Notification No. FEMA .322/2014-RB dated 14th
October, 2014 Overseas Direct Investments by Indian Party –
Rationalisation/Liberalisation
This circular provides as under: –
(i) Creation of charge on shares of JV/WOS/step down subsidiary (SDS) in favour of domestic/overseas lender
Bankscan
now, subject to certain conditions, permit creation of charge/pledge on
the shares of the JV/WOS/ SDS (irrespective of the level) of an Indian
party in favour of a domestic or overseas lender for securing the funded
and/or non-funded facility to be availed of by the Indian party or by
its group companies/sister concerns/associate concerns or by any of its
JV/WOS/SDS (irrespective of the level) under the automatic route.
(ii) Creation of charge on the domestic assets in favour of overseas lenders to the JV/WOS/step down subsidiary
Banks
can now (previously, prior permission of RBI was required for the
same), subject to certain conditions, permit creation of charge (by way
of pledge, hypothecation, mortgage, or otherwise) on the domestic assets
of an Indian party (or its group companies/sister concerns /associate
concerns including the individual promoters/ directors) in favour of an
overseas lender for securing the funded and/or non-funded facility to be
availed of by the JV/WOS/SDS (irrespective of the level) of the Indian
party under the automatic route. However, the domestic assets of the
borrower on which charge is being created must not be securitised and
pledge of shares of an Indian company, if any, must be in compliance
with FEMA provisions /regulations as well as FDI Policy.
(iii) Creation of charge on overseas assets in favour of domestic lender
Banks
can now (previously, prior permission of RBI was required for the
same), subject to certain conditions, permit creation of charge (by way
of hypothecation, mortgage, or otherwise) on the overseas assets
(excluding the shares) of the JV/WOS/SDS (irrespective of the level) of
an Indian party in favour of a domestic lender for securing the funded
and/or non-funded facility to be availed of by the Indian party or by
its group companies/sister concerns /associate concerns or by any of its
overseas JV/WOS/ SDS (irrespective of the level) under the automatic
route. However, the overseas assets of the borrower on which charge is
being created must not be securitised.
Some of the condtions that are applicable to the above 3 cases are: –
i)
The period of charge, if not specified upfront, must be co-terminus
with the period of end use (like loan or other facility) for which
charge has been created.
ii) The loan/facility availed by the
JV/WOS/SDS from the domestic/overseas lender must be utilised only for
its core business activities overseas and not for investing back in
India in any manner whatsoever.
iii) A certificate from the
Statutory Auditors’ of the Indian party, to the effect that the
loan/facility availed by the JV /WOS/SDS has not been utilised for
direct or indirect investments in India, must be obtained and kept by
the designated Bank.
