Executive Summary:
This notification from the Reserve Bank of India amends the Foreign Exchange Management Deposit Regulations of 2016, specifically concerning Special Non-Resident Rupee (SNRR) accounts. These amendments, effective from the date of publication in the Official Gazette, modify the regulations related to the purpose, operation, and tenure of SNRR accounts. The changes aim to clarify and update the permitted transactions and operational aspects of these accounts for individuals with business interests in India.
Key Points / Main Content:
* **SNRR Account Purpose and Transactions:**
* Persons resident outside India with business interests in India can open SNRR accounts for bona fide rupee transactions.
* Business interests include investments under Foreign Exchange Management Rules, import/export of goods and services, trade credit transactions, ECB framework lending, and specific IFSC unit transactions.
* **SNRR Account Operations:**
* The SNRR account nomenclature must reflect the specific business purpose.
* Banks may maintain separate SNRR accounts for each transaction category or a single account for multiple categories, provided segregation and accounting are maintained.
* The word "shall" replaces "should" in paragraphs 3, 5, and 6 of the Principal Regulation.
* **SNRR Account Tenure:**
* The SNRR account tenure is linked to the contract period/business operation, with a maximum limit of seven years, subject to Reserve Bank approval for renewal.
* The seven-year restriction does not apply to SNRR accounts opened for the purposes outlined in sub-paragraphs i to v of paragraph 1.
* **Nominee Account:**
* Funds payable to a non-resident nominee from a deceased account holder's account shall be credited to the nominee's NRO/NRE account or remitted through normal banking channels.
Impact Analysis:
* **Persons Resident Outside India with Business Interests in India:**
* Impact: Clarification and expansion of permissible transactions through SNRR accounts, changes in tenure rules, and clearer guidelines for nominee fund transfers.
* Action Required: Review current SNRR account usage to ensure compliance with the updated regulations, particularly regarding permissible transactions and tenure limits.
* **Authorised Dealers/Banks:**
* Impact: Changes to SNRR account operation, including nomenclature, segregation of transactions, and tenure management.
* Action Required: Update internal procedures to reflect the amended regulations, particularly regarding SNRR account opening, monitoring of transactions, and tenure management. Implement changes to SNRR account opening forms to account for updated regulations.
* **Reserve Bank of India:**
* Impact: Oversight and enforcement of the amended regulations.
* Action Required: Monitor compliance with the new regulations and provide clarifications as needed.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the country's monetary policy and foreign exchange.
Foreign Exchange Management Act, 1999: An act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Foreign Exchange Management Deposit Regulations, 2016: Regulations pertaining to the management of deposits under the Foreign Exchange Management Act.
Foreign Exchange Management Deposit Third Amendment Regulations, 2019: Amendment to the Foreign Exchange Management Deposit Regulations.
Special Non-Resident Rupee Account (SNRR account): A bank account opened by a person resident outside India for the purpose of putting through bona fide transactions in rupees related to their business interests in India.
Foreign Exchange Management Non-debt Instruments Rules, 2019: Rules governing investments in India not involving debt instruments.
Foreign Exchange Management Debt Instruments Regulations, 2019: Regulations governing investments in India involving debt instruments.
Foreign Exchange Management Borrowing and Lending Regulations, 2018: Regulations governing borrowing and lending activities under the Foreign Exchange Management Act.
RESERVE BANK OF INDIA
FOREIGN EXCHANGE DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001
Notification No. FEMA 5 (R)/(3)/2019-RB November 13, 2019
Foreign Exchange Management (Deposit) (Third Amendment) Regulations, 2019
In exercise of the powers conferred by clause (f) of sub-section (3) of section 6, sub-section (2) of section 47 of the
Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India makes the following amendment
in the Foreign Exchange Management (Deposit) Regulations, 2016 (Notification No. FEMA 5 (R)/2016-RB dated
April 01, 2016) (hereinafter referred to as 'the Principal Regulations'), namely:-
1. Short title and commencement.
(i) These regulations shall be called the Foreign Exchange Management (Deposit) (Third Amendment)
Regulations, 2019.
(ii) They shall come into force with effect from the date of their publication in the Official Gazette.
2. In the Principal Regulation, in SCHEDULE 4,
(a) for paragraph 1, the following shall be substituted, namely, :-
“1. Any person resident outside India, having a business interest in India, may open Special Non-
Resident Rupee Account (SNRR account) with an authorised dealer for the purpose of putting
through bona fide transactions in rupees, not involving any violation of the provisions of the Act,
rules and regulations made thereunder. The business interest, apart from generic business interest,
shall include the following INR transactions, namely, :-
i. Investments made in India in accordance with Foreign Exchange Management (Non-debt
Instruments) Rules, 2019 dated October 17, 2019 and Foreign Exchange Management
(Debt Instruments) Regulations, 2019 notified vide notification no. FEMA 396/2019-RB
dated October 17, 2019, as applicable, as amended from time to time;
ii. Import of goods and services in accordance with Section 5 of the Foreign Exchange
Management Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May
3, 2000, viz., Foreign Exchange Management (Current Account Transaction) Rules, 2000,
as amended from time to time;
iii. Export of goods and services in accordance with Section 7 of the Foreign Exchange
Management Act 1999 (42 of 1999), read with Notification No. G.S.R. 381(E) dated May
3, 2000, viz., Foreign Exchange Management (Current Account Transactions) Rules, 2000,
as amended from time to time, and further read with FEMA Notification No.23(R)/2015-
RB dated January 12, 2016, as amended from time to time;
iv. Trade credit transactions and lending under External Commercial Borrowings (ECB)
framework in accordance with Foreign Exchange Management (Borrowing and Lending)
Regulations, 2018, as amended from time to time; and
v. Business related transactions outside International Financial Service Centre (IFSC) by
IFSC units at GIFT city like administrative expenses in INR outside IFSC, INR amount
from sale of scrap, government incentives in INR, etc. The account will be maintained with
bank in India (outside IFSC).”(b) for paragraph 2, the following shall be substituted, namely, :-
“2. The SNRR account shall carry the nomenclature of the specific business for which it is
in operation. Indian bank may, at its discretion, maintain separate SNRR Account for each
category of transactions or a single SNRR Account for a person resident outside India
engaged in multiple categories of transactions provided it is able to identify/ segregate and
account them category-wise.”
(c) in paragraphs 3,5 and 6, for the word ‘should’, the word ‘shall’ shall be substituted.
(d) for in paragraph 8, the following shall be substituted, namely, :-
“8. The tenure of the SNRR account shall be concurrent to the tenure of the contract /
period of operation / the business of the account holder and in no case shall exceed seven
years. Approval of the Reserve Bank shall be obtained in cases requiring renewal:
Provided the restriction of seven years shall not be applicable to SNRR accounts
opened for the purposes stated at sub. paragraphs i to v of paragraph 1 of this
schedule.”
(e) for paragraph 13, the following shall be substituted, namely, :-
“13. The amount due/ payable to non-resident nominee from the account of a deceased account
holder, shall be credited to NRO/NRE account of the nominee with an authorised dealer/
authorised bank in India or by remittance through normal banking channels.”
(Ajay Kumar Misra)
Chief General Manager-in-Charge
Foot Note: The Principal Regulations were published in the Official Gazette vide No. G.S.R. 389(E) dated April 01,
2016 and subsequently amended as under
G.S.R.1093 (E) dated 09.11.2018
G.S.R. 498 (E) dated 16.07.2019
No. FEMA 5(R)/(3)/2019-RB dated November 13, 2019