The expenditure requirement and the account clock both matter
The RBI Master Direction—Deposits and Accounts, paragraph 3.11, updated 2 September 2026 permits an Indian company receiving foreign investment under the FDI route, in terms of the Non-debt Instruments Rules, to maintain a foreign-currency account with an authorised dealer in India where it has impending foreign-currency expenditure. The account is to close immediately after the requirements are completed or within six months from opening, whichever is earlier.
This analysis is checked as of 24 October 2026. It concerns the temporary banking facility, not the company’s eligibility to receive FDI, sectoral conditions, share-issuance timetable, pricing or reporting obligations. Those require separate verification. The account’s six-month period is not an extension of any investment or corporate-compliance deadline.
Prepare a requirement-backed opening file
Identify the Indian investee, the qualifying FDI inflow and the impending expenditure. Support the purpose with actual contracts, approved budgets and expected payment dates. A general desire to retain foreign currency indefinitely is not the same as an identified impending requirement. The bank account, investment receipt and expenditure should reconcile without treating any foreign remittance as automatically qualifying FDI.
Maintain two closure triggers
| Trigger | Working | Operational evidence |
|---|---|---|
| Completion | When have the stated expenditure requirements actually finished? | Paid invoices, cancellations and completion approval |
| Outer period | When is six months reached from account opening? | Bank opening confirmation and calendar diary |
| Earlier date | Which event requires action first? | Documented comparison and bank closure plan |
| Residual funds | What remains when closure is required? | Balance reconciliation and lawful settlement instructions |
The clock refers to opening the account, not the date of each credit. A later funding tranche does not by itself reopen or extend that same account. Nor does retaining a small unused balance prevent completion of the expenditure requirements. Identify cancellations and scope reductions: a budget line that will no longer be spent should not be kept open merely to postpone closure.
Use a calendar-month diary, not an unexamined fixed-day approximation. The illustrations deliberately use simple mid-month or first-of-month dates to avoid disputed month-end conventions. Treat the dates as planning control points and arrange closure before any outer limit; do not read the examples as authority for an extra grace day. Future-dated calendar illustrations assume the verified framework remains applicable and require a current-law check before implementation.
An uncompleted purchase does not authorise indefinite continuation
If expenditure slips beyond the outer period, contact the authorised dealer before expiry to determine a lawful alternative or any required permission. A supplier delay, board expectation or internal extension note is not an automatic regulatory extension. The facility’s existence also does not establish that every debit is permissible; verify each underlying import or service payment and applicable tax and banking documentation.
Resolve the balance without inventing a transfer permission
The direction requires closure on the stated basis but does not make every possible disposition of residual currency automatically lawful. Obtain the bank’s documented process for settlement, conversion or other permitted treatment on the actual facts. Do not assume that unused FDI money can be remitted to any shareholder, lent to another company or shifted into an unrelated account merely because the temporary account must close.
The investment register and this banking diary should remain linked but distinct. Confirm actual closure with the bank rather than marking the task complete when the final invoice is entered. Reconcile bank charges, final payments and remaining currency; a nil balance is useful evidence but is not the same as a bank-confirmed closed account.
Worked illustrations
These illustrations use fictional facts and expressly stated assumptions. Amounts are Indian rupees unless a different currency or unit is specified. They are independent examples, not findings about any actual client.
Illustrative example 1: Completion comes first
An account opens on 1 April 2026. The six-month comparison point is 1 October 2026, but all identified requirements finish on 15 June 2026. The earlier trigger is completion on 15 June; October is not an optional holding period after completion. The interval from opening to completion is 75 days, used only as a calendar reconciliation.
Illustrative example 2: Outer period comes first
An account opens on 15 April 2026 and requirements remain uncompleted on 15 October 2026, the six-month comparison point. The outer period controls. That span is 183 days in this calendar; do not replace the six-month rule with a universal 183-day rule.
