Updates from RBI
To grant additional privileges to NRIs/PIOS by virtue of flexibility in operation and simplifying transactions, the Reserve Bank of India has further liberalized its policies.
In this welcoming step, the RBI has simplified maintenance of various accounts, acquisition of securities and dealing in rupees and has further facilitated provisions relating to joint account holding, transfer of securities/ rupees by way of gift to NRIs/PIOS and other expenses borne on behalf of NRIs/PIOs
The brief of circulars is given below:
- NRIs/PIOs holding NRE/ FCNR (B) accounts jointly with Indian resident close relative – liberalization
The Reserve Bank of India vide A.P. (DIR Series) Circular No. 13 dated 15.09.2011 has permitted NRIs/ PIOs to open FCNR(B)/NRE accounts jointly with a resident close relative, as defined in Section 6 of the Companies Act, 1956. However, such resident joint account holder shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the lifetime of the NRI/ PIO account holder.
- Foreign Investments in India – Transfer of security by way of gift -Liberalization
The Reserve Bank of India vide A.P. (DIR Series) Circular No. 14 dated 15.09.2011 has granted general permission to individual residents in India to gift shares / securities /convertible debentures, etc. to their NRI/PIO close relative (relative as defined in Section 6 of the Companies Act, 1956) subject to certain prescribed conditions. It has raised the limit as given in Regulation 10(a)(e) of Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 to US $ 50,000 per financial year from the existing limit of US $ 25,000 during the calendar year .
- Exchange Earners Foreign Currency (EEFC) Account and Resident Foreign Currency (RFC) account – Joint holder – liberalization
The Reserve Bank of India vide A.P. (DIR Series) Circular No. 15 dated 15.09.2011 has permitted holding of RFC / EEFC accounts jointly with a resident close relative, as defined in Section 6 of the Companies Act, 1956. However, such joint account holder shall not be permitted to operate that account during the lifetime of the resident account holder.
- Credit of sale proceeds of Foreign Direct Investments in India to NRE/FCNR (B) accounts
The Reserve Bank of India vide A.P. (DIR Series) Circular No. 16 dated 15.09.2011 has permitted the sale proceeds of FDI Investments to be credited to NRE/ FCNR accounts as there is no provision in Regulation 11 of Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000.
- Gift in Rupees by Resident Individuals to NRI close relatives.
The Reserve Bank of India vide A.P. (DIR Series) Circular No. 17 dated September 16, 2011 has permitted the resident individual to make a rupee gift to a NRI/PIO who is a close relative of the resident individual by way of crossed cheque /electronic transfer within overall limit of USD 200,000 per financial year as per the Liberalized Remittance Scheme (LRS). The amount should be credited to the Non-Resident (Ordinary Rupee (NRO) Account of the NRI/PIO and credit of such gift amount may be treated as an eligible credit to NRO a/c.
- Loans in Rupees by resident individuals to NRI close relatives.
The Reserve Bank of India vide A.P. (DIR Series) Circular No. 18 dated 16.09.2011 has granted general permission to resident individuals to provide interest free rupee loans to their close relatives who are NRI/PIO with maximum maturity of one year for any personal purpose or business activities by way of crossed cheque /electronic transfer. This facility subject to the following conditions:
| 1. | The loan should be within the overall limit of USD 200,000 per financial year as per the Liberalized Remittance Scheme (LRS). | |
| 2. | The amount should be credited to the NRO Account. | |
| 3. | The loan shall not be utilized for the following purposes: | |
| (i) Chit fund business, or (ii) Nidhi Company, or (iii) Agricultural/ plantation/ real estate business/ construction of farm houses, or (iv) Trading in Transferable Development Rights (TDRs). |
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| 4. | The loan amount shall not be remitted outside India. | |
| 5. | Repayment of loan shall be made by way of inward remittances through normal banking channels or by debit to the NRO/ NRE/ FCNR account of the borrower or out of sale proceeds of the shares or securities or immovable properties against which such loan was granted. | |
- Repayment of loans by residents of Non-resident close relatives.
The Reserve Bank of India A.P. (DIR Series) Circular No. 19 dated 16.09.2011 has extended the general permission to resident Individuals to make the repayment of loans availed by the NRI/ PIO(s) from an authorized dealer by crediting the borrower’s loan account through the bank account of such relative. Prior to this notification, such facility was restricted only to the Housing Loans.
- Meeting of Medical expenses by Resident Individuals of NRIs close relatives.
The Reserve Bank of India vide A.P. (DIR Series) Circular No. 20 dated 16.09.2011 has, in addition to the meeting expenses on account of boarding, lodging and travelling expenses, permitted the resident Indians to bear the medical expenses of visiting close relatives who are NRIs/ PIOs.