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Category: Spotlight: Part C RBI/FEMA

RBI /FEMA

Given below are the highlights
of certain RBI Circulars & Notifications

85. FED Master Direction No. 9/2015-16 dated January 1, 2016

Master Direction – Insurance

This Notification contains the
updated Master Direction 9 on Insurance. The Master Directions have been
updated up to November 17, 2016 and are Annexed to this Notification. The
Master Direction prescribes the manner in which insurance business, in foreign
exchange, has to be conducted and deals with the following topics: –

1.  Introduction.

2.  Foreign Exchange Regulations
relating to General / Health / Life Insurance from Insurers outside India.

3.  Foreign Exchange Regulations
relating to General/ Health Insurance from insurers in India.

4.  Foreign Exchange Regulations
relating to Life Insurance from insurers in India.

86. Corrigendum dated November 25, 2016

Notification No. FEMA.362/2016-RB dated February 15, 2016

This corrigendum replaces
paragraph 2(C) (iv), S. No. 9.3 and 9.3.1 of Notification No. FEMA.362/2016-RB
dated February 15, 2016 as under: –

9.3

Air Transport Services

 

 

 

(1)   (a) Scheduled Air Transport Service /   Domestic Scheduled Passenger Airline

      (b) Regional Air Transport Service

 

49%

(100% for NRIs)

Automatic

 

(2) Non-Scheduled Air
Transport Service

100%

Automatic

 

(3) Helicopter services/
seaplane services requiring DGCA approval

100%

Automatic

9.3.1

Other Conditions

 

 

 

(a) Air Transport Services would include Domestic Scheduled
Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and
seaplane services.

(b) Foreign airlines are allowed to participate in the equity of
companies operating Cargo airlines, helicopter and seaplane services, as per
he limits and entry routes mentioned above.

 

 

 

9.3.1

Other Conditions

 

 

 

(c) Foreign airlines are also allowed to invest in the capital
of Indian companies, operating scheduled and non-scheduled air transport
services, up to the limit of 49% of their paid-up capital. Such investment
would be subject to the following conditions:

(i)    It would be made under the Government approval route.

(ii)   The 49% limit will subsume FDI and FII/FPI investment.

(iii)  The investments so made would need to
comply with the relevant regulations of SEBI, such as the Issue of Capital
and Disclosure Requirements (ICDR) Regulations/ Substantial Acquisition of
Shares and Takeovers (SAST) Regulations, as well as other applicable rules
and regulations.

(iv)   A Scheduled Operator’s Permit can be
granted only to a company:

      a) that is registered and has its
principal place of business within India;

      b) the Chairman and at least two-thirds
of the Directors of which are citizens of India; and

        c) the substantial ownership and
effective control of which is vested in Indian nationals.

(v)    All foreign nationals likely to be
associated with Indian scheduled and non-scheduled air transport services, as
a result of such investment shall be cleared from security view point before
deployment; and

(vi)   All technical equipment that might be
imported into India as a result of such investment shall require clearance
from the relevant authority in the Ministry of Civil Aviation.

 

 

 

 

 

 

 

Note: (i) The FDI
limits/entry routes, mentioned at paragraph 9.3(1) and 9.3(2) above, are
applicable in the situation where there is no investment by foreign airlines.

(ii) The dispensation for
NRIs regarding FDI up to 100% will also continue in respect of the investment
regime specified at paragraph 9.3.1(c) (ii) above.

(iii) The policy mentioned
at 9.3.1(c) above is not applicable to M/s Air India Limited

87.  A. P. (DIR Series)
Circular No. 20 dated November 09, 2016

Issue of Pre-Paid Instruments to foreign tourists

This circular: –

1.  Supersedes A. P. (DIR Series) Circular No. 16
dated November 11, 2016 regarding Withdrawal of the legal tender character of
the existing and any older series banknotes in the denominations of ? 500 and ?
1000.

2.  Provides that foreign citizens (i.e. foreign
passport holders) are permitted to exchange foreign exchange for Indian
currency notes up to a limit of ? 5,000/- per week until December 15, 2016. 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.

3.  Provides that foreign tourists can continue to
avail facility of Pre-Paid Instruments as mentioned A. P. (DIR Series) Circular
No. 17 dated November 11, 2016.

88.  A. P. (DIR Series)
Circular No. 22 dated December 16, 2016

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 December 31, 2016. 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.

RBI /FEMA

Given below are the highlights of certain RBI Circulars & Notifications

12.    FED Master Direction No. 1/2016-17 dated February 22, 2017

Master Direction – Money Transfer Service Scheme (MTSS)

This Notification contains the updated Master Direction 1 on MTSS. The Master Directions contains a list of Circulars and Notifications that have been consolidated vide this Direction and are Annexed to this Direction. Reporting instructions with respect to this Direction are mentioned in the Master Direction on Reporting.

