RBI directive on post-euro nostro accounts

MUMBAI, DEC 9: The Reserve Bank of India on Wednesday said that after the introduction of the euro from January 1, 1999, authorised dealers will have the option to either close the existing nostro accounts maintained in national currency units (NCUs) of member countries of the European Union and transfer business only in the euro or continue with the existing nostro accounts in NCUs of the member countries of the EU and simultaneously maintain nostro accounts in the euro.

The RBI directive said that banks have been advised that existing accounts in NCUs are proposed to be closed. It has been further decided to have all future transactions in respect of member countries of the European Union in the euro alone. The authorised dealers may convert all cash and suspense account balances in NCUs into the euro on January 1, 1999, it said.

Thereafter, all transactions denominated in NCUs or the euro should be reported as euro transactions in the same manner in which transactions in other foreign currencies arereported.

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"In respect of export bills purchased discounted or negotiated prior to January 1, but realised after that date, instructions contained in para 26(iv) of the annexure to Chapter 16 of the ECM should be followed," the RBI directive said.

In case authorised dealers decide to continue existing nostro accounts in NCUs and at the same time open nostro account in the euro, they should follow the procedure contained in para 26 (iv) of the annexure to Chapter 16 of the ECM where the realisation of the export is in a currency other than the currency in which the bill was initially purchased, discounted or negotiated by the authorised dealer, the RBI said.