What changed
Previously, NRO accounts could only be opened jointly with residents. Now, a non-resident individual can grant a Power of Attorney to a resident to operate the account, subject to specific restrictions. The resident PoA holder can make local rupee payments and remit the account holder's current income abroad after tax, but cannot repatriate other funds, make gifts, or transfer to another NRO account.
What it means for you
Banks must update their NRO account operating instructions to allow PoA-based operations within the defined limits. This simplifies compliance for non-residents managing Indian finances through a trusted resident, but banks need to ensure strict monitoring to prevent unauthorized repatriation or transfers. The circular reinforces existing FEMA deposit regulations with this specific operational flexibility.
What you must do
- Update internal NRO account policies to permit PoA operations as per the circular.
- Train staff on the allowed and prohibited transactions under PoA for NRO accounts.
- Implement monitoring mechanisms to ensure PoA holders do not repatriate funds except to the account holder or remit current income net of taxes.
- Communicate the new facility to existing and prospective NRO account holders and their PoA holders.
Who it affects
AD Category-I banks, Authorised banks, Non-resident individual NRO account holders, Resident Power of Attorney holders, Bank compliance and operations teams
Can a resident PoA holder transfer funds from the NRO account to another NRO account?
No, the circular explicitly prohibits transfer of funds from the NRO account to another NRO account by the resident PoA holder.
What remittances are allowed by the resident PoA holder from the NRO account?
The PoA holder can remit outside India only the current income of the non-resident account holder, net of applicable taxes. No other repatriation is permitted.
Does this circular require any amendment to existing FEMA regulations?
Yes, the circular states that necessary amendments to the Foreign Exchange Management (Deposit) Regulations, 2000 are being notified separately.