Foreign Currency (Non-Resident Indians) FCNR (B) Account

Eligibility to Open and Maintain FCNR A/c

With the exception of persons of Indian origin from Bangladesh and Pakistan, all NRIs and PIOs
are eligible to maintain an FCNR account with an authorised bank in India.

• Accounts may be opened with funds remitted from outside, existing NRE/ FCNR
accounts, etc.
• Remittances should be in the designated currency.
• Conversion to currency other than the designated currency also permitted at the risk and
cost of the remitter.

Features of FCNR Account

• The account can be opened with funds remitted from abroad, or transferred from an
existing NRE/FCNR account.
• FCNR accounts can be opened with designated currencies, which are: GBP, USD,
Deutsche Mark, Japanese Yen and the Euro.
• Conversion to another designated currency is permitted at a cost to the account holder.
• Only term deposits can be maintained in FCNR accounts, in a time range of 6 months to
3 years.
• As per RBI guidelines, banks are free to offer interest on FCNR deposits below LIBOR
rates, less 25 basis points for deposits between 6 months to one year, and LIBOR rates
plus 50 basis points for deposits over a year.
• Banks are also free to decide on a fixed or a floating rate of interest on FCNR term
deposits.
• Interest rates are reviewed periodically and determined by directives from the Reserve
Bank (Department of Banking Operations and Development).
• The account holder can choose the periodicity of interest, from half-yearly to annual
payments. The interest can be credited to a new FCNR (B) account or a NRE/NRO
account.
• For permissible debits and credits, the regulations for FCNR accounts are similar to the
NRE accounts.
• For conversion of currencies, from designated currency to rupees and vice versa, the
day’s rate of conversion will apply.
• Funds from the FCNR account are allowed to move within the country at no extra cost to
the account holder.
• For loans and overdrafts against FCNR accounts, the same conditions as the NRE
accounts apply.
• In case of premature withdrawal of the FCNR Term Deposit, a penalty is levied. Interest
paid on the account is calculated at a 1% below the committed rate if accounts are closed
prematurely.
• However, no interest is paid on deposits held for less than 6 months, and a penalty would
have to be paid as per directives from the apex bank. The RBI guidelines prevail on these
terms, issued as and when required.
FCNR A/c after Change in Resident Status

• NRI deposits such as the FCNR can continue till the maturity date at the contracted rate
of interest even after the account holder’s resident status changes to resident Indian.
• However, except for interest rates and reserve requirements of FCNR deposits, these
accounts are treated as resident accounts effective from the account holder’s date of
return to India.
• On maturity, these accounts are converted to either an RFC account or the Resident
Rupee Deposit account.
• As for joint accounts, the same rules as those for NRE accounts apply to FCNR deposits
too.
• For repatriation of funds from the FCNR account, the same conditions as those for NRE
accounts apply.
• The RBI does not provide any guarantee on foreign exchange.

Other Features -

• Reserve Bank will not provide foreign exchange guarantee.

• Lending of resources mobilized by authorized dealers under these accounts are not
subject to any interest rate stipulations.

Resident Foreign Currency Account (RFCA)

An RFC (Resident Foreign Currency) account is a foreign currency bank account in India that
can be maintained by a Non-resident Indian who has returned home for permanent settlement,
after staying abroad for a minimum period of one year. An RFC account can be opened without
any regulatory approval from the Reserve Bank of India. A person resident in India can open,
hold and maintain a Resident Foreign Currency (RFC) Account, out of foreign exchange: -

(a) received as pension or any other superannuation or other monetary benefits from his
employer outside India; or

(b) realised on conversion of assets which were acquired, held or owned by such person when he
was resident outside India.

(c) received or acquired as gift or inheritance from a person who was resident outside India.

(d) acquired or received before the 8th day of July, 1947 or any income arising or accruing
thereon which is held outside India by any person or acquired as gift or inheritance therefrom.

The funds held in these accounts shall be free from all restrictions regarding utilisation of foreign
currency balances including any restriction on investment in any form, by whatever name called,
outside India.

These deposits can be maintained under Savings, Current and Term Deposits. Term Deposits can
be accepted for a minimum period of 1 month to maximum period of 5 years.
Article 4 Credits v. Contracts

a. A credit by its nature is a separate transaction from the sale or other contract on which it may be
based. Banks are in no way concerned with or bound by such contract, even if any reference whatsoever
to it is included in the credit. Consequently, the undertaking of a bank to honour, to negotiate or to fulfil
any other obligation under the credit is not subject to claims or defences by the applicant resulting from
its relationships with the issuing bank or the beneficiary.
A beneficiary can in no case avail itself of the contractual relationships existing between banks or
between the applicant and the issuing bank.

b. An issuing bank should discourage any attempt by the applicant to include, as an integral part of the
credit, copies of the underlying contract, proforma invoice and the like.

