non-Resident (External) Rupee account or FCNR account or by remittance in
foreign currency from abroad, such credits will be permitted only in the
proportion which the amount of premiums so paid bears to the total premiums
paid. The balance amount will have to be disposed of in one of the manners laid
down in sub-paragraph (i) above.
Claims
in favour of other Non-residents
Payment of
maturity proceeds/surrender values/death claims in respect of rupee life
insurance policies issued to non-resident policy holders other than Indian
nationals or persons of Indian origin may be freely made in India in any of the
manners indicated in paragraph D.2(i) and (ii) provided actuarial
reserves of the relative polices are held in India.
Notes :
A. Where the policies were assigned to
an overseas bank, credit of the maturity proceeds/surrender values/death claims
to the overseas assignee’s account with an authorised dealer in India in rupees
will require prior permission of Reserve Bank.
B. Cases of Chinese and Pakistani
policy holders should be referred to Reserve Bank even if Exchange Control
regulations have been complied with.
Claims
in favour of Residents
(i) Maturity
proceeds/surrender values in respect of rupee policies on lives of persons who
have returned to India for permanent residence may be freely settled locally in
rupees provided actuarial reserves of the relative policies are held in India
and the premiums were collected in conformity with the provisions in this
Memorandum during the period the policy holders were non-resident. There are no
restrictions on settlement of death claims in respect of rupee life insurance
policies to claimants resident in India.
(ii) Maturity
proceeds/surrender values in respect of policies (foreign currency or rupee
policies) held by persons of Indian nationality or origin while resident abroad
and who have since returned to India after having been non-residents for a
minimum continuous stay of one year abroad [See paragraph A.1(iii)]
may be settled in foreign currency provided all the premiums have been paid in
foreign currency. Where only some of the premiums have been paid in foreign
currency, payment of maturity proceeds/surrender values in foreign currency
will require prior approval of Reserve Bank.
Note : Cases of Chinese and Pakistani policy holders
should be referred to Reserve Bank.
Claims
in favour of Foreign Nationals
Maturity
proceeds or surrender value in respect of rupee policies issued to foreign
nationals not permanently resident in India may be paid in rupees to such
persons. If at the time the claim falls due for payment, the claimant has left
India for good, the claim should be settled by credit to the ordinary
non-resident rupee account maintained by claimant with an authorised dealer in
India. Remittance of the dues to the claimant abroad will require approval of
Reserve Bank for which application should be made by claimant through concerned
authorised dealer furnishing full particulars of remittance facilities availed
of at the time of retirement and thereafter.
Settlement
of Claims out of LIC’s Funds abroad
Payment of
maturity proceeds, surrender values or death claims in respect of policies
issued in rupees or foreign currency to policy holders resident outside India
and held in the Indian register may be made from foreign currency accounts
maintained by LIC in the respective countries only if the following conditions
are satisfied—
(a) the
assured/claimant is a permanent resident of the country in which payment is to
be made, and
(b) all premiums
have been collected in foreign currency or paid by direct remittance from
abroad through normal banking channels in an approved manner or paid from
policy holder’s Non-resident (External) Rupee or FCNR account with an
authorised dealer in India.
Cases where
these conditions are not satisfied should be referred to Reserve Bank.
Notes :
A Payment of claims in terms of this
paragraph may also be made in respect of policies originally held in Indian
register, if the transfer of policy records to the foreign register has been
approved by Reserve Bank.
B. This paragraph does not apply to
payment of loans on rupee life insurance policies. Such payments will require
prior approval of Reserve Bank.
Settlement
of Claims on Foreign Register Policies
Payment of
maturity proceeds, surrender values or death claims in respect of foreign
currency/rupee policies issued by overseas offices of LIC and held in foreign
register may be made from funds held abroad by the respective offices provided
the assured/claimant is permanently resident in the foreign country and all
premiums were collected by the overseas offices of LIC in foreign currency.
Settlement
of Claims by Remittance from India
LIC should apply
to Reserve Bank through their bankers for obtaining prior approval for
remittance abroad of maturity proceeds, surrender values and death claims under
rupee life policies standing in Indian register to beneficiaries residing
outside India. Application should be made on Form A2 together with Form LIM 1
duly completed.
