The International Financial Services Centres Authority (IFSCA) on January 22, 2024, issued a circular regarding the Avoiding rerouting of transactions to IBUs that have been wrongly credited in the parent AD bank's Nostro account – Reporting in R-Return.
The following reporting procedures are stated:
• Reporting by the AD Bank in R-Return
o AD banks on receipt of such remittances, can be advised to report such transactions as purchases from overseas Banks/correspondents (in QE file under P0093 purpose code).
o (b)The corresponding outward transaction of AD bank to IBU can be reported as a reversal of wrong entries (under the S1502 purpose code in the BOP file).
o (c) However, to identify the transactions between DTA and IFSC, AD banks have been instructed to report all transactions with IBUs under country code ‘FC’ (and NOT ‘IN’). Therefore, the transaction indicated in (b) above will be reported with country code ‘FC’.
• Reporting by the IBU in R-Return:
o In the above scenario, IBU would receive the remittance from AD bank instead of the bank of the non-resident remitter (an overseas bank). Depending upon the beneficiary in IBU, being resident or non-resident, the reporting would be in different files (BOP or QE).
o If the beneficiary at IBU is a resident account, this will become a non-resident (overseas counterparty) to the resident (IBU/or IBU’s resident account) and hence is classified as a BOP transaction. Hence the inward remittance transactions (routed through the parent AD bank) shall be reported in the BOP file under the appropriate economic purpose code as per the extant guidelines of RBI.
o If the beneficiary at IBU is a non-resident account, this will become a non-resident (overseas counterparty) to a non-resident (non-resident client of IBU) non-BOP transaction. Hence the said inward remittances (from the parent AD bank) shall be reported as purchases from other ADs in India under P0092 in the QE file.
o For reporting the transaction in the BOP file (as indicated in (b)), IBUs shall use the country of the non-resident remitter.
[Circular No. IFSCA-FMPP0BR/9/2023-Banking]
