ELECTRONICMODES OF TRANSMISSION / PAYMENT

ELECTRONICMODES OF TRANSMISSION / PAYMENT
SWIFT: SWIFT stands for Society for Worldwide Inter-bank Financial Telecommunication. It provides secured
telecommunication of financial messages amongst banks and financial institutions, throughout the world. Authentication
of messages is done through bilateral key exchange. The cost of sending message is only 1/4th of the conventional talex
system.
CHIPS: CHIPS stands for "Clearing House Inter-bank payment system'. It is a major payment system in USA, being used by major
banks. It is operative in New York only.
Fedwire: This is a payment system operated by Federal Reserve Bank of US operated all over USA.
ABA number: It is the no. allotted by Federal Reserve of USA to banks participating in Fedwire, to identify the senders and
receivers of payment.
CHAPS: CHAPS, the Clearing House Automated Payments System is British equivalent to CHIPS, handling receipts and payments in
London. It is used by a large no. of banks in UK.
Target: It stands for Trans-European Automated Real-time Gross Settlement Express Transfer system in EURO payment system
comprising 15 national RTGS systems working in Europe.
RTGS-plus: RTGS plus is German hybrid clearing systems and operating as an European oriented RTGS and payment system.
EBA-EURO-1: It is a netting system with focus on cross border Euro payments.
RTGS in India: RBI implemented RTGS in India. It functions on line. Banks maintain a pool account with RBI for inflow and
outflow of funds through RTGS. Minimum amount is Rs.2 lac for RTGS.
NEFT in India: It is an electronic funds transfer system which functions on a batch basis. There are no amount ceilings.
Types of Persons :Non-Resident: As per FEMA, a person who is not a resident, is called a non-resident.
Person resident in India
(i) a person residing in India for more than one hundredand eighty-two days during the course of the
preceding financial year but does not include
(A) a person who has gone out of India or who stays outside India, in either case
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(B) a person who has come to or stay in India, in either case, otherwise than
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an. office, branch or agency outside India owned or controlled by a person resident in India;
Non-Resident Indian (NRI) : He is a person resident outside India who is a citizen of India. Indian students abroad, also treated NRIs.
Person of Indian Origin (PIO) : A person resident outside India who is a citizen of any country other than Bangladesh or Pakistan and
:
a) Who was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955; or
b) Who belonged to a territory that became part of India after the 15th day of August, 1947; or
c) Who is a child or a grandchild or a great grandchild of a citizen of India or of a person referred to in clause (a) or (b); or
d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign origin of a person referred to in
clause (a) or (b) or (c)
Non Residents and their
Accounts

Resident: As per section 2(v) of the FEMA 1999, a person is called resident in India if he stays in India for more than 182 days during
the preceding financial year except those who have gone out of India for taking up employment outside India or for carrying on a
business or vocation outside India or for any other purpose indicating his intention to stay abroad for indefinite period.
NON Resident: Person resident outside India means a person who is not resident in India.
 Person of Indian Origin: A. Person of Indian Origin is one who is presently not a national of Pakistan or Bangladesh and: (a) who
at anytime held an Indian passport; or (b) he himself, either of his parents or any of his grandparents was a citizen of India by
virtue of Constitution of India or the Citizenship Act,1955 ; or (c) the person is a spouse of Person of Indian Nationality / Origin.
 Overseas Corporate Bodies are those in which at least 60% shareholding is of NRI. OCBs are not allowed to open NRI accounts.
 Students who go abroad for studies have also been given the facility of opening NRI accounts.
Non-resident accounts are of 3 types (a) Non Resident ordinary (b) Non Resident (External) (c) Foreign Currency Non Resident (Bank)
account. Salient features of these accounts are as under:
FEATURES OF NRI DEPOSITS Foreign Currency Non-Resident (Bank) Account (FCNR(B) A/c) —(w.e.f. 15.5.1993)
Account holder: NRI of Indian nationality or origin (RBI approval for Bangladesh entities/Pakistan entities and citizens).
 Joint account: Can be of two or more NRIS. With close resident relatives, joint account (Former, or Survivor) can be opened.
Relatives can operate a/c as power of attorney holder for local withdrawals or remittance abroad in name of account holder.
 Currencies: Any freely convertible currency.
 Type of account: FDR only (a) 1 year and above, less than 2 years (b) 2 years and above less than 3 years (c) 3 years and above
less than 4 years (d) 4 years and above less than 5 years (e) 5 years only. RD, SB or CA is not allowed.  Repatriation: Principal and interest permitted.
