RBI eases float and collateral norms for exchange house vostro accounts
Current · Source: Reserve Bank of India · RBI/2008-09/304 · issued 02 Dec 2008 · ~1 min read
Quick answerRBI has increased the maximum float period for DDA accounts from 3 to 5 days and reduced the collateral requirement for non-DDA procedures from 30 days to 10 days, offering more flexibility to exchange houses.
The rule, in the simplest words
Exchange houses now have up to 5 days (instead of 3) to move money from a DDA account (a special account for collecting payments) to the bank.
For non-DDA procedures (another way to handle payments), the collateral (security deposit) needed is reduced from 30 days' worth to 10 days' worth.
The 10-day collateral can be either cash or a bank guarantee (a promise from a bank to pay if needed), not both.
Banks must update their agreements with exchange houses to show the new 5-day float period and the lower 10-day collateral rule.
How it plays out — a real example
A branch operations officer in Mumbai reviews a vostro account agreement for an exchange house. She changes the float period from 3 to 5 days, giving the exchange house more time to transfer daily collections. She also reduces the collateral requirement from a 30-day equivalent to a 10-day cash deposit, easing the exchange house's liquidity burden.
What changed
The maximum float period for funds in the DDA account has been extended from three to five days, giving exchange houses more time to transfer collections. For non-DDA procedures, the collateral requirement has been reduced from a combined 30-day equivalent (15 days cash deposit plus 15 days bank guarantee) to a single 10-day equivalent, which can be held as either cash deposit or bank guarantee.
What it means for you
Banks can now offer exchange houses a longer float period, potentially improving client relationships and operational ease. The reduced collateral requirement lowers the liquidity burden on exchange houses, which may encourage more business through vostro accounts. However, banks must carefully assess the credit risk of exchange houses under the new, less stringent collateral norms.
What you must do
Update vostro account agreements to reflect the new maximum float period of five days for DDA accounts.
Revise collateral requirements for non-DDA procedures to a 10-day equivalent, accepting either cash deposit or bank guarantee.
Communicate these changes to all relevant branches and constituents handling exchange house accounts.
Review risk management policies to ensure adequate safeguards under the relaxed collateral norms.
Who it affects
AD Category-I banks, Non-resident exchange houses, Branches handling vostro accounts
❓ Common questions
What is the new maximum float period for DDA accounts?
The maximum float period has been increased from three days to five days, as per the revised instructions.
How has the collateral requirement changed for non-DDA procedures?
The collateral requirement has been reduced from a total of 30 days (15 days cash deposit plus 15 days bank guarantee) to a single 10-day equivalent, which can be either cash deposit or bank guarantee.
📜 Read the original circular — full text as issued by RBI
RBI/2008-09/304
A. P. (DIR Series) Circular No. 37
A. P. (FL/RL Series) Circular No. 02
December 02, 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. The existing instructions have been reviewed and modified as under :
(a) In terms of para C 1 (v) of Annex - I to the abovementioned circular, the Exchange House has the responsibility of arranging for the transfer of the sum collected on any particular day to the DDA account. Further, the float period for the funds with DDA account will be decided by the drawee bank in consultation with the Exchange House subject to a maximum of three days.
With a view to give more flexibility to Exchange Houses, the maximum float period has been enhanced from three days to five days.
(b) In terms of para C 2 of Annex - I to the abovementioned circular, under Non-DDA procedure, the Exchange House shall keep a cash deposit of USD equivalent to 15 days drawings on moving average basis in India or abroad. The Exchange House shall also furnish bank guarantee from an international bank of repute for an equivalent amount.
In view of the reduction in time lag between issuance of drafts and payment to the beneficiaries, the period for the collateral requirement has been reduced from 30 days (viz. cash deposit and bank guarantee each for an amount equivalent to 15 days drawings on moving average basis in India or abroad) to 10 days, which can be kept either in the form of cash deposit or a bank guarantee from an international bank of repute.
3. The other instructions issued vide the abovementioned circular shall remain unchanged.
4. AD Category - I banks may bring the contents of this circular to the notice of their constituents concerned.
5.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/2008-09/304 · issued 02 Dec 2008. The plain-English explanation above is BankPulse’s own independent summary.
Communicate these changes to all relevant branches and constituents handling exchange house accounts.
💰 Credit
Revise collateral requirements for non-DDA procedures to a 10-day equivalent, accepting either cash deposit or bank guarantee.
Review risk management policies to ensure adequate safeguards under the relaxed collateral norms.
📜 Compliance
Update vostro account agreements to reflect the new maximum float period of five days for DDA accounts.
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 Compliance officer at a bank this circular applies to (AD Category-I banks, Non-resident exchange houses, Branches handling vostro accounts), your first concrete step on “RBI eases float and collateral norms for exchange house vostro accounts” is: “Update vostro account agreements to reflect the new maximum float period of five days for DDA accounts.” (RBI issued this 02 Dec 2008).
Circular: RBI/2008-09/304 -- RBI eases float and collateral norms for exchange house vostro accounts
Issued: 02 Dec 2008
Action required: Update vostro account agreements to reflect the new maximum float period of five days for DDA accounts.
Action required: Revise collateral requirements for non-DDA procedures to a 10-day equivalent, accepting either cash deposit or bank guarantee.
Action required: Communicate these changes to all relevant branches and constituents handling exchange house accounts.
Action required: Review risk management policies to ensure adequate safeguards under the relaxed collateral norms.
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
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
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=4678&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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