Article 30 Tolerance in Credit Amount, Quantity and Unit Prices

a. The words "about" or "approximately" used in connection with the amount of the credit or the
quantity or the unit price stated in the credit are to be construed as allowing a tolerance not to
exceed 10% more or 10% less than the amount, the quantity or the unit price to which they refer.
b. A tolerance not to exceed 5% more or 5% less than the quantity of the goods is allowed,
provided the credit does not state the quantity in terms of a stipulated number of packing units or
individual items and the total amount of the drawings does not exceed the amount of the credit.
c. Even when partial shipments are not allowed, a tolerance not to exceed 5% less than the
amount of the credit is allowed, provided that the quantity of the goods, if stated in the credit, is
shipped in full and a unit price, if stated in the credit, is not reduced or that sub-article 30 (b) is
not applicable. This tolerance does not apply when the credit stipulates a specific tolerance or
uses the expressions referred to in sub-article 30 (a).

As an exporter of goods or services you will need to be aware of and consider insuring against
the risks of:

• loss of or damage to goods in transit

• non-payment for your goods or services
• the cost of returning to your premises any goods that a buyer abroad refuses to accept
• political or economic instability in the buyer's country
• a new customer's credit worthiness
• currency fluctuations
• a fault that causes an end-customer to sue

If you are an importer, you may need to take into account:

• possible loss of or damage to goods in transit

• supplier problems, including failure to supply
• transport delays and potential hold-ups at ports
• the risk of performance or health and safety problems
• import duties
• storage of goods in bonded warehouses
• currency fluctuations
The responsibility for organising insurance can be shared between the importer and exporter, or
be taken on by just one of them. When you agree the terms of a contract, it is advisable to use
one of 13 International Commercial Terms (Incoterms) - eg Free on Board or Cost Insurance
Freight.

Incoterms clearly clarify who has responsibility for freight, insurance and other costs. They also
determine when ownership of the goods passes from buyer to seller.

WHOLE-TURNOVER PACKING CREDIT (ECIB-WTPC)

These Guarantees facilitate Banks to cover the entire export credit portfolio
granted by way of Pre/Post Shipment advances to exporters as well as indirect
exporters at a lower premium rate at a higher coverage.

ELIGIBILITY: A bank or a financial institution dealing in foreign exchange is eligible to

obtain this Whole-turnover Cover for all its accounts.
MINIMUM CRITERIA: No. of Accounts: 25; Minimum assured Premium: Rs. 5 lacs.
PERIOD OF COVER: 12 months

ELIGIBLE ADVANCES: All packing credit advances as per RBI guidelines.

PROTECTION OFFERED: Against losses that may be incurred in extending packing credit
advances due to protracted default or insolvency of the exporter-client.
PERCENTAGE OF COVER: For banks taking the cover for the first time it is 75% up to
Grade Percentage Limit fixed and 65% beyond. (For others varies from 55% to 75% depending
on claim premium ratio of the bank.). For Small Scale Exporters (SSE)/ Small Scale Industrial
Units (SSI), it is 90%.
PREMIUM: For a fresh cover it is 8 paise. (For others, varies from 6 to 9.5 paise per Rs. 100
p.m. depending on claim premium ratio.)
MAXIMUM LIABILITY: Overall limit up to which claims can be paid by the Corporation in
respect of advances granted in any ECIB year and will be determined on the basis of aggregate
outstanding.
IMPORTANT OBLIGATIONS OF THE BANK: Monthly declaration of advances granted
and payment of premium before the end of the month. Approval of the Corporation for extension
of due date beyond 360 days from due date to be obtained. Default to be reported within 4
months from due date or extended due date of advances, if not recovered, filing of claim within 6
months of the Report of Default. Recovery action after payment of claim and sharing of
recovery.
HIGHLIGHTS: Banks can exercise option to exclude SSI, Govt. Cos., and Units in OBU under
the Cover. Submission of a single proposal for all accounts to be covered. (Premium is payable
on average outstanding for the month. Declaration to be submitted by the end of the succeeding
month.) Higher percentage of cover and lower premium rate as compared to individual credit
insurance cover. Less procedural formalities, administrative work and greater convenience.
ECGC whole Turnover Post-shipment Guarantee Scheme

2.6.1 The Whole Turnover Post-shipment Guarantee Scheme of the Export

Credit Guarantee Corporation of India Ltd. (ECGC) provides protection to
banks against non-payment of post-shipment credit by exporters. Banks
may, in the interest of export promotion, consider opting for the Whole
Turnover Post-shipment Policy. The Salient features of the scheme may be
obtained from ECGC.