13.    Notification No. FEMA.385/2017-RB dated March 03, 2017

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

This notification contains two amendments to Notification No. FEMA 20/2000-RB dated 3rd May 2000 – Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017. Both the amendments pertain to FDI in an Indian LLP.

1.    Sub-Regulation (9) of Regulation 5 is substituted as follows: –

    “5 (9) A person resident outside India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated outside India (other than an entity in Pakistan or Bangladesh), not being a Foreign Portfolio Investor or Foreign Institutional Investor or Foreign Venture Capital Investor registered in accordance with SEBI guidelines, may contribute foreign capital either by way of capital contribution or by way of acquisition / transfer of profit shares in the capital structure of an LLP under Foreign Direct Investment, subject to the terms and conditions as specified in Schedule 9”

2.    Schedule 9 is substituted by a new Schedule 9.

    The new Schedule 9 will be known as – The Scheme for Foreign Direct Investment (FDI-LLP) in Limited Liability Partnerships (LLP) formed and registered under the Limited Liability Partnership Act, 2008.

    The details as to eligible investors, eligible investment, eligibility of LLP, pricing, mode of payment and reporting are given this Notification.

RBI /FEMA

Given below are the highlights
of certain RBI Circulars & Notifications

17.  Notification No.
FEMA.387/2017-RB dated March 09, 2017

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

This notification contains two
amendments to Notification No. FEMA 20/2000-RB dated 3rd May 2000 –
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident
outside India) Regulations, 2017.

The amendments are as under: –

1.    Insertion of new sub-regulations in
Regulation 2: –

(ii E) E-commerce:

a. ‘E-commerce’ means buying and selling of goods and services including
digital products over digital & electronic network.

b. ‘E-commerce entity’ means a company incorporated under the Companies
Act, 1956 or the Companies Act, 2013 or a foreign company covered under section
2 (42) of the Companies Act, 2013 or an office, branch or agency in India as
provided in Section 2 (v) (iii) of FEMA 1999, owned or controlled by a person
resident outside India and conducting the e-commerce business.

c. ‘Inventory based model of e-commerce’ means an e-commerce activity
where inventory of goods and services is owned by e-commerce entity and is sold
to the consumers directly.

d. ‘Market place model of e-commerce’ means providing of an information
technology platform by an e-commerce entity on a digital & electronic
network to act as a facilitator between buyer and seller.

2.    Substitution of existing entry 16.2 in Annex
B to Schedule 1:    (Table given below)

16.2

E-Commerce

%
of equity/FDI Cap

Entry
Route

16.2.1

B2B
E-commerce activities

100%

Automatic

 

Such
companies would engage only in Business to Business (B2B) e-commerce and not
in retail trading, inter alia implying that existing restrictions on
FDI in domestic trading would be applicable to e-commerce as well.

16.2.2

Market
place model of e-commerce

100%

Automatic

16.2.3

Other
Conditions

 

 

 

a)
  Digital & electronic network will
include network of computers, television channels and any other internet
application used in automated manner such as web pages, extranets, mobiles
etc.

b)
  Marketplace e-commerce entity will be
permitted to enter into transactions with sellers registered on its platform
on B2B basis.

c)
   E-commerce marketplace may provide
support services to sellers in respect of warehousing, logistics, order
fulfilment, call centre, payment collection and other services.

d)
  E-commerce entity providing a
marketplace will not exercise ownership over the inventory i.e. goods
purported to be sold. Such an ownership over the inventory will render the
business into inventory based model.

e)
  An e-commerce entity will not permit
more than 25% of the sales value on financial year basis affected through its
marketplace from one vendor or their group companies.

f)
   Goods/services made available for
sale electronically on website should clearly provide name, address and other
contact details of the seller. Post sales, delivery of goods to the customers
and customer satisfaction will be responsibility of the seller.

g)
  Payments for sale may be facilitated
by the e-commerce entity in conformity with the guidelines of the Reserve
Bank of India.

h)
  Any warranty /guarantee of goods and
services sold will be responsibility of the seller.

i)
    E-commerce entities providing
marketplace will not directly or indirectly influence the sale price of goods
or services and shall maintain level playing field.

j)     Guidelines
on cash and carry wholesale trading as given in S.No. 16.1.2 (stated above)
shall apply to B2B e-commerce activities.

Note:
FDI is not permitted in inventory based model of e-commerce.