Settlement
of Claims on Rupee Policies issued to Non-resident Indians under Married
Women’s Property Act
In case of rupee
policies issued on lives of non-resident Indian nationals under the Married
Women’s Property Act, the beneficiaries will be the wife of policy holder or
his children or both. The policy holders may, however, appoint a bank in India
or a relative as special trustee to receive claims when due under such policies
and distribute them to the beneficiaries. Claims in such cases may be settled
by LIC in either of the following manners without reference to Reserve Bank
provided actuarial reserves against the policies are held in India :
(a) Payment to an
authorised dealer in foreign exchange in India whether any or all of the
beneficiaries are resident in India or not.
(b) Payment to a
bank other than an authorised dealer in foreign exchange in India or any resident
relative appointed as special trustee, provided all the beneficiaries under the
policy are persons resident in India.
All other cases
will require prior approval of Reserve Bank. Applications made to Reserve Bank
should contain full details regarding beneficiaries and exact manner in which
their shares will be disposed of by the special trustee.
Payment
of Claims to Non-residents by credit to their Rupee Accounts in India
Authorised
dealers have been granted general permission to allow credits of all legitimate
dues to the accounts of non-residents maintaining ordinary non-resident rupee
accounts with them. Maturity proceeds/surrender values/death claims/payment of
loans/annuity instalments etc. under rupee life insurance policies due to
non-resident policy holders/claimants etc., may, therefore, be credited to
their ordinary non-resident rupee accounts with authorised dealers in India.
Payment
of Loans, Annuity Instalments etc.
The rules
governing settlement of maturity proceeds/surrender values/death claims to
different categories of policy holders will also be applicable to payments to
such policy holders of loans, annuity instalments and all other types of claims
under insurance policies including discounted value of claims.
Part
E - Supplemental provisions
Export
of policies
(i) Life insurance
policies are regarded as securities in terms of section 9(5) of Foreign
Exchange Regulation Act, 1973, for purposes of section 9 and section 19 ibid.
Export of life insurance policies requires therefore special permission of
Reserve Bank, vide section 19(1)(a) of the Act. Applications for
issue of export licences should be made to Reserve Bank giving full particulars
of the policy, person to whom the policy is to be sent and reasons therefor.
Export of policies by LIC has, however, been permitted in the following cases
without specific licence from Reserve Bank :
(a) Export of life
insurance policies to policy holders resident outside India provided policy
holders are permanent residents of the countries to which the policies are
exported except where policyholders have taken up permanent residence outside
India subsequent to the issue of the policies.
(b) Re-export of
policies received for endorsement etc. to the foreign countries from where they
were sent.
(c) Export of policies on Indian
register for execution of nomination/assignment.
(ii) The export of
life insurance policies, either against licence issued by Reserve Bank or under
the general permission granted to LIC, should not be construed as commitment on
the part of Reserve Bank for settlement of claims eventually falling due under
the policies in foreign exchange abroad, which shall be governed by rules laid
down in Part D of this Memorandum.
Transfer
of Policy Records outside India
Records of rupee
life insurance policies cannot be transferred by LIC from an office in India to
an office outside India without prior approval of Reserve Bank as the transfer
of records will normally involve transfer of the actuarial reserves held
against the policies from India and such transfer is treated as a remittance of
capital from India. Such transfers are likely to be authorised only if transfer
of actuarial reserves is not involved or Reserve Bank will be prepared to
permit a capital transfer on the basis of the eligibility of the concerned
policy holders for such remittances from India.
Transfer
of Policy Records to India
In the following
cases, LIC may freely transfer policy records of life insurance policies issued
by their offices abroad :
(a) Transfer from
a foreign register to Indian register, of records relating to foreign currency
as well as rupee policies issued by LIC’s overseas offices to non-resident
Indian nationals and persons of Indian origin on the policy holders returning
to India for permanent residence, provided the policies have been converted
into rupee policies in the case of foreign currency policies and actuarial
reserves, if held abroad, have also been transferred to India.
(b) Transfer from
a foreign register to Indian register, of records relating to foreign currency
as well as rupee policies issued to Indian nationals or persons of Indian
origin resident abroad, provided (1) all the premiums have been paid in foreign
currency abroad and (2) actuarial reserves, if held abroad, have been
repatriated to India. (Payment of further premiums and settlement of eventual
claims under such policies will be governed by the rules laid down in Parts B
and D of this Memorandum.)
Cases which are not covered by these provisions will require prior approval
of Reserve Bank.
Transfer
of Policy Records from one Foreign Country to another
Transfer of
records relating to foreign currency as well as rupee policies, along with
actuarial reserves, from a register in one country to a register in another
country may be made freely. If, however, actuarial reserves are to be
transferred from India, prior approval of Reserve Bank should be obtained.
