What changed
Earlier, AD Category-I banks needed prior RBI approval for every Rupee Vostro account opened for non-resident Exchange Houses under RDAs. Now, only the first arrangement with Exchange Houses from Gulf countries, Hong Kong, Singapore, and Malaysia requires prior approval; subsequent arrangements can be entered into subject to guidelines and must be reported immediately. Additionally, once a bank has 20 RDAs, it must get a detailed external audit of its internal systems; based on a satisfactory report, the board can authorize more arrangements, with a board note and resolution filed with RBI.
What it means for you
This gives banks more operational flexibility to expand Rupee Drawing Arrangements with Exchange Houses without repeated RBI approvals, speeding up business. However, banks must ensure robust internal systems and compliance, as the audit trigger at 20 RDAs and board authorization requirements add governance checks. The move likely aims to boost remittance flows from Gulf and select Asian countries while maintaining oversight.
What you must do
- Review your current Rupee Drawing Arrangements with non-resident Exchange Houses and identify if you need to file the first-time approval with RBI.
- Set up a process to immediately inform RBI of any new RDA entered into after the first approval.
- Monitor the total number of RDAs; when it reaches 20, commission a detailed external audit of internal systems.
- Prepare a board note and resolution for authorizing more than 20 RDAs, and file copies with RBI.
- Update internal compliance manuals and train staff on the revised approval and reporting requirements.
Who it affects
AD Category-I banks, Non-resident Exchange Houses from Gulf countries, Hong Kong, Singapore, and Malaysia, Bank compliance and operations teams handling cross-border remittances
Do we need RBI approval for every new Rupee Vostro account under RDA now?
No. Only the first arrangement with an Exchange House from the specified regions needs prior RBI approval. Subsequent arrangements only require immediate intimation to RBI, subject to guidelines.
What happens when our bank reaches 20 Rupee Drawing Arrangements?
You must arrange a detailed external audit of your internal systems. If the audit report is satisfactory, your board can authorize more arrangements, and you must file a board note and resolution with RBI.
Does this circular affect existing RDAs entered before January 30, 2012?
No. All other instructions from the earlier circular (A.P. DIR Series No. 28 dated Feb 6, 2008) remain unchanged. This circular only modifies the prior approval requirement for new RDAs.