What changed
Previously, opening escrow or special accounts for non-resident acquirers required prior RBI approval. Now, AD Category-I banks can open these accounts directly, without RBI nod, for share acquisitions via open offers, delisting, or exit offers under SEBI regulations.
What it means for you
This gives banks more operational flexibility to service non-resident clients in M&A transactions. Banks must ensure strict compliance with SEBI SAST regulations, KYC norms, and the attached terms—accounts must be non-interest bearing, no fund/non-fund facilities allowed, and balances repatriable only after deal completion.
What you must do
- Update internal policies to allow AD Category-I banks to open escrow/special accounts for non-resident corporates without prior RBI approval.
- Ensure all such accounts are non-interest bearing and comply with SEBI SAST or applicable regulations.
- Verify KYC compliance and that no fund/non-fund facilities are extended against account balances.
- Monitor repatriation of residual balances only after all acquisition formalities are completed, with exchange risk borne by the overseas acquirer.
Who it affects
AD Category-I banks, Non-resident corporate acquirers, Indian companies undergoing open offers, delisting, or exit offers
Can we open these accounts for any non-resident corporate?
Yes, for non-resident corporates involved in open offers, delisting, or exit offers under SEBI regulations, subject to the terms in the circular.
Are these accounts interest-bearing?
No, both escrow and special accounts must be non-interest bearing as per the RBI terms.
What happens to the balance if the deal fails?
The AD bank must ensure repatriation of the balance only after all formalities are completed; if the deal does not materialize, the balance should be handled per RBI guidelines.