16.2.4

Sale
of services through e-commerce shall be under automatic route subject to the
sector specific conditions, applicable laws/regulations, security and other
conditionalities.

28. A. P. (DIR Series) Circular No. 41 dated March 21, 2017 Notification
No. FEMA No.384/2017-RB dated March 17, 2017

Risk Management and Inter-bank
Dealings: Operational flexibility for Indian subsidiaries of Non-resident
Companies

This circular has amended the
provisions of Notification No. FEMA.25/RB-2000 dated May 3, 2000 dealing with
Foreign Exchange Derivatives Contracts.

This circular now permits, subject
to certain terms and conditions, a non-resident to enter into a foreign
exchange derivative contract with a bank in India to hedge an exposure to
exchange risk of and on behalf of its Indian subsidiary in respect of the said
subsidiary’s transactions.

The detailed terms and conditions,
etc. are contained in 2 Annex’s to this circular.

29. A. P. (DIR Series) Circular No. 42 dated March 30, 2017

Purchase of foreign exchange from
foreign citizens and others

This circular has withdrawn the
restrictions on purchase of foreign exchange from customers by authorised
persons and restored the position as contained in paragraph 4.4 (e) (iii) of
Annex to A.P. (DIR Series) Circular No.17 dated November 27, 2009.

The said paragraph provides as
under: –

iii) (a) Requests for payment in
cash in Indian Rupees to resident customers towards purchase of foreign
currency notes and / or Travellers’ Cheques from them may be acceded to the
extent of only US $ 1000 or its equivalent per transaction.

(b) Requests for payment in cash
by foreign visitors / Non-Resident Indians may be acceded to the extent of only
US $ 3000 or its equivalent.

(c) All purchases within one month
may be treated as single transaction for the above purpose and also for
reporting purposes.

(d) In all other cases, APs should
make payment by way of ‘Account Payee’ cheque / demand draft only.

30. A. P. (DIR Series) Circular No. 43 dated March 31, 2017

Investment by Foreign Portfolio
Investors in Government Securities

This circular has increased the
limits for investment by FPI in Central Government Securities and State
Development Loans (SDL) for the quarter April-June 2017 by Rs. 110 billion and
Rs. 60 billion respectively.

The details of the revised limits
are as under: –

Rs. Billion

 

Central Government securities

State
Development Loans

Aggregate

 

For all FPI – General Category

Additional for Long Term FPI

Total

For all FPI (including Long Term FPI)

 

Existing Limits

1,20

680

2,200

210

2,410

Revised limits for quarter April-June, 2017

1,565

745

2,310

270

2,580

RBI /FEMA

Given below are the highlights
of certain RBI Circulars & Notifications

117.  A. P. (DIR
Series) Circular No. 23 dated 27th 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 3rd 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 31st 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 10th 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 3rd 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 10th 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 3rd May 2000): –

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

F.4

Infrastructure Company in the Securities Market

 

 

F.4.1

Infrastructure companies in Securities Markets,
namely, stock exchanges, commodity derivative exchanges, depositories and
clearing corporations, in compliance with SEBI Regulations.

49%

 

Automatic

F.4.2

Other Conditions:

 

 

 

(i)    Foreign
investment, including investment by FPIs, will be subject to the Guidelines/
Regulations issued by the Central Government, SEBI and the Reserve Bank from
time to time.

(ii)   Words
and expressions used herein and not defined in these regulations but defined
in the Companies Act, 2013 (18 of 2013) or the Securities Contracts
(Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of
India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) or in
the concerned Regulations issued by SEBI shall have the same meanings
respectively assigned to them in those Acts / Regulations.

 

 

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 12th 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 1st 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 25th 
January, 2017

Notification No. FEMA 382/2016-RB dated 2nd
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 7th 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 2nd 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 2nd February, 2017

Notification No. FEMA 378/2016-RB dated 25th
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 17th 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.

This circular now, in addition to the above, now
permits Indian entities to issues Rupee denominated bonds to Multilateral and
Regional Financial Institutions in which India is a member country.

A. P. (DIR Series) Circular No. 78 dated June 23, 2016

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Notification No. FEMA 365/2016-RB dated June 01, 2016

Permitting writing of options against contracted exposures by Indian Residents

This circular permits resident exporters and importers of goods and services to write (sell) standalone plain vanilla European call and put option contracts against their contracted exposure, i.e. covered call and covered put respectively, with any bank in India subject to operational guidelines, terms and conditions annexed in Annex I to this circular.

