JAIIB PPB Paper-2 Module-A Unit 10: Foreign Currency Accounts For Residents And Other Aspects

01/03/2023

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JAIIB Paper 2 (PPB) Module A Unit 10: Foreign Currency Accounts For Residents And Other Aspects (New Syllabus)

The Institute of Indian Banking and Finance (IIBF) has recently revealed the revised syllabus and examination pattern for the JAIIB Exam 2023. The JAIIB 2023 will consist of four papers, with Paper 2 (Principles & Practices of Banking ) covering the crucial topic of “Unit 10: Foreign Currency Accounts For Residents And Other Aspects.” It is essential for candidates to thoroughly understand this unit to perform well in the examination.

To assist candidates in comprehending the topic, we will provide all the necessary details related to Unit 10: Foreign Currency Accounts For Residents And Other Aspects of JAIIB Paper 2 (PPB) Module A: General Banking Operations. We highly recommend that candidates refer to this article and make use of our Online Mock Test Series to enhance their knowledge of Foreign Currency Accounts For Residents And Other Aspects.

Understanding each unit in the syllabus, especially the Marketing unit, is essential for JAIIB Certification Examination 2023 candidates. This unit plays a vital role in the banking industry, and thus, candidates must prepare well to excel in the exam and establish a successful career in the banking sector.

Foreign Currency Denominated Accounts In India

Exchange Earner’s Foreign Currency Account (EEFC)

Permitted Credits

100% foreign exchange earnings by way of inward remittance through normal banking channel.
Payments received for the purpose of counter trade.
Advance remittance received towards export of goods or services.
Professional earnings received by a professional rendering services in individual capacity.
Interest earned on the funds held in the account.
Re-credit of unutilised foreign currency earlier withdrawn from the account.
Repayment of trade related loans/ advances.
Disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/ GDRs.
Payments received in foreign exchange by an Indian startup arising out of sales/ export made by the startup or its overseas subsidiaries.

Permitted Debits

Payment outside India for capital or current account transactions.
Payment in foreign exchange for goods purchased from a 100% Export Oriented Unit or a Unit in an Export Processing Zone.
Payment of customs duty as per Export Import Policy.
Trade related loans/ advances, by an exporter account holder to his importer customer outside India.
Payment in foreign exchange to a person resident in India for supply of goods/ services including payments for air fare and hotel expenditure.

Other Conditions

Withdrawal in rupees is permitted but the amount cannot be re-credited.
The account will be a non-interest bearing account.
The claims settled in rupees by ECGC/insurance companies cannot be credited.
Fund-based/non-fund based credit facilities should not be granted against these balances.
Can be used to repay packing credit advances in any currency up to actual exports made.

Resident Foreign Currency Account (RFC)

Permitted Credits

The account can be opened from foreign exchange received or acquired by him:

As pension or superannuation benefits or other monetary benefits from his overseas employer.
By converting assets acquired by him as a non-resident or inherited from or gifted by a person resident outside India and repatriated to India.
Before July 8, 1947 or any income arising/ accruing thereon and held outside India as per of a general/ special RBI permission.
As proceeds of LIC claims/ maturity/ surrendered value settled in forex from an Indian insurance company.

Permitted Debits

The balance in RFC account can be fully utilised outside India, and converted to Indian Rupee.

Other Conditions

Can have resident relative as joint holder on ‘former or survivor’ basis, who cannot operate the account during the life time of the account holder.
The balances in the NRE/FCNR (B) Account can be credited to RFC account when the residential status of the NRI/ PIO changes to a Resident.

Resident Foreign Currency Domestic Account (RFC(D))

Permitted Credits

The account can be opened from foreign exchange acquired in the form of currency notes, bank notes and travellers cheques from overseas sources such as:

Payment on a visit abroad for services not arising from any business or anything done in India.
Honorarium or gift or for services rendered or in settlement of any lawful obligation from any person not resident in India and who is on a visit to India.
Honorarium or gift while on a visit to any place outside India.
Gift from a relative
Unspent foreign exchange acquired from an authorised person for travel abroad.
Representing the disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/ GDRs.
By way of earnings received as the proceeds of life insurance policy claims values settled in foreign currency from an insurance company in India.

Permitted Debits

Balances in the account can be used for permitted current or capital account transactions.

Firms and companies which comply with the eligibility criteria stipulated in the Foreign Trade Policy of the Government of India may open DDA accounts.

Realisation of export proceeds and local sales (in USD) of rough, cut, polished diamonds; and pre and post shipment finance availed in USD can be credited.
Payments for purchase of rough, cut and polished diamonds can be made. Funds can be transferred to rupee account.
The account should be a non-interest bearing current account.

Diamond Dollar Account Scheme – DDA Account

Firms and companies which comply with the eligibility criteria stipulated in the Foreign Trade Policy of the Government of India may open DDA accounts.

Realisation of export proceeds and local sales (in USD) of rough, cut, polished diamonds; and pre and post shipment finance availed in USD can be credited.
Payments for purchase of rough, cut and polished diamonds can be made. Funds can be transferred to rupee account.
The account should be a non-Interest bearing current account.

Other Conditions for Foreign Currency Accounts

For EEFC, RFC(D), DDA Accounts:

The sum total of the accruals during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization for approved purposes or forward commitments.

For EEFC and RFC (D) Accounts:

Balances may be credited to NRE/ FCNR (B) Accounts, consequent upon change of status to non- resident.

