Mumbai, Nov. 1: If you have legitimately acquired dollars, or any other foreign currency, you can now open a foreign currency account in a bank in India.
The Reserve Bank today announced that a resident Indian can open such an account in a licensed bank authorised to deal in foreign exchange. There will be no limit on the balance that can be kept in an account.
With this relaxation, the RBI took another step towards making the rupee fully convertible — a situation where there is no restriction on currency movement in and out of the country.
“As an important step towards further liberalisation of foreign exchange facilities available to individual residents, it has been decided to permit a person resident in India to open, hold and maintain with a licensed bank in India a foreign currency account,” the central bank said.
Foreign currency in such accounts will have to be earned through permissible channels such as payments received for services on a visit abroad, or remittances from a non-resident. Even cash in foreign currency acquired as a gift while on a visit abroad, or given by someone visiting India can be used to open this ‘resident foreign currency (domestic) account’ or deposited in it. Banks will issue cheque books to the holder. The scheme will be reviewed after one year.
Before today, resident Indians could hold only up to $2,000 in cash or in travellers’ cheques and had to turn in the excess. Exporters are allowed to keep their income in a special exchange earners’ foreign currency account, and this will continue.
“It is great for the travelling Indian, the businessman and the software professional. He will face few hassles with foreign currency each time he travels abroad,” said a foreign exchange dealer.
Dealers said the RBI has been emboldened to relax the rules because it is flush with foreign currency reserves, which touched $64 billion on October 18.
“Full convertibility is still a long way off,” said O.N. Singh, executive director at the Bank of India. “This is a preparation or an acclimatisation for full convertibility,” he added.
Full convertibility will mean repatriation of foreign currency to an overseas account and investing in foreign equities and in real estate abroad.
Senior officials at Indian banks were guarded on the latest move. “We would like to see the guidelines before we can comment,” said Lalitha Gupte, joint managing director of ICICI Bank.
Foreign banks were more forthcoming when they said they would allow their branches to open such accounts.
Earlier, the RBI had allowed companies to prepay their foreign loans in a signal of its growing confidence in the country’s foreign exchange position. In September, it also permitted companies to borrow up to $50 million from global sources without government approval.