Master Direction – Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange Houses (Updated as on December 22, 2022)
UR
- Applies toBanks that handle foreign money
- StatusIn force
- RBI text changedRBI updated this document on October 01, 2026. BankPulse is re-reading it. BankPulse checked 38 points against RBI's new text on 11 October 2026. 37 stand. 1 are marked below and are being re-read.
- IssuedJan 04, 2016
- Amendmentsnone tracked
- Length38 points in 4 sections · 4 min read
The four dates on this rule
- PublishedJan 04, 2016The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNot statedNot stated separately in this document. Read the rule itself before you assume a start date.
- Time to get readyNot statedCannot be worked out until the day it starts to apply is known.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Numbers to remember
| Rs.15,00,000 | Trade transactions through these accounts are capped at Rs.15,00,000 each. RBI Para 3 |
| five days | Under the DDA procedure, funds may sit for at most five days before transfer. RBI Para 4 |
| three months | A draft drawn by an exchange house is valid for only three months. RBI Para 4 |
| three years | An exchange house under three years old must give collateral worth 7 days' drawings. RBI Para 4 |
| six months | Banks must inspect each exchange house's vostro account every six months. RBI Para 8 |
What it says
How firm is each point
Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
Our reading — BankPulse read RBI’s paragraph and shortened it. The paragraph is the authority, not this line.
Needs judgement — RBI leaves this to the bank to settle, so nobody can give you a fixed number here.
Must know
1. What this document covers
This rulebook covers how banks run vostro accounts for non-resident exchange houses.
2. Twenty arrangements trigger an audit
Once a bank reaches twenty such arrangements, it must get an external audit of its systems.
3. Board must approve more arrangements
Based on a satisfactory audit, the bank's Board may approve more such arrangements.
4. Which banks may open these
Only AD Category-I banks may open Rupee or foreign currency vostro accounts for exchange houses.
5. Trade payments capped
Trade transactions through these accounts are capped at Rs.15,00,000 each.
BankPulse example. A customer wants to send Rs.18,00,000 through an exchange house for a trade payment. Only Rs.15,00,000 of it may go through this account; the rest needs a different channel.
6. No overdrafts on these accounts
These accounts must run on credit only, with no overdraft allowed.
7. One vostro account per arrangement
Each arrangement needs its own separate Rupee vostro account.
8. Funds cannot move elsewhere
Funds in these accounts cannot convert or transfer to other banks or accounts.
9. 300 drawee branches allowed
A cap of 300 drawee branches applies unless online monitoring is in place.
10. No donations through exchange houses
Donations to charities may never be routed through exchange houses.
11. No cash payouts allowed
Cash disbursement of remittances received under these arrangements is never allowed.
12. Receiving bank must complete KYC
The receiving bank must complete KYC checks before crediting a non-KYC account.
13. Transfers must be flagged
A sending bank must flag direct account transfers as foreign inward remittances.
14. Suspicious transfers go to FIU-IND
The receiving bank must report suspicious transfers to FIU-IND, naming the sending bank.
15. DDA float capped
Under the DDA procedure, funds may sit for at most five days before transfer.
16. Drafts valid for three months
A draft drawn by an exchange house is valid for only three months.
17. Newer houses need more collateral
An exchange house under three years old must give collateral worth 7 days' drawings.
18. Every tie-up needs RBI approval
Each foreign currency tie-up with an exchange house needs its own RBI approval.
19. No C-category branch drafts
Exchange houses may not draw drafts on C-category branches.
20. Separate foreign currency vostro account
A separate foreign currency vostro account is needed for these drafts.
21. Minimum deposit is USD 50,000
Exchange houses must keep a deposit of at least USD 50,000 with the bank.
22. Annual compliance report required
Banks must get an annual compliance report from each exchange house's auditors.
23. Unusual features go to RBI
Unusual features in these arrangements must be reported to RBI at once.
24. No outside back-office providers
Exchange houses cannot use outside firms to issue drafts or stop-payment orders.
25. Name change needs RBI approval
RBI approval is needed if an exchange house changes its name or constitution.
26. Half-yearly self-inspection required
Banks must inspect each exchange house's vostro account every six months.
27. Board reviews findings every year
Inspection findings must go into the annual review sent to the Board.
Do it
1. First arrangement needs RBI approval
A bank must apply to its RBI regional office before its first arrangement with an exchange house.
2. Board approval past 300 branches
Banks need Board approval before adding drawee branches beyond 300.
3. NRE accounts may be credited
Payments to NRE Rupee accounts of NRIs are permitted through this route.
4. School fees may be paid
School and college fees for NRIs in India may be paid through these accounts.
5. Hospital bills may be paid
Hospital bills for NRIs and FATF-country nationals in India may be paid this way.
6. Utility bills may be paid
Electricity, water and internet bills in India may be paid through these accounts.
7. Loan EMIs may be paid
Loan EMI payments to Indian banks and finance companies are permitted this way.
8. Non-DDA needs weekly statements
Under Non-DDA, the exchange house sends weekly statements of drawing and funding.
9. Speed remittance uses SWIFT details
Under speed remittance, the exchange house sends payment details by SWIFT or internet.
10. Deposit reviewed every six months
The bank must review deposit adequacy every six months.
Background
1. Balances earn no interest
Money sitting in these vostro accounts earns no interest.