RBI relaxes Forex Facilities for Individuals

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Sept. 26 – The Reserve Bank of India has further liberalized foreign exchange services for individuals under the Foreign Exchange Management Act (FEMA) 1999. The services are as follows:

NRIs can be joint holders in resident’s SB/EEFC/RFC accounts
Individual residents in India are now allowed to comprise non-resident close relative(s) as joint holder(s) in their resident bank accounts, namely: savings (SB), exporter earners’ foreign currency (EEFC) and residents’ foreign currency (RFC) accounts, on a “former or survivor” basis.

Residents can be joint holders in NRE/FCNR accounts
Non-resident Indians (NRIs)/persons of Indian origin (PIO), are now allowed to open non-resident (external) (NRE) rupee account scheme/foreign currency (non-resident) (FCNR) account (banks) scheme with their resident close relative(s) as joint holder(s) on a “former or survivor” basis. Nevertheless, such resident joint account holder shall be entitled to function the account as a power of attorney holder in agreement with extant instructions during the lifetime of the NRI/PIO account holder.

Residents can gift shares/debentures up to US$50,000 value
The Reserve Bank of India has approved general consent 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 agreed 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.

Resident Indian can open NRE/FCNR (B) account with their resident close relative
Resident individuals are allowed to comprise resident close relative(s) as defined in the Companies Act, 1956 as a joint holder(s) in their EEFC/RFC bank accounts on a “former or survivor” basis. Nevertheless, such resident Indian close relative, now qualified to become joint account holder, shall not be eligible to operate the account during the life time of the resident account holder.

Sale proceeds of FDIs can be credited to NRE/FCNR (B) account
Sale proceeds of foreign direct investment (FDI) can be accredited to NRE account scheme/foreign currency (non-resident) account FCNR (banks) scheme provided the original acquisition was by way of inward remittance or funds held in their NRE/FCNR (B) accounts.

Gifts to NRIs can be credited to NRO accounts in rupees
Resident individuals are now allowed to make rupee gifts within the overall limit of US$200,000 per financial year as allowed under the liberalized remittance scheme (LRS) to an NRI/PIO who is a close relative by way of crossed cheque/electronic transfer to the non-resident (ordinary) rupee account (NRO) of the NRI/PIO.

Loans to NRI close relatives can be given in rupees
Likewise, resident individuals are now allowed to lend in rupees within the overall limit under the liberalized remittance scheme (LRS) of US$200,000 per financial year to a NRI/PIO close relative by way of crossed cheque/electronic transfer, subject to the following conditions:

  1. The loan should be within the overall limit of US$200,000 per financial year as per the LRS
  2. The amount should be credited to the NRO account.
  3. The loan amount shall not be remitted outside India
  4. The loan shall not be utilized for the following purposes:
  • Chit fund business
  • Nidhi company
  • Agricultural/plantation/real estate business/construction of farm houses
  • Trading in transferable development rights (TDRs)

Residents can repay the loans given to NRI close relatives
Resident individuals are now arranged general permission to repay loans availed of in rupees from banks in India by their NRI close relatives. Previously, repayment of loans by close relative in respect of rupee loan availed by NRIs was restricted only to housing loans.

Residents can bear medical expenses of NRIs
Residents will now be allowed to bear the medical expenses of visiting NRIs/PIOs close relatives. Earlier, residents were allowed to make payment in rupees towards meeting expenses on account of boarding, lodging and services related to it or travel to and from and within India of a person resident outside India and who is on a visit to India.

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