RBI/2004-05/397
Master Circular No.9/2004-05
March 19, 2005
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
Master Circular – Non-Resident Ordinary
Rupee (NRO) Account
As you are aware, acceptance of
deposits by an authorised dealer/authorised bank from persons resident outside
India are regulated in terms of sub-sections (1) and (2) of section 6 of the
Foreign Exchange Management Act, 1999 read with FEMA
Notification No.5/2000 RB dated May 3, 2000 as amended from time to time.
2. This Master Circular consolidates
the existing instructions on the subject of "Non-Resident Ordinary Rupee
(NRO) Account" at one place. The list of underlying circulars/notifications
is set out in the annex.
3. As recommended by the Committee
on Procedures and Performance Audit on Public Services (CPPAPS) (Chairman: Shri
S. S. Tarapore) set up by the Reserve Bank, this Master Circular is being issued
with a sunset clause and as such will stand withdrawn on July 1, 2005 and be
replaced by an updated Master Circular on the subject.
Yours faithfully,
F. R. Joseph
Chief General Manager
Annex
List of circulars, which
have been consolidated in this Master Circular on NRO account
|
Sr.No.
|
AP(DIR Series) Circular
No.
|
Dated
|
|
1.
|
AP (DIR Series) Circular No.45
|
May 14, 2002
|
|
2.
|
AP (DIR Series) Circular No.1
|
July 2, 2002
|
|
3.
|
AP (DIR Series) Circular No.5
|
July 15, 2002
|
|
4.
|
AP (DIR Series) Circular No.19
|
September 12, 2002
|
|
5.
|
AP (DIR Series) Circular No.26
|
September 28, 2002
|
|
6.
|
AP (DIR Series) Circular No.27
|
September 28, 2002
|
|
7.
|
AP (DIR Series) Circular No.56
|
November 26, 2002
|
|
8.
|
AP (DIR Series) Circular No.59
|
December 9, 2002
|
|
9.
|
AP (DIR Series) Circular No.67
|
January 13, 2003
|
|
10.
|
AP (DIR Series) Circular No.43
|
December 8, 2003
|
|
11.
|
AP (DIR Series) Circular No.45
|
December 8, 2003
|
|
12.
|
AP (DIR Series) Circular No.62
|
January 31, 2004
|
Notifications issued
|
Sr.No.
|
Notification No.
|
Dated
|
|
1.
|
Notification No. FEMA 62/2002-RB
|
May 13, 2002
|
|
2.
|
Notification No.FEMA 97/2003-RB
|
July 8, 2003
|
INDEX
Master Circular on NRO Account
Master Circular - Non-Resident
Ordinary Rupee (NRO) Account Scheme
1. Eligibility
a. Any person/entity resident
outside India may open NRO account with an authorised dealer or an authorised
bank for the purpose of putting through bonafide transactions denominated
in Rupees.
b. Opening of accounts by
individuals/entities of Bangladesh/Pakistan nationality/ownership requires
prior approval of Reserve Bank.
2. Types of Accounts
NRO accounts may be opened/maintained
in the form of current, savings, recurring or fixed deposit accounts. Rate of
interest applicable to these accounts and guidelines for opening, operating
and maintenance of such accounts shall be in accordance with directives/instructions
issued by Reserve Bank (DBOD) from time to time.
3. Joint Accounts with Residents/Non-residents
The accounts may be held jointly
with residents and/or with non-residents.
4. Permissible Credits/Debits
A. Credits
i. Proceeds of remittances
from outside India through normal banking channels received in foreign currency
which is freely convertible
ii. Any foreign currency
which is freely convertible tendered by the account-holder during his temporary
visit to India. Foreign currency exceeding USD 5000/- or its equivalent in
form of cash should be supported by Currency Declaration Form. Rupee funds
should be supported by Encashment Certificate, if they represent funds brought
from outside India.
iii. Transfers from rupee
accounts of non-resident banks.
iv. Legitimate dues in India
of the account holder. This includes current income like rent, dividend, pension,
interest etc. as also sale proceeds of assets including immovable property
acquired out of rupee/foreign currency funds or by way of legacy/inheritance.
B. Debits
i. All local payments in
rupees including payments for investments in India subject to compliance with
the relevant regulations made by the Reserve Bank.
ii. Remittance outside India
of current income like rent, dividend, pension, interest etc. in India of
the account holder.
iii. Remittance of an amount
of balances in NRO account of NRI/PIO up to USD One million, per calendar
year, for all bonafide purposes to the satisfaction of the authorised dealer.
5. Remittance of assets
5.1 Remittance of assets by NRI/PIO
NRIs/PIO may remit through an Authorised
Dealer, an amount not exceeding USD One million per calendar year, out of balances
held in the NRO account representing the sale proceeds of assets (a) acquired
in India out of rupee/foreign currency funds or (b) by way of inheritance legacy
from a person who was resident in India subject to conditions outlined below:
(a) Assets acquired in India out
rupee/foreign currency funds
(i) Immovable property
NRI/PIO may remit sale proceeds
of immovable property purchased by him as a resident or out of Rupee funds as
NRI/PIO provided such a property was held by him for a period of not less than
ten years. If such a property is sold after being held of less than ten years,
remittance can be made, if the sale proceeds were held for the balance period
in NRO account (Savings/Term Deposit) or in any other eligible investment to
the satisfaction of the authorised dealer.
