PART E - RESIDENT FOREIGN CURRENCY (RFC) ACCOUNTS

General

14E.1

A scheme known as 'Resident Foreign Currency Accounts (RFC accounts) Scheme' has been

drawn up by Reserve Bank in pursuance of Government of India Notification No. F.10/22/90/NRI Cell dated 17th July 1992 and Reserve Bank Notifications Nos. FERA.116, 117 and 118 /92-RB dated 7th September 1992 to enable eligible returning Indians to open and maintain foreign currency accounts with authorised dealers in India. The Scheme has been reproduced in Annexure II. Reserve Bank has also granted exemption from the prohibition imposed under Section 24 of FERA 1973 in respect of gift of foreign exchange held in India/abroad or of any property held abroad in certain cases referred to in its Notification No. FERA 165/95-RB dated 28th April 1995.

Opening of RFC Accounts

14E.2

(i)

Under the scheme, persons of Indian nationality or origin, who, having been resident

outside India for a continuous period of not less than one year, have become persons resident in India on or after 18th April 1992 are eligible to open and maintain the accounts with authorised dealers in India in any freely convertible foreign currency. Authorised dealers may, on receipt of an application in form RFC, open RFC accounts in the names of eligible persons. Persons who return to India after a short assignment of less than one year abroad desiring to have RFC accounts should apply through authorised dealers to Reserve Bank in form RFC. RFC accounts opened with the specific approval of Reserve Bank will be governed by the conditions stipulated by Reserve Bank while granting such approval.

NOTE:

For arriving at the period of continuous stay abroad of not less than one year, short visits to India on personal grounds like meeting family members/relatives or on health grounds which do not indicate the person's intention to stay in India for an indefinite period may be ignored.

(ii)

RFC accounts may be maintained in the form of current, savings (without cheque

facility) or term deposit accounts and held singly or jointly only in the names of eligible persons.

NOTES:

A.

Persons who returned to India prior to 18th April 1992 after having been resident outside India for a continuous period of not less than one year are also eligible to open RFC accounts if (a) they are holding valid specific permission/licence from Reserve Bank as on 17th July 1992 to maintain foreign accounts or to hold other foreign currency assets abroad or (b) they are in receipt of pension or other monetary benefits from their overseas employers subsequent to their return to India even if they did not maintain foreign currency accounts or hold other foreign currency assets abroad.

B.

Persons holding RIFEE permits or Reconversion facility have been given option to continue those facilities or avail of RFC account facility (cf. paragraph 12.13). These options can be exercised at one stroke or in part amounts during the validity period of RIFEE permit or Reconversion facility. Accordingly, holders of RIFEE permit or Reconversion facility are also eligible to open RFC accounts.

Explanation: For the purpose of this Scheme -

A person (not being a citizen of Pakistan or Bangladesh) shall be deemed to be of Indian origin, if,

i)

he at any time held an Indian passport,

or

ii)

he or either of his parents or any of his grand parents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955),

or

iii)

that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh).

Eligible Assets

14E.3

Assets acquired or held otherwise than in contravention of the Act by an eligible person,

while he was resident outside India(non-resident), in the form of deposits in banks outside India, investments in foreign currency shares or securities or immovable properties situated outside India or investments in business etc. outside India and include foreign exchange earnings through employment, business or vocation outside India taken up or commenced by such person while he was resident outside India.

Credits

14E.4

Undernoted credit transactions may be allowed in RFC Accounts by authorised dealers.

(a)

Remittance in convertible foreign currency from outside India through normal banking channels representing

i)

Funds in bank accounts outside India forming part of eligible assets held by the eligible person.

ii)

Income such as dividend, interest, profit, rent, etc. earned on eligible assets held by the eligible person.

iii)

Sale proceeds of eligible assets.

(b)

Pension or other monetary benefits received from outside India in convertible foreign currency, through normal banking channels, arising out of employment taken up outside India by the eligible person prior to his returning to India.

(c)

Interest earned on RFC account.

(d)

Foreign currency notes/travellers cheques brought into India by the eligible person, provided that where the amount tendered exceeds US$ 10,000 or its equivalent or where the value of foreign currency/bank notes exceeds US$ 2500 or its equivalent they have been declared on the Currency Declaration Form (CDF) (cf. papragraph 7D.5).

(e)

Transfers from other RFC accounts of the account holder.

(f)

Balances in any NRE/FCNR Account (other than in NRE rupee accounts of persons resident in the erstwhile Bilateral Group countries which have been funded in non-convertible rupees) in the name of the eligible person standing to his credit at the time of his arrival in India. No penalty would be payable for premature withdrawal of NRE/FCNR deposits in such cases.

(g)

Unutilised entitlement under any valid RIFEE permit or Reconversion facility granted by Reserve Bank (See paragraph 12.13).

(h)

Unspent foreign exchange surrendered by the RFC accountholders provided authorised dealer is satisfied that the concerned foreign exchange/currency had in fact been released for travel etc. abroad by debit to the same RFC accounts and the amount of foreign exchange/currency is surrendered within the stipulated period as required under the Exchange Control regulations.

Debits

14E.5

(i)

The funds in the RFC account may be allowed to be freely utilised by the account

holder for any bona fide remittance outside India through normal banking channels including for investments abroad provided the cost of such investments and/or any subsequent payments required therefor are met out of RFC account.

(ii)

Withdrawals/payments from such accounts, other than for remittances outside India, or

for payments in foreign currency authorised to be made in India by Reserve Bank, shall be permitted by the authorised dealer only in equivalent Indian rupees.

Rate of Interest

14E.6

Rate of interest payable on the funds held in RFC accounts may be decided by authorised

dealers on the basis of market rates. No interest shall be payable on balances held in the form of current accounts.

Nomination Facility

14E.7

(i)

RFC accounts shall have the nomination facility as in the case of resident rupee

accounts.

(ii)

On the death of a RFC account holder, the balance in the account may be repatriated to

nominees to the extent of his/their entitlement, if on the date of death of the account holder such nominees are resident outside India. To the extent any nominee is a person resident in India on the date of the death of account holder, the amount may be paid to him in equivalent Indian rupees.

Reserve Requirements

14E.8

Funds held in RFC accounts are exempt from CRR/SLR requirements.

Loans/Overdrafts against the Deposits

14E.9

No loan/overdraft shall be granted by authorised dealers against balances in RFC accounts.

Transfer of Balances on becoming Non-resident

14E.10

Funds held in RFC account may be freely remitted abroad or credited to fresh NRE/FCNR

accounts in the event of the account holder becoming non-resident by virtue of his going abroad for employment, etc. A monthly statement in form STAT 10 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 400 001 so as to reach him by 10th of the month following the month to which it relates.