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FAIR PRACTICES CODE FOR DEBT COLLECTION
The Bank is committed to following fair practices especially with regard to collection and recovery of its dues from its borrowers (hereinafter referred to as “customer”). At the same time the Bank is also committed to follow fair practices in this regard to foster customer confidence and to retain the image of the Bank as an institution, which is fair in its dealings even with defaulters.

Preamble: This Code for Collection of Dues and Repossession of Security (CDRS) is a non-statutory code issued on voluntary basis. Bank adopts this Code for Collection of Dues and Repossession of Security. It lays down guidelines to have fairness and transparency in the collection, recovery and repossession of security.

Applicability: It applies to the Bank and the agents engaged by it for the purpose of collection, recovery and repossession of securities.

Dues Collection Policy Statement: Although the Bank is committed to collection /recovery of its dues and repossession of securities, the dignity of and respect for the customer is central to the Debt Collection Policy. Bank’s dues collection policy is built on courtesy, fair treatment and persuasion. The bank shall not follow policies, which are unduly coercive in collection of dues.

Security Repossession Policy Statement: The Bank’s Security Repossession Policy aims at recovery of dues in the event of default and is not aimed at whimsical deprivation of the property. The Bank shall resort to repossession of the securities only when the collection/ recovery of dues is not forthcoming in spite of request made and the policy for repossession shall be in accordance with the terms and conditions of the loan documents and within the legal framework. The policy recognises fairness and transparency in repossession, valuation and realisation of securities.

General Guidelines: We will follow collection of dues and security repossession policy in consonance with the law. The policy will be displayed on our website and a copy of the same will be made available at our branch for perusal.All the members of the staff or any person authorised to represent the Bank in collection/recovery of dues and/or Repossession of Securities shall follow the guidelines as set out below:
1. Whenever we give loans, we will explain to you the repayment schedule viz. amount, tenure and periodicity of repayment. However, if you do not adhere to the repayment schedule, a defined process in accordance with the laws of the land will be followed for recovery of dues.
2. We will have a Board approved policy for Collection of Dues and Security Repossession as also appointment of Recovery Agents.
3. All relevant laws, regulations, guidelines and conditions of approval, licensing or registration will be taken into account while appointing Recovery Agents.
4. We will ensure that our Recovery Agents are properly trained to handle their responsibilities with care and sensitivity. We will also ensure that they do not exceed their brief.
5. Our collection policy is built on courtesy, fair treatment and persuasion. We believe in fostering customer confidence and long-term relationship.
6. We will provide you with all the information regarding your dues and will endeavour to give sufficient notice for payment of dues.
7. We will have a system of checks before passing on a default case to recovery agencies so that you are not inconvenienced on account of lapses on our part.
8. We will write to you when we initiate recovery proceedings against you and will inform you of the name of the recovery agency / agent, to whom your case has been assigned as also their address and telephone numbers.
9. We will provide details of the recovery agency firms / companies engaged by us on our website.
10. We will also make available, on request, details of the recovery agency firms / companies relevant to you at our branch.
11. Our staff or any person authorized to represent us in collection of dues and / or security repossession will identify himself / herself and produce the authority letter issued by us and upon request show you his / her identity card issued by the bank or under authority of the bank.
12. All the members of our staff or any person authorised to represent us in collection and / or security repossession would follow the guidelines set out below:
  - You would be contacted ordinarily at the place of your choice and in the absence of any specified place at the place of your residence and if unavailable at your residence, at the place of business / occupation.
  - Their identity and authority to represent us would be made known to you.
  - Your privacy would be respected.
  - Interaction with you would be in a civil manner.
  - Normally our representatives will contact you between 07.00 hrs and 19.00 hrs, unless the special circumstances of your Code of Bank’s Commitment to Customers – January 2018 business or occupation require otherwise.
  - Your requests to avoid calls at a particular time or at a particular place would be honoured as far as possible.
  - Time and number of calls and contents of conversation would be documented.
  - All assistance would be given to resolve disputes or differences regarding dues in a mutually acceptable and in an orderly manner.
  - During visits to your place for dues collection, decency and decorum would be maintained. Our officials / agents will not resort to intimidation or harassment of any kind, either verbal or physical against any person, including acts intended to humiliate publicly or intrude the privacy of your family members, referees and friends, making threatening and anonymous calls or making false and misleading representations. However, it is your responsibility to keep updating your contact details. In case the bank is unable to contact you at the details provided, the bank will access information available from public sources and approach your friends / relatives to trace you.
  - Inappropriate occasions such as bereavement in the family or other important family functions like marriages would be avoided for making calls / visits to collect dues.
We will investigate any complaint from you about unfair practices of our recovery agent
April 12, 2020
TYPES OF CREDIT FACILITIES IN BANKS
Lending is an important activity of the banking industry. Bank invests public deposits in the form of lending and earns a profit. The quality of the advances indicates the bank’s image in the market. A banker should have a thorough knowledge of the requirement of the customer and should be in a position to cater to the needs of the customer. A credit facility is an agreement with the bank that enables a person or organization to take credit or borrow money when it is needed. The business of lending is carried on by the bank by offering various credit facilities to its customer. Based on security bank credit can be classified into two types.
1. Secured Advance: The advance which is secured by primary or collateral security is called Secured Advances. In the event of a loan default, the lender can take possession of the asset and use it to cover the loan. e.g.Business loan, housing loan, etc
2. Unsecured Advances: Unsecured advances don’t have assets either primary or collateral. These are also called clean advances. Unsecured loans rely solely on the borrower’s credit history and his income to qualify for the loan. e.g.- Credit Card, Clean personal loan, Education loan (small), etc.
All types of credit facilities may be classified into two groups based on fund outflow:

