Advance Remittance for Import of Services: PSUs Exempted from Higher Limit
Current · Source: Reserve Bank of India · RBI/2009-10/175 · issued 05 Oct 2009 · ~2 min read
Quick answerRBI clarifies that the USD 500,000 advance remittance limit for service imports without bank guarantee does not apply to PSUs or government entities; they must still cap at USD 100,000 or get Finance Ministry approval.
The rule, in the simplest words
PSUs (public sector companies) and government entities can't use the higher USD 500,000 limit for advance remittance for service imports without bank guarantee.
PSUs and government entities must cap their advance remittance at USD 100,000 or get Finance Ministry approval.
Banks must update their systems to flag PSUs and government entities for the lower limit and require Finance Ministry approval for amounts above USD 100,000.
How it plays out — a real example
As a forex & trade-finance officer in Indore, I need to verify the entity type of a PSU before processing their advance remittance for service imports. If it's a PSU, I'll cap their limit at USD 100,000 or require Finance Ministry approval for any amount above that. This ensures that public sector entities face tighter scrutiny on upfront payments, reducing the risk of fund misuse.
What changed
RBI clarified that the increased advance remittance limit of USD 500,000 for service imports without bank guarantee, introduced in September 2008, is not available to public sector companies or government departments/undertakings. For these entities, the old USD 100,000 threshold remains, and any amount above that requires prior approval from the Ministry of Finance.
What it means for you
Banks must now apply two different limits for advance remittances for service imports: a higher USD 500,000 limit for private entities and a stricter USD 100,000 limit for PSUs and government bodies. This ensures that public sector entities face tighter scrutiny on upfront payments, reducing risk of fund misuse. Lenders need to update their compliance checks to distinguish between entity types when processing such remittances.
What you must do
Update internal systems to flag PSUs and government entities for the lower USD 100,000 advance remittance limit without bank guarantee.
Require Finance Ministry approval for any advance remittance above USD 100,000 for public sector companies or government departments.
Train staff to verify the entity type (private vs. public sector) before processing advance remittances for service imports.
Communicate this circular to all relevant customers and constituents handling service import payments.
Who it affects
Authorised Dealer Category-I Banks, Public Sector Companies, Government of India/State Government Departments and Undertakings, Importers of services making advance remittances
❓ Common questions
Does the USD 500,000 limit apply to all entities for advance remittance for service imports?
No, it applies only to private entities. Public sector companies and government departments/undertakings are still restricted to USD 100,000 without bank guarantee, and any amount above that needs Finance Ministry approval.
What should a bank do if a PSU requests an advance remittance of USD 200,000 for service imports?
The bank must not process it under the USD 500,000 limit. It should require the PSU to provide a bank guarantee or obtain prior approval from the Ministry of Finance, Government of India.
Are there any other conditions from the September 2008 circular that remain unchanged?
Yes, all other terms and conditions from A.P. (DIR Series) Circular No. 15 dated September 8, 2008, remain unchanged for all entities.
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/175
A.P. (DIR Series) Circular No.10
October 5, 2009
To
All Authorised Dealer Category - I Banks
Madam / Sir,
Foreign Exchange Management Act, 1999 –
Advance Remittance for import of Services
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P.(DIR Series) Circular No. 15 dated September 8, 2008, in terms of which the limit for advance remittance for all admissible current account transactions for import of services without bank guarantee was raised from USD 100,000 to USD 500,000 or its equivalent.
2. It is clarified that the increase in the limit for advance remittance for all admissible current account transactions for import of services without bank guarantee is not applicable for a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments.
3. In the case of a Public Sector Company or a Department/ Undertaking of the Government of India/ State Governments, approval from the Ministry of Finance, Government of India for advance remittance for import of services without bank guarantee for an amount exceeding USD 100,000 (USD One hundred thousand) or its equivalent would continue to be required.
4. All other terms and conditions specified in A.P. (DIR Series) Circular No. 15 dated September 8, 2008, shall remain unchanged.
5. AD – Category I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. The directions contained in this Circular have been issued under Section 10(4) and 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/2009-10/175 · issued 05 Oct 2009. The plain-English explanation above is BankPulse’s own independent summary.
Update internal systems to flag PSUs and government entities for the lower USD 100,000 advance remittance limit without bank guarantee.
📜 Compliance
Require Finance Ministry approval for any advance remittance above USD 100,000 for public sector companies or government departments.
Train staff to verify the entity type (private vs. public sector) before processing advance remittances for service imports.
Communicate this circular to all relevant customers and constituents handling service import payments.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (Authorised Dealer Category-I Banks, Public Sector Companies, Government of India/State Government Departments and Undertakings, Importers of services making advance remittances), your first concrete step on “Advance Remittance for Import of Services: PSUs Exempted from Higher Limit” is: “Update internal systems to flag PSUs and government entities for the lower USD 100,000 advance remittance limit without bank guarantee.” (RBI issued this 05 Oct 2009).
Circular: RBI/2009-10/175 -- Advance Remittance for Import of Services: PSUs Exempted from Higher Limit
Issued: 05 Oct 2009
Action required: Update internal systems to flag PSUs and government entities for the lower USD 100,000 advance remittance limit without bank guarantee.
Action required: Require Finance Ministry approval for any advance remittance above USD 100,000 for public sector companies or government departments.
Action required: Train staff to verify the entity type (private vs. public sector) before processing advance remittances for service imports.
Action required: Communicate this circular to all relevant customers and constituents handling service import payments.
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 03 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=5299&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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