Rbi Widens Rfc Accounts Scope

The Reserve Bank of India (RBI) has widened the scope of resident foreign currency (RFC) accounts by allowing existing account holders to maintain these accounts for receipt of monetary accruals such as pension from their former overseas employer. RBI has also permitted the free use of RFC funds for investment purposes.

In another move, RBI has lifted the ceiling for acquisition of bonus shares of foreign companies by employees of their Indian branches, majority holding joint ventures, or subsidiaries.

Persons who returned to India before April 18, 1992 after being non residents for at least one year without any break can hold RFC accounts with RBI permission for holding foreign currency income and assets acquired prior to their return to India.

 

Now these account holders can open RFC accounts for pension and other monetary benefits received from the overseas employer subsequently.

The funds in the RFC account can be freely utilised for any bona fide remittance outside India, including investments, through normal banking channels. However, the Reserve Bank insists that the cost of such investments as well as subsequent payments must be met out of the RFC account.

With regards to obtaining equity in a foreign company, RBI had specified a ceiling of $10,000 per Indian employee to obtain shares, including rights issues, in the foreign parent company in a block of five years. However, it has done away with ceiling for acquiring bonus shares.

Those eligible include employees of Indian offices of foreign companies, wholly-owned subsidiaries of foreign companies, or companies in which a foreign company holds a majority (at least 51 per cent) stake.

However, the RBI has insisted that the shares should be made available by the overseas parent company at a concessive rate below the market price which have been approved by the parent companys board.

Lastly, RBI has insisted that importers availing of import credit should supply documentary evidence of imports at the time the bank makes remittance of the import bill. Earlier, the importer was allowed a period of three months from the date of remittance.

The RBI has now ruled that since the goods are cleared before the date of payment, banks should insist on production of documentary evidence of imports at the time of effecting remittance of the import bill.