RBI allows startups with overseas unit to open foreign currency accounts

Reserve Bank today allowed start-ups with an overseas subsidiary to open foreign currency accounts abroad to credit foreign exchange earnings from exports and sales made by them.

In line with the Government of India's start-up initiative, it has been decided that an Indian startup, having an overseas subsidiary, may open a foreign currency account with a bank outside India for the purpose of crediting to the account foreign exchange earnings out of exports/sales, RBI said in a notification.

The balances held in such accounts, to the extent they represent exports from India, should be repatriated to India within the period prescribed for realisation of exports, it said.

RBI further said payments received in foreign exchange by an Indian start-up arising out of sales or exports... will be a permissible credit to the Exchange Earners Foreign Currency (EEFC) account maintained in India by the start-up.

Furthermore, the existing facility of opening a foreign currency account outside India, available to LIC or GIC and their subsidiaries for the purpose of meeting the expenditure incidental to the insurance business carried on by them, has now been liberalised, it said.

Accordingly, any insurance or reinsurance company registered with the Insurance Regulatory and Development Authority of India may open a foreign currency account with a bank outside India to carry out insurance or reinsurance business.

Also read : Financing the startup sector needs a rethink, how about a collateral free debt?

In the month of February, to help fledgling breed of Indian entrepreneurs, RBI had announced that it plans to smoothen flow of funds to startups by allowing them to get foreign venture capital without any curbs and enable easier transfer of shares between residents or non-resident investors.  RBI then Governor Raghuram Rajan had also said the aim was to simplify movement of capital and do away with regulatory impediments hampering their growth, to create more ‘unicorns’ or companies with billion-dollar valuations.