Seeking improvement in individual foreign exchange transactions, a Reserve Bank of India (RBI) panel has said the central bank should allow non-resident Indians (NRIs) to jointly open joint foreign currency non-resident (FCNR)/non-resident external (NRE) accounts with a resident relative.
RBI can permit the opening of FCNR accounts in any freely convertible currency, said the panel, headed by K J Udeshi, former deputy RBI governor, constituted in May. Its report was given to RBI on August 8.
The operations of the Foreign Exchange Management Act (Fema) still betray a “fear” of compensatory payments between non-residents and residents, harking back to the Foreign Exchange Regulation Act days. Bank customers continue to face unnecessary hardships for simple transactions which are compliant with Fema, the panel said. The rules now contain contradictory provisions. There is also a need to make definitions uniform and consistent across Fema. On RBI's task of tracking NRI investments in companies, the panel said the regulator should monitor only the total 'foreign holding, comprising foreign institutional investments and NRIs/people of Indian origin. RBI can dispense with monitoring NRI investments in sectors where 100 per cent foreign direct investment is allowed.
The panel also said Fema's ambit should be expanded to allow gifts from residents and allowing them to bear medical expenses of visiting NRIs. RBI should permit residents to gift shares, securities and convertible debentures to their NRI subject to provisions of the Companies Act, it said. The thrust of the reforms should be to shift from the macro-management of transactions by individuals to monitoring flows from transactions by residents and NRIs, it said.