Illustrative example 3: Later tranche does not restart the account
Opening is 1 May 2026; another qualifying tranche arrives on 1 July. The six-month comparison point from opening is 1 November, not 1 January 2027. The later-tranche shortcut would shift the diary by 61 days. Completion, if earlier, would still control.
Illustrative example 4: First receipt is not the opening date
The bank confirms opening on 1 April 2026, while the first credit arrives on 20 April. The six-month comparison remains based on 1 April, producing 1 October rather than 20 October. The funding-date approach would postpone the diary by 19 days.
Illustrative example 5: Residual balance after completed requirements
Assume USD50,000 qualifying receipts and completed supported expenditure of USD45,000. USD5,000 remains. If the account opened on 1 June 2026 and requirements finish on 10 August, completion is earlier than the 1 December six-month comparison. Plan lawful settlement of USD5,000 with the bank rather than retaining the account solely because it has a balance.
Illustrative example 6: Revised budget does not extend the clock
An account opens on 15 May 2026 for USD100,000 expenditure. USD70,000 is paid and the remaining USD30,000 requirement is definitively cancelled on 15 September. Assume no other impending requirement remains. Completion/cancellation is earlier than the 15 November six-month comparison. Document the USD30,000 residual requirement reduction and the bank settlement process; a superseded budget is not a continuing purpose.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Confirm the Indian investee and FDI route | Investment and entity documents |
| 2 | Substantiate impending currency expenditure | Contracts, budgets and payment plan |
| 3 | Confirm the actual account opening date | Bank opening evidence |
| 4 | Calculate the six-calendar-month comparison | Reproducible date diary |
| 5 | Track each expenditure requirement | Payment and cancellation status schedule |
| 6 | Detect earlier completion or cancellation | Purpose-completion evidence |
| 7 | Keep later credits on the original account clock | Tranche-to-account reconciliation |
| 8 | Verify underlying payment compliance separately | Banking, import/service and tax documents |
| 9 | Arrange lawful residual settlement and closure | Authorised dealer instructions |
| 10 | Obtain bank confirmation and close the control | Final balance reconciliation and closure evidence |
Sixteen practitioner FAQs
1. Is this a permanent foreign-currency account facility?
No. The route has a requirement-completion trigger and a six-month outer period.
2. Who is the relevant account holder?
The Indian company receiving the qualifying foreign investment under the stated FDI framework.
3. Does any overseas receipt establish eligibility?
No. Identify the FDI route and the Indian investee’s actual facts.
4. Why must expenditure be identified?
The permission is conditioned on impending foreign-currency expenditure, not merely a preference to hold currency.
5. Does the clock start at the first remittance?
The direction refers to the date of opening the account.
6. Can each new tranche restart the same clock?
A later credit does not by itself change the opening date or grant an extension.
7. May the company wait six months after early completion?
No. The earlier completion trigger must be respected.
8. What if requirements remain outstanding at six months?
Do not assume continuation. Resolve the lawful route with the authorised dealer before the outer period.
9. Is six months always 180 or 183 days?
No. Maintain a calendar-month calculation; day counts depend on the dates.
10. Does cancellation of the final requirement matter?
Yes. Document whether any impending requirement remains rather than relying on an obsolete budget.
11. Does a residual balance keep the purpose alive?
Not by itself. Determine lawful settlement and closure steps with the bank.
12. Can the residual automatically be returned to the investor?
No automatic remittance permission is asserted here. Apply the relevant investment and payment rules.
13. Does this facility extend share-issue or FDI reporting deadlines?
No. Those are separate obligations with their own applicable framework.
14. Are all foreign-currency debits permitted by account opening?
No. Validate each underlying transaction and required documentation.
15. Is an empty account automatically closed?
No. Obtain the bank’s actual closure confirmation.
16. What is the essential monthly dashboard?
Opening date, outer period, requirement status, earlier completion trigger, actual currency movements and closure evidence.
Conclusion
Link the account to its documented requirements and original opening date. Plan closure for the earlier trigger and obtain lawful residual-settlement instructions rather than treating the six-month facility as indefinite currency retention.