Master Circular on Vostro Accounts for Non-Resident Exchange Houses

What changed

This master circular consolidates all prior instructions on the memorandum for opening and maintaining rupee/foreign currency vostro accounts of non-resident exchange houses into a single document. It includes a sunset clause, meaning it would be withdrawn and replaced by an updated version on July 1, 2012.

What it means for you

Banks must follow these consolidated guidelines for vostro accounts of exchange houses from Gulf countries, Hong Kong, Singapore, and Malaysia. The circular emphasizes prior RBI approval, due diligence on exchange houses, and optional but recommended legal documentation for drawing arrangements.

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 and valid licenses from local monetary authorities.
• Ensure comprehensive legal documentation for drawing arrangements, even though registration is optional, and confirm all partners are jointly and severally liable.
• Adhere to the sunset clause and prepare for the updated master circular effective July 1, 2012.

Who it affects

AD Category-I banks, Non-resident exchange houses in Gulf countries, Hong Kong, Singapore, and Malaysia (for Malaysia only under Speed Remittance Procedure)