What changed
This Master Circular consolidated all existing instructions on Non-Resident Ordinary Rupee (NRO) accounts into a single document, replacing earlier circulars. It was issued with a sunset clause, meaning it would stand withdrawn on July 1, 2006, and be replaced by an updated version. The circular formalized rules for joint accounts with residents/non-residents and specified remittance limits for NRIs/PIOs.
What it means for you
Banks must now refer to this single master circular for NRO account operations, ensuring uniformity in compliance. The USD 1 million per calendar year remittance cap from NRO balances for NRIs/PIOs for bonafide purposes, subject to authorized dealer satisfaction and specific asset remittance conditions (e.g., lock-in periods for immovable property), remains a key limit for cross-border transactions. The sunset clause signals RBI's intent to periodically update guidelines, requiring banks to stay alert for future revisions.
What you must do
- Ensure NRO accounts are opened only for bonafide rupee transactions and comply with eligibility criteria, including prior RBI approval for Bangladesh/Pakistan nationals.
- Apply DBOD-prescribed interest rates and account maintenance guidelines for NRO savings, current, recurring, or fixed deposits.
- Verify Currency Declaration Forms for cash deposits over USD 5,000 and Encashment Certificates for rupee funds from abroad.
- Monitor remittances from NRO accounts to ensure NRIs/PIOs do not exceed USD 1 million per calendar year for bonafide purposes, subject to authorized dealer satisfaction and conditions for asset remittances (e.g., lock-in periods for immovable property).
- Update internal policies to reflect the sunset clause and prepare for the next master circular by July 1, 2006.
Who it affects
All banks authorized to deal in foreign exchange, Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs), Foreign nationals of non-Indian origin visiting India, Residents holding joint NRO accounts with non-residents
What is the remittance limit from an NRO account for NRIs/PIOs?
NRIs/PIOs can remit up to USD 1 million per calendar year from their NRO account balances for bonafide purposes, subject to the authorized dealer's satisfaction.
Can a resident hold a joint NRO account with a non-resident?
Yes, NRO accounts may be held jointly with residents and/or non-residents, as per the master circular.
What documentation is needed for cash deposits over USD 5,000 in an NRO account?
Foreign currency cash exceeding USD 5,000 or equivalent must be supported by a Currency Declaration Form. Rupee funds from abroad need an Encashment Certificate.