Introduction Of Foreign Contribution (Regulation) Act Related Transaction Code In NEFT And RTGS Systems

Posted On - 10 March, 2023 • By - Manali Desai

According to Foreign Contribution (Regulation) Act, 2010 (amended on 28.09.2020), foreign contributions should be only in the Foreign Contribution (Regulation) Act (FCRA) account of the State Bank of India (SBI) New Delhi Main Branch. Payments to FCRA account are received directly from foreign banks through SWIFT and from Indian intermediary banks through NEFT and RTGS systems. 

In terms of current requirements of Ministry of Home Affairs, Government of India, the donor details such as name, address, country of origin, amount, currency, and purpose of remittance are required to be captured in such transactions and SBI is required to report the same to Ministry of Home Affairs on daily basis. 

Keeping in view the above, necessary changes have been introduced in NEFT and RTGS systems, technical details of which are provided in Annex. Member banks are advised to incorporate necessary changes in their core banking/middleware solutions to capture the requisite details while forwarding the foreign donations through NEFT and RTGS systems to the State Bank of India. The instructions will be effective from 15.03.2023. 

These instructions are issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007).  

Section 10: Power to determine standards,  

(1) The Reserve Bank may, from time to time, Power to prescribe— determine  

 (a) the format of payment instructions and the size and standards shape of such instructions;  

 (b) the timings to be maintained by payment systems;  

 (c) the manner of transfer of funds within the payment system, either through paper, electronic means or in any other manner, between banks or between banks and other system participants; (d) such other standards to be complied with the payment systems generally; 

 (e) the criteria for membership of payment systems including continuation, termination and rejection of membership;  

(f) the conditions subject to which the system participants shall participate in such fund transfers and the rights and obligations of the system participants in such funds. 

(2) Without prejudice to the provisions of sub-section (1), the Reserve Bank may, from time to time, issue such guidelines, as it may consider necessary for the proper and efficient management of the payment systems generally or with reference to any particular payment system. 

Section 18: Powers of Reserve Bank to give directions generally,  

“Without prejudice to the provisions of the foregoing, the Reserve Bank may, if it is satisfied that for the purpose of enabling it to regulate the payment systems or in the interest of management or operation of any of the payment systems or in public interest, it is necessary so to do, lay down policies relating to the regulation of payment systems including electronic, non-electronic, domestic and international payment systems affecting domestic transactions and give such directions in writing as it may consider necessary to system providers or the system participants or any other person either generally or to any such agency and in particular, pertaining to the conduct of business relating to payment systems” 

Technical Details related to FCRA Transactions in NEFT and RTGS Systems are detailed mentioned in the Notification dated 16.02.2023 bearing No. CO.DPSS.RPPD.No.S1931/04-03-001/2022-23 issued by Reserve Bank of India (Attached below)