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All you need to know about Rupee Drawing Arrangement

Varun Hariharan

| Updated: Oct 20, 2020 | Category: Finance

Rupee Drawing Arrangement

Rupee drawing arrangement is a process in which overseas foreign currency is received through proper banking channels. The RBI has developed a system whereby rupee drawing arrangement transactions can be facilitated.

Under the Foreign Exchange Management Act[1], 1999, Authorised dealers or authorised banks can enter into non-Resident Exchange houses for carrying out such transactions and arrangements.

These arrangements are carried out in countries which are not greylisted under the financial action task force (FATF) and through the VOSTRO account.

Which countries would be applicable for Rupee Drawing Arrangement?

The following countries would be applicable for carrying out rupee drawing arrangement:

  • UAE
  • Middle Eastern Countries
  • Hong Kong
  • Singapore

Apart from the above list, countries have to comply with the regulations brought about by the FATF to enter into the Rupee Drawing Arrangements.

What is a Non-resident Exchange house?

A Non-Resident Exchange House would be an institution established abroad to carry out the process of remitting money and carrying out exchange activities. The Non-resident exchange house under the Rupee Drawing Arrangement has to comply with the respective provisions of the foreign country financial and prudential rules from time to time.

How many Rupee Drawing Arrangements can an Authorised Bank Enter into?

An Authorised Bank or Authorised Dealer is allowed to enter into maximum twenty rupee drawing arrangements with non-resident exchange houses outside India. After this, the authorised bank can take permission from the RBI based on the internal and external audit requirements of the bank. When it comes to dealing with trade-related transactions, then there is an upper limit of Rs 15 Lakhs which can be remitted in a single transaction.

What remittances are allowed under an RDA?

Under an RDA, only private remittances are allowed to be carried out. The individuals under RDA must be private individuals. Through this scheme, outward remittance cannot be carried out. Only direct credit to the bank account of the beneficiary is allowed under a respective RDA. Under no circumstances, will cash payments be allowed.

Conclusion


With a view of increasing the number of cross border transactions, the RBI has brought out the system of RDA. Through this system, an authorised bank can enter into an arrangement with a non-resident exchange house. Transactions under the RDA will effectively allow seamless transmission of funds within an outside India.

Read our article:Qualified Foreign Investors (QFI) and their Investment Norms

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Varun Hariharan

Varun Hariharan has completed the Legal Practice Course from BPP Law School, Manchester. He has a Masters in Commercial and Corporate Law from the Queen Mary University of London and LLB Honours from Bangor University, UK. He specialises in law related to corporate, artificial intelligence and technology law.

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