EXCHANGE CONTROL REGULATIONS APPLICABLE TO NEPAL AND BHUTAN
General
Transactions
with Persons Resident in Nepal and Bhutan
Bank
Accounts in India of Persons Resident in Nepal and Bhutan
Export of Goods to Nepal and
Bhutan
Export of
Goods from Nepal and Bhutan to Third Countries
Methods of Payment for Export of Goods and Services to Nepal and Bhutan
Payments to Nepal
through ACU Not Permitted
Import of Goods into Nepal/Bhutan
Freight on
Nepalese/Bhutanese Exports and Imports
Payment of General Insurance Claims arising in Nepal and Bhutan
Basic Travel Quota (BTQ)
Issue of Rupee Travellers Cheques to Foreign Tourists Visiting Nepal
Remittances on account of Foreign Tourists Visiting Nepal
Consolidated Tour
Arrangements in Bhutan
Import of Indian Currency from
Nepal
Export of Indian Currency to
Nepal
Exemption from Surrender obligation for Currencies of Nepal and Bhutan
Joint Ventures in Nepal
Issue/Transfer of Shares and Securities to Persons Resident in Nepal and Bhutan
Acquisition, Holding, etc. of Immovable Property in Nepal and Bhutan
Acquisition, Holding, etc. of Immovable Property in India by Nepalese/Bhutanese
Nationals/Companies
Project Exports of Nepal and
Bhutan
Investment
facility of NRIs resident in Nepal and Bhutan
EXCHANGE CONTROL REGULATIONS APPLICABLE
TO NEPAL AND BHUTAN
General
- Exchange Control regulations specifically applicable to Nepal and Bhutan
have been given in appropriate Chapters of the Manual. For facility of easy
reference, these regulations have been brought together and amplified,
wherever necessary, in this Supplement.
Transactions with Persons Resident in Nepal and Bhutan
- In terms of Reserve Bank Notification No FERA.7/74-RB dated 1st January
1974, for purpose of transactions in Indian rupees, undernoted categories of
persons, firms, companies (including banks), et. resident in Nepal and
Bhutan are treated as resident in India---
- Indians, Nepalese or Bhutanese resident in Nepal or Bhutan.
- Offices and branches situated in Nepal or Bhutan of any business
carried on by a company or a corporation incorporated or established
under any law in force in India. Nepal or Bhutan.
- Offices and branches situated in Nepal or Bhutan of any business
carried on as a partnership firm or otherwise by Indians, Nepalese or
Bhutanese.
For purpose of transactions in foreign exchange, however, persons,
firms, companies or other organisations resident in Nepal and Bhutan are
treated like any other non-resident. No sales of foreign exchange can be
made to them except as specifically provided in this Manual.
NOTE:
The provisions in the paragraph relate only to payments between persons
resident in Indian and persons resident in Nepal and Bhutan. For all
other purposes, such as transactions in shares of Indian companies,
carrying on any business activity in India, transactions in immovable
property in India, etc., persons resident in Nepal and Bhutan are
treated like any other non-residents.
Bank Accounts in India of Persons Resident in Nepal and Bhutan
- By virtue of Reserve Bank Notification no. FERA. 7/74-RB dated 1st
January 1974, rupee accounts with authorised dealers in India, of
Persons, firms, companies (including banks), etc. indicated in paragraph
2 above are regarded as resident accounts. Such accounts will be opened
by authorised dealers freely, provided, however, a declaration in form
QA 22 has been completed and nature and sources of credits declared by
the account holder do not indicate any intention to undertake
transactions which may be contrary to the Indian Exchange Control
regulations. Once the declaration has been furnished, operations on the
accounts may be made freely.
Export of Goods to Nepal and Bhutan
- In terms of Government of India Notifications No. F1/67/EC/73-1 and
No. F1/67/EC/73-2 both dated 1st January 1974 (as amended), export of
goods from India to Nepal and Bhutan is not subject to declaration of
GR/PP forms.
Export of Goods from Nepal and Bhutan to Third Countries
- Nepalese/Bhutanese goods exported from Nepal/Bhutan to countries
outside India through Indian ports are not governed by the GR/PP form
procedure.
