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RBI bans non-banking entities from accepting fresh NRE deposits

Our Bureau

Mumbai , April 24

THE Reserve Bank of India has banned entities other than banks and authorised dealers from collecting non-resident external (NRE) deposits with immediate effect. This would affect fresh NRE deposits collection by non-banking financial companies (NBFCs) and non-financial companies.

The RBI move comes in the wake of surging foreign exchanges reserves, which incidentally grew by over $1 billion in the last week to cross $117 billion. Just a week ago, RBI had taken a similar measure to check forex inflow by lowering interest rates on NRE deposits.

"The Reserve Bank of India has disallowed entities other than authorised dealers or authorised banks from accepting deposits from non-resident Indians (NRIs) received through fresh remittances from overseas," said a release from RBI. Hitherto, a company registered under the Companies Act, 1956, or a body corporate created under an Act of Parliament or State Legislature and NBFCs were also allowed to collect deposits. These entities can continue to hold the existing deposits and also renew such deposits held in their books in the name of NRIs on repatriation or non-repatriation basis as the case may be. The interest earned on such deposits will continue to be repatriable, said the release.

"Entities other than authorised dealers or authorised banks will also not be permitted to accept deposits from NRIs by debit to their non-resident external (NRE)/foreign currency non-resident (banks) (FCNR(B)) accounts," stated the release. This means that these entities can accept deposits from NRIs by debit from NRO deposits or non-repatriable account of NRIs. Essentially, the central bank is concerned to arrest only the fresh forex inflows into the country.

NRE deposit volumes collected by various non-financial companies and NBFCs, although it may not be substantial, is a grey area with no estimates available on the same. However, there may be some finance companies in States such as Kerala active in NRE deposit mobilisation.

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