(ii) Other financial assets
For remittance of sale proceeds
of financial assets there is no lock-in-period.
(b) Assets acquired by way of inheritance/legacy
For remittance of sale proceeds
of assets, both financial and immovable property acquired by way of inheritance/legacy
from a person who was resident in India there is no lock-in-period. NRI/PIO
may submit to the satisfaction of Authorised Dealer documentary evidence in
support of inheritance/legacy.
5.2 Remittance of assets out of
NRO account by a person resident outside India other than NRI/PIO
A citizen of a foreign state not
being a citizen of Pakistan, Bangladesh, Nepal or Bhutan who
(i) has retired from an
employment in India, or
(ii) has inherited assets
from a person who was resident in India, or
(iii) is a widow resident
outside India and has inherited assets of her deceased husband who was an
Indian citizen resident in India.
may remit an amount up to USD One
million, per calendar year on production of documentary evidence in support
of acquisition, inheritance or legacy of assets to the authorised dealer.
5.3 Restrictions
(a) The facility of remittance
of sale proceeds of immovable property to a citizen of Pakistan, Bangladesh,
Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan is not available.
(b) The facility of remittance
of sale proceeds of other financial assets is not available to a citizen of
Pakistan, Bangladesh, Nepal and Bhutan.
6. Foreign Nationals of non-Indian
origin on a visit to India
NRO account (current/savings) can
be opened by a foreign national of non-Indian origin visiting India,
with funds remitted from outside India through banking channel or by sale of
foreign exchange brought by him to India. The balance in the NRO account may
be converted by the authorized dealer into foreign currency for payment to the
account holder at the time of his departure from India provided the account
has been maintained for a period not exceeding six months and the account has
not been credited with any local funds, other than interest accrued thereon.
7. Grant of Loans/overdrafts by
authorised dealers/bank to account holders and third parties
(a) Loans to non-resident account
holders and to third parties may be granted in Rupees by authorised dealers
against the security of fixed deposits subject to the following terms and conditions:
(i) The loans shall be utilised
only for meeting borrower's personal requirements and/or business purpose
and not for carrying on agricultural/plantation activities or real
estate business or for relending.
(ii) Regulations relating
to margin and rate of interest as stipulated by Reserve Bank from time to
time shall be complied with.
(iii) The usual norms and
considerations as applicable in the case of advances to trade/industry shall
be applicable for such loans/facilities granted to third parties.
(b) Authorised dealer/bank may
permit overdraft in the account of the account holder subject to his commercial
judgement and compliance with the interest rate etc. directives.
8. Change of Resident Status of
Account holder
(a) From Resident to Non-resident
When a person resident in India
leaves India for a country (other than Nepal or Bhutan) for taking up employment
or for carrying on business or vocation outside India or for any other purpose
indicating his intention to stay outside India for an uncertain period, his
existing account should be designated as a Non-Resident (Ordinary) Account.
When a person resident in India
leaves for Nepal or Bhutan for taking up employment or for carrying on business
or vocation or for any other purposes indicating his intention to stay in Nepal
or Bhutan for an uncertain period, his existing account will continue as a resident
account. Such account should not be designated as Non-Resident (Ordinary)
Account (NRO).
(b) From Non-Resident to Resident
NRO accounts may be re-designated
as resident rupee accounts on the return of the account holder to India for
taking up employment, or for carrying on business or vocation or for any other
purpose indicating his intention to stay in India for an uncertain period. Where
the account holder is only on a temporary visit to India, the account should
continue to be treated as non-resident during such visit.
9. Treatment of loans/overdrafts
in the event of change in the resident status of the borrower
In case of person who had availed
of loan or overdraft facilities while resident in India and who subsequently
becomes a person resident outside India, the authorised dealer may at their
discretion and commercial judgement allow continuance of the loan/overdraft
facilities. In such cases, payment of interest and repayment of loan may be
made by inward remittance or out of legitimate resources in India of the person
concerned.
10. Payment of funds to Non-resident/Resident
Nominee
The amount due/payable to non-resident
nominee from the NRO account of a deceased account holder shall be credited
to NRO account of the nominee with an authorised dealer/authorised bank in India.
The amount payable to resident
nominee from the NRO account of a deceased account holder shall be credited
to resident account of the nominee with a bank in India.
11. Facilities to a person going
abroad for studies
Persons going abroad for studies
are treated as Non-Resident Indians (NRIs) and are eligible for all the facilities
available to NRIs. Educational and other loans availed of by them as residents
in India will continue to be available as per FEMA regulations.
12. International Credit Cards
Authorised dealers have been permitted
to issue International Credit Cards to NRIs/PIO, without prior approval of RBI.
Such transactions may be settled by inward remittance or out of balances held
in the cardholder's FCNR/NRE/NRO Accounts.
13. Income-Tax
The remittances (net of applicable
taxes) will be allowed to be made by the authorised dealers on production of
an undertaking by the remitter and a Certificate from a Chartered Accountant
in the formats prescribed by the Central Board of Direct Taxes, Ministry of
Finance, Government of India in their Circular No. 10/2002 dated October 9,
2002 [cf. our A.P. (DIR Series) Circular No. 56 dated November 26, 2002 ].