Assignment
of Rupee Policies in favour of Non-residents
Prior approval
of Reserve Bank should be taken for assignment of rupee life insurance policies
held in Indian register by a resident of India in favour of any person resident
outside India or by a non-resident in favour of another non-resident in a
different country, except where the assignment is without consideration in
favour of the policy holder’s non-resident wife or other dependent relative.
Note : Rupee life insurance policies may be freely
assigned by non-residents in favour of banks or LIC in India for obtaining
loans provided the loan amount is disbursed in rupees in India to the policy
holder or his close relatives or by credit to the policy holder’s ordinary
non-resident rupee account with an authorised dealer in India.
Maintenance
of Records
LIC should
maintain proper records of foreign currency and rupee policies issued to
non-residents and foreign nationals not permanently resident in India to
facilitate quick disposal, in case any matter connected with the policies
requires reference to Reserve Bank. Nationality, country of permanent
residence, currency and exact manner of payment of premiums over the years [e.g.
whether made by direct remittance from outside India in any convertible foreign
currency or by debit to policy holder’s Non-resident (External) Rupee account
or FCNR account or Ordinary Non-resident Rupee account, etc. as evidenced by
bank certificates], details of loans if any granted, loan recoveries and the
manner in which loans/loan recoveries were paid/received etc., should be
recorded. Where LIC is in doubt in regard to source of funds at the time of
receiving premium payments, they should take up the matter promptly with
concerned authorised dealer to ascertain exact source of funds.
Commission
to Overseas Agents
(i) LIC may pay
commission to their agents who are permanently resident outside India out of
their foreign currency accounts in the respective countries, regardless of the
fact that part of the business booked by them may be on the lives of persons
resident in India and relative premiums are paid in rupees in India.
Remittances of commission from India to such agents abroad will, however,
require approval of Reserve Bank for which applications should be made through
an authorised dealer.
(ii) If the agent is
temporarily resident abroad, payment of commission can be made only in rupees
locally to him or to his close relatives in India or by credit to his bank
account in India (including a joint account with a person resident in India).
Commission may also be settled in like manner locally in rupees in cases where
the agents are Indian nationals or persons of Indian origin permanently
resident abroad, if they which to have their commission dues settled in rupees
in India.
Part
F - Foreign Currency Accounts, Investment of Surplus Funds Abroad and Overseas
Offices
Foreign
Currency Accounts
The opening of
accounts by LIC with overseas banks requires prior approval of Reserve Bank.
Such permission will be granted on application by LIC, provided the accounts
are required to be opened for facilitating collection of premiums, settlement
of claims and making of statutory investments, etc.
Payment
of Claims and Replenishment of Funds
Premiums
collected abroad in respect of rupee policies should be repatriated to India
and cannot be retained abroad. Claims on such policies may be settled from foreign
currency balances of LIC, provided payment of claims abroad is permitted by the
regulations laid down in Part D of this Memorandum or has been specifically
approved by Reserve Bank. Replenishment of funds in the foreign currency
accounts will require approval of Reserve Bank for which application should be
made through an authorised dealer giving details of balances held in the
country concerned and explaining the circumstances in which the need for
replenishment has arisen.
Investment
of Surplus Funds
(i) LIC may freely
invest its surplus funds in foreign countries, arising out of premium income on
foreign currency policies issued by its overseas offices, in local Government
securities, securities of local bodies or in shares/debentures of companies, irrespective
of whether or not such investment is required to be made in terms of statutory
obligations existing in the foreign country for retention of funds as premium
reserves etc. LIC may also switch its investments from time to time according
to its business needs in the foreign country. LIC should, however, furnish
half-yearly statements (in duplicate) giving summary of all purchases, sales
and redemption of foreign currency shares, securities and other investments
during the period. On receipt of the statements, Reserve Bank will issue
licence authorising LIC to hold foreign securities under section 19(1)(e)
of Foreign Exchange Regulation Act, 1973.
(ii) Investment of
surplus funds in any other form and lending of funds to local institutions or
bodies or Indian joint ventures or Indian Missions abroad will require prior
approval of Reserve Bank.
Use
of Foreign Currency Funds.
Expenses of Overseas Offices etc.
