The International Financial Services Centres Authority (IFSCA) circular has issued fresh guidelines for IFSC Banking Units (IBUs) regarding the operation of Foreign Currency Accounts (FCAs) for Indian Resident Individuals (RIs). These accounts are opened under the Liberalised Remittance Scheme (LRS), which allows Indian residents to remit foreign exchange abroad for various purposes such as education, medical expenses, and investments. The updated circular provides clarity on how such accounts should be managed, with a focus on compliance, reporting, and enhanced monitoring.
Applicability of the Circular
The new directions are applicable to IFSC Banking Units (IBUs) that facilitate the opening of Foreign Currency Accounts (FCA) for Indian residents under the LRS.
The circular also notes that IBUs can allow RIs to open FCAs for purposes other than LRS, but these will be subject to the Foreign Exchange Management Act (FEMA) regulations.
General Directions for IBUs
The IFSCA provides detailed instructions to IBUs regarding the management of these accounts. The key requirements include:
- Remittance and Monitoring: IBUs must ensure that funds remitted into an FCA are received in a reasonable time frame after the account is opened. Additionally, all remittances from onshore India under LRS must be routed through an Authorised Person (AP).
- Documentation: IBUs must obtain documentation such as the return filed by the RI to the AP or other relevant records confirming that the funds were remitted under the LRS.
Declarations from RIs
IBUs must ensure that RIs provide declarations confirming that:
- Funds received from locations other than onshore India are from sources duly remitted under LRS or are income from investments made using LRS remittances.
- Any unused foreign exchange or funds in the FCA must be repatriated to India within 180 days unless reinvested in approved products.
