The Hindu Business Line : FCNR-B deposit accounts: RBI proposes tie-up arrangement

Regional rural banks (RRBs) will have to enter into suitable tie-up arrangements with their sponsor banks for opening and maintaining FCNR-B deposit accounts by non-resident Indians and persons of Indian origin (PIO).

The tie-up will enable necessary support and expertise to the RRBs in putting through the transactions regarding acceptance of FCNR (B) deposits.

“Since the RRBs may not have well-developed treasuries to manage the foreign currency liability or risk, they may enter into suitable tie-up arrangements with their sponsor banks,” according to the Reserve Bank of India notification.

Rate of interest

The operational and accounting details relating to rate of interest to be offered by the RRBs, accounting treatment of interest accruals on such deposits and payment of maturity proceeds will be decided by mutual agreement between the RRBs and the sponsoring banks, the notification added.

Though the FCNR (B) deposit receipt would be issued by the RRBs to the depositors concerned, the foreign currency funds received as deposits would be treated as placements/deposits by the RRBs with the sponsoring banks.

The sponsoring banks will be required to manage the foreign currency funds including deployment of FCNR (B) deposit funds.

Swap option

The RRBs desiring to make use of the foreign currency resources for broad basing their rupee resources would be allowed to swap foreign currency funds including accrued interest with the sponsoring banks.

The entire exchange risk and maturity mismatch risk should, however, be managed by the sponsor bank and the RRBs will not carry any foreign currency and maturity mismatch risks in their books, the notification added.

The RRBs will be required to approach the concerned regional office of the Foreign Exchange Department, for authorisation for acceptance of FCNR (B) deposits.

They will be authorised to accept deposits in dollars, pound sterling, euro, Japanese yen, Australian dollars and Canadian dollars.

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