India-based Rajesh Dhruva is a Chartered Accountant who has been advising Overseas Indians in matters related to Foreign Exchange Management Act, 1999 (FEMA), Indian and International Tax for more than 26 years. He has found some anomalies in the new RBI Notification and has urged the bank brass to look into this and have them removed.
Reserve Bank of India Notification RBI/2016-17/205 dated 31st December 2016 extends facility for Indian citizens who were abroad for exchange of Specified Bank Notes (SBNs). However, there are certain important miss outs which have created serious hardship for Non Resident Indians, many of whom are foreign citizens of Indian origin:
RULES:
1. The Notification No. RBI/2016-17/205 DCM (Plg) No.2170 /10.27.00/2016-17 grants facility to exchange SBNs during grace period to Indian Citizens only.
2. Indian Citizens are further divided as:
01 Resident Indians who were abroad from 9th November to 30th December and
02 Non Resident Indians (NRIs) who were not in India from 9th November to 30th December.
03 Whereas Resident Indians are not having any restrictions about the amount of deposits; NRIs are restricted to tender a maximum of Rs. 25,000/- subject to production of Indian Customs certificate of import of SBNs.
Glaring anomalies
Here are some glaring anomalies in this Notification:
1. Foreign citizens of Indian origin i.e. Person of Indian Origin (PIOs), who are also NRIs, are not granted the facility and are eliminated in total.
2. The term NRI as also definition of NRIs (vide Foreign Exchange Management (Deposit) Regulations 2000 vide Schedule 1) clearly regarded Indian citizens as also foreign citizens of Indian origin as Non Resident Indians.
Even the Foreign Exchange Management (Deposit) Regulations 2016, Notification No. FEMA 5(R)/2016-RB dated 1st April 2016 in Schedule 1 specifically permits foreign citizen of Indian Origin to maintain Non Resident External (NRE) accounts at par with NRIs who are Indian citizens.
3. Foreign citizens of Indian origin are also allowed to maintain Non Resident Ordinary (NRO) account as per details of Schedule 3 of Master Direction on Deposits and Accounts.
4. There are a large number of NRIs who have adopted foreign citizenship and the entire class of these foreign citizen NRIs are excluded from this facility which is restricted only to NRIs who are Indian citizens.
I feel that there seems to be a drafting error and not the intention of Reserve Bank of India or the Government of India.
Moreover, whereas Resident Individuals are granted facility to deposit any amount of SBNs, NRIs are restricted to deposit maximum amount of Rs. 25,000.
This restriction seems to be based on the assumption of SBNs being carried out of India and brought back in India as a condition is also laid down about certificate of Customs Authorities for import and subsequent deposit of SBNs up to Rs. 25,000 as FEMA Regulations permit an individual to carry a maximum of Rs. 25,000/- only out of India.
This provision has totally missed NRIs having SBNs at home in India or in Lockers in India which would have been left in India being legitimate balances out of Bank withdrawals from NRO / NRE accounts.
It is interesting to note that till 31st December 2016 Foreign Citizens of Indian Origin could deposit legitimate balances of SBNs in their NRO account at par with Indian Citizen NRIs.
And there were no limits of Rs. 25,000 as the Reserve Bank of India recognized the fact of NRIs having legitimate unspent balances of SBNs in India.
In contrast, now, only Indian citizens are allowed to deposit SBNs up to Rs. 25,000 being imported into India thereby NRIs who were Foreign Citizens of Indian Origin are denied the benefit of depositing their legitimate balances of their SBNs imported into India and,
NRIs who are Foreign Citizens as also Indian Citizens are both denied facilities of depositing SBNs which were retained in India but could not be deposited before 31st December only on account of such NRIs not being in India and also relying on Reserve Bank of India’s earlier Notification allowing deposit of legitimate balances of SBNs after 31st December 2016 up to 31st March 2017.
Ideas for correction
Here are some ideas for correcting these anomalies:
• No doubt by virtue of A.P. (DIR Series) Circular No. 24 of 3rd January 2017 extension has been granted to Foreign Citizens to exchange SBNs up to Rs. 5,000 per week up to 31st January 2017, which will squarely include Foreign Citizens of Indian Origin but as that would not allow import of SBNs by Foreign Citizen NRIs, Reserve Bank of India should allow up to 30th June 2017
• Recognize Foreign Citizens of Indian Origin NRIs at par with Indian Citizen NRIs as regards deposit of SBNs up to 30th June 2017.
• Allow Foreign Citizens of Indian Origin to import SBNs up to Rs. 25,000 in India for depositing into their NRO account and
• Also allow deposit of all the legitimate balances of SBNs retained in India by Indian Citizens as also Foreign Citizens of Indian Origin.
Reserve Bank of India should also accept deposits of SBNs by NRIs as also other permissible individuals at all offices of Reserve Bank of India.
Rajesh H Dhruva is Chief Executive, femaonline.com
Tel. No. : 0091 281 245 3367 (four lines) / 245 9613
Cell : 0091 98240 49944; email rajesh@femaonline.com ; keynote@nribanks.com
Rajesh Dhruva
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