A. P. (DIR Series) Circular No. 77[2]/10[R] dated June 23, 2016

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Given below are the highlights of certain RBI Circulars & Notifications

Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2015

This circular permits as under: –

1. An Indian start-up (as defined vide Notification No. GSR 180(E) dated February 17, 2016 issued by DIPP) having an overseas subsidiary can: –

a) Open a foreign currency account with a bank outside India for the purpose of crediting to the account the foreign exchange earnings out of exports / sales made by it or its overseas subsidiary. The balances held in such accounts, to the extent they represent exports from India, shall be repatriated to India within the period prescribed for realization of exports.

b) Credit payments received by it in foreign exchange against sales / exports made by it or its overseas subsidiaries to its EEFC account maintained in India.

2. Any insurance / reinsurance company registered with the Insurance Regulatory and Development Authority of India (IRDA) can open a foreign currency account with a bank outside India to carry out insurance / reinsurance business.

A. P. (DIR Series) Circular No. 70 dated May 19, 2016

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Money Transfer Service Scheme – Submission of statement/returns under XBRL

This circular states that all Authorized Persons, who are Indian Agents under Money Transfer Service Scheme (MTSS) have to submit the statement on quantum of remittances from the quarter ending June 2016 in eXtensible Business Reporting Language (XBRL) system which can be accessed at https://secweb.rbi.org.in/orfsxbrl/.

A. P. (DIR Series) Circular No. 69[(1)/22(R)] dated May 12, 2016

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Notification No. FEMA 22 (R)/2016-RB dated March 31, 2016

Establishment of Branch Office (BO)/ Liaison Office (LO) / Project Office (PO) in India by foreign entities – procedural guidelines

This Notification repeals and replaces the earlier Notification No. FEMA 22/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Establishment in India of branch or office or other place of business) Regulations, 2000. 

A. P. (DIR Series) Circular No. 68[(1)/23(R)] dated May 12, 2016

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Notification No. FEMA 23 (R)/2015-RB dated January 12, 2016

Foreign Exchange Management (Exports of Goods and Services) Regulations, 2015

This Notification repeals and replaces the earlier Notification No. FEMA 23/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Export of Goods and Services) Regulations, 2000.

A. P. (DIR Series) Circular No. 67/2015- 16[(1)/23(R)] dated May 02, 2016

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Notification No. FEMA 5 (R)/2016-RB dated April 01, 2016

Foreign Exchange Management (Deposit) Regulations, 2016

This Notification repeals and replaces the earlier Notification No. FEMA 5/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Deposit) Regulations, 2000.

A. P. (DIR Series) Circular No. 66 dated April 28, 2016

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Opening and Maintenance of Rupee / Foreign Currency Vostro Accounts of Non- Resident Exchange Houses: Rupee Drawing Arrangement

Presently, Exchanges Houses are required to maintain a collateral equivalent to one day’s estimated drawings under Rupee Drawing Arrangement with respect to Vostro Accounts.

This circular has done away with the requirement of mandatorily maintaining a collateral by Exchange Houses under Rupee Drawing Arrangement with respect to Vostro Accounts. However, banks are free to frame their own policies and decide whether to request for a collateral or not from Exchange Houses.

A. P. (DIR Series) Circular No. 65 dated April 28, 2016

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Import of Goods: Import Data Processing and Monitoring System (IDPMS )

This circular states that an Import Data Processing and Monitoring System (IDPMS) on the lines of Export Data Processing and Monitoring System (EDPMS) is to be developed. For this purpose Customs will modify the Bill of Entry format and non-EDI (manual) ports will be upgraded to EDI Ports.

This circular also contains guidelines to be following once the IDPMS system becomes operational. The guidelines pertain to: –

1. Write off of import bills due to discounts, fluctuation in exchange rates, change in the amount of freight, insurance, quality issues; short shipment or destruction of goods by the port / Customs / health authorities, etc.

2. Extension of Time for settlement of import dues

3. Follow-up for Evidence of Import.

A. P. (DIR Series) Circular No. 64/2015-16 [(1)/13(R)] dated April 28, 2016

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Notification No. FEMA 13 (R)/2016-RB dated April 01, 2016

Foreign Exchange Management (Remittance of Assets) Regulations, 2016

This Notification repeals and replaces the earlier Notification No. FEMA 13/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Remittance of Assets) Regulations, 2000.

