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January 2015

A. P. (DIR Series) Circular No. 41 dated 25th November, 2014

By Gaurang Gandhi Chartered Accountant
Reading Time 1 mins
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Routing of funds raised abroad to India

This
circular states that when funds raised overseas by overseas
holding/associate/subsidiary/group companies of Indian Companies are
routed back to the Indian companies: –

1. Indian
companies/their banks must not issue any direct or indirect guarantee or
create any contingent liability or offer any security in any form for
such borrowings by their overseas holding/associate/subsidiary/ group
companies except for the purposes explicitly permitted in the relevant
Regulations.

2. Funds raised abroad by overseas
holding/associate /subsidiary/group companies of Indian companies with
support of the Indian companies/their banks, as mentioned above, cannot
be used in India unless it conforms to the general or specific
permission granted under the relevant Regulations.

3. Indian
companies/their banks using or establishing structures which contravene
the above will be liable for penal action as prescribed under FEMA,
1999.

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