What changed
Previously, only shipping or airline companies incorporated outside India (or their agents) could hold foreign currency accounts in India for local expenses. Now, ship-manning and crew-management agencies serving overseas shipping companies can also open such accounts. Credits are restricted to inward remittances from the overseas principal, and debits cover ordinary business expenses like crew management.
What it means for you
Banks can now offer a new product to ship-manning agencies, but must ensure accounts are non-interest bearing and no credit facilities are extended against them. Reserve requirements apply, and no EEFC facility is allowed. This expands the scope of permissible foreign currency accounts under FEMA, potentially increasing fee-based income for banks.
What you must do
- Update internal FEMA compliance checklists to include ship-manning/crew agencies as eligible entities for foreign currency accounts.
- Ensure account opening forms and agreements specify that accounts are non-interest bearing and valid only during the agreement period.
- Train staff to verify that credits come only via inward remittances from the overseas principal and debits are for ordinary business expenses.
- Monitor that no fund-based or non-fund-based credit facilities are granted against these accounts.
- Report these accounts in regulatory returns as per existing reserve requirement norms.
Who it affects
AD Category-I banks, Ship-manning and crew-management agencies in India, Overseas shipping companies using these agencies
Can these accounts earn interest?
No, the circular explicitly states the accounts must be non-interest bearing.
What happens if the agreement with the overseas principal expires?
The account can only be maintained during the validity period of the agreement. Once it expires, the account must be closed or dealt with as per FEMA guidelines.
Are these accounts subject to reserve requirements?
Yes, banks must meet the prescribed Reserve Requirements (like CRR/SLR) on balances held in these accounts.