FEM (Deposit) Amendment Regulations 2026

 

RBI Expands the Scope of Special Non-Resident Rupee (SNRR) Accounts: Key Highlights of the Sixth Amendment to FEMA Deposit Regulations, 2026

The Reserve Bank of India (RBI), through Notification No. FEMA 5(R)(6)/2026-RB dated June 18, 2026, has amended the Foreign Exchange Management (Deposit) Regulations, 2016. While the amendments appear technical, they represent another significant step towards simplifying the regulatory framework governing Special Non-Resident Rupee (SNRR) Accounts, facilitating cross-border transactions, and strengthening India's aspirations of making the Indian Rupee a more globally accepted currency.

Historical Background

India's foreign exchange regulatory framework has evolved considerably since the enactment of the Foreign Exchange Management Act, 1999 (FEMA), which replaced the restrictive Foreign Exchange Regulation Act (FERA). FEMA shifted the regulatory philosophy from one of control to one of facilitation, enabling greater participation of foreign investors and businesses in the Indian economy.

As international trade and investment expanded, the RBI introduced the Special Non-Resident Rupee (SNRR) Account in 2016 to facilitate permissible current and capital account transactions by non-residents. Over time, the account has become an important instrument for foreign investors, multinational corporations, overseas financial institutions and entities operating in India's International Financial Services Centres (IFSCs).

The present amendment continues this gradual liberalisation by enhancing operational flexibility and removing procedural constraints.

Key Changes

The Sixth Amendment introduces several important changes:

• Recognition of IFSCs: The regulations now expressly recognise branches of authorised dealers operating in an International Financial Services Centre (IFSC), allowing SNRR accounts to be maintained through such branches.

• Expanded Scope of SNRR Accounts: The amended provisions permit SNRR accounts to be used not only for permissible transactions with residents in India but also for bona fide transactions with persons resident outside India, subject to the applicable FEMA framework.

• Simplification of Schedule 4: Several existing paragraphs governing SNRR accounts have been deleted, indicating RBI's intent to streamline the regulatory framework and reduce unnecessary operational prescriptions.

• Greater Flexibility in Fund Transfers: The amendments expressly permit transfers between NRO, NRE and SNRR accounts within the limits prescribed under the FEMA Remittance of Assets Regulations, providing greater flexibility in fund management for eligible non-residents.

• Transactions Between Non-Residents: A new provision enables authorised dealer banks to process transactions between two non-residents involving SNRR accounts based on the account holder's mandate specifying the underlying purpose, where such transactions are otherwise outside FEMA compliance requirements.

Why These Amendments Matter

The amendments align with the RBI's broader objective of promoting ease of doing business, encouraging greater use of the Indian Rupee in international transactions, and strengthening India's position as a global financial centre through IFSCs.

For banks, the revised framework simplifies account operations. For foreign investors and multinational businesses, it provides greater flexibility in managing rupee-denominated transactions. The changes also complement India's ongoing efforts to deepen cross-border financial markets and enhance the attractiveness of IFSCs as international financial hubs.

Conclusion

Although the Sixth Amendment does not introduce an entirely new regulatory framework, it represents another incremental yet meaningful step in the continuing liberalisation of India's foreign exchange regime. By simplifying the operation of SNRR accounts, recognising the growing importance of IFSCs, and facilitating a wider range of permissible transactions, the RBI has reinforced its commitment to creating a more efficient, flexible and internationally competitive financial ecosystem.