 Source of funds: Foreign Inward remittance (FIR) or transfer from NRE-RA account (at TT selling rate)
 Interest rate and interest payment: Ceiling rate fixed by RBI (presently LIBOR + 2% (1 year to less than 3 years) and LIBOR + 3%
(for 3 years to 5 years w.e.f. 01.03.14). No interest payment if cancellation before one year. For one year deposit,. no
compounding of interest. For above one year, compounding on 180 days basis. Interest payment on 360 days in year basis. On
floating ROI, half yearly reset is allowed.
 Fund or non-fund Rupee loan: Up to value of FDR with proper margin to the depositor or 3rd party. Margin / interest rate bank
discretion. Loans proceeds to be credited to NRO account. Loans can be repaid from FCNR, NRE or NRO account balances. Banks
should not mark any type of lien, direct or indirect,
against these deposits. Premature payment not allowed if loan is granted. FC loan can be given in India or abroad.
 Nomination facility is available.
 Income Tax: Interest is not taxable. TDS not applicable.
 Additional ROI not allowed to Staff (Jul 18, 2012)
 At the request of the depositor, banks can permit remittance of the maturity proceeds to third parties outside India, provided
bank is satisfied about the bonafides of the transaction.
Non-Resident External (Rupee Account)
 Account holder: NRIs of Indian nationality or origin (RBI approval for Bangladesh entities/Pakistan citizens and entities).
 Joint account: Can be in the names of two or more NRIs. With close resident relatives, joint account (Former or Survivor) can be
opened. Relatives can operate a/c as power of attorney holder for local withdrawals or remittance abroad in name of account
holder.
 Currencies: Indian rupee by converting foreign currency.
 Type of account: Current, saving or FDR. FDR period at discretion of banks.
 Repatriation: Principal and interest permitted.
 Source of funds: Foreign Inward remittance (FIR) or transfer from FCNR-B account (at 'TT buying rate) or transfer of repatriable
funds from NRO account
 Interest rate and interest payment : Bank discretion but not more than domestic deposit (deregulated w.e.f. Dec 16, 2011).  Rupee loan: Same as in case of FCNR-B account.
 Nomination facility is available.
 Income Tax: Interest is not taxable. TDS not applicable.
 Additional ROI not available to Staff w.e.f. Jul 18, 2012.
 Important Notes (a) PoA holders cannot credit foreign currency notes and foreign traveller’schequesin NRE accounts. (b) Banks
may credit the proceeds of account payee cheques/ demand drafts / bankers' cheques, issued against encashment of foreign
currency to the NRE account of the NRI account holder where the instruments issued to the NRE account holder are supported
by encashment certificate issued by AD Category-I / Category-IL
Non-Resident Ordinary Account (NRO)
 Account holder: NRIs or Person of Indian Origin (individuals & not entities from Bangladesh, can be allowed without RBI
permission w.e.f. 11.2.13 Pakistan citizen not to be allowed). Foreign students can also open NRO accounts (RBI 20.09.13).
 Joint a/c : Allowed with resident individuals.
 Currencies Indian rupee.
 Account: Current, saving, RD or FDR. FDR 7 days to10 years.  Repatriation: Interest and current income is permitted. Remittance, including of sale proceeds of immovable property also
allowed @USD 1 million per financial year for bonafide purposes.
Source of funds: New account can be opened with Foreign Inward remittance. Existing account of an NRI opened when he was
resident, will be designated as NRO by the bank.  Interest rate: Bank discretion. Not more than domestic deposit interest rates.
 Nomination facility is available.
 Income Tax: Interest is taxable. TDS provisions applicable for all interest payments (FD/SB account).
 Transfer of repatriable amount from NRO to NRE permitted (May 8, 2012) within USD 1 million /FY subject to payment of tax,
as applicable.  Additional ROI not allowed to Staff (Jul 18, 2012)
 Rupee loan Up to value of FDR with proper margin to depositor or 3rd party. FC loan or loan abroad not permitted.
 Power of attorney: The facility of operation of accounts by PA holder is permitted for local withdrawals or remittance abroad in
name of account holder.
Accounts of Foreign Students in India
 NRO account can be opened on the basis of passport, photo and admission letter, for KYC purpose. Local address proof to be
provided within 30 days, when monthly withdrawal will be up to Rs.50000 and foreign inward remittance up to USD 1000. On
receiving local address proof, normal operations can be allowed.