1. Fund Based Credit

2. Non-Fund Based Credit

1. Fund Based Credit: Fund Base Credit is the credit facility that involves the direct outflow of the Bank’s fund to the borrower. Various types of Fund Based Credit facilities are as follows:-

A) Loan: A term/demand loan is simply a loan provided for meeting the capital expenditure need & business purposes that need to be paid back within a specified time frame along with interest. Loans are given for the purchase of machinery, equipment, or any fixed assets for starting a business or fulfilling personal needs. Repayment Schedule, period of the loan, mode of disbursement, rate of interest & other terms are predetermined terms.

The loan which is repaid for up to three years is called ‘Demand Loan’ & If the repayment schedule is more than three years is called ‘Term Loan’. Loans can be classified into three types based on repayment period:-

i. Short Term Loan: Usually short-term loans are repayable within one year.

ii. Medium Term Loan: It is generally repayable between one and three years.

iii. Long Term Loan: It is repayable in more than three years.

B) Cash Credit: For running the business, a borrower needs working capital to meet day-to-day expenses, Stock, and book debt. It refers to a credit facility in which borrowers can borrow any time within the agreed limit for a certain period for their working capital need. It is a running account facility where credit and debit both are permitted. It is secured by way of Hypothecation of Stock (goods), Debtors (Book Debts), and all other current Assets of the business generated during the business. Cash credit can also be secured by way of mortgage of immovable properties (as collateral security).

C) Over Draft: An overdraft allows a current account holder to withdraw more than their credit balance up to a sanctioned limit. An overdraft may be permitted without any security as a ‘clean overdraft’ for temporary periods to enable the borrower to tide over some emergent financial difficulty. ‘Secured overdraft’ facility is secured by way of Mortgage of immovable properties and pledge of F.D., Bonds, Shares securities, Gold & silver and all other current assets of the business generated during the business.

D)Credit Card: Credit cards serve many useful functions, including the ability to pay for purchases when you don’t have cash on hand. The credit card issuer essentially loans you the money to make the purchase, and you will be able to repay that loan at a later date while being charged a certain interest rate. The credit limit of the Credit Card depends upon the credit history and regular income of the cardholder.

E) Bridge Loan: Loans given to businesses that might need instant cash flow to finance a project. Bridge loans are normally obtained while the borrower is waiting for long-term financing to go through. These loans are repaid out of the amount of term loan sanctioned or the fund raised in the capital market.

F) Composite Loans: It is a loan that is granted for both buying capital assets and meeting working capital requirements. Composite Loans are usually given to an MSME Unit, cottage industry, artisan, farmers, etc.

G) Retail Loan: Retail loans are those loans that are given by the banks to meet personal needs, retail loans are smaller in size as compared to corporate loans. Home loans, Vehicle loans, Education loans, personal loans, Vacation purposes, medical purposes, etc are categorized as retail loans.

H) Bill Finance: Bill discounting is a major activity with some of the Banks. Under this type of lending, Bank takes the bill drawn by the borrower on his (borrower’s) customer and pays him immediately deducting some amount as discount/commission. The Bank then presents the Bill to the borrower’s customer on the due date of the Bill and collects the proceeds. If the bill is delayed, the borrower or his customer pays the Bank a predetermined interest depending upon the terms of the transaction. The transaction is practically an advance against the security of the bill which is due for payment.