(i) LIC may freely
use its foreign currency balances for meeting all the normal expenses of its
overseas offices inclusive of taxes and other dues in connection with
maintenance and upkeep of buildings and properties held by LIC in foreign
countries as well as purchase of cars for official use.
Payment of Retirement Benefits
(ii) LIC’s overseas
funds may also be used for settlement of provident fund, gratuity and other
retirement benefits to retiring employees of overseas offices. If, however, the
retiring employees are Indian nationals who had been deputed or posted from
India, settlement of such dues should be made only in India and if any part of
such balances is held by LIC in the foreign country, equivalent amount should
be repatriated to India from overseas funds.
Grant of Loans
(iii) Loans may also
be granted by LIC, without prior permission of Reserve Bank, to employees of
its overseas offices (other than Indian nationals who had been deputed or
posted from India) against provident fund balances held in the country
concerned provided loan recoveries will be made locally in foreign currency.
Part G - Submission of Statements to
Reserve Bank1
The Head
Office/Divisional Offices of LIC may submit the following statement to the
office of Reserve Bank, under which they function :—
LIM - 2: Half
yearly statement, giving summary of purchases/sales/redemptions of foreign
currency shares/securities and other investments. This statement is to be
submitted before the end of the month following the period to which the
statement relates.
Note
: LIM-1 is an application form for
receiving premium/settlement of claims in foreign currency, on a case to case
basis.
[K1]AD (MA Series) Circular No. 11, dated 16-5-2000
[K2]See AP (DIR Series) (2001-2002) Circular No. 19, dated 24-1-2002
[K3]See para 5(ii)(A) of Annex II of AD (MA Series) Circular No. 11, dated 16-5-2000.
[K4]See para 5A(ii)(B), ibid.
[K5]Inserted by A.D. (M.A. Series) Circular No. 33, dated 5-9-1998
[K6]“The Commercial Bank of Korea Ltd.” and “Hanil Bank” omitted,
respectively, by A.D. (M.A. Series) Circular No. 11, dated 7-4-1999.
[K7]“The Commercial Bank of Korea Ltd.” and “Hanil Bank” omitted,
respectively, by A.D. (M.A. Series) Circular No. 11, dated 7-4-1999.
[K8]Inserted by AD (MA Series) Circular No. 45, dated 26-11-1998.
[K9]Inserted by AD (MA Series) Circular No. 45, dated 26-11-1998.
[K10]“Times Bank Ltd.” omitted by A.D. (M.A. Series) Circular No. 2, dated 14-3-2000.
[K11]Substituted for “European Currency Unit (ECU) of the European Monetary System (EMS)” by A.D. (M.A. Series) Circular No. 50, dated 29-12-1998.
[K12]Substituted for “ECU” by A.D. (M.A. Series) Circular No. 50, dated 29-12-1998.
[K13]This was allowed up to 31st December, 1995.
[K14]See also A.D. (M.A. Series) Circular No. 42, dated 31-10-1998.
[K15]Inserted by A.D. (M.A. Series) Circular No. 26, dated 30-8-1999.
[K16]Inserted by A.D. (M.A. Series) Circular No. 26, dated 30-8-1999.
[K17]See A.D. (M.A. Series) Circular No. 40, dated 17-10-1998.
[K18]Annexure renumbered as Annexure I by the A.D. (M.A. Series) Circular No. 34, dated 28-9-1998.
[K19]Revised by A.D. (M.A. Series) Circular No. 40, dated 17-10-1998.
[K20]Substituted by A.D. (M.A. Series) Circular No. 5, dated 25-2-1999.
[K21]See AP (DIR Series) (2000-2001) Circular No. 23, dated 30-12-2000 and AP (DIR Series) (2002-2003) Circular No. 76, dated 3-2-2003.
[K22]Omitted by A.D. (M.A. Series) Circular No. 24, dated 6-8-1998.
[K23]Substituted by A.D. (M.A. Series) Circular No. 40, dated 17-10-1998
[K24]Chapter 5 of ECM is now superseded by AP (DIR Series) (2001-2002) Circular No. 19, dated 24-1-2002.
[K25]Chapter 5 of ECM is now superseded by AP (DIR Series) (2001-2002) Circular No. 19, dated 24-1-2002.
[K26]Chapter 5 of ECM is now superseded by AP (DIR Series) (2001-2002) Circular No. 19, dated 24-1-2002.
[K27]Chapter 5 of ECM is now superseded by AP (DIR Series) (2001-2002) Circular No. 19, dated 24-1-2002.
