Master Circular on Vostro Accounts for Non-Resident Exchange Houses

What changed

This Master Circular consolidates existing instructions on opening and maintaining rupee/foreign currency vostro accounts for non-resident exchange houses into a single document. It includes a sunset clause, meaning it will be withdrawn and replaced by an updated version on July 1, 2014. The circular outlines procedures for Rupee Drawing Arrangements (RDAs) and Foreign Currency Drawing Arrangements, with specific rules for first-time approvals and ongoing monitoring.

What it means for you

For banks, this circular streamlines compliance by centralizing all related instructions, reducing the need to refer to multiple circulars. It mandates prior RBI approval for first-time RDAs with exchange houses from specified regions, and requires a detailed external audit once a bank reaches 20 RDAs before adding more. Banks must ensure robust internal controls and monitoring to avoid regulatory issues, as the circular emphasizes reporting and audit requirements.

What banks were required to do at the time

• Obtain prior RBI approval before entering into first Rupee Drawing Arrangement with a non-resident exchange house from Gulf, Hong Kong, Singapore, Malaysia, or FATF-compliant countries.
• Once total RDAs reach 20, cause a detailed external audit of internal systems. Only after a satisfactory audit report may the Board authorize additional arrangements.
• File a copy of the Board Note together with Board Resolution with RBI for new RDAs after the 20th arrangement, and inform RBI immediately of any new arrangements.
• Ensure all vostro accounts are maintained per the memorandum, with proper monitoring and reporting as per annexes.

Who it affects

AD Category-I banks, Non-resident exchange houses from Gulf, Hong Kong, Singapore, Malaysia, and FATF-compliant countries, RBI's foreign exchange department