What changed
Previously, Indian parties needed prior RBI permission to open a Foreign Currency Account abroad for overseas direct investments. Now, they can do so without prior approval, subject to conditions: the Indian party must be eligible for overseas investments under FEMA, the host country must require a designated account, and the account must be maintained per host country laws. Dividends and other entitlements must be repatriated within 30 days, and annual statements with auditor certification must be submitted to the AD bank.
What it means for you
This liberalisation gives Indian parties greater operational flexibility for overseas direct investments by removing the need for case-by-case RBI approval. Banks must ensure customers comply with conditions, including repatriation timelines and annual reporting. It reduces administrative burden on both RBI and AD banks, but requires diligent monitoring of account usage and compliance.
What you must do
- Update internal procedures to allow Indian parties to open Foreign Currency Accounts abroad without prior RBI approval, subject to eligibility and host country regulations.
- Ensure customers submit annual statements of debits and credits with a statutory auditor's certificate confirming compliance with host country laws and FEMA.
- Monitor repatriation of dividends and other entitlements within 30 days of credit to the account.
- Close the account within 30 days of disinvestment from the joint venture or wholly owned subsidiary.
Who it affects
Category-I Authorised Dealer Banks, Indian parties making overseas direct investments, Compliance departments of banks handling FEMA transactions
Do Indian parties still need RBI approval to open a Foreign Currency Account abroad for overseas investments?
No, prior RBI approval is no longer required. The Indian party can open the account if it is eligible for overseas direct investments under FEMA and the host country mandates such an account.
What are the reporting requirements for the Foreign Currency Account?
The Indian party must submit yearly details of debits and credits to the designated AD bank, along with a certificate from the statutory auditor confirming compliance with host country laws and FEMA regulations.
What happens to dividends received in the Foreign Currency Account?
Dividends and other entitlements from the subsidiary must be repatriated to India within 30 days from the date of credit to the account.