RBI expands permitted payments via exchange house vostro accounts
Current · Source: Reserve Bank of India · RBI/2012-13/394 · issued 24 Jan 2013 · ~2 min read
Quick answerRBI has modified items 7 and 8 of the permitted transactions list for vostro accounts of non-resident exchange houses, now explicitly allowing payments to medical institutions and hotels for specified foreign nationals and NRIs.
The rule, in the simplest words
Banks can now use vostro accounts (special bank accounts for foreign exchange houses) to pay hospitals and hotels for certain people.
The people who can get these payments are: NRIs (Indians living abroad), their family, and people from Gulf countries, Hong Kong, Singapore, and Malaysia.
Payments to hospitals are for medical treatment, and payments to hotels are for their stay.
Banks must update their rules and train staff to follow these new rules correctly.
How it plays out — a real example
A forex & trade-finance officer in Mumbai sees a payment request from a non-resident exchange house's vostro account to pay a local hotel for a guest from Singapore. She checks the new rules and confirms the guest is a national of Singapore, so she processes the payment smoothly, making the hotel and the exchange house happy.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2012-13/394
A. P. (DIR Series) Circular No. 81
January 24, 2013
To,
All Authorised Dealer Category - I Banks
Madam / Sir,
Memorandum of Instructions for Opening and Maintenance of Rupee / Foreign
Currency Vostro Accounts of Non-resident Exchange Houses
Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to Part (B) of Annex-I to the A.P. (DIR Series) Circular No. 28 [A. P. (FL/RL Series) Circular No. 02] dated February 6, 2008 on the captioned subject, as amended from time to time.
2. Items No. 7 and 8 under Part (B) Permitted Transactions of Annex-I to the above mentioned circular have been modified and the said modified items may be read as under:
Payments to medical institutions and hospitals in India, for medical treatment of NRIs / their dependents and nationals of Gulf Countries, Hong Kong, Singapore and Malaysia.
Payments to hotels by nationals of Gulf Countries, Hong Kong, Singapore and Malaysia / NRIs for their stay.
3. All other instructions issued vide A.P. (DIR Series) Circular No. 28 [A. P. (FL/RL Series) Circular No. 02] dated February 6, 2008, as amended from time to time will remain unchanged.
4. AD Category - I banks may bring the contents of this circular to the notice of their constituents concerned.
5. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/394 · issued 24 Jan 2013. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (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), your first concrete step on “RBI expands permitted payments via exchange house vostro accounts” is: “Update vostro account operating instructions to reflect the revised items 7 and 8 for permitted transactions.” (RBI issued this 24 Jan 2013).
Circular: RBI/2012-13/394 -- RBI expands permitted payments via exchange house vostro accounts
Issued: 24 Jan 2013
Action required: Update vostro account operating instructions to reflect the revised items 7 and 8 for permitted transactions.
Action required: Train staff handling vostro accounts on the new eligible payees (medical institutions, hotels) and eligible beneficiaries (NRIs, dependents, and specified nationals).
Action required: Communicate the changes to all relevant constituents, including exchange houses and their corporate clients.
Action required: Ensure all transactions under these items comply with FEMA Section 10(4) and 11(1) and any other applicable laws.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7826&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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