Banking · Foreign Exchange Management Act (FEMA)
A high-net-worth individual residing abroad wants to open an NRE Fixed Deposit account with a bank in India using a Power of Attorney (PoA) granted to his resident brother. According to the Master Direction on KYC and FEMA guidelines, which of the following conditions is mandatory for the bank to fulfill before allowing the Power of Attorney holder to operate the account for non-business related local payments?
- 1The resident brother must be made a joint account holder with 'Either or Survivor' clause, thereby changing the status of the account to a resident account automatically.
- 2The resident Power of Attorney holder is legally prohibited from executing any transaction on NRE accounts, and the account can only be operated online by the non-resident individual.
- 3The bank must ensure that the Power of Attorney is properly notarized/attested, and it must explicitly state that the agent can operate the account for local payments in rupees excluding any form of remittance outside India.✓
- 4The Power of Attorney must be strictly restricted to only allowing the resident agent to withdraw funds for investment in Indian equity markets and cannot be used for any local personal payments.
Correct answer
The bank must ensure that the Power of Attorney is properly notarized/attested, and it must explicitly state that the agent can operate the account for local payments in rupees excluding any form of remittance outside India.
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