I) Export Finance: Banks grant export credit on very liberal terms to meet all the financial requirements of exporters. The bank credit for exports can broadly be divided into two groups as under:

i) Pre-Shipment advances/packing credit advances: It is a credit facility sanctioned to an exporter in the Pre-Shipment stage. Such credit facilitates the exporter to purchase raw materials at competitive rates and manufacture or produce goods according to the requirement of the buyer and organize to have it packed for onward export.

ii) Post-Shipment Finance: Post shipment credit is a working capital facility granted by a bank to the exporter of goods/services from the date of extending credit after shipment of goods/rendering of services to the date of realization of export proceeds. As per the extant instructions, the maximum period prescribed for the realization of export proceeds is 12 months from the date of shipment.

2. Non-Fund Based Credit: Non-fund based facilities are such facilities extended by banks that do not involve outgo of funds from the bank when the customer avails the facilities but may at a later date crystallize into a financial liability if the customer fails to honor the commitment made by availing these facilities. These are also called Off-balance sheet (OBS) items.

Off-balance sheet (OBS) items refer to assets or liabilities that do not appear on a company’s balance sheet but that are nonetheless effectively assets or liabilities of the company. These items are not assets or liabilities to be reported in the balance sheet as on the date of the balance sheet but may get converted into an asset or liability at a later date, depending on the happening of a certain event. These items are contingent upon certain breaches of commitments and are also called ‘Contingent Liabilities’. These contingent liabilities have to be disclosed as ‘Notes to the Balance Sheet’. But once these commitments crystalize, these also become part of the assets or liabilities of the bank and have to be shown in the balance sheet.

Banks classify their off-balance sheet exposure into three broad categories:

1. Full risk (credit substitute): Standby letter of credit, money guarantees, etc.

2. Medium risk (not direct credit substitute): Bid bonds, letter of credit, indemnities and warranties, etc.

3. Low risk: Reverse Repos, currency swaps, options, futures, etc.

The banker undertakes a risk to the amount on happening of a contingency. Different types of Non-fund-based credit facility are as follow:

(i)  Letter Of Credit: Letter of Credit is an undertaking issued by a bank (Issuing Bank), on behalf of the buyer (the importer), to the seller (the exporter) to pay for goods and services provided that the seller presents documents which comply with the terms and conditions of the Letter of Credit, within a specified time. The banks follow the Uniform Customs & Practices relating to Documentary Credits 600 (UCPDC 600) framed by the International Chamber of commerce. LC issued by the banker is irrevocable and shall not cancel without the consent of both the buyer and the seller.

(ii)  Bank Guarantee: A Bank guarantee is a promise from a bank that the liabilities of a debtor will be met if the debtor fails to fulfill your contractual obligations. It is a promise from a bank or other lending institution that if a particular borrower defaults on a loan, the bank will cover the loss. It may be Financial Guarantee, Performance Guarantee, or Deferred Payment Guarantee.

(iii)  Derivative Products: In addition to the traditional non-fund facilities, banks are now offering derivative products to their clients to enable them to hedge their currency and interest rate risks.

(iv) Buyer Credit: It is a short-term credit available to an importer (buyer) from overseas lenders such as banks and other financial institutions for goods they are importing. The overseas banks usually lend the importer (buyer) based on the letter of comfort (a bank guarantee) issued by the importer’s bank.

First, let us try to understand it from a layman’s perspective: Suppose I have to buy a certain high-end mobile phone from Delhi, but I am not able to go to Delhi, for this purpose. I live in Patna, but one of my friends Mr. Sanjay studies there in JNU. I will ask the supplier to send me the mobile and I assure him that I will make arrangements to make the payment to him through my friend Sanjay. The shopkeeper couriers the mobile to me. Sanjay pays the bill to the shopkeeper. I, in turn, send an NEFT to Sanjay’s account.

Now coming to the exact definition, to make the payment of import bills, the importer buyer, say, in India requests his banker, say, Bank of India to arrange credit for him in foreign currency from its correspondent bank, say, Bank of India in New York. Conceding to his request, Indian Bank arranges a loan to him, say, for $ 1 million from Bank of America and makes it available to the importer for making payment of import bills. Sometimes importer himself strikes a deal by negotiating with various banks to get buyer’s credit at a very competitive rate, say LIBOR+0.80 or so. Later on, the importer repays this amount either through their EEFC account, realization proceeds of export bills, etc. Such arrangements are known as Buyer’s Credit.

As the ROI of such loans is cheaper as compared to bill finance rates, nowadays, importer customers prefer to adopt the route of Buyer’s Credit instead of availing bill negotiating facility under Letter of Credit.

