IRDA license not required for selling in India medical/accident insurance policies of foreign insurer which is operative and enforceable only outside India

Insurance : IRDA license not required for selling in India medical/accident insurance policies of foreign insurer which is operative and enforceable only outside India

• There is no indication of the intention of the legislature to give extra-territorial operation to the Insurance laws of India. The Indian laws do not apply to insurance business outside India.

• The business of Foreign Insurance Companies of covering risks incurred outside India, cannot be said to be insurance business in India (within the meaning of Insurance Act), even if the premium for such insurance is paid in/from India and Insurance Policy is issued in India.

• The essence of the business/contract of insurance is the coverage of risk and if the policies issued by the foreign insurer do not cover the risk as long as the insured remains in India, mere issuance thereof cannot be said to be carrying on insurance business in India. There cannot be said to be an insurance business only in effecting a contract which is contingent and is to be operative and enforceable not in India and only outside India.

• Without the contract being operative and enforceable in India, mere ministerial act of issuance of the contract in India cannot be said to be amounting to carrying on insurance business in India. - [2012] 21 taxmann.com 189 (Delhi)

Exchange Earner's Foreign Currency (EEFC) Account

RBI/2011-12/547
A. P. (DIR Series) Circular No. 124

May 10, 2012

To

AD Category I Authorised Dealer Banks

Madam/ Sir,

Exchange Earner's Foreign Currency (EEFC) Account

1.     Attention of Authorised Dealer Category - I (AD Category - I) banks is invited to A.P. (DIR Series) Circular No.15 dated November 30, 2006 in terms of which all foreign exchange earners were permitted to retain 100% of their forex earnings in EEFC account with any AD in India.

2.     On a review of the Scheme, it  has been decided as under :-

a)     50% of the balances in the EEFC accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder. This process may be completed within a fortnight from the date of the circular and compliance reported to the Chief General Manager, Foreign Exchange Department, Central Office, Trade Division, Amar Building, Sir P.M. Road, Fort, Mumbai 400 001

b)    In respect of all future forex earnings, an exchange earner is eligible to retain 50% (as against the previous limit of 100%) in non-interest bearing EEFC accounts.  The balance 50% shall be surrendered for conversion to rupee balances.

c)     The facility of EEFC scheme is intended to enable exchange earners to save on conversion/transaction costs while undertaking forex transactions in future. This facility is not intended to enable exchange earners to maintain assets in  foreign currency, as India is still not fully convertible on Capital Account.  Accordingly, EEFC account holders henceforth will be permitted to access the forex market for purchasing foreign exchange only after utilising fully the available balances in the EEFC accounts.  ADs may, accordingly, obtain a declaration while selling foreign exchange to their constituents.

3.     It may be noted that the provisions at paragraph 2(b) and 2(c) above will apply, mutatis mutandis, also to holder of  either a Resident Foreign Currency  Account (RFC) or a Diamond Dollar Account (DDA).

4.     AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

5.     The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Yours faithfully,

(Rashmi Fauzdar)
Chief General Manager