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 Introduction: 

Receipt of foreign exchange in India is called Inward remittance. Apart from exports there are other transactions, which generate inward remittance. For example Non-resident Indian staying abroad may remit foreign exchange to their relatives in India. Inward remittances are usually in the nature of foreign currency notes, foreign currency traveller cheques, foreign currency cheques / foreign currency demand drafts and inward telex transfers.

Part A 

Exchange Management Regulations

1.  There are no restrictions on receiving remittances from abroad through authorised dealers in foreign exchange in India.

a.   Persons resident in India are also permitted to receive directly from persons resident outside India foreign exchange in the form of bank drafts or traveller’s cheques issued outside India or cheques drawn on banks situated outside India provided the instruments so received are surrendered to an authorised dealer in foreign exchange in India within a period of seven days from date of receipt.

b.   Persons resident in India are also permitted to receive from any person resident outside India and who is on a visit to India payment in foreign currencies for services rendered or in settlement of any lawful obligations - subject to the condition that the foreign currencies so received will be surrendered to an authorised dealer in foreign exchange within seven days of receipt.

(Note: General permission has been given by RBI to persons resident in India to retain with them foreign currency up to the value of USD 2,000. In other words, the amount held by residents should not exceed USD 2,000 or its equivalent at any point of time. The amount, which is in excess of USD 2,000 mentioned above, must be surrendered to an authorised dealer within a period of seven days of acquisition. Needless to state that the foreign exchange mentioned above should have been acquired by the resident in conformity with the provisions of the FEMA).

c.   Exporters in India are permitted to receive directly from the overseas buyers during their visit to India foreign exchange in the form of bank drafts, personal cheques, currency notes, pay orders, banker’s cheques and traveller’s cheques in payment of goods already exported or to be exported. The exporters must surrender these foreign currency instruments to an authorised dealer in foreign exchange in India within a period of seven days from date of receipt. Authorised dealers have been advised by RBI to treat such payments as realisation of export proceeds.

d.  If the amount of inward remittance exceeds Rs.1,00,000 (or its equivalent in foreign exchange), then the purpose of remittance should be ascertained by the authorised dealer. This information should be reported to RBI in the supplementary statement annexed to R-Returns.

e.  Authorised dealers should issue foreign Inward Remittance Certificate (FIRC) in the prescribed form if  requested by the beneficiary.

           (i).          If the amount received exceeds Rs.15, 000/- in value, then the FIRC should be issued on security paper. The FIRC forms should be printed on security paper. If, however, the amount received from abroad does not exceed Rs.15, 000, then the FIRC may be issued on the printed letterhead with logo of the authorized dealer instead of on the security paper.

      (ii).          Exporters may ask for certificates to be issued by authorised dealers for submission to the office of the Director General of Foreign Trade (DGFT). Authorised dealers may issue such certificates - after verifying all the required particulars.

 (iii).          Sometimes customers may ask for inward remittance certificates for submission to the Income tax Department. Authorised dealers may also comply with such requests.

      (iv).       Whenever exporters receive advance remittances, it is their practice to obtain FIRC for the amount so received from the bank concerned. Subsequently as and when export is made and documents are presented by the exporter, the FIRC mentioned above should be called for in original and necessary endorsement made thereon by the authorised dealer.

           (v).       Whenever inward remittances are received for opening of a NRE or FCNR account (or for funding these accounts) FIRCs should not be issued by authorised dealers.

2.  Persons who are receiving inward remittance from abroad may, if they so desire, request the bank concerned to keep a portion of the amount in foreign currency in an account styled as Exchange Earners Foreign Currency account (EEFC). The limit is 70 per cent of the inward remittance in the case of 100 per cent export oriented units and 50% in other cases. The EEFC facility is available not only for exporters but also for any person who is receiving an inward remittance from abroad. Therefore, before converting the inward remittance amount into Indian rupees, it is advisable to ascertain from the beneficiary of the remittance whether the entire amount may be converted into Indian rupees or any portion thereof is required to be held in an EEFC account.