(v) Supplier Credit: Under such a credit facility an exporter extends credit to a foreign importer to finance his purchase. Usually, the importer pays a portion of the contract value in cash and issues a Promissory note as evidence of his obligation to pay the balance over some time. The exporter thus accepts a deferred payment from the importer and may be able to obtain cash payment by discounting or selling such promissory note created with his bank.

Let us first understand the concept from a layman’s point of view: The milkman gives us milk daily for all 30/31 days of a month, but he asks for money only at the end of the month. So all these 30 days he has been extending credit to us. Such type of credit extended by the seller or supplier to the purchaser is termed as Supplier’s Credit.

Now coming to the precise definition, such types of credit is extended by the exporter supplier to the buyer or importer of the capital goods. The terms can be a down payment with the balance payable in installments. To finance the credit given to the importer under such arrangements, the exporter raises a loan from his banker under the export credit scheme in force.
April 11, 2020
NRO, NRE, FCNR, EEFC & RFC Bank Account for NRI’s
The Reserve Bank of India (RBI) is the regulator of foreign exchange dealings in India. It prohibits, restricts, and regulates the opening, holding and maintaining of foreign currency accounts, and the limits up to which a person resident in India can hold the amount in such accounts.

These regulations are known as Foreign Exchange Management (foreign currency accounts by a person resident in India) (FEMA) Regulations, 2015 and contain separate provisions for resident and non-residents.

According to FEMA, a resident individual is a person who has been in India for more than 182 days in the preceding financial year. However, there are a few exceptions as under:
- A person who has come to, or stays in India, only for taking up employment or to carry on any business, or with an intention to stay in India for an uncertain period; he or she will be treated a resident in India.
- A person who has gone outside India for taking up employment or to carry out any business outside India for an uncertain period; he or she will be treated as a non-resident.
The following persons (other than individuals) are treated as person resident in India:
- Person or body corporate which is registered or incorporated in India;
- An office, branch or agency in India, even if it is owned or controlled by a person resident outside India; or
- An office, branch or agency outside India, if it is owned or controlled by a person resident in India.
The FEMA regulations allow a resident to remit an aggregate sum of US$250,000 per financial year (April 1 to March 31) for any permissible current account or capital account transaction under the Liberalized Remittance Scheme (LRS) without any approval from RBI. The LRS is a scheme established by the RBI to grant permission to citizens of India to transfer funds abroad for permitted current or capital account transactions or for both.

Here, we discuss the types of foreign currency accounts that can be opened, maintained and held by resident and non-resident individuals in India.

Foreign currency accounts for non-residents in India

1. Non-Resident (External) Rupee Account- NRE Account: The Non-Resident (External) Rupee Account NR(E)RA scheme, also known as the NRE scheme, was introduced in 1970. Any NRI/PIO can open an NRE account. It allows non-residents as well as Persons of Indian Origin (PIO) to transfer foreign earnings easily to India. A ͚PIO is a person resident outside India, who is a citizen of any country other than Bangladesh, Pakistan, or such other country as may be specified by the federal government. Joint accounts can be opened by two or more NRIs and/or PIOs or by an NRI/PIO with a resident relative(s) on ‘former or survivor’ basis. However, during the life time of the NRI/PIO account holder, the resident relative can operate the account only as a Power of Attorney holder.

Credits permitted to this account as inward remittance are interest accruing on the account, interest on investment, transfer from other NRE/ FCNR(B) accounts, maturity proceeds if such investments were made from this account or through inward remittance.

This is a repatriable account and transfer from another NRE account or FCNR(B) account is also permitted. An NRE rupee account may be opened as current, savings or term deposit. Local payments can be freely made from NRE accounts. Since this account is maintained in Rupees, the depositor is exposed to exchange risk. NRIs / PIOs have the option to credit the current income to their Non-Resident (External) Rupee accounts, provided the authorised dealer is satisfied that the credit represents current income of the non-resident account holders and income-tax thereon has been deducted / provided for.

Taxation: There is no tax on interest earned from NRE accounts, and no wealth tax. The tax exemptions are available only for an NRE Account held by an individual and not for those maintained by overseas corporate bodies. Overseas corporate bodies refer to a company, partnership firms, trust or other corporate body located overseas and owned by individuals of Indian nationality. It can also be owned by individuals residing outside India but who are of Indian nationality. The ownership of overseas corporate body by these individuals must be at least 60 percent.

2. Non-Resident Ordinary Accounts (NRO): An NRO deposit account allows non-residents (including foreign nationals) for collecting their funds from local bonafide transactions. The account can be credited with inward remittances from outside India, legitimate dues in India and rupee gift or loan made by a resident to an NRI or PIO relative subject to the limit prescribed under LRS.

