RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001

March 26, 1999

A.D. (M.A. Series ) Circular No.8
To,

All Authorised Dealers in Foreign Exchange

Dear Sirs,

Non-Resident (Special) Rupee (NRSR) Account Scheme

Attention of authorised dealers is drawn to Part A of Chapter 13 of Exchange Control Manual (ECM) containing rules and regulations for maintenance of Ordinary Non-Resident Rupee (NRO) accounts in India. In order to simplify the procedures applicable to operation of bank accounts and financial transactions in India by non-resident individuals of Indian nationality/persons of Indian origin, it has been decided to introduce, with effect from 15th April 1999, a new type of account viz., Non-Resident (Special) Rupee (NRSR) Account for such persons who would voluntarily undertake not to seek repatriation of funds held in such accounts and/or income/interest accrued thereon. These accounts will have the same facilities as well as restrictions as are applicable to domestic resident accounts of individuals in respect of repatriation of funds held in these accounts, with the exception that investment of funds held in these accounts in shares/securities and immovable property will be governed by the extant exchange control regulations. For opening of NRSR account, the applicant should submit an application in form NRSR (proforma enclosed) to an authorised dealer, together with the undertaking contained therein duly signed. Authorised dealers may, on receipt of application and undertaking duly signed by the applicant open the account and allow all financial transactions therein freely without going into the details of sources of credits and purposes of debits. This facility will, however, not be available to overseas corporate bodies.

2. The non-resident individuals of Indian nationality/persons of Indian origin maintaining Non-Resident (Ordinary) account will have the option of converting these accounts into Non-Resident (Special) Rupee Accounts. Similarly, when a resident becomes a non-resident by virtue of going abroad on emigration/employment etc., he will also have an option of designating his account as Non-Resident Ordinary Account or Non-Resident (Special) Rupee Account.

3. There will be no need for completion of Form A4 either for approval or for reporting the transactions in Non-Resident (Special) Rupee Accounts.

4. The following consequential amendments may be carried out in the Exchange Control Manual :

Volume I

(i) Existing Part A of Chapter 13 may be renumbered as "Part A –section I"
(ii) A new "Part A-Section II" may be inserted after existing paragraph 13A.13 as per slip 1.

Volume II

(iii) In Appendix III new Form NRSR may be inserted as per slip 2, after Form NRI and its entry be made in the index to the Appendix.

5. Authorised dealers may bring the contents of this circular to the notice of their constituents.

6. The directions contained in this circular have been issued under section 73(3) of the Foreign Exchange Regulation Act, 1973 ( 46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.

Yours faithfully,
B. MAHESHWARAN
Chief General Manager

Slip 1
[AD/MA/ 8 /1999]

Part A –Section II

Non-Resident (Special) Rupee (NRSR) Account Scheme

General

13A.14 The facility of maintaining Non-Resident (Special) Rupee (NRSR) Account is extended to non resident individuals of Indian nationality and persons of Indian origin. These accounts will carry the same facilities and restrictions as are applicable to domestic accounts of residents in respect of repatriation of funds held in the account and/or income accrued thereon with an exception of investment in shares / securities and immovable property in India, which will be governed by the extant exchange control regulations applicable on such investments.

13A.15 For opening an NRSR account, the account holders should submit an application in Form NRSR together with the undertaking therein duly signed to an authorised dealer. After these formalities are completed it is the responsibility of the accountholder/s to ensure that all operations in the account including investments/disinvestments are covered either by the general or special permission of Reserve Bank. Once this undertaking has been obtained, authorised dealers need not verify the source of credits and purpose of debits or the particulars of approvals for investments/disinvestments while permitting individual credits/debits to the account.

NOTE: Opening of and operations on the accounts of individuals of Pakistani/Bangladeshi/Sri Lankan nationality require approval of Reserve Bank.

Change of Status from Resident to Non-resident

13A.16 When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment, business or vocation outside India or for any other purpose indicating his intention to stay outside India permanently or for an uncertain period, he becomes a person resident outside India. He will have the option of designating his account as Non-Resident Ordinary (NRO) account or Non-Resident (Special) Rupee (NRSR) account.

Joint Account with Residents

13A.17 Non-residents may hold accounts jointly with residents.

Types of Accounts

13A.18 NRSR accounts may be maintained in the nature of current, savings, recurring or fixed deposit accounts. The requirements laid down in the directives issued by Reserve Bank in regard to resident accounts shall apply to NRSR accounts.

Operations on the Accounts

13A.19 The operations on Non-Resident (Special) Rupee accounts may be allowed freely as in the case of domestic accounts maintained by resident individuals.

Interest Rates

13A.20 The Non-Resident (Special) Rupee accounts are subject to same interest rate discipline as applicable to resident accounts.

Inland movement of funds

13A.21 The account holders are permitted to freely transfer funds from NRO/NRE/FCNR accounts to NRSR accounts. However, under no circumstances funds held in NRSR account, irrespective of their source, should be transferred to NRO/NRE/FCNR account.

Nomination Facility

13A.22 Like any other account held by residents the NRSR accountholders can freely nominate residents and/or non-residents. However, a non-resident nominee will not be entitled to any remittance facility out of funds held in NRSR account of the deceased person.

Form A4

13A.23 Irrespective of amount involved Form A4 need not be completed in respect of debits and credits to NRSR accounts.