RBI Relaxes Cap on Drawee Branches for Rupee Drawing Arrangements
Current · Source: Reserve Bank of India · RBI/2008-09/139 · issued 22 Aug 2008 · ~2 min read
Quick answerRBI now permits AD Category-I banks to designate over 300 drawee branches under Rupee Drawing Arrangements, provided branches are on Core Banking Solution with real-time funds monitoring. Prior RBI approval for tie-ups with Exchange Houses remains mandatory.
The rule, in the simplest words
Banks can now have more than 300 branches that pay out money to people in India from abroad (called 'drawee branches'), but only if those branches use a computer system that tracks money in real time (Core Banking Solution).
Before adding more than 300 branches, the bank's top leaders (board) must say 'yes' and tell the RBI (India's central bank) right away.
Banks still need to get permission from RBI before making a new deal with a foreign exchange company (Exchange House).
All extra branches must have online monitoring to stop hidden overspending (concealed overdrafts) in the foreign company's account.
How it plays out — a real example
A branch operations officer in Indore, Priya, works for a bank that wants to add 50 more branches to its network for sending money from abroad. She checks that all new branches use the bank's computer system (Core Banking Solution) so she can see the money balance instantly. After her bank's board approves the plan, she informs RBI immediately, knowing she can now serve more non-resident Indians without breaking any rules.
What changed
Earlier, a prudential cap of 300 drawee branches was imposed on Rupee Drawing Arrangements with Exchange Houses. The new circular removes this numerical ceiling, allowing banks to exceed 300 branches if all such branches operate under Core Banking Solution with online monitoring to prevent concealed overdrafts. Banks must obtain board approval before crossing the 300-branch threshold and inform RBI immediately.
What it means for you
Banks can now expand their RDA network beyond the previous 300-branch limit, enabling wider remittance coverage for non-resident Indians. However, this liberalization comes with stricter operational discipline—only CBS-enabled branches with real-time fund tracking qualify. The move signals RBI's confidence in banks' risk management systems while maintaining oversight through mandatory board approval and unchanged tie-up approval requirements.
What you must do
Obtain board approval before increasing drawee branches beyond 300 under any RDA tie-up.
Ensure all additional drawee branches are on Core Banking Solution with online funds monitoring to avoid concealed overdrafts.
Inform RBI immediately after board approval for branch expansion beyond 300.
Continue to seek prior RBI approval for new tie-ups with Exchange Houses as per existing instructions.
Who it affects
AD Category-I banks handling Rupee Drawing Arrangements, Non-resident Exchange Houses with vostro accounts in India, Compliance and risk management teams of authorized dealer banks
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Can we now open unlimited drawee branches under RDA?
No, there is no explicit upper limit, but you must have board approval and ensure all branches beyond 300 are on Core Banking Solution with real-time monitoring. RBI must be informed immediately after board approval.
Does this circular change the requirement for RBI approval of Exchange House tie-ups?
No, the requirement for prior RBI approval for tie-ups with Exchange Houses remains unchanged. Only the cap on drawee branches has been relaxed.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
RBI’s words: “revise certain instructions contained in the Memorandum”
📜 Read the original circular — full text as issued by RBI
RBI/2008-09/139
A. P. (DIR Series) Circular No. 11
A. P. (FL/RL Series) Circular No. 01
August 22, 2008
To,
All Authorized Dealer Category - I Banks
Madam / Sir,
Memorandum of Instructions for Opening and Maintenance of Rupee / Foreign Currency Vostro Accounts of Non-resident Exchange Houses
Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to the Memorandum of Instructions for Opening and Maintenance of Rupee / foreign currency Vostro accounts of Non-resident Exchange Houses, issued vide A. P. (DIR Series) Circular No. 28 [A. P. (FL/RL Series) Circular No. 02] dated February 6, 2008.
2. In terms of Para A(4) (ix) of Annex-I to the said circular, the tie-up of an AD Category – I bank with an Exchange House is required to be approved by the Reserve Bank. A cap of 20 on the number of arrangements and 300 on the number of drawee branches has been prescribed by the Reserve Bank as a prudential measure, which may be relaxed by the Reserve Bank subject to the AD Category - I banks having sound risk management systems and on-line monitoring of funds position to avoid concealed overdrafts in the vostro accounts.
3. The instructions have since been reviewed and as a measure of further liberalization it has been decided to permit AD Category – I banks to designate drawee branches under Rupee Drawing Arrangements (RDA) beyond 300, provided such branches are under Core Banking Solution where on-line monitoring of funds position is ensured to avoid concealed overdrafts in vostro accounts, subject to the terms and conditions of Reserve Bank’s approval for the tie-up with an Exchange House (EH) and the instructions pertaining to Rupee Drawing Arrangements issued by the Reserve Bank from time to time. The AD Category - I banks should obtain necessary Board approval before increasing the number of drawee branches beyond 300 and inform the Reserve Bank immediately. However, the extant instructions on obtaining prior permission from the Reserve Bank for tie-ups with EHs remain unchanged.
4. The other instructions issued vide the abovementioned circular shall remain unchanged.
5. AD Category - I banks may bring the contents of this circular to the notice of their constituents concerned.
6. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions/ approvals, if any, required under any other law.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/139 · issued 22 Aug 2008. The plain-English explanation above is BankPulse’s own independent summary.
Obtain board approval before increasing drawee branches beyond 300 under any RDA tie-up.
Ensure all additional drawee branches are on Core Banking Solution with online funds monitoring to avoid concealed overdrafts.
Inform RBI immediately after board approval for branch expansion beyond 300.
📜 Compliance
Continue to seek prior RBI approval for new tie-ups with Exchange Houses as per existing instructions.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Branch Manager at a bank this circular applies to (AD Category-I banks handling Rupee Drawing Arrangements, Non-resident Exchange Houses with vostro accounts in India, Compliance and risk management teams of authorized dealer banks), your first concrete step on “RBI Relaxes Cap on Drawee Branches for Rupee Drawing Arrangements” is: “Obtain board approval before increasing drawee branches beyond 300 under any RDA tie-up.” (RBI issued this 22 Aug 2008).
Circular: RBI/2008-09/139 -- RBI Relaxes Cap on Drawee Branches for Rupee Drawing Arrangements
Issued: 22 Aug 2008
Action required: Obtain board approval before increasing drawee branches beyond 300 under any RDA tie-up.
Action required: Ensure all additional drawee branches are on Core Banking Solution with online funds monitoring to avoid concealed overdrafts.
Action required: Inform RBI immediately after board approval for branch expansion beyond 300.
Action required: Continue to seek prior RBI approval for new tie-ups with Exchange Houses as per existing instructions.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4432&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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