A. P. (DIR Series) Circular No. 63 dated April 21, 2016

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Foreign Investment in units issued by Real Estate Investment Trusts, Infrastructure Investment Trusts and Alternative Investment Funds governed by SEBI regulations

This circular now permits foreign investment (acquire, purchase, sell, transfer) in units of Investment Vehicles registered and regulated by SEBI or any other competent authority, subject to compliance with the applicable terms and conditions. For the purpose of investment under these Regulations: –

1. foreign investment in units of REITs registered and regulated under the SEBI (REITs) Regulations, 2014 will not be included in “real estate business”

2. Presently, an Investment Vehicle will mean: –

a. Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations 2014;

b. Infrastructure Investment Trusts (InvITs) registered and regulated under the SEBI (InvITs) Regulations, 2014;

c. Alternative Investment Funds (AIFs) registered and regulated under the SEBI (AIFs) Regulations 2012.

3. Unit will mean beneficial interest of an investor in the Investment Vehicle and will include shares or partnership interests.

4. A person resident outside India will include a Registered Foreign Portfolio Investor (RFPI) and a Non-Resident Indian (NRI).

5. Payment for the units must be by way inward remittance or by debit to an NRE or an FCNR account.

A. P. (DIR Series) Circular No. 1 dated July 7, 2016

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Discontinuation of Reporting of Bank Guarantee on behalf of service importers

Presently, banks are required to furnish to the CGM-in- Charge, FED, Foreign Investments Division (EPD), RBI, Central Office, Mumbai-400 001 details of invocation of bank guarantee issued by them, on behalf of their resident customers, to non-resident service provider against service imports.

This circular states that, with immediate effect, banks are not required to submit details of invocation of bank guarantee issued by them, on behalf of their resident customers, to non-resident service provider against service imports. They are however required to maintain records of such invocations and furnish the required details to RBI whenever sought.

A. P. (DIR Series) Circular No. 81 dated June 30, 2016

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Settlement System under Asian Clearing Union (ACU)

This circular states that from July 01, 2016, until further notice, all eligible current account transactions including trade transactions in ‘Euro’ can be settled outside the ACU mechanism.

A. P. (DIR Series) Circular No. 80 dated June 30, 2016

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External Commercial Borrowings (ECB) – Approval Route cases

This circular states that all proposal received under the Approval route and exceeding a particular threshold limit will be placed before an Empowered Committee. Final decision will be taken by RBI after considering the recommendations of the Empowered Committee.

A. P. (DIR Series) Circular No. 71 dated May 19, 2016

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Rupee Drawing Arrangement – Submission of statement/returns under XBRL

This circular states that banks have to submit the statement E on total remittances from the quarter ending June 2016 in eXtensible Business Reporting Language (XBRL) system which can be accessed at https://secweb. rbi.org.in/orfsxbrl/.

A. P. (DIR Series) Circular No. 79 dated June 30, 2016

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Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR

With effect from June 20, 2016 the Rupee value of the Special Currency Basket has been fixed at Rs. 83.5796140 as against the earlier value of Rs. 80.9604520.

Notification No. FEMA 10 (R) / 2015-RB dated January 21, 2016

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Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015

This Notification repeals and replaces the earlier Notification No. FEMA 10/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2000.

Further, this Notification contains regulations updated up to June 01, 2016 with respect to Foreign currency accounts by a person resident in India (including changes made vide Notification No. FEMA 10 (R) / (1) / 2016-RB dated June 01, 2016, mentioned above).

Notification No. FEMA 10 (R)/(1)/2016-RB dated June 01, 2016

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Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Amendment) Regulations, 2016

This Notification has made the following changes in Regulation 10(R): –

Amendment to Regulation 5

A. The existing sub-regulation (E) shall be renumbered as (F).

B. In the re-numbered regulation (F), the existing subregulation (3) shall be substituted by the following namely:

“Insurance/reinsurance companies registered with Insurance Regulatory and Development Authority of India (IRDA) to carry out insurance/reinsurance business may open, hold and maintain a Foreign Currency Account with a bank outside India for the purpose of meeting the expenditure incidental to the insurance/reinsurance business carried on by them and for that purpose, credit to such account the insurance/reinsurance premia received by them outside India.”

C. After the existing sub-regulation (D), the following shall be inserted namely: –

“(E) Accounts in respect of Startups

An Indian startup or any other entity as may be notified by the Reserve Bank in consultation with the Central Government, having an overseas subsidiary, may open a foreign currency account with a bank outside India for the purpose of crediting to it foreign exchange earnings out of exports / sales made by the said entity and / or the receivables, arising out of exports / sales, of its overseas subsidiary.

Provided that the balances in the account shall be repatriated to India within the period prescribed in Foreign Exchange Management (Export of Goods and Services) Regulations, 2015 dated January 12, 2016, as amended from time to time, for realization of export proceeds.

Explanation: For the purpose of this sub-regulation a ‘startup’ means an entity which complies with the conditions laid down in Notification No. G.S.R 180(E) dated February 17, 2016 issued by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India.”