Methods of Payment for Export of Goods and Services to Nepal and Bhutan
- Rupee transfers from accounts in India of Indians, Nepalese and
Bhutanese resident in Nepal and Bhutan as well as of Indian, Nepalese
and Bhutanese firms, companies or other organisations (including banks)
functioning in these countries against exports to these countries from
India or against any other transaction can be made freely without
reference to Reserve Bank. Payments from other persons in or resident in
Nepal and Bhutan (such as foreign tourists, foreign nationals employed
or otherwise engaged in Nepal and Bhutan, transit passengers on short
visits to Nepal and Bhutan, etc.) in settlement of transactions with
persons, firms and companies resident in India should be made in
convertible foreign currency. If authorised dealers come across any
cases where payment by such persons is settled in rupees from a resident
account, they should be reported to Reserve Bank. Ordinarily, payments
towards exports from India to Nepal/Bhutan financed from external
assistance such as credits from World Bank, Asian Development Bank, etc.
to these countries will be settled by the aid-giving agencies by
payments to exporters/exporters' bankers directly in India in foreign
exchange or out of their convertible rupee resources in India. If
authorised dealers come across cases where such exports are paid for in
rupees held by persons (including banks) resident in Nepal/Bhutan, such
cases should also be promptly reported to Reserve Bank. This provision
is also applicable to turnkey/construction contracts and consultancy
services undertaken in Nepal or Bhutan by firms/companies in India,
against external aid to Nepal and Bhutan.
Payments to Nepal through ACU Not Permitted
- Payments between Nepal and India are not eligible for settlement
through Asian Clearing Union.
Import of Goods into Nepal/Bhutan
- Reserve to referred be should currency permitted a in received will
Bhutan Nepal buyers from payment where into imports country third of
financing intermediary for proposals Specific permitted. not are goods
import against countries suppliers India Payments>
Freight on Nepalese/Bhutanese Exports and Imports
- Nepalese/Bhutanese exports to foreign countries will ordinarily be
made through Indian ports. In respect of Nepalese/Bhutanese exports made
on freight prepaid basis, therefore, freight will be paid to
airline/shipping companies or their agents in India. Where shipment is
made by an Indian or Nepalese/Bhutanese carrier, freight may be freely
paid in rupees. Where, however, other carriers are used, freight is
permitted to be collected only in convertible foreign currency. If
payment in rupees is offered, it will be accepted only if the rupees
have been derived by sale of convertible foreign currency to an authorised dealer and certificate issued by the latter to this effect is
produced to airline/shipping company or its agents. Similar regulations
are applicable where freight on imports into Nepal/Bhutan from countries
outside India is payable at destination i.e., at an Indian port.
Payment of General Insurance Claims arising in Nepal and Bhutan
- General Insurance Corporation of India and its subsidiaries may
freely make payment of claims in Indian rupees to Indians, Nepalese and
Bhutanese resident in Nepal and Bhutan as well as offices and branches
of Indian, Nepalese and Bhutanese firms, companies or other organisations in these two countries against insurance policies (marine
as well as non-marine). Payments in foreign currency towards claims
under insurance policies are not permissible without specific approval
of Reserve Bank, except where premiums thereon were also collected in
foreign currency.
Basic Travel Quota (BTQ)
- Nepalese and Bhutanese nationals resident but not permanently
resident in India are not eligible to avail of BTQ.
Issue of Rupee Travellers Cheques to Foreign Tourists Visiting Nepal
- Exchange Control in Nepal does not permit transit passengers and
foreign tourists (other than Indian nationals and foreign nationals
resident in India) bringing rupee instruments including travellers
cheques to Nepal. Before issuing rupee travellers cheques to foreign
tourists in India, authorised dealers should ascertain whether such
tourists are also visiting Nepal and if so, the relevant regulations
should be brought to their notice and they should be advised to carry
with them foreign currency travellers cheques instead of rupee
travellers cheques in order to avoid inconvenience in Nepal. Rupee
travellers cheques issued to such persons may be prominently endorsed as
`Not valid for negotiation in Nepal'.
Remittances on account of Foreign Tourists Visiting Nepal
- Under Exchange Control regulations prevailing in Nepal, travel
agents and hoteliers in that country will accept only free foreign
exchange towards payment/reimbursement on account of services rendered
to foreign tourists (other than Indian nationals and foreign nationals
resident in India) visiting that country under arrangements made through
travel agents in India. That part of foreign exchange remittances
received in India against such consolidated tour arrangement which
pertains to services rendered by travel agents and hoteliers in Nepal,
will be permitted to be remitted from India to Nepal in free foreign
exchange.