NRO accounts being Rupee accounts, the exchange rate risk on such deposits is borne by the depositors themselves. When a resident becomes an NRI, his existing Rupee accounts are designated as NRO. Such accounts also serve the requirements of foreign nationals’ resident in India. AD Category-I banks may permit foreign nationals who have come to India on employment and are eligible to open/hold a resident savings bank account to re-designate their resident account maintained in India as NRO account on leaving the country after their employment to enable them to receive their legitimate dues subject to certain conditions. NRO accounts can be maintained as current, saving, recurring or term deposits.

Only current income such as rent, pension, and interest, can be remitted from an NRO account outside India. In addition to this, balances in the NRO account may be repatriated abroad or to an NRE account only up to US$1 million in a financial year (April to March). Repatriation of an amount in excess of US$1 million may be permitted by the RBI under the approval route in exceptional circumstances.

NRO accounts can be maintained in the form of savings account, fixed deposit, or recurring deposit account.

Taxation: Interest earned in this account is taxable.

3. Foreign Currency (Non-resident) Account (Banks) Scheme – FCNR (B) Account: Foreign Currency Non-Resident Account Bank or FCNR (B) was first introduced in 1993. It replaced the existing FCNR (A) scheme. The detailed instructions for opening and maintaining this account are laid down in Schedule 2 to Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time to time. FCNR (B) accounts are maintained only in the form of term deposits of one to five years. FCNR is a fixed deposit foreign currency account that allows non-residents to keep their deposits in foreign currency.

Earlier this account is opened by the NRIs in 6 designated currencies US Dollars, Pounds Sterling, Euro, Japanese Yen, Australian Dollars, and Canadian Dollars. only, but Based on the recommendations of the Committee to Review the Facilities for Individuals under FEMA, 1999, Foreign Exchange Department (FED) has permitted banks to accept FCNR (B) deposits in any permitted currency with effect from October 19, 2011.

Repatriation of funds in foreign currencies is permitted. If the account holder so wishes these accounts can also be transferred to other NRE/FCNR accounts before the maturity period. Such transfers are subjected to penalties that are charged for premature withdrawals of the deposit. Transfer of funds from existing NRE accounts to FCNR (B) accounts and vice versa of the same account holder is permissible without prior approval of RBI.

Other conditions such as credits/debits, joint accounts, loans / overdrafts, operation by power of attorney etc., as applicable to an NRE account will be applicable to FCNR (B) account as well.

The entire deposit (principal and interest) is exempt from tax.

Foreign currency accounts by a person resident in India

(A) Exchange Earners’ Foreign Currency Account: –

A person resident in India may open, hold and maintain with an authorised dealer in India, a Foreign Currency Account to be known as Exchange Earners’ Foreign Currency (EEFC) Account, subject to the terms and conditions of the Exchange Earners’ Foreign Currency Account Scheme specified as under:

1. Limit up to which foreign currency may be credited to EEFC account

(1) A person resident in India may credit to the EEFC Account with an Authorised Dealer in India 100 percent of the foreign exchange earnings as specified here under:
1. inward remittance through banking channel, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India or those received for meeting specific obligations by the account holder;
2. payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area and also payments received in foreign exchange by a unit in Domestic Tariff Area for supply of goods to a unit in Special Economic Zone (SEZ);
3. payments received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade, in accordance with the approval granted in terms of the Foreign Exchange Management (Export of Goods and Services) Regulations, 2015, as amended from time to time;
4. advance remittance received by an exporter towards export of goods or services;
5. payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorised dealer in India;
6. Professional earnings including director’s fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity.
(2) For the purpose of the sub-paragraph (1), payment received through an international credit card for which reimbursement will be provided in foreign exchange may be regarded as a remittance through banking channels.

2. Permissible credits to EEFC account: Following credits may be made to an EEFC Account, namely –

i) Inward remittance/ payment received by the recipient in foreign exchange subject to the provisions of paragraph (1);

ii) Interest earned on the funds held in the account;

iii) Re-credit of unutilised foreign currency earlier withdrawn from the account;

iv) Amount representing repayment by the account holder’s importer customer, of loan/ advances granted in terms of clause (iv) of Paragraph 3.

v) Representing the disinvestment proceeds received by the resident accountholder on conversion of shares held by him to ADRs/ GDRs under the DR Scheme, 2014 approved by the Government of India

3. Permissible debits to the EEFC account: Following debits may be made to an EEFC Account, namely –

i) Payment outside India towards a current account transaction in accordance with the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and towards a capital account transaction permissible under the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000.

ii) Payment in foreign exchange towards cost of goods purchased from a 100 percent Export Oriented Unit or a Unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park

iii) Payment of customs duty in accordance with the provisions of Export Import Policy of Central Government for the time being in force.

iv) Trade related loans/ advances, by an exporter holding such account to his importer customer outside India, subject to compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000.

v) Payment in foreign exchange to a person resident in India for supply of goods/ services including payments for air fare and hotel expenditure.

