Master Circular on Vostro Accounts for Non-Resident Exchange Houses

What changed

This master circular consolidates all existing instructions on opening and maintaining rupee/foreign currency vostro accounts for non-resident exchange houses into a single document. It includes a sunset clause, meaning it will be withdrawn on July 1, 2011, and replaced by an updated version. The requirement for registering the agreement between banks and exchange houses has been made optional, though comprehensive legal documentation is still required.

What it means for you

Banks must now refer to this single master circular for all guidelines on vostro accounts for non-resident exchange houses, simplifying compliance. The optional agreement registration reduces administrative burden, but banks must still ensure robust legal documentation and due diligence. The sunset clause signals that these guidelines are temporary and will be updated, so banks should stay alert for the revised circular.

What banks were required to do at the time

• Obtain prior RBI approval before opening or maintaining rupee/foreign currency vostro accounts for non-resident exchange houses.
• Conduct thorough due diligence on exchange houses, including verifying their financial standing, valid licenses, and authority to transact money transfer business.
• Ensure comprehensive legal documentation for the arrangement, even though agreement registration is optional.
• Maintain proper records of power of attorney and specimen signatures of exchange house officials.
• Monitor the sunset clause and prepare for the updated master circular expected by July 1, 2011.

Who it affects

AD Category-I banks, Non-resident exchange houses from Gulf countries, Hong Kong, and Singapore, RBI compliance departments