Foreign Currency Accounts for Residents and Other Aspects | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE A: GENERAL BANKING OPERATIONS

Banker-Foreign Currency Accounts for Residents and Other Aspects

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Types of Accounts Permitted

In India, the following types of foreign currency accounts are permitted for residents:

• Foreign Currency Non-Resident (FCNR) Accounts: These accounts can be maintained in foreign currency by non-resident Indians (NRIs) and Persons of Indian Origin (PIOs). Interest on these accounts is tax-free in India.
• Non-Resident External (NRE) Accounts: These are accounts held in India by NRIs and PIOs. The principal and interest earned on NRE accounts are fully repatriable.
• Resident Foreign Currency (RFC) Accounts: Indian residents returning from abroad can hold RFC accounts, allowing them to maintain foreign currency and earn interest.

Foreign Currency Denominated Accounts in India

India allows residents to open foreign currency denominated accounts under certain conditions, mainly for business purposes or by residents who return from abroad. Such accounts are usually regulated under the Foreign Exchange Management Act (FEMA) and related guidelines.

Permitted Foreign Currency Accounts Outside India

Indian residents may open foreign currency accounts outside India under certain conditions, subject to regulations by the Reserve Bank of India (RBI). These accounts may be for business or personal purposes, and they are governed by FEMA.

Remittance of Assets by Foreign Nationals not Being PIOs

Foreign nationals who are not Persons of Indian Origin (PIOs) can remit assets from India, but they must adhere to specific guidelines under FEMA. The assets, including any earnings or investments, can only be transferred to the country of origin following the applicable foreign exchange regulations.

Modes of Acquiring Property Outside India by a Resident

A resident Indian can acquire property outside India through personal remittances or by using assets accumulated in foreign currency accounts. However, such transactions must be in accordance with FEMA and RBI guidelines, ensuring that the total remittance does not exceed prescribed limits.

Foreign Contribution (Regulation) Act 2010

The Foreign Contribution (Regulation) Act (FCRA), 2010 regulates the acceptance and utilization of foreign contributions or foreign hospitality by individuals, associations, and NGOs in India. It ensures that foreign funds do not adversely affect India’s sovereignty, integrity, or public interest.

Multiple-Choice Questions (MCQs)

1. Which of the following accounts is exclusively for Non-Resident Indians (NRIs)?
   FCNR
   NRE
   RFC
   All of the above
   Answer: d) All of the above
2. Which currency can be maintained in a Non-Resident External (NRE) account?
   Indian Rupees
   Foreign Currency
   Both Indian Rupees and Foreign Currency
   None of the above
   Answer: b) Foreign Currency
3. Who is eligible to open a Resident Foreign Currency (RFC) account?
   Indian residents returning from abroad
   Non-resident Indians
   Both a and b
   None of the above
   Answer: a) Indian residents returning from abroad
4. Which of the following regulations apply to remittance of assets by foreign nationals?
   Foreign Contribution (Regulation) Act 2010
   FEMA
   Both a and b
   None of the above
   Answer: b) FEMA
5. Which act regulates the acceptance and utilization of foreign contributions in India?
   FEMA
   Foreign Contribution (Regulation) Act 2010
   Indian Penal Code
   None of the above
   Answer: b) Foreign Contribution (Regulation) Act 2010
6. Foreign currency accounts for residents in India are typically regulated by:
   RBI
   SEBI
   RBI and FEMA
   Ministry of Finance
   Answer: c) RBI and FEMA
7. Which of the following is true regarding Non-Resident External (NRE) accounts?
   The interest earned is taxable in India.
   The interest earned is repatriable.
   Both a and b
   Neither a nor b
   Answer: b) The interest earned is repatriable.
8. Which of the following is a key objective of the Foreign Contribution (Regulation) Act, 2010?
   To regulate the receipt of foreign funding
   To ensure transparency in foreign funding
   To prevent foreign interference in Indian sovereignty
   All of the above
   Answer: d) All of the above
9. What is the primary objective of FEMA concerning foreign currency accounts?
   To regulate currency exchange
   To control foreign currency transactions
   To promote foreign investments
   All of the above
   Answer: b) To control foreign currency transactions
10. Can a resident Indian acquire property outside India?
    Yes, under certain conditions
    No
    Yes, with permission from RBI
    None of the above
    Answer: a) Yes, under certain conditions