Comprehensive Guide to Foreign Currency Accounts for Resident Individuals: What IBUs Need to Know

The Reserve Bank of India (RBI) has issued comprehensive guidelines for International Banking Units (IBUs) regarding the opening and management of Foreign Currency Accounts (FCA) for resident individuals (RIs) under the Liberalised Remittance Scheme (LRS). The circular, effective immediately, outlines directions to ensure regulatory compliance and facilitate seamless operations.

These guidelines are applicable to IBUs opening FCAs for RIs under the RBI Circular No. 15, dated July 10, 2024. IBUs can also permit FCAs for purposes outside LRS, subject to the Foreign Exchange Management (FEMA) Regulations, 2015 (as amended).

Definition of FCA:

FCAs refer specifically to accounts opened by RIs under the LRS with IBUs.

A. General Directions for IBUs

IBUs must adhere to the following directives to manage FCAs responsibly:

1. Permissible Remittances: FCAs can receive funds under LRS from onshore India. FCAs can also receive funds from other locations, provided certain conditions are met.
2. Timely Remittances: Ensure that funds are remitted to the FCA within a reasonable timeframe after opening.
3. Authorised Person (AP) Route: All remittances from India under LRS must be routed through an AP.
4. Compliance Proof: IBUs must collect proof of compliance, such as a copy of the return submitted by the RI to the AP, for any inward remittance from onshore India.
5. Overseas Fund Declarations: RIs must declare that overseas remittances are either funds sent earlier under LRS or income generated from such investments.
6. Unused Funds Repatriation: Unused foreign exchange in the FCA must be repatriated to the RI’s designated AD Bank within 180 days unless reinvested.
7. Domestic Transactions: FCAs cannot be used for settling domestic transactions between RIs.
8. AML/KYC Compliance: IBUs must ensure compliance with the Anti-Money Laundering (AML), Counter-Terrorist Financing, and Know Your Customer (KYC) Guidelines issued by IFSCA in 2022.

B.???? Utilisation of Funds in IFSCs

• Permissible Financial Services/Products: Funds in FCAs can be used for financial services and products within IFSCs, as defined in the International Financial Services Centres Authority Act, 2019.
• Fixed Deposits: Fixed Deposits can be offered to RIs for less than 180 days. Maturity proceeds must comply with the repatriation or reinvestment rules.
• Utilisation Declaration: IBUs must obtain a declaration from the RI confirming that FCA funds used in IFSCs align with the purposes declared during remittance under LRS.

C. Utilisation of Funds in Other Jurisdictions

For transactions outside IFSCs, IBUs must ensure:

1. Permitted Transactions Only: Funds can be used for permitted current or capital account transactions in foreign jurisdictions.
2. Purpose Declaration: RIs must declare that the remittance purpose matches the intent stated during LRS remittance.
3. FATF Compliance: Ensure funds are not sent to non-cooperative countries identified by the Financial Action Task Force (FATF) or as notified by RBI.
4. Prohibition of Terrorist Links: Prevent remittances to individuals or entities flagged for terrorism-related risks as per RBI guidelines.

D. Reporting Requirements

• Notification to IFSCA: IBUs must notify IFSCA about each FCA opened, including compliance arrangements, in a letter signed by the Branch Head.
• Operational Data Submission: Data on FCA operations must be furnished in the format specified by IFSCA.

E. Enabling Digital Operations

IBUs should facilitate FCA operations digitally through internet banking and mobile banking platforms of their parent banks, ensuring a smooth customer experience.

F. Supersession of Previous Circulars:

The provisions of the earlier circular (dated October 10, 2024) are repealed with the issuance of this circular.

Detailed Press Release

International Financial Services Centres Authority | Press Release

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