3.  Inward remittances through normal banking channel are freely permitted under the Foreign Exchange Management Act 1999 (FEMA). There is, however, another law in the country and it is called Foreign Contribution (Regulation) Act, 1976. This law is administered by the Ministry of Home Affairs, Government of India, New Delhi and not by Reserve Bank of India. Beneficiaries of inward remittances are advised to comply with the provisions of this law wherever considered necessary. This law applies to Associations having a definite cultural, economic, educational, religious or social programme. These types of associations must be registered with the Home Ministry of Central Government before they could accept foreign contribution. Branches should communicate with IBD Chennai and obtain prior approval and instructions before opening accounts for such associations when receiving inward remittances from abroad.  

PART B 

Question and Answers 

1.  A query from a customer: My son is working in USA as a computer software specialist. Every month he will be sending remittances in US dollar to me. What are the formalities to be observed by me? Which is the easiest method by which the remittances may be made to me by my son?  

   There are no restrictions on receiving inward remittances from USA (or from any other foreign country for that matter) through the normal banking channel. No particular formalities have been prescribed in this regard from the exchange management point of view. If the value of the remittance received from abroad exceeds Rs.1,00,000 the purpose of the remittance should be advised by the beneficiary to the authorised dealer through whom the remittance is received. The customer is free to receive the remittances in US dollar from his son in USA through his bankers.

a.  The remitter in USA may be advised to send the remittances through our foreign correspondent bank through telex transfer. An example is given below.

     Name and address of correspondent bank

                                                    HSBC Bank USA
140 Broadway
New York, NY-10005-1180.

     Our account number :

                    000-04395-8 standing in the name of City Union Bank Ltd, International Banking Division, Chennai – India 

     Amount remitted : USD 

     Name of remitter : Mr. __________ 

     Name of beneficiary :Mr.________ account number  with City Union Bank Ltd.  Branch 

     Purpose of remittance: Family maintenance (from son in USA to father in India) 

     If all the required particulars (as stated above) are furnished, it would be possible for us to receive the amounts from your son in USA and pay the amount (in Indian rupees) to you through your bank account promptly. 

b.  There is another method also. The remitter in USA may send a cheque, draft, international money order etc. drawn in favour of his father. Usually these instruments will be expressed in US dollar and will be made payable in USA preferably at New york in USA. These instruments may be handed over to our bank for collection. We will collect the amount through our foreign correspondent bank, and after the proceeds are realised and after the ‘cooling period’ is over, the equivalent Indian rupees will be credited to the account of the beneficiary held with our branch. 

2.  A customer states that the authorized dealer takes a long time (several days) to collect the clean instruments and transfer the rupee proceeds to the branch for being credited to his account. He desires to know whether anything can be done to reduce the delay. 

The overseas correspondent banks to whom the instruments are sent for collection reserve the right to debit the nostro account of the authorized dealer at any later date if the cheques and other instruments presented by them are returned unpaid by the drawee-banks. Therefore, before transferring the rupee proceeds for credit of customer’s accounts, authorised dealers in foreign exchange in India wait for a few weeks and then only part with the rupee funds. This period is known as ‘cooling period’. This procedure is common to all banks. There is no delay on the part of the bank. This is similar to the clearing cheques returning  time in India. 

3.  The customer states that even for small value cheques sent for collection, hefty charges are collected and these charges are very much on the high side - taking into consideration the value of the instrument collected. What explanation is given by the authorized dealer. 

  It is a well-known fact that the charges collected by overseas banks for services rendered are very much more than the charges usually collected by banks in India. Even in the case of small-value cheques sent by us for collection, the overseas banks have specified some minimum amount towards charges. Further, if the instrument presented is an outstation cheque (that is, payable at a place other than the centre where our correspondent bank is situated), then charges will be comparatively more. To sum up, foreign banks are collecting the charges as per the “tariff” fixed by them, and we have to accept and pay the charges as claimed by them. The tariff is more or less uniform among all the banks in a country