(i) Inflows into foreign currency accounts arise primarily from client-related transactions, swap deals, deposits, borrowings etc. Banks may maintain balances in foreign currencies upto the levels approved by the Top Management. They are free to manage the surplus in these accounts through overnight placement or investments with their overseas branches/correspondents subject to adherence to the gap limits approved by Reserve Bank.

(ii) Banks may invest upto 15% of their unimpaired Tier I capital or US$ 10 million whichever is higher, and the entire amount representing foreign currency deposit liabilities in overseas money market instruments rated at least A1 + by Standard and Poor or P1 by Moodys.

(iii) Foreign currency funds representing deposit liabilities may be utilised for:

(a) making loans to resident constituents for meeting their foreign exchange requirements or for the rupee working capital/capital expenditure needs subject to the prudential/interest-rate norms, credit discipline and credit monitoring guidelines in force.

(b) extending credit facilities to Indian wholly owned subsidiaries/ joint ventures in which at least 51% equity is held by a resident company, subject to the guidelines issued by Reserve Bank (Department of Banking Operations & Development).
(iv) Banks should regularly reconcile the balances in the foreign currency accounts as appearing in their books with the balances advised by the correspondents and maintain records to show that such reconciliation has been made.

(v) Banks may write off/transfer to unclaimed balances account, unreconciled debit/credit entries up to the value of US.$.1,000 or its equivalent provided:

(a) the entry has been outstanding in the books for two or more years and

(b) approval from the Competent Authority has been obtained,

(c) a separate record of all such entries is maintained and the transactions reported in the respective R Return.
Applications for adjustment of an entry in excess of US$ 1,000 or its equivalent should be referred to the concerned Regional Office of Reserve Bank.