Amendment to Schedule 1

In Paragraph 1, in sub-paragraph (1), after the existing clause (vi), the following shall be inserted namely: – “vii) Payments received in foreign exchange by an Indian startup, or any other entity as may be notified by the Reserve Bank in consultation with the Central Government, arising out of exports/ sales made by the said entity or its overseas subsidiaries, if any.

Explanation: For the purpose of this schedule a ‘startup’ means an entity which complies with the conditions laid down in Notification No. G.S.R 180(E) dated February 17, 2016 issued by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India.”

A. P. (DIR Series) Circular No. 74 dated May 26, 2016

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Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of exporters, reporting of advance remittance for exports and migration of old XOS data

This circular contains details of proposed enhancements to the EDMS system which will be operational from June 15, 2016. The enhancements are in the areas of Caution / De-caution Listing of Exporters, Reporting of Advance Remittance for Exports & Export Outstanding Statement.

A. P. (DIR Series) Circular No. 73 dated May 26, 2016

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

This circular states that RBI will upload on its web site www.rbi.org.in all compounding orders passed on or after June 1, 2016.

Further, annexed to this circular are the guidelines, along with examples, used by RBI for calculating the amount imposed under Section 13 of FEMA. The said Annex is as under: –

II. The above amounts are presently subject to the following provisos, viz.

(i) the amount imposed should not exceed 300% of the amount of contravention

(ii) In case the amount of contravention is less than Rs. One lakh, the total amount imposed should not be more than amount of simple interest @5% p.a. calculated on the amount of contravention and for the period of the contravention in case of reporting contraventions and @10% p.a. in respect of all other contraventions.

(iii) In case of paragraph 8 of Schedule I to FEMA 20/2000 RB contraventions, the amount imposed will be further graded as under:

a. If the shares are allotted after 180 days without the prior approval of Reserve Bank, 1.25 times the amount calculated as per table above (subject to provisos at (i) & (ii) above).
b. If the shares are not allotted and the amount is refunded after 180 days with the Bank’spermission: 1.50 times the amount calculated as per table above (subject to provisos at (i) & (ii) above).
c. If the shares are not allotted and the amount is refunded after 180 days without the Bank’s permission: 1.75 times the amount calculated as per table above (subject to provisos at (i) & (ii) above).

(iv) In cases where it is established that the contravenor has made undue gains, the amount thereof may be neutralized to a reasonable extent by adding the same to the compounding amount calculated as per chart.

(v) If a party who has been compounded earlier applies for compounding again for similar contravention, the amount calculated as above may be enhanced by 50%.

III. For calculating amount in respect of reporting contraventions under para I.1 above, the period of contravention may be considered proportionately {(approx. rounded off to next higher month ÷ 12) X amount for 1 year}. The total no. of days does not exclude Sundays / holidays.

A. P. (DIR Series) Circular No. 72 dated May 26, 2016

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Memorandum of Procedure for channeling transactions through Asian Clearing Union (ACU)

Presently, the minimum amounts for which transactions can be channelized through the ACU mechanism is US $ 25,000 / € 25,000 and thereafter the amounts should be in multiples of US $ 1,000 / € 1,000.

The circular has reduced the minimum as well as multiples amount for which transactions can be channelized through the ACU mechanism. Hence, the new minimum amounts are US $ 500 / € 500 and the amounts should be in multiples of US $ 500 / € 500.

Notification No. FEMA 368/2016-RB dated May 20, 2016

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Given below are the highlights of certain RBI Circulars & Notifications

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

Vide this amendment a new regulation – Regulation 10A has been inserted in Notification No. FEMA. 20/2000-RB dated 3rd May 2000 – Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000. This Regulation 10A permits deferment of 25% of the total consideration for a period of 18 months with respect to payment for transfer of shares between a resident and non-resident.

The said Regulation is as under: –

“10A. In case of transfer of shares between a resident buyer and a non-resident seller or vice-versa, not more than twenty five per cent of the total consideration can be paid by the buyer on a deferred basis within a period not exceeding eighteen months from the date of the transfer agreement. For this purpose, if so agreed between the buyer and the seller, an escrow arrangement may be made between the buyer and the seller for an amount not more than twenty five per cent of the total consideration for a period not exceeding eighteen months from the date of the transfer agreement or if the total consideration is paid by the buyer to the seller, the seller may furnish an indemnity for an amount not more than twenty five per cent of the total consideration for a period not exceeding eighteen months from the date of the payment of the full consideration.

Provided the total consideration finally paid for the shares must be compliant with the applicable pricing guidelines.”