4. Miscellaneous:

i) There is no restriction on withdrawal in rupees of funds held in an EEFC account. However, the amount so withdrawn in rupees cannot be re-credited to the account.

ii) Authorised dealer may issue cheque books of separate series with the superscription “EEFC Account” to the account holders maintaining such accounts, and also satisfy himself while honouring the cheques that the payment made by the account holder by issue of a cheque is permissible under these Regulations.

(iii) Resident individuals are permitted to include resident relative(s) as a joint holder(s) in their EEFC account on ‘former or survivor’ basis. However, such resident Indian relative(s) shall not be eligible to operate the account during the life time of the resident account holder.

(B) Resident Foreign Currency Account: –

(1) A person resident in India may open, hold and maintain with an authorised dealer in India a Foreign Currency Account, to be known as a Resident Foreign Currency (RFC) Account, out of foreign exchange –
1. received as pension or any other superannuation or other monetary benefits from his employer outside India; or
2. realised on conversion of the assets referred to in sub-section (4) of section 6 of the Act, and repatriated to India; or
3. received or acquired as gift or inheritance from a person referred to in sub-section (4) of section 6 of the Act; or
4. referred to in clause (c) of section 9 of the Act, or acquired as gift or inheritance there from; or
5. received as the proceeds of life insurance policy claims/ maturity/ surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority.
(2) The funds in a Resident Foreign Currency Account opened or held or maintained in terms of sub-regulation (1) shall be free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form, by whatever name called, outside India.

(3) Resident individuals are permitted to include resident relative(s) as joint holder(s) in their Resident Foreign Currency account on ‘former or survivor’ basis. However, such resident Indian relative joint account holder shall not be eligible to operate the account during the life time of the resident account holder.

Explanation – For the purpose of this sub-regulation, the expression ‘relative’ shall have the same meaning as assigned to it under section 2(77) of the Companies Act, 2013.

(C) Resident Foreign Currency (Domestic) Account: –

(1) A resident Individual may open, hold and maintain with an Authorised Dealer in India a foreign currency account, to be known as Resident Foreign Currency (Domestic) Account, out of foreign exchange acquired in the form of currency notes, bank notes and travellers’ cheques as under:
1. by way of payment for services not arising from any business in or anything done in India while on a visit to any place outside India; or
2. from any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation; or
3. by way of honorarium or gift while on a visit to any place outside India; or
4. in the form of unspent amount of foreign exchange acquired by him from an authorised person for travel abroad; or
5. as gift from a relative;
Explanation – For the purpose of this sub-regulation, the expression ‘relative’ shall have the same meaning as assigned to it under section 2(77) of the Companies Act, 2013.
- by way of earning through export of goods/ services, or as royalty, honorarium or by any other lawful means;
- representing the disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/ GDRs under the DR Scheme, 2014 approved by the Government of India.
- by way of earnings received as the proceeds of life insurance policy claims/ maturity/ surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority
(2) Debits to the account shall be for payments towards a current account transaction in accordance with the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and towards a capital account transaction permissible under the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000.

(3) The account shall be maintained in the form of Current Account and shall not bear any interest.

(4) There shall be no ceiling on the balances in the account

(D) A Unit in a Special Economic Zone (SEZ)

A unit located in a Special Economic Zone may open hold and maintain a Foreign Currency Account with an authorized dealer in India provided that,
1. all foreign exchange funds received by the unit in the Special Economic Zone (SEZ) are credited to such account,
2. no foreign exchange purchased in India against rupees shall be credited to the account without prior permission from the Reserve Bank,
3. the funds held in the account shall be used for bona fide trade transactions of the unit in the SEZ with the person resident in India or otherwise,
4. the balances in the accounts shall be exempt from the restrictions imposed under Rule 5, except item 1(ii) of the Schedule III, of the Government of India Notification No.GSR.381(E) dated May 3, 2000, as amended from time to time.
Provided that the funds held in these accounts shall not be lent or made available in any manner to any person or entity resident in India not being a unit in Special Economic Zones.

(E) Diamond Dollar Accounts (DDAs)

An Authorized Dealer Category-I bank in India may allow firms and companies who comply with the eligibility criteria stipulated in the Foreign Trade Policy of Government of India, in force from time to time and the directions as may be issued by Reserve Bank of India, from time to time, to open, hold and maintain Diamond Dollar Accounts (DDAs) in India subject to the terms and conditions of the DDA Scheme specified as under.