NRO Accounts Of Foreign Nationals of Non- Indian Origin on a visit to India
 NRO (current/savings) a/c max 6 months. Source and use of funds: Funds remitted from outside India through banking channel
or by sale of forex brought into India. All payments' to residents exceeding INR 50,000 by means of cheques / pay orders /
demand drafts.
 Remittance : The balance may be converted by AD bank into foreign currency for payment to the account holder at the time of
his departure from India provided the account has been maintained for a period not exceeding 6 months and the account has
not been credited with any local funds, other than interest accrued thereon. If account maintained for more than 6 months,
account holder to seek permission on plain paper from Regional Office of RBI.
 Accounts of Foreign nationals resident in India Foreign nationals resident in India can open and maintain a resident Rupee
account in India in terms of Notification No.5/2000-RB dated May 3, 2000 viz., Foreign Exchange Management (Deposit)
Regulations, 2000, as amended from time to time.
Accounts of residents Resident Foreign Currency Account (RFC)
 Account holder: A resident in India who was earlier an NRI (at least one year stay abroad) and became resident again on or after
18.04.92
 Source of funds: (a) Forex received as pension/ superannuation /other benefits from employer abroad (b) Realization of assets
held abroad (c) Forex acquired as gift or inheritance from person who was NRI (d) Existing FCNR account or NRE-FD to be
converted to RFC FD at discretion of account holder before or after maturity.
 Joint account: It can be single account. With close resident relatives, joint account can be opened as FORMER or SURVIVOR
account.
 Type of account : Savings, Current, Fixed Deposit (min 7 days and max 10 years)
 Repatriation is permitted.
 Interest rates: The banks are free to determine ROI.
 Use of funds: No restrictions
Resident Foreign Currency (Domestic) Account - RFC(D)
 Account holder: Resident Individuals
 Source of funds: Foreign exchange acquired, (a) while on a visit abroad (b) from any person on visit to India or honorarium or
gift or for services or settlement of any lawful obligation (c) by way of honorarium or gift while on a visit abroad (d) representing
unspent foreign exchange acquired during travel abroad. Amount to be converted in rupees, latest by last day of next month.
 Type of account : Only current account
 Interest : No interest payable on this deposit
 Use of funds: For all permitted transactions.
Exchange Earner's Foreign Currency Account (EEFC Account)
 Account holder : Exporters of goods and services, resident in India
 Source of funds: Up to 100% of forex earnings can be kept in the account. But amount to be converted in rupees, latest by last
day of next month.
 Use of funds: Balance can be transferred to NRE/FCNR account on change of status from resident to non-resident. Funds can be
used for adjustment of pre-shipment loans.
 Loan: No loan can be allowed against the balances in such account.
 Type of account: Current account, single or joint (FORMER or SURVIVOR) with close resident relatives.  Interest : No Interest is payable
LIBERALISED REMITTANCE SCHEME (LRS) FOR RESIDENT INDIVIDUALS
 RBI introduced LRS on Feb 04, 2004. Major changes were made by RBI in LRS w.e.f. 01.06.2015 (based on Govt. notification
15.05.15).
 Eligibility: All resident individuals including minors and non-individuals are eligible. Remittances under the facility can be
consolidated in respect of family members subject to individual family members complying with the terms and conditions.

 It is mandatory to have PAN number to make remittances beyond USD 25000.00 for current account transaction and for all
capital account transactions.
 Forex can be purchased from authorised person which indude AD Category-1 Banks, AD Category-2 and Full Fledged Money
Changers.
 Capital Accounts transactions Remittances up to USD 250,000 per financial year can be allowed for permissible capital account
transactions as under: I) opening of foreign currency account abroad; ii) purchase of property abroad; iii) making investments
abroad; iv) setting up Wholly owned subsidiaries and Joint Ventures abroad; v) loans including in Indian Rupees to Non-resident
Indians relatives as defined in Companies Act, 2013.
 Current account transactions: All facilities (Including private/business visits) for remittances have been subsumed under overall
limit of USD 250,000/FY.
 Facilities for Individuals: Individuals can avail of forex facility for the following purposes within the limit of USD 250000.
Additional remittance shall require prior approval of RBI. Private visits to a country (except Nepal & Bhutan),Gift or donation.
