NDTV Profit

IFSC Banking Units can Open Foreign Currency Current Accounts

The Reserve Bank on Thursday relaxed norms for the units of banks operating from International Financial Services Centres (IFSC) and permitted them to open foreign currency current accounts.
EMAIL
COMMENTS
IFSC Banking Units can Open Foreign Currency Current Accounts
Mumbai: The Reserve Bank on Thursday relaxed norms for the units of banks operating from International Financial Services Centres (IFSC) and permitted them to open foreign currency current accounts.

Besides, the RBI has also done away with limit for raising short-term liabilities by banks.

As per the existing norms, IFSC Banking Units (IBUs) were not allowed to open any current or savings accounts.

"It has now been decided that the IBUs can open foreign currency current accounts of units operating in IFSCs and of non-resident institutional investors to facilitate their investment transactions," an RBI notification said.

However, such entities cannot raise liabilities from retail customers including high net worth individuals (HNIs) and no cheque facility will be available for holders of current accounts in the IBUs.

All transactions through these accounts must be undertaken via bank transfers, it said.

An IFSC caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders. Some of the examples of IFSC are Dubai, Singapore and GIFT City in Gujarat.

"On a review, it has been decided that RBI will not prescribe any limit for raising short-term liabilities from banks. However, the IBUs must maintain Liquidity Coverage Ratio as applicable to Indian banks on a stand alone basis and strictly follow the liquidity risk management guidelines," it said.

With a view to providing greater flexibility to the such entities in their business transactions, it has been decided that exposure ceiling for IBUs will be 5 per cent of the parent bank's capital in case of a single borrower, it said.

It will be 10 per cent of parent bank's capital in the case of a borrower group, the notification added.

In another notification, RBI allowed banks to give non-fund based services such as letter of credit, bank guarantees to customers who do not avail any fund based facility from any bank in India.

Earlier, there was a restriction placed on banks by the RBI to give non-fund based facilities to non-constituents borrowers of banks to prevent events to fraud and diversion of funds.

Borrower constituents are sanctioned regular credit facilities by banks.

RBI said the said restriction had led to problems faced by those customers who require non-fund based facilities, but do not avail of any fund based facility from any bank.

For latest news on Business, like us on Facebook and follow us on Twitter.

Advertisement

Advertisement

GAINERS / LOSERS