Notification No. FEMA 5(R)/2016-RB dated September 8, 2016

CORRIGENDUM  – G.S.R. 389(E) –
dated September 8, 2016

Foreign  Exchange  management 
(deposit)  Regulations, 2016

By a Corrigendum dated September
8, 2016 published in the Gazette of india, extraordinary, Part-ii, Section 3,
Sub-section (i), the following changes have been made to Notification No. FEMA
5(R)/2016-RB relating to Foreign exchange management (deposit) regulations,
2016: ­

Paragraph 6(3) of Schedule i has
been substituted as under: ­

“loans  outside india – authorised dealers may allow
their branches/correspondents outside india to grant loans to or in favour of
non-resident depositor or to third parties at the request of depositor for bona
fide purpose against the security of funds held in the NRE accounts in india
and also agree for remittance of the funds from india, if necessary, for
liquidation of the outstanding.”

Previously, third party loans
could be given for bona fide purpose except for the purpose of relending or
carrying on agricultural / plantation activities or for investment in real
estate business. With this amendment restriction on user of funds has been
removed.

A. P. (DIR Series) Circular No. 5 dated October 6, 2016

Import   data    Processing  
and   monitoring System (IDPMS)

This
circular states that IDPMS will go live from October 10, 2016 and all Banks
must use IDPMS  for reporting and
monitoring of the import transactions. Operational directions / guidelines with
respect to IDPMS  are mentioned in this
circular and are also available in the help menu on EDPMS Portal under “import
process” tag.

A. P. (DIR Series) Circular No. 4 dated September30, 2016

Investment by 
Foreign  Portfolio  investors (FPI) in government Securities

This
circular has increased the limit for investments in Government Securities by
FPI in two tranches each of Rs. 100 billion from October 3, 2016 and January 2,
2017 as under, in the table below:

INR Billion

 

Central Government Securities

State Development Loans

Aggregate

 

For All FPIs

Additional for Long Term FPIs

Total

For all FPIs (including Long Term FPIs)

 

Existing Limits

1440

560

2000

140

2140

Revised limits with effect from
October 3, 2016

1480

620

2100

175

2275

Revised limits with effect from
January 2, 2017

1520

680

2200

210

2410

The operational guidelines relating to allocation
and monitoring of limits will be issued by the Securities and exchange Board of
india (SEBI).

A. P. (DIR Series) Circular No. 3 dated September 29, 2016

Exim Bank’s GoI supported line  of Credit of USD 87.00 million to the
government of the Republic of zimbabwe

Exim
Bank has made available, subject to certain terms and conditions, to the
Government of the republic of Zim­ babwe, a Line of Credit of US $ 87 million
for financing renovation / up-gradation of Bulawayo thermal  Power Plant in republic of Zimbabwe. Eligible
goods and servic­ es including consultancy services of the value of at least
75% of the contract price must be supplied by the sellers from india, while the
remaining 25% of the goods and ser­ vices can be procured by the sellers from
outside india.

The
last date for opening letters of credit and disbursement is 60 months from the
scheduled completion date of the project.

Notification No. FEMA 375/2016-RB dated September 9, 2016

Foreign Exchange management (Transfer or issue of Security
by a Person Resident out- side india) (Thirteenth amendment) Regulations, 2016

This
Notification states that Schedule 1, in Annex B, Para­ graph F.8 Notification
No. FEMA. 20/2000-RB dated 3rd may 2000 will be substituted as under: ­

F.8

Other Financial Services

 

 

 

Financial Services activities
regulated by financial sector regulators, viz., RBI, SEBI, IRDA, PFRDA, NHB
or any other financial sector regulator as may be notified by the Government
of India.

100%

Automatic

F.8.1

Other Conditions

 

 

 

i.        Foreign investment in ‘Other
Financial Services’ activities shall be subject to conditionalities,
including minimum capitalization norms, as specified by the concerned
Regulator/Government Agency.

ii.      ‘Other Financial Services’ activities need to be
regulated by one of the Financial Sector Regulators. In all such financial
services activity which are not regulated by any Financial Sector Regulator
or where only part of the financial services activity is regulated or where
there is doubt regarding the regulatory oversight, foreign investment up to
100% will be allowed under Government approval route subject to conditions
including minimum capitalization requirement, as may be decided by the
Government.

iii.    Any activity which is specifically regulated by an
Act, the foreign investment limits will be restricted to those
levels/limit that may be specified in that Act, if so mentioned.

iv.    Downstream investments by any of these entities engaged in “Other
Financial Services” will be subject to the extant sectoral regulations
and provisions of Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident outside India) Regulations, 2000, as amended
from time to time.”