Going abroad for employment or immigration. Maintenance of close relatives abroad ,Travel for business, or attending a conference
or specialized training or for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going
abroad for medical treatment/ check-up. Expenses for medical treatment abroad , Studies abroad ,
 Any other current account transaction
 Exception: For immigration, medical treatment and studies abroad, the individual may avail of exchange facility in excess of LRS
limit if required by a country of emigration, medical institute offering treatment or the university, respectively.
 Facilities for persons other than individual: Donations up to 1% of forex earnings in previous 3 FY or USD 5,000,000, whichever is
less, for: creation of Chairs in reputed educational institutes, contribution to funds (not being an investment fund) promoted by
educational institutes; and technical institution/body/ association in the field of activity of the donor Company.
 Commission, per transaction, to agents abroad for sale of residential flats or commercial plots in India exceeding USD 25,000 or
5% of inward remittance whichever is more.
 Remittances exceeding USD 10,000,000 per project for any consultancy services for infrastructure projects and USD 1,000,000
per project, for other consultancy services procured from outside India.
 Remittances exceeding 5% of investment brought into India or USD 100,000 whichever is higher, by an entity in India by way of
reimbursement of pre-incorporation expenses.
 Loan facility: Banks should not extend any kind of credit facilities to resident individuals to facilitate remittances under the
Scheme.  Remittances not available under the scheme:
 Remittance for any purpose specifically prohibited under Schedule-I (like purchase of lottery/sweep stakes, tickets, prescribed
magazines etc.) or item restricted under Schedule II of FEMA (Current A/c Transactions) Rules, 2000.
 Remittances made to Bhutan, Nepal, Mauritius or Pakistan.
 Remittances made to countries identified by the Financial Action Task Force (FATF) as "non cooperative countries and
territories" as available on FATF website (viz Cook Islands, Egypt, Guatemala, Indonesia, Myanmar, Nauru, Nigeria, Philippines
and Ukraine) or as notified by RBI.
 Remittances to individuals and entities identified as posing significant risk of committing acts of terrorism as advised separately
by RBI to the banks.
 Reporting of the transactions: The remittances made will be reported in the R-Return in the normal course.
Rules related to release / remittance of foreign exchange to residents
 AD banks can release forex to residents in India as per Rules framed u/s Sec 5 of FEMA. Forex cannot be released for Schedule I
transactions. For Schedule II transactions, Govt. permission is required. For Schedule III transactions, forex can be released up to
specified limit by AD banks. Beyond that limit, approval of RBI is required.
 Nepal & Bhutan - Forex for any kind of travel to or for any transaction with persons resident in Nepal and Bhutan cannot be
released. Any amount of Indian currency can be used. Highest denomination of currency note can be Rs.100.
 Up to Rs.25000, any denomination is allowed.
 Form of foreign currency: 1. Coins, currency notes and traveller's cheques. Currency notes/coins can be up to US$ 3000. The
balance can be traveller's cheque or banker's draft.
 For Iraq and Libya currency notes and coins can be obtained up to US$ 5000 or its equivalent.
 For Iran, Russian Federation, and other Republics of Commonwealth of Independent Countries, no ceiling.
 Mode of purchase: In cash up to Rs.50, 000/-. Above this, payment by way of a crossed cheque/banker's cheque/pay
order/demand draft / debit card / credit card only.
 Surrender of unused forex: Currency notes and travellers' cheques within 180 days of return.
 Retention of unused forex : US$2,000 or its equivalent. There is no restriction on residents for holding foreign currency coins.  Use of International Credit Card (ICC): Use of the ICCs / ATMs/ Debit Cards can be made for personal payments and for travel
abroad for various purposes, only up to specified limits.
 Export / Import of Indian currency by Residents or non-residents: Up to Rs. 25000 each to or from any country other than
Nepal or Bhutan (Pakistan & Bangladesh Rs.10000).
 Import of Foreign exchange from abroad: Any amount subject to declaration on CDF.

Mandatory CDF: Where total amount exceeds US$ 10,000 (or its equivalent) and/or value of foreign currency notes exceeds
US$ 5,000, declaration should be made to the Customs Authorities through Currency Declaration Form (CDF), on arrival in India.
 Application for purchase of FC: Form A2. It is not required up to $ 25000. A2 to be preserved by banks for one year for
verification by Auditors. endorsement on Passport : It is not mandatory for Authorised
 Dealers to endorse the amount of foreign exchange sold for travel abroad on the passport of the traveller. However, if
requested by the traveller, AD may record under its stamp, date and signature, details of foreign exchange sold for travel.