Introduction
The Reserve Bank of India, vide Notification No. FEMA 5(R)(6)/2026-RB dated June 18, 2026, has notified the Foreign Exchange Management (Deposit) (Sixth Amendment) Regulations, 2026, amending the Foreign Exchange Management (Deposit) Regulations, 2016 (Notification No. FEMA 5(R)/2016-RB dated April 1, 2016). The amendment is issued in exercise of powers conferred under sub-section (2) of Section 6 and sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999.
The amendment will come into force from the date of its publication in the Official Gazette, and primarily reworks the regulatory framework governing Special Non-Resident Rupee (SNRR) Accounts under Schedule 4 of the principal regulations, while also introducing related changes to Schedules 1 and 3.
Key Amendments
1. Insertion of Definition of "IFSC"
A new clause (v-a) has been inserted in Regulation 2 of the principal regulations, defining "International Financial Services Centre" or "IFSC" with the same meaning assigned to it under clause (g) of Section 3 of the International Financial Services Centres Authority Act, 2019.
This insertion is foundational to the subsequent substantive changes, as it formally brings IFSC-based banking operations within the ambit of the Deposit Regulations.
2. SNRR Accounts Now Permitted Through AD Branches in IFSC
Sub-regulation (4) of Regulation 5 has been substituted to permit any person resident outside India to open, hold, and maintain an SNRR account with an authorised dealer (AD) in India, or its branch outside India — explicitly including a branch located in an IFSC in India.
Correspondingly, paragraph 1 of Schedule 4 has also been substituted to reflect this expanded scope, allowing SNRR accounts to be opened with an AD or its branch outside India (including in an IFSC), for the purpose of putting through permissible current and capital account transactions with persons resident in India, as well as bona fide transactions with persons resident outside India.
This change formally enables IFSC-based banking units to offer SNRR account facilities, supporting the broader policy objective of positioning IFSCs (such as GIFT City) as hubs for cross-border rupee transactions.
3. New Permissible Transfers Between NRO, NRE, and SNRR Accounts
Two related insertions widen the scope of permissible debits and credits:
- Schedule 1, paragraph 3: A new clause (k) has been inserted permitting transfer from an NRO account, within the limit specified under Regulation 4 of the Foreign Exchange Management (Remittance of Assets) Regulations, 2016.
- Schedule 3, paragraph 3(B): A new clause (v) has been inserted permitting transfer to an NRE or SNRR account, within the same prescribed limit under the Remittance of Assets Regulations, 2016.
Read together, these amendments create a clearer, rule-based channel for moving funds between NRO, NRE, and SNRR accounts, subject to the remittance limits already applicable under the extant Remittance of Assets framework.
4. Deletion of Redundant Provisions in Schedule 4
Existing paragraphs 2, 5, 6, 7, and 8 of Schedule 4 have been deleted in their entirety. This represents a consolidation and simplification of the conditions previously governing SNRR accounts, several of which appear to have been superseded by the substituted paragraph 1 and other restructured provisions.
5. Revision of Paragraph 10 — NRO to SNRR Transfers
The existing paragraph 10 of Schedule 4 has been substituted to provide that transfer from an NRO account to an SNRR account shall be governed in accordance with Schedule 3 of the Deposit Regulations, thereby aligning this transfer route with the newly inserted clause (v) discussed above.
6. New Paragraph 16 — Transactions Between Persons Resident Outside India
A new paragraph 16 has been inserted in Schedule 4, addressing transactions between two persons resident outside India routed through SNRR accounts. Where such transactions may not be subject to compliance under the Act or the Rules and Regulations framed thereunder, the AD bank may give effect to them based on instructions or a mandate from the account holder, provided such instructions indicate the underlying purpose of the transfer.
This provision appears intended to facilitate genuine offshore-to-offshore transactions routed through SNRR accounts, while placing the onus of purpose-identification on the account holder's mandate to the AD bank.
Effective Date
The Sixth Amendment Regulations shall come into force from the date of their publication in the Official Gazette.
Legislative History
The principal regulations — Foreign Exchange Management (Deposit) Regulations, 2016 — were originally published vide G.S.R. No. 389(E) dated April 1, 2016, and have since been amended on the following occasions:
- G.S.R. No. 1093(E) dated November 9, 2018
- G.S.R. No. 498(E) dated July 16, 2019
- Notification No. FEMA 5(R)/(3)/2019-RB dated November 13, 2019
- Notification No. FEMA 5(R)/(4)/2024-RB dated May 6, 2024
- Notification No. FEMA 5(R)(5)/2025-RB dated January 14, 2025
- Notification No. FEMA 5(R)(6)/2026-RB dated June 18, 2026 (present amendment)
Practical Implications
For NRIs, OCIs, foreign portfolio investors, and other persons resident outside India, this amendment effectively widens the operational reach of SNRR accounts by formally enabling their availability through AD branches situated in IFSCs. Entities and individuals routing capital or current account transactions through SNRR accounts — particularly those involving NRO/NRE transfers or offshore-to-offshore transactions — should review the revised Schedule 4 conditions and align internal mandates and documentation accordingly once the amendment is notified in the Official Gazette.
AD banks will also need to update internal SOPs to reflect the deletion of erstwhile paragraphs 2, 5–8, the revised paragraph 10, and the newly inserted paragraph 16 governing purpose-based processing of outside-India SNRR transactions.
No comments:
Post a Comment