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February 2014

A. P. (DIR Series) Circular No. 83 dated 3rd January, 2014

By Gaurang Gandhi, Chartered Accountant
Reading Time 1 mins
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Overseas Direct Investments – Rollover of Guarantees

This circular provides that renewal/rollover of an existing/original guarantee, which is part of the total financial commitment of the Indian Party will not be not to treated/reckoned as a fresh financial commitment, if: –

(a) The existing/original guarantee was issued in terms of the then extant/prevailing FEMA guidelines.

(b) There is no change in the end use of the guarantee, i.e. the facilities availed by the JV/WOS/Step Down Subsidiary.

(c) There is no change in any of the terms & conditions, including the amount of the guarantee except the validity period. The rolled over guarantee has to be reported as fresh financial commitment in Part II of Form ODI. If the Indian party is under investigation by any investigation/enforcement agency or regulatory body, the concerned agency/body must be kept informed about the rollover.

If the above conditions are not met, the Indian party has to obtain, through the designated AD bank, prior approval of RBI for rollover/renewal of the existing guarantee.

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