What changed
Items 7 and 8 under Part (B) of Annex-I to the earlier circular (A.P. DIR Series No. 28 dated Feb 6, 2008) have been revised. The new item 7 permits payments to medical institutions/hospitals for treatment of NRIs, their dependents, and nationals of Gulf countries, Hong Kong, Singapore, and Malaysia. The new item 8 permits payments to hotels by those same nationals and NRIs for their stay.
What it means for you
Banks can now process a wider range of payments through vostro accounts of non-resident exchange houses, specifically covering medical and hotel expenses for a defined set of foreign nationals. This simplifies cross-border fund flows for healthcare and tourism, reducing the need for separate remittance channels. AD Category-I banks must update their internal guidelines and ensure compliance with FEMA provisions.
What you must do
- Update vostro account operating instructions to reflect the revised items 7 and 8 for permitted transactions.
- Train staff handling vostro accounts on the new eligible payees (medical institutions, hotels) and eligible beneficiaries (NRIs, dependents, and specified nationals).
- Communicate the changes to all relevant constituents, including exchange houses and their corporate clients.
- Ensure all transactions under these items comply with FEMA Section 10(4) and 11(1) and any other applicable laws.
Who it affects
AD Category-I banks handling vostro accounts of non-resident exchange houses, Non-resident exchange houses with rupee/foreign currency vostro accounts in India, NRIs and nationals of Gulf countries, Hong Kong, Singapore, and Malaysia using these accounts, Medical institutions and hotels receiving payments through these channels
Which specific nationalities are covered under the new payment permissions?
The circular explicitly covers nationals of Gulf countries, Hong Kong, Singapore, and Malaysia, in addition to NRIs and their dependents.
Do these changes affect any other instructions from the 2008 circular?
No, all other instructions from the 2008 circular and its amendments remain unchanged. Only items 7 and 8 under Part (B) have been modified.
What legal authority does this circular derive from?
The directions are issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999, and are without prejudice to any other required permissions or approvals.