1. Firms and companies may open and maintain DDA with AD Category–I banks, subject to the following terms and conditions:-

a) The exporter should comply with the eligibility criteria stipulated in the Foreign Trade Policy of the Government of India, issued from time to time.

b) The DDA shall be opened in the name of the exporter and maintained in US Dollars only.

c) The account shall only be in the form of current account and no interest should be paid on the balance held in the account.

d) No intra-account transfer should be allowed between the DDAs maintained by the account holder.

e) An exporter firm/ company shall be permitted to open and maintain not more than 5 DDAs.

f) The balances held in the accounts shall be subject to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements.

g) Exporter firms and companies maintaining foreign currency accounts, excluding EEFC accounts, with banks in India or abroad, are not eligible to open Diamond Dollar Accounts.

2. Permissible Credits: –
1. Amount of pre-shipment and post-shipment finance availed in US Dollars.
2. Realisation of export proceeds from shipments of rough, cut, polished diamonds and diamond studded jewellery.
3. Realisation in US Dollars from local sale of rough, cut and polished diamonds.
3. Permissible Debits:-
1. Payment for import/ purchase of rough diamonds from overseas/ local sources.
2. Payment for purchase of cut and polished diamonds, coloured gemstones and plain gold jewellery from local sources.
3. Payment for import/ purchase of gold from overseas/ nominated agencies and repayment of US Dollars loans availed from the bank.
4. Transfer to rupee account of the exporter.
The above transactions are subject to the provisions of the Foreign Trade Policy of Government of India, issued from time to time.

(F) Exporters

A person resident in India, being an exporter who has undertaken a construction contract or a turnkey project outside India or who is exporting services or engineering goods from India on deferred payment terms may open, hold and maintain a Foreign Currency Account with a bank in India, provided that –
1. approval as required under the Foreign Exchange Management (Export of goods and services) Regulations, 2015 has been obtained for undertaking the contract/ project/ export of goods or services, and
2. the terms and conditions stipulated in the letter of approval have been duly complied with.
April 10, 2020

TYPES OF DEPOSIT IN BANK

The main function of the banks is to mobilise deposit from public and lend that deposit to individual, firms and corporate institutions. Banks offers various types of deposit products which can be broadly classified as Demand Deposits and Term/Time Deposits. Difference between Demand Deposits and Term/Time Deposits are as follows.

Demand Deposits	Term or Time Deposits
Payable on demand	Fixed for a definite term or time
Low interest or no interest paid. It also called CASA or Low cost deposit.	High rate of interest, Vary as per deposit tenure.
It includes SB deposit, Current Deposit, Unclaimed Deposit, Overdue TDR, Credit balance in CC and OD accounts	It includes all term deposits includes RD, FDR for the period of Minimum 7 days to maximum 10 years.
Interest on savings account is calculated on a daily basis. Banks are free to pay interest half yearly or quarterly basis.	Generally, interest is compounding and payable quarterly.

Current Account

A current account is always a Demand Deposit and the bank is obliged to pay the money on demand. These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day. Current Accounts are basically meant for businessmen and are never used for the purpose of investment or savings. Most of the current account are opened in the names of firm / company accounts. Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties. No interest is paid by banks on these accounts. On the other hand, banks charges certain service charges, on such accounts.

Saving Accounts

These deposits accounts are one of the most popular deposits for individual accounts. These accounts not only provide cheque facility but also have a lot of flexibility for deposits and withdrawal of funds from the account. Savings deposits are subject to restrictions on the number of withdrawals as well as on the amounts of withdrawals during any specified period. From 25th October, 2011, RBI has deregulated Saving Fund account interest rates and now banks are free to decide the same within certain conditions imposed by RBI. Minimum balances may be prescribed in order to offset the cost of maintaining and servicing such deposits. Savings deposits are deposits that accrue interest at a fixed rate set by the commercial banks. The interest amount earned in savings account must be filed for Income Tax Returns as Income from other sources. But, TDS is not applicable for a savings account as per section 194 A of IT Act. Savings Bank Account Interest amount exceeding Rs. 10, 000 will be taxed at marginal tax rate of the concerned account holder. Under directions of RBI, now banks are also required to open Small accounts.

Small Account: In case an individual customer who does not possess any of the OVDs and desires to open a bank account, banks shall open a ‘Small Account’, which entails the following limitations:

the aggregate of all credits in a financial year does not exceed rupees one lakh;
the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand; and
the balance at any point of time does not exceed rupees fifty thousand.
Provided, that this limit on balance shall not be considered while making deposits through Government grants, welfare benefits and payment against procurements.