2.6.2 As the post-shipment guarantee is mainly intended to benefit the

banks, the cost of premium in respect of the Whole Turnover Post-shipment
Guarantee taken out by banks may be absorbed by the banks and not
passed on to the exporters.

2.6.3 Where the risks are covered by the ECGC, banks should not slacken
their efforts towards realisation of their dues against long outstanding export
bills.

Crystallization of Overdue Export Bills

Exporter foreign exchange is converted into Rupee liability, if the export bill purchase /
negotiated /discounted is not realize on due date. This conversion occurs on the 30th day after
expiry of the NTP in case of unpaid DP bills and on 30th day after national due date in case of
DA bills, at prevailing TT selling rate ruling on the day of crystallization, or the original bill
buying rate, whichever is higher.

“Write off” of unrealised export bills

Circular No.12 dated September 9, 2000 in terms of which they have been permitted to allow
`writeoff’ of unrealised export dues, under certain conditions, upto an aggregate amount of 10
per cent of the total export proceeds realised by the exporter through the concerned
authorised dealer during the previous calendar year.
2. With a view to simplify the procedure the matter has been reviewed and it has been
decided that status holders exporters, ( viz. Export Houses, Trading Houses, Star Trading
Houses, Super Star Trading Houses) and manufacturer exporters exporting more than 50 per
cent of their production, and recognised as such by DGFT, may be permitted to “write off”
outstanding export bills upto an annual limit of 5 per cent of their average annual
realisations (not turnover) during the preceding 3 calendar years. The limit of 5% will be
cumulatively available in a year and will be subject to the following conditions:-
(i) The exporter should submit to the concerned authorised dealer a Chartered
Accountant’s certificate indicating –
(a) the export realisation in the preceding three calendar years and also the amount
of “write off” already availed of during the year, if any.
(b) the relevant GR/SDF Nos. to be written off, Bill No., invoice value, commodity
exported, country of export,
(c) the export benefits, if any, availed of by the exporter have been surrendered.
3. It is clarified that the followings do not qualify for the “write off” facility :-
(a) Exports made to countries with externalisation problem i.e. where the overseas
buyer has deposited the value of export in local currency but the amount has not been
allowed to be repatriated by the central banking authorities of the country.
2
(b) GR/SDF forms which are under investigation by agencies like, Enforcement
Directorate, Directorate of Revenue Intelligence, Central Bureau of Investigation, etc. as
also the outstanding bills which are subject matter of civil/criminal suit.
4. After the "write off" has been permitted authorised dealer may submit the duplicate
GR/SDF forms in question to the Reserve Bank along with R-Return, duly certified as
under:-
" Write off of ……………………………………
( Amount in words and figures) permitted in
terms of AP(DIR Series) Circular No 30 dated April 4, 2001.
Date Stamp & Signature of
Authorised Dealer"
5. Authorised dealers may note to take into account the amount written off under this
facility while arriving at the eligible amount under paragraph C.18 of AP (DIR Series)
Circular No. 12 of September 9, 2000.
6. Authorised dealers may forward a statement in form EBW, in the enclosed format, to
the Regional Office of Reserve Bank under whose jurisdiction they are functioning,
indicating details of write offs allowed under this circular.
7. Authorised dealers may bring the contents of the circular to the notice of their
constituents concerned.
8. The directions in this circular has been issued under Section 10(4) and Section 11(1)
of the Foreign Exchange Management Act, 1999 (42 of 1999). Any contravention or
nonobservance of these directions is subject to the penalties prescribed under the Act.

Follow-up of Overdue Bills

6C.12 (i) Authorised dealers should closely watch realisation of bills through Bills
Register and,
in cases where bills remain outstanding beyond the due date for payment, they should
take
up the matter promptly with exporter concerned. If exporter fails to arrange for delivery of the
proceeds on the due date, the matter should be reported to Reserve Bank by letter stating, where
possible, the reason for the delay in realisation of proceeds of the exports unless exporter has
sought permission for extension of time (see paragraph 6C.16). The duplicate copies of GR / PP
forms should, however, continue to be held by authorised dealer until full proceeds are realised
except in case of undrawn balances covered by Note under paragraph 6C.7. Authorised dealers
should follow up export outstandings with exporters systematically and vigorously so that action
against defaulting exporters does not get delayed. Any laxity noticed in the follow up of
realisation of export proceeds by authorised dealers will be viewed seriously by Reserve Bank
leading to the invocation of the provision in FERA 1973, authorising it to impose penalty on an
authorised dealer.
 (ii) Authorised dealers should furnish to Reserve Bank a consolidated statement
in form XOS giving details of all export bills which remained unrealised beyond the period of
180 days from the date of shipment as at the end of June and December every year. The
statements should be submitted in triplicate within fifteen days from the close of the relative half
year. However, authorised dealers should ensure that export bills which remained unrealised and
unpaid on the due date of payment are treated as outstanding export bills for all purposes.