Other Specific Categories Permitted to Maintain Foreign Currency Accounts

Indian agent of shipping or airline companies incorporated outside India.
Ship-manning/ crew managing agencies in India.
Project offices of foreign companies
Organisers of international Seminars, Conferences, Conventions,
Exporters of specified goods or services on deferred payment terms.
Units located in a Special Economic Zone (SEZ)
An Indian company receiving foreign investment under FDI route
Re-insurance and Composite Insurance Brokers Registered with IRDA

Permitted Foreign Currency Accounts Outside India

Permission to maintain foreign currency accounts with a bank outside India has been given for specific purposes.

For business related purposes.
For studies abroad, during the stay there. On returning, the account is deemed to be under LRS.
During stay abroad on a visit to a foreign country. The balance should be repatriated on returning.
Participating in an exhibition/ trade fair – for crediting the sale proceeds of goods.
By a resident for sending remittances under LRS.
For raising ECB, GDR, ADR etc.
Indian startup, having an overseas subsidiary, for crediting the earnings out of exports/ sales.

Remittance Of Assets By Foreign National Not Being PIOs

ADs are permitted to allow remittance of assets by a foreign national where:

The person has retired from employment in India
The person has inherited from a person referred to in section 6(5) of the Act
The person is a non-resident widow/ widower and has inherited assets from the deceased spouse who was an Indian national resident in India.
A foreign student in India has completed studies in India.

Modes Of Acquiring Property Outside India By a Resident

A resident in India can acquire immovable property outside India in any of the following situations.

If such property was acquired, held owned or inherited when resident outside India
By way of gift or inheritance: A person resident in India had acquired such property on or before July 8, 1947 and continued to be held by him with RBI permission or has acquired such property as per FEMA.
Purchase out of foreign exchange in RFC account, or under LRS.
Acquire jointly with a relative resident outside India, with no outflow of funds from India.

Foreign Contribution (Regulation) Act 2010

Foreign Contribution

The term ‘foreign contribution’ includes the donation, delivery or transfer made by a foreign source of any article, currency (whether Indian or foreign) or any security.

Foreign Hospitality

The term ‘foreign hospitality’ means any offer, made in cash or kind by a foreign source for providing a person with the costs of travel to any foreign country or territory or with free boarding, lodging, transport or medical treatment.

Acceptance of contribution from foreign sources and foreign hospitality by certain types of organisations ike non-government organisations, political organisations, media houses, etc. are regulated under the
The Foreign Contribution (Regulation) Amendment Bill, 2020 was introduced in Lok Sabha on September 20, 2020. The Bill amends the Foreign Contribution (Regulation) Act, 2010.
The Act regulates the acceptance and utilisation of foreign contribution by individuals, associations and companies

Prohibition on Acceptance of Foreign Contribution

FCRA prohibits under mentioned classes of persons from receiving ‘foreign contribution’.

Candidate for election
Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper
Public servant, Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government
Member of any Legislature
Political party or office bearers thereof
Organisations of a political nature
Associations or companies engaged in the production or broadcast of audio news or audio visual news or current affairs program’s through any electronic mode
Correspondent or columnist, cartoonist, editor, owner of the association or company referred to in (g) above

Restrictions on Acceptance of Foreign Hospitality

Under mentioned persons, while visiting any country or territory outside India, shall not accept any foreign hospitality, except with the prior permission of the Central Government.

A member of a Legislature
An office-bearer of a political party
A Judge
A Government servant
An employee of any corporation or any other body owned or controlled by the Government.

Foreign Contribution to be received through State Bank of India

With effect from September 2020, the procedure for receiving and dealing with foreign contribution is as follows.

A person shall receive foreign contribution only in an account designated as “FCRA Account” opened in New Delhi Main Branch of State Bank of India
Such person may open another “FCRA Account” in any of the scheduled bank of his choice for keeping or utilising the foreign contribution transferred from the “FCRA Account” in SBI.
Such person may open one or more accounts in one or more scheduled banks of his choice to which he may transfer for utilising any foreign contribution received in his “FCRA Account” in SBI or held in the “FCRA Account” in another scheduled bank.
No funds other than foreign contribution shall be received or deposited in any such account.

NOTE: Every person receiving foreign contribution shall submit a copy of a statement indicating therein the particulars of foreign contribution received duly certified by officer of the bank or authorised person in foreign exchange and furnish the same to the Central Government along with the intimation.

Disclosures of Foreign Contribution Received

A person who has been granted a certificate of registration or prior permission shall place on its official website the audited statement of accounts on receipts and utilisation of the foreign contribution, including income and expenditure statement, receipt and payment account and balance sheet for every financial year beginning on the first day of April within nine months of the closure of the financial year.
A person receiving foreign contribution in a quarter of the financial year shall place details of foreign contribution received on its official website or on the website as specified by the Central Government within fifteen days following the last day of the quarter in which it has been received clearly indicating the details of donors, amount received and date of receipt.

Unutilised Foreign Contribution in FCRA Account

The amount of foreign contribution lying unutilised in the exclusive foreign contribution bank account of a person whose certificate of registration has been cancelled shall vest with the banking authority concerned till the Central Government issues further directions in the matter.
In case a person whose certificate of registration has been cancelled has transferred the foreign contribution to any other person, the above condition would apply to the person to whom the fund has been transferred.

Reporting by Banks of Receipt of Foreign Contribution

The bank shall report to the Central Government within 48 hours any transaction in respect of receipt or utilisation of any foreign contribution by any person.
Central Government – Ministry of Home Affairs (MHA), Government of India has developed a software for submission of online reports of receipt of foreign contribution by banks. Accordingly, any transaction in respect of receipt of foreign contribution has to be reported online through the software developed for the purpose.

JAIIB PPB Module Unit 10 FOREIGN CURRENCY ACCOUNTS FOR RESIDENTS AND OTHER ASPECTS (Ambitious Baba) PDF