RBI provides more leeway to banks for rupee vostro accounts

The Reserve Bank of India (RBI) today dispensed with the rule under which banks were required to seek its approval for opening and maintaining vostro accounts by non-resident exchange houses for each new client.

Vostro is an account that one party holds for another.

"With a view to give more operational leeway to the AD Category-I banks, it has been decided to dispense with the requirement of prior approval of the RBI for opening and maintaining each Rupee Vostro account in India of non-resident Exchange Houses in connection with the Rupee Drawing Arrangements (RDAs) that banks enter into with them," the apex bank said in a circular.

The RBI said that approved dealer banks can now take its permission the first time they enter into such an arrangement with non-resident exchange houses from the Gulf countries, Hong Kong, Singapore and Malaysia.

"Subsequently, they may enter into RDAs, subject to the prescribed guidelines and inform the RBI immediately," the central bank said.

The circular said, "Once the total number of RDAs reaches 20, the AD Category-I bank may cause a detailed external Audit of their internal system to ensure that it is working satisfactorily.

"Based on the satisfactory report, the board of AD Category-I banks may authorise more such arrangements. A copy of the board note together with board resolution in the matter may be filed with the RBI and new arrangements informed to the RBI."

In another circular, the apex bank said that it has also dispensed with the old rule under which fresh licences were issued to banks and financial institutions to act as Full Fledged Money Changers on a selective basis based on criteria.

Such criteria included provisions for facilitating an increase in outreach and preference was given to branches based locational advantage like being located in border areas or tourist centers and so on.

"In view of the recent measures adopted to provide more flexibility to the Authorised Persons in selecting the location for their branches, it has now been decided to remove the criteria relating to increase in outreach and locational advantage while considering the applications for issuance of fresh licenses for Full Fledged Money Changers (FFMC)," the RBI said.