The exporters that are receiving interest rate subsidy from select sectors are
likely to see the subvention extended beyond the earlier set date of March
31st, 2009.

The government has extended the 2% interest rate subsidy for another nine
months up to December 31st, 2009. This move has been taken by the UPA
government in an attempt to boost the economy.

This interest rate subvention was allowed by the Reserve Bank of India (RBI)
to seven export sectors from December 2008 to March 31st, 2009. The
seven export sectors include textiles, handicrafts, leather, marine products,
gems & jewellery, carpets and small & medium enterprises. These exporters
are extended credit from banks at 2% lower interest rate against the card
rate set for exporters. Further this 2% is reimbursed to the banks by the
government.

However this facility is only available if the interest rates do not fall below
7%. It is basically the rate at which credit is extended to the agriculture
sector under priority sector lending.

The exporters that are receiving interest rate subsidy from select sectors are likely to see the
subvention extended beyond the earlier set date of March 31st, 2009.

It has been decided to extend interest subvention of 2% on rupee export credit with effect
from April 1, 2010 to March 31, 2011 on the same terms and conditions to certain additional
sectors. The new list would be as follows.

1. Handicrafts

2. Carpets

3. Handlooms

4. Small and Medium (SME) (as defined in Annex III )

5. Leather and Leather Manufactures

6. Jute Manufacturing including Floor covering

7. Engineering Goods
 8. Textiles

In finance, a forward contract or simply a forward is a non-standardized contract

between two parties to buy or sell an asset at a specified future time at a price
agreed today

In economics and finance, arbitrage is the practice of taking advantage of a price

difference between two or more markets: striking a combination of matching deals
that capitalize upon the imbalance, the profit being the difference between the
market prices

Purpose

Business trip

Visits in connection with attending of an international conference, seminar, specialised training,

study tour, apprentice training, etc., are treated as business visits

• Up to USD 25000 for a business trip to any country other than Nepal & Bhutan.

Medical treatment

• Up to USD 100,000 on self declaration basis

• For amount exceeding the limit as per estimate of medical expenses from Doctor/Hospital
abroad or Doctor in India

• For medical treatment, additional USD25,000 can be drawn for meeting

boarding/lodging/travel expenses of the patient and also the accompanying attendant on
self-certification

Study abroad

• Foreign exchange up to USD 100,000 per academic year or estimate from the institution
abroad which ever is higher

Private visits

• Up to USD 10000 in any financial year to any country except Nepal & Bhutan
• For Nepal & Bhutan, Indian Currency only without any limit except currency notes of
denominations of Rs.500 and above
• Amount can be released on the basis of self-declaration

Employment abroad
 • Up to USD 100,000

Emigration

• Up to USD 100,000

Gifts & donations (Individuals)

• Under the liberalised remittance scheme upto USD 200,000 per financial year...

Gifts & donations(others)

• Other residents like corporates, partnership firms, trusts etc., are free to remit up to USD
5000 per annum per donor/remitter each as gift and donation.

Liberalised Remittances Scheme

The Reserve Bank of India had announced a Liberalized Remittance Scheme (the
Scheme) in February 2004 as a step towards further simplification and liberalization
of the foreign exchange facilities available to resident individuals. As per the
Scheme, resident individuals may remit up to USD 200,000 per financial year for
any permitted capital and current account transactions or a combination of both.

What is the Liberalised Remittance Scheme of USD 200,000?

This is a facility extended to all resident individuals under which, they may freely remit upto
USD 200,000 per financial year for any permissible current or capital account transaction or a
combination of both.

Is there any frequency for the remittance?

There is no restriction on the frequency. However, the total amount of foreign exchange
purchased from or remitted through, all sources in India during the current financial year
should be within the limit of USD 200,000/-.

What are the purpose/s for which remittance can be made under the Scheme?

This facility is available for making remittance/s for any permissible current or capital account
transaction or a combination of both. It is not available for purposes specifically prohibited
(Schedule I) or regulated by the Government of India (Schedule II) of Foreign Exchange
Management (Current Account Transactions) Rules, 2000.