RBI hikes trade related remittance limit to Rs5 lakh
14 March 2014
The Reserve Bank of India (RBI) on Thursday announced a hike in trade-related remittance limit for non-residents through vostro accounts from Rs2,00,000 to Rs5,00,000 per transaction, amid an increase in the number of transactions handled by exchange houses.
Vostro account (also known as a loro account) is one in which the domestic bank acts as custodian or manages the account of a foreign counterpart.
"On a review of the permitted transactions under the Rupee Drawing Arrangements (RDAs), it has been decided to increase the limit of trade transactions from the existing Rs2,00,000 per transaction to Rs5,00,000 per transaction, with immediate effect," RBI said.
The central bank said it has made necessary changes in the memorandum of instructions for opening and maintenance of rupee/ foreign currency vostro accounts of non-resident exchange houses.
The accounts can be used for channelling inward remittances to India primarily on private account. The remitter and the beneficiary (in most cases) should be individuals. The accounts should not be used for outward remittances from India.
The accounts should run on a credit basis. No overdraft should be granted to the account holders. However, in case of designated depository agency (DDA) procedure, the funds lying in the DDA account may be taken into account, if need be.
Authorised dealer banks should adopt value dating where on-line debit to Rupee Vostro Account is not possible on a real time basis when any payment is made at drawee branches, to check adequacy of funds and detect concealed overdrafts. However, the RBI has directed early networking of the drawee branches.
Separate rupee vostro account shall be maintained for each arrangement. The accounts should be funded by sale of permitted foreign currency to the authorised bank, which maintains the account. Rupee funds transferred from another the authorised dealer or from another vostro account will not be eligible for credit to the account.
Funds in such accounts will not be convertible, nor will they be transferable to other authorised dealer banks or to non-resident accounts of other such institutions or banks with the same category.
Balances in rupee account will not also qualify for payment of interest.
Earlier in 2008, the RBI had rationalised norms on maintenance of rupee/foreign currency vostro accounts of non-resident exchange houses in view of the increased number of transactions being handled by the exchange houses and rapid developments in the communication facilities.