[Repealed] Key Rules for Using Foreign Currency Accounts by Indian Residents in GIFT City

The International Financial Services Centres Authority (IFSCA) is constantly working to facilitate cross-border remittances and operations of foreign currency accounts (FCAs) for Indian residents through International Banking Units (IBUs). The introduction of the Liberalized Remittance Scheme (LRS) under A.P. (DIR Series) Circular No. 15 by the Reserve Bank of India (RBI) on July 10, 2024, allows Indian resident individuals (RIs) to open FCAs within IFSCs. This circular provides clear guidelines for IBUs regarding the compliance and management of these accounts.

1. Applicability of the Circular

This circular applies specifically to IBUs opening FCAs for resident individuals under the LRS as per the RBI Circular dated July 10, 2024. FCAs refer to foreign currency accounts of resident individuals permitted under the LRS in collaboration with IBUs.

2. General Directions for IBUs

IBUs must adhere to the following key directions:

• Opening FCA for RIs: FCAs can be opened to receive remittances from onshore India or other locations under the LRS framework.
• Routing through Authorized Persons (APs): All remittances from India must be routed through an Authorized Person, ensuring compliance with RBI regulations.
• Return Submission: A copy of the return filed by the RI must be obtained both before opening the FCA and at every subsequent inward remittance.
• Utilization of Funds: The funds received should only be used for purposes declared in the submitted return.
• Declaration from RI: IBUs should obtain a declaration confirming that any remittance from foreign locations represents funds remitted earlier under LRS or income from investments made from such funds.
• 180-day Rule: If the foreign exchange received is not reinvested within 180 days, it must be repatriated through an AP back to the RI’s account in an Authorised Dealer (AD) bank in India.
• Domestic Transactions Restriction: FCAs cannot be used for domestic transactions, and compliance with the Anti-Money Laundering (AML), Counter-Terrorist Financing (CTF), and Know Your Customer (KYC) guidelines is mandatory.

3. Use of FCA Funds in IFSCs

Funds remitted to FCAs may be used to avail of financial products or services within IFSCs. These may include fixed deposits, subject to a tenure of less than 180 days. If the maturity proceeds are not reinvested, the provisions of the 180-day rule must be followed.

4. Availing Services in Foreign Jurisdictions

IBUs are permitted to allow funds from FCAs to be used for current or capital account transactions in foreign jurisdictions, excluding IFSCs. However, funds cannot be remitted to FATF-identified non-cooperative countries or high-risk jurisdictions or to individuals/entities posing terrorism risks.

5. Reporting Requirements

IBUs must notify IFSCA by submitting a letter that details compliance measures with this circular. This letter must be signed by the Branch Head. Furthermore, IBUs must provide operational data for FCAs as specified by IFSCA.

6. Compliance with the Circular

IBUs are expected to ensure strict compliance with the directions issued in this circular. This includes aligning operations with IFSCA (Banking) Regulations, 2020, and the provisions of the IFSCA Act, 2019.

The issuance of this circular under Section 13 of the IFSCA Act, 2019, strengthens the regulatory framework, ensuring that resident individuals have transparent access to foreign currency accounts under the LRS while complying with the highest standards of international finance.

For More Refer Circular International Financial Services Centres Authority (ifsca.gov.in)

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