[K28]Chapter 5 of ECM is now superseded by AP (DIR Series) (2001-2002) Circular No. 19, dated 24-1-2002.
[K29]Chapter 5 of ECM is now superseded by AP (DIR Series) (2001-2002) Circular No. 19, dated 24-1-2002.
[K30]Chapter of ECM is now superseded by AP (DIR Series) (2000-2001) Circular No. 12, dated 9-9-2000.
[K31]Chapter of ECM is now superseded by AP (DIR Series) (2000-2001) Circular No. 12, dated 9-9-2000.
[K32]Chapter 7 is now superseded by AP (DIR Series) (2000-2001) Circular No. 9, dated 24-8-2000.
[K33]No more relevant.
[K34]No more relevant.
[K35]No more relevant.
[K36]No more relevant.
[K37]No more relevant.
[K38]No more relevant.
[K39]No more relevant.
[K40]No more relevant.
[K41]No more relevant.
[K42]No more relevant.
[K43]See AP (DIR Series) (2002-2003) Circular No. 76, dated 3-2-2003.
[K44]See AP (DIR Series) (2002-2003) Circular No. 14, dated 9-9-2002.
[K45]See AP (DIR Series) (2002-2003) Circular No. 14, dated 9-9-2002.
[K46]See AP (DIR Series) (2000-2001) Circular No. 23, dated 30-12-2000.
[K47]As amended till
December, 2003.
See
AP (DIR
Series) (2003-2004) Circular No. 32, dated 28-10-2003.
[K48]See AP (DIR Series) (2000-2001) Circular No. 25, dated 17-2-2001 and AP (DIR Series) (2001-2002) Circular No. 10, dated 1-11-2001.
[K49]Inserted by AD (M.A. Series) Circular No. 1, dated 31-1-1995.
[K50]This is valid for one year from 26-10-1994 and is subject to review thereafter.
[K51]Substituted by AD (M.A. Series) Circular No. 1, dated 31-1-1995.
[K52]See AP (DIR Series) (2000-2001) Circular No. 25, dated 17-2-2001.
[K53]As amended by the Board of Directors during various meetings upto September 1995.
[K54]. Substituted for the following sub-rules (b) and (c)
by AD (M.A. Series) Circular No. 10, dated 6-7-1996 :
“(b) When
a Commercial Bank desires to fund its ACU dollar account with its correspondent
bank in another participating country, it will surrender equivalent amount of
US dollars or, at the option of the central
bank, the equivalent in the local
currency to its own central bank for remittance through the ACU
mechanism. The participant receiving the amount will advise the participant in
the country concerned to make available the amount in U.S. dollars to the
concerned bank in that country. After making the payment, the second
participant will advise the General Manager of the ACU to credit its account by
debit to the first participant’s account.
(c) When a Commercial Bank desires to repatriate funds from its ACU dollar account with its correspondent bank in another participating country, it will request that bank to effect the remittance through the ACU mechanism. The correspondent bank will surrender equivalent amount of U.S. dollars to its own central bank for remittance. The participant receiving the amount will advise the participant in the country concerned to make available the equivalent amount to the concerned bank in that country. The central bank may, at its option, make the payment in U.S. dollar or in local currency. After making the payment the second participant will advise the General Manager of the ACU to credit its account by debit to the first participant’s account.”
[K55]Vide AP (DIR Series) (2002-2003) Circular No. 18, dated 12-9-2002.
[K56]See also AP (DIR Series)
(2001-2002) Circular No. 8, dated 13-10-2001.
See
also
new GIM outlined vide AP (DIR Series) (2002-2003) Circular No. 18, dated
12-9-2002.
[K57]See AP (DIR Series) (2001-2002) Circular No. 36, dated 2-4-2002.
[K58]See AP (DIR Series) (2001-2002) Circular No. 8, dated 13-10-2001.
[K59]Inserted by AD (M.A. Series) Circular No. 3, dated 12-2-1996.
[K60]Inserted by AD (M.A. Series) Circular No. 3, dated 12-2-1996.
[K61]Substituted by AD (M.A. Series) Circular No. 24, dated 21-12-1996.
[K62]Vide A.P. (DIR Series) (2002-2003) Circular No. 72, dated 17-1-2003.
[K63]See also new LIM outlined vide AP (DIR Series) (2002-2003) Circular No. 72, dated 17-1-2003.
[K64]. Substituted by AD (MA Series) Circular No. 31, dated 23-10-1999.