Further, small accounts are subject to the following conditions:

(a) The bank shall obtain a self-attested photograph from the customer.

(b) The designated officer of the bank certifies under his signature that the person opening the account has affixed his signature or thumb impression in his presence.

TERM DEPOSITS

Term deposits are fixed for a definite term. Minimum period as per RBI is 7 days. Maximum period as per IBA is 10 years. Features of Term Deposits are as under:

Accounts may be opened by individuals, firms or corporates.
Term deposits receipts are not transferable.
Amount is payable on maturity. The interest is cumulative on quarterly rests.
Interest rate on term deposits is decided by Asset Liability Management Committee of the bank.
If due date of term deposit is on a holiday, banks will make payment on next working day or thereafter and will pay the interest for the holiday to depositor at contracted rate irrespective of when the payment is taken.
Depositor can request for addition or deletion of names in the deposit but at least one of the original depositors must remain. if loan has been raised against term deposit, name of a minor can be added only when loan has been adjusted.
If interests paid on term deposit is more than Rs. 10000 or above in a financial year, TDS is deducted @10% if PAN is submitted and @20% if PAN is not submitted. If 15G/H along with PAN is submitted by individual, TDS will not be deducted by bank.
As per Section 269 T of income Tax Act, if the principal plus interest of term deposit is Rs 20,000 or above, the payment should be made through credit to account or issuing account payee cheque or DD. It should not be paid in cash.
In case of premature payment of FDR, penalty may be decided by the bank. Many banks has removed penal charge on premature closure of TDR. However, penalty cannot be charged in case of premature payment in case of death of depositor.
In case of death of depositor, interest for overdue period will be paid at saving rate if depositor died after maturity date. if depositor dies before maturity of FDR, interest for overdue period will be paid at FD rate as on date of maturity for the period overdue amount remained with the bank.
FDR can be renewed on due date even in the absence of FDR. It will be renewed for the period indicated by customer. If no period is indicated, it will be renewed for a term equal to the original term.
Term deposits are classified into various schemes such as:
- Fixed Deposit (Interest payable every 6 months),
- Monthly Interest Deposit (Interest payable monthly),
- Quarterly Interest Deposit (Interest payable quarterly),
- Short-Term Deposits (Period of deposit minimum 7 days to less than one year)
- Recurring Deposit (Equal monthly instalment deposited for minimum 6 months to maximum 120 months)
- Flexi Recurring Deposit (In addition to monthly installment (Core Deposit) an option to deposit excess amount as per bank’s scheme during the stipulated tenure.

Foreign Currency Accounts by Resident and Non-Resident Persons in India

The Reserve Bank of India (RBI) is the regulator of foreign exchange dealings in India. It prohibits, restricts, and regulates the opening, holding and maintaining of foreign currency accounts, and the limits up to which a person resident in India can hold the amount in such accounts.

These regulations are known as Foreign Exchange Management (foreign currency accounts by a person resident in India) (FEMA) Regulations, 2015 and contain separate provisions for resident and non-residents.

According to FEMA, a resident individual is a person who has been in India for more than 182 days in the preceding financial year. However, there are a few exceptions as under:

A person who has come to, or stays in India, only for taking up employment or to carry on any business, or with an intention to stay in India for an uncertain period; he or she will be treated a resident in India.
A person who has gone outside India for taking up employment or to carry out any business outside India for an uncertain period; he or she will be treated as a non-resident.

The following persons (other than individuals) are treated as person resident in India:

Person or body corporate which is registered or incorporated in India;
An office, branch or agency in India, even if it is owned or controlled by a person resident outside India; or
An office, branch or agency outside India, if it is owned or controlled by a person resident in India.

The FEMA regulations allow a resident to remit an aggregate sum of US$250,000 per financial year (April 1 to March 31) for any permissible current account or capital account transaction under the Liberalized Remittance Scheme (LRS) without any approval from RBI. The LRS is a scheme established by the RBI to grant permission to citizens of India to transfer funds abroad for permitted current or capital account transactions or for both.

Here, the types of foreign currency accounts that can be opened, maintained and held by resident and non-resident individuals in India.

Non-Resident (External) Rupee Account- NRE Account,
Non-Resident Ordinary Accounts (NRO),
Foreign Currency (Non-resident) Account (Banks) Scheme – FCNR (B) Account,
Exchange Earners’ Foreign Currency Account,
Resident Foreign Currency (Domestic) Account.

April 9, 2020

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