RBI /FEMA

Given below are the highlights
of certain RBI Circulars & Notifications

117.  A. P. (DIR
Series) Circular No. 23 dated 27^th December, 2016

Purchase and sale of securities
other than shares or convertible debentures of an Indian company by a person
resident outside India

This circular permits Foreign
Portfolio Investors to undertake transactions of non-convertible debentures /
bonds issued by Indian companies either directly or in any manner as per the
prevalent / approved market practice.

118.  A. P. (DIR
Series) Circular No. 24 dated 3^rd January,  2017

Exchange facility to foreign
citizens

This circular provides that the
facility for exchange of foreign exchange for Indian currency, available to
foreign citizens (i.e. foreign passport holders) whereby they were permitted to
exchange foreign exchange for Indian currency notes up to a limit of Rs.
5,000/- per week will continue up to 31^st January, 2017. The foreign
tourist will have to give, at the time of exchange, a self-declaration that he
/ she has not availed of this facility during the week and also provide a copy
of their passport.

119.  Notification No.
FEMA. 377/2016-RB dated 10^th January, 2017

Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) (Fifteenth
Amendment) Regulations, 2016

This
notification has made the following two changes Notification No. FEMA.
20/2000-RB dated 3^rd May 2000): –

1.  A new definition ‘convertible
note’ has been inserted vide clause (iiA), as under, in Regulation 2: –

“(iiA) ‘convertible note’ means an
instrument issued by a startup company evidencing receipt of money initially as
debt, which is repayable at the option of the holder, or which is convertible
into such number of equity shares of such startup company, within a period not
exceeding five years from the date of issue of the convertible note, upon
occurrence of specified events as per the other terms and conditions agreed to
and indicated in the instrument;”

2.  A new Regulation 6D which deals
with Issue of Convertible Notes by startup companies has been added.

120.  Notification No.
FEMA. 383/2016-RB dated 10^th January, 2017

Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) (Amendment)
Regulations, 2017

This notification has made the
following changes in Schedule 1, in Annex B of Notification No. FEMA.
20/2000-RB dated 3^rd May 2000): –

A.  The existing Paragraph F.4 shall
be substituted by the following namely: –

B.  The existing Paragraph F.6 shall be deleted.

C.  The existing Paragraphs F.7, F.8, F.9 and F.10
shall be re-numbered as F.6, F.7, F.8 and F.9
respectively.

121.  A. P. (DIR
Series) Circular No. 27 dated 12^th January, 2017

Evidence of Import under Import Data Processing and
Monitoring System (IDPMS)

This circular: –

1. States that the procedure for submission of
hardcopy of Evidence of Import documents i.e. Bill of Entry, has been
discontinued with effect from 1^st December, 2016, as the same is
available in IDPMS.

2.  Lays
down the revised procedure to be followed by Banks with respect to evidence of
import under IDPMS.

122.  A. P. (DIR
Series) Circular No. 28 dated 25^th 
January, 2017

Notification No. FEMA 382/2016-RB dated 2^nd
January, 2017

Prohibition on Indian Party
from making direct investment in countries identified by the Financial Action
Task Force (FATF) as “Non Co-operative countries and territories”

Presently, an Indian Party, in terms of FEMA Notification No.
FEMA.120/RB-2004 dated 7^th July, 2004, can undertake investment in
any country.

This circular prohibits an Indian Party from undertaking ODI,
in terms of FEMA Notification No. FEMA.120/RB-2004, in an entity, either
directly by setting up or acquiring a JV/ WOS or indirectly by way of a step
down subsidiary, which is located in countries identified as “non co-operative
countries and territories” by the FATF.

The list is available on the FATF website –
www.fatf-gafi.org.

123.  A. P. (DIR
Series) Circular No. 29 dated 2^nd February, 2017

Foreign Exchange Management Act, 1999 (FEMA) Foreign
Exchange (Compounding Proceedings) Rules, 2000 (the Rules) – Compounding of
Contraventions under FEMA, 1999

This circular states that the powers to compound the
contraventions pertaining to delay in filing the Annual Return on Foreign
Liabilities and Assets (FLA return), by all Indian companies which have received
Foreign Direct Investment in the previous year(s) including the current year,
have been delegated to the Regional Offices of RBI.

All Regional Offices except the Regional Offices at Kochi and
Panaji can compound the contraventions without any limit as to the amount of
contravention.

The Regional Offices at Kochi and Panaji can compound the
contraventions up to Rs. 10,000,000. Contraventions in excess of Rs. 10,000,000
will be compounded by the Central Office at Mumbai.

124.  A. P. (DIR
Series) Circular No. 30 dated 2^nd February, 2017

Notification No. FEMA 378/2016-RB dated 25^th
October, 2016

Risk Management and
Inter-bank Dealings: Permitting Non Resident Indians (NRIs) access to Exchange
Traded Currency Derivatives (ETCD) market

This circular now permits NRI, subject to certain terms and
conditions, to hedge their currency risk arising out of their investments in
India by using the products available on the exchange traded currency
derivatives market in India. This facility is in addition to the existing
hedging facilities that are available to NRI.

125.  A. P. (DIR
Series) Circular No. 31 dated 17^th February, 2017

Issuance of Rupee denominated bonds overseas – Multilateral
and Regional Financial Institutions as Investors

Presently, Rupee denominated bonds can be issued only in a
country and to a person resident in a country: –

1.  That is a member of Financial Action Task
Force (FATF) or a member of a FATF Style Regional Body; and

2.  Whose securities market regulator is a
signatory to the International Organization of Securities Commission’s
(IOSCO’s) Multilateral Memorandum of Understanding (Appendix A Signatories) or
a signatory to bilateral Memorandum of Understanding with the Securities and
Exchange Board of India (SEBI) for information sharing arrangements; and

3.  That should not be a country identified in the
public statement of the FATF as: –

(i)  A jurisdiction having a strategic Anti-Money
Laundering or Combating the Financing of Terrorism deficiencies to which
counter measures apply; or

(ii) A jurisdiction that has not made sufficient
progress in addressing the deficiencies or has not committed to an action plan
developed with the Financial Action Task Force to address the deficiencies.