What changed
RBI issued FEMA 10A/2014-RB on March 21, 2014, requiring banks to crystallize inoperative foreign currency deposits into rupees after 3 years of inactivity. For fixed-maturity deposits, conversion happens at the end of the third year from maturity; for no-fixed-maturity deposits, after a 3-month notice period. Depositors can later claim either the rupee proceeds or the foreign currency equivalent at the prevailing rate.
What it means for you
Banks must systematically identify and convert inoperative foreign currency deposits to rupees, reducing their foreign currency liability exposure. This aligns foreign currency account rules with the domestic Depositor Education and Awareness Fund Scheme, ensuring unclaimed funds are handled uniformly. Banks need to update systems to track inactivity periods and manage exchange rate risks during conversion.
What you must do
- Identify all foreign currency deposits (fixed and no fixed maturity) that have been inoperative for 3 years from maturity or last operation.
- For fixed-maturity deposits, convert balances to rupees at the end of the third year at the prevailing exchange rate.
- For no-fixed-maturity deposits, send a 3-month notice to the depositor's last known address before converting to rupees.
- Update internal systems to track inactivity periods and automate conversion processes.
- Inform customers about their right to claim either rupee proceeds or foreign currency equivalent at payment date.
Who it affects
All Category-I Authorised Dealer Banks, Depositors with inoperative foreign currency accounts, Bank operations and compliance teams
What triggers the crystallization of a fixed-maturity foreign currency deposit?
If the deposit remains inoperative for 3 years from its maturity date, the bank must convert the balance to rupees at the end of the third year at the prevailing exchange rate.
Can a depositor still claim the foreign currency amount after crystallization?
Yes, the depositor can choose to receive either the rupee proceeds (plus interest) or the foreign currency equivalent of those rupee proceeds at the rate on the payment date.
What is the notice requirement for no-fixed-maturity deposits?
Banks must give a 3-month notice to the depositor at their last known address before converting the deposit to rupees.