Consolidated Tour Arrangements in Bhutan
- Travel agents in India may freely arrange consolidated tours to
Bhutan for foreign tourists against payment from the tourists or from
overseas tour operators in foreign exchange. Indian travel agents may
remit the dues of travel agents and hoteliers in Bhutan through authorised dealers. (See paragraph 8B.7)
Import of Indian Currency from Nepal
- Any person may bring with him from Nepal currency notes of
Government of India and Reserve Bank of India notes (other than notes of
the denominations of above Rs.100/-).
Export of Indian Currency to Nepal
- Any person may take or send to Nepal, Indian currency notes other
than notes of denominations of above Rs.100/- and Indian coins without
limit.
Exemption from Surrender obligation for Currencies of Nepal and Bhutan
- The obligation placed in terms of Government of India Notification
F.No.10/22/90-NRI Cell dated 17th July 1992 for surrender of foreign
exchange to an authorised dealer is not applicable to currencies of
Nepal and Bhutan.
Joint Ventures in Nepal
- Although there are no restrictions on export of goods from India to
Nepal or on transactions in Indian rupees with Indian and Nepalese
individuals, firms, companies, etc. in Nepal the setting up of joint
ventures in Nepal by firms, companies etc. resident in India requires
approval of Reserve Bank in case any remittance towards equity capital
or loan even in Indian rupees or export of goods/services towards equity
contribution to the joint ventures is involved.
Issue/Transfer of Shares and Securities to Persons Resident in Nepal and
Bhutan
- Issue and transfer of Indian rupee shares and securities to persons,
firms, companies, etc. resident in Nepal require prior permission of
Reserve Bank in terms of Section 19 of FERA 1973, even though the
underlying sale transaction may be settled in Indian rupees. Purchase of
such shares and securities of Indian company by persons, firms,
companies resident in Nepal and Bhutan also requires approval of Reserve
Bank under Section 29(1)(b) of FERA 1973. Remittance of divident/interest
on shares/securities held by persons, firms, companies, etc. resident in
Nepal and Bhutan in Indian rupees is not, however, subject to
restriction.
Acquisition, Holding, etc. of Immovable Property in Nepal and Bhutan
- Indian nationals resident in India and firms/companies
registered/incorporated in India are required to obtain permission of
Reserve Bank under Section 25 of FERA 1973, to acquire, hold, transfer
or dispose of by sale, mortgage, lease (for a period exceeding five
years), gift, settlement or otherwise, any immovable property situate in
Nepal and Bhutan even though the transactions may be settled in Indian
rupees.
Acquisition, Holding, etc. of Immovable Property in India by
Nepalese/Bhutanese Nationals/Companies
- Nepalese/Bhutanese nationals, whether resident in India or not,
should obtain prior permission of Reserve Bank under Section 31 of FERA
1973, to acquire, hold, transfer or dispose of by sale, mortgage, lease
(for a period exceeding five years), gift, settlement or otherwise, any
immovable property in India even though the transactions may be settled
in Indian rupees. (See paragraph 11 E.4 regarding general permission).
Project Exports of Nepal and Bhutan
- All project export proposals to Nepal and Bhutan require the
clearance of the concerned authorities like the authorised dealer/Exim
Bank/Working Group on Project Exports depending upon the value and other
terms and conditions of the bid/tender and Reserve Bank's post facto
approval for payment terms. The general permission granted for opening
of foreign currency bank account, temporary site office, payment of
agency commission and availing of temporary overseas borrowings vide RBI
notification No. FERA, 98/91-RB dated 18th November 1991 are applicable,
mutatis mutandis, in respect of project exports to Nepal and Bhutan.
Investment facility of NRIs resident in Nepal and Bhutan
- NRIs resident in Nepal and Bhutan will be permitted to make
investments in India provided the funds for the purpose are remitted in
free foreign exchange through proper banking channels. Such investments
will either be on repatriation or on non-repatriation basis depending on
the terms and conditions applicable under the existing schemes for NRI
investment.