25/06/2021
(LRS):
Operational Instructions to Authorised Persons by RBI:
📌 Authorized Persons may carefully study the provisions of the Act/Regulations / Notifications issued under Foreign Exchange Management Act (FEMA), 1999.
📌 The RBI will not, generally, prescribe the documents which should be verified by the Authorised Persons while releasing foreign exchange for current account transactions.
📌 Attention of authorized persons is drawn to Section 10(5) of the FEMA, 1999 which provides that an authorised person shall require any person desiring to transact in foreign exchange to make such a declaration and to give such information as will reasonably satisfy him that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of the or any rule, regulation, notification, direction or order issued there under.
📌 AD Bank can prescribe documents to be obtained by branches – With a view to maintaining uniform practices, Authorized Dealers may consider requirements or documents to be obtained by their branches to ensure compliance with provisions of section 10(5) of the FEMA Act.
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📌 AD Bank to keep records and report suspicious transactions to RBI – Authorised Dealers are also required to keep on record any information/documentation, on the basis of which the transaction was undertaken for verification by the . *In case the applicant refuses to comply with any such requirement or makes unsatisfactory compliance therewith, the Authorised Dealer shall refuse, in writing, to undertake the transaction and shall, if he has reasons to believe that any contravention/evasion is contemplated by the person, report the matter to RBI.*
📌 AD Bank to ensure compliance of income tax TDS provisions – RBI will not issue any instructions under the FEMA, regarding the procedure to be followed in respect of deduction of tax at source while allowing remittances to the non-residents ( ). It shall be mandatory on the part of Authorised Dealers to comply with the requirement of the , as applicable.
📌 AD Bank to follow KYC norms and Anti- Rules – While allowing the facility to resident individuals, Authorised Dealers are required to ensure that “ ” guidelines have been implemented in respect of bank accounts. They should also comply with the Rules in force while allowing the facility.
📌 Applicant should be customer of AD Bank for remittance of transactions – The applicants should have maintained the bank account with the bank for a minimum period of one year prior to the for capital account transactions.
📌 Due diligence in case of new customer – If the applicant seeking to make the remittances is a new customer of the bank, Authorised Dealers should carry out due diligence on the opening, operation and maintenance of the account. The Authorised Dealers should obtain bank statement for the previous year from the applicant to satisfy themselves regarding the source of funds. If such a is not available, copies of the latest Order or Return filed by the applicant may be obtained.
📌 Remittances should be out of own funds of applicant – The Authorised Dealer should ensure that the payment is received out of funds belonging to the person seeking to make the remittances, by a cheque drawn on the applicant’s bank account or by debit to his account or by Demand Draft/Pay Order. Authorised Dealer may also accept the payment through credit/debit/prepaid card of the card holder.
📌 No remittance to ineligible entities –The Authorised Dealer should certify that the remittance is not being made directly or indirectly by/or to ineligible entities and that the remittances are made in accordance with the instructions contained herein.
📌 No credit facilities to applicant for capital account transactions – AD bank should not extend any kind of credit facilities to resident individuals to facilitate remittances for under the LRS Scheme.
📌 No remittance of capital account transactions to countries – Authorised Dealer may keep a record of the countries identified by FATF as non-co-operative countries and territories and accordingly update the list from time to time for necessary action by their branches handling the transactions under the Liberalised Scheme. For this purpose, they may access the website www.fatf-gafi.org to obtain the latest list of non-co-operative countries notified by FATF.
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📌 Reporting by AD Bank of transactions in LRS – The remittances made under this Scheme will be reported in FETERS in the normal course. The Authorised Dealers may also prepare and keep on record dummy Form A2, in respect of remittances less than $25,000.
📌 Foreign Banks and Indian Banks should not advertise LRS scheme without approval of RBI – A number of operating in India as well as have been soliciting (through advertisements) foreign currency deposits (from residents under LRS) [on behalf of overseas ] or for placing at their overseas branches.
📌 All banks, both Indian and foreign, including those not having an operational presence in India, should seek prior approval from RBI for the schemes being marketed by them in India to residents either for soliciting deposits for their foreign/overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company. The applications in this regard may be addressed to the Chief General Manager-in-Charge, Department of Banking Regulations, Reserve Bank of India, Central Office, 12th Floor, Fort, Mumbai - 400001.
The instructions are contained in para B of RBI DED Master Direction No. 7/2015-16 dated 1-1-2016.
To get consultation on your LRS case, please book a tele-appointment with Ozg Lawyers or simply Email to: [email protected] / WhatsApp.
Ozg Lawyers:
Tele-Appointment Link:
☎️ ozglaw.com/appointment
24/7 ☎️ WA.me/918779696580
📲 https://femaconsultant.ozg.in