Part C | RBI/FEMA

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Given below are the highlights of certain RBI Circulars

34] A. P. (DIR Series) Circular No. 22 dated 21st
October, 2015

Notification No. FEMA. 351/2015-RB dated
September 30, 2015
Annual Return on Foreign Liabilities and Assets
(FLA Return) – Reporting by Limited Liability
Partnerships

This circular states that Limited Liability Partnerships (LLP) in India that have received FDI and / or made overseas investment in the previous year(s) as well as in the current year, have to submit the FLA return to RBI by 15th July every year, in the prescribed format.

As LLP do not have 21 Digit CIN (Corporate Identity Number), they should enter ‘A99999AA9999LLP999999’ against CIN in the FLA Return.

35] A. P. (DIR Series) Circular No. 23 dated 29th October, 2015

No fresh permission/renewal of permission to
LOs of foreign law firms- Supreme Court’s directions

This circular states that, till the final disposal of the matter by the Honorable Supreme Court of India: –

1. Foreign law firms that have been granted permission prior to the date of interim order for opening Liaison Office (LO) in India are permitted to continue till the date such permission is still in force.

2. No fresh permission / renewal of permission will be granted by RBI / banks.


36] A. P. (DIR Series) Circular No. 24 dated 29th October, 2015

Notification No. FEMA. 353 /2015-RB dated October 6, 2015 Subscription to National Pension System by Non-Resident Indians (NRIs)

This circular permits NRI to subscribe to
National Pension System governed and administered by Pension Fund
Regulatory and Development Authority (PFRDA), provided
the subscriptions are made through normal banking channels or out of
funds held in their NRE / FCNR / NRO account and the person is eligible
to invest as per the
provisions of the PFRDA Act.

 There are no restrictions on repatriation of the annuity / accumulated
savings and hence, the annuity / accumulated saving will be repatriable.

37] A. P. (DIR Series) Circular No. 26 dated 5th November, 2015

Notification No FEMA.347/2015-RB dated July 24, 2015 Switching from Barter Trade to Normal Trade at the Indo-Myanmar Border

This circular provides that with effect from 1st December, 2015 all trade at the Indo-Myanmar border will be as per normal trade route i.e. payments can be settled in any permitted currency in addition to the Asian Clearing Union mechanism. As a result, no trade on the barter system basis will be permitted from 1st December, 2015.

38] A. P. (DIR Series) Circular No. 27 dated 5th November, 2015

Software Export – Filing of bulk SOFTEX-further liberalisation

Presently, software exporters with an annual turnover of at least Rs.1,000 crore or who file at least 600 SOFTEX forms annually on an all India basis, are eligible to declare all the off-site software exports in bulk in the form of a statement in excel format, to the competent authority for certification on monthly basis.

This circular has extended that facility to all software exporters. Hence, all software exporters can now file single as well as bulk SOFTEX form in excel format with the competent authority for certification in the SOFTEX form Annexed to this circular.

Software exporters are required to submit the SOFTEX form induplicate as per the revised procedure. STPI / SEZ will retain one copy and handover the duplicate copy to the exporters after due certification. Software exporters can generate SOFTEX form number (single as well as bulk) for use in off-site software exports from the website of RBI viz., www.rbi.org.in. In order to generate the SOFTEX number/s, an online application form Annexed to this circular has to be filled in.

39] A. P. (DIR Series) Circular No. 28 dated 5th November, 2015

Risk Management & Inter-Bank Dealings: Relaxation of facilities for residents for hedging of foreign currency borrowings

Presently, residents having a long term foreign currency liability are permitted to hedge, with a bank in India, their exchange rate and/or interest rate risk exposure by undertaking a foreign currency-INR swap to move from a foreign currency liability to a rupee liability.

This circular now permits residents to enter in to FCY-INR swaps with Multilateral or International Financial Institutions (MFI / IFI) in which the Government of India is a shareholding member subject to the following terms and conditions: –

(i) Such swap transactions must be undertaken by the MFI / IFI concerned on a back-to-back basis with a bank in India.

(ii) Banks can face, for the purpose of the swap, only those Multilateral Financial Institutions (MFIs) and International Financial Institutions (IFIs) in which Government of India is a shareholding member.

(iii) The FCY-INR swaps must have a minimum tenor of 3 years.

(iv) All other operational guidelines, terms and conditions relating to FCY-INR swaps as laid down in A.P. (DIR Series) Circular No. 32 dated 28th December, 2010, as amended from time to time, shall apply, mutatis mutandis.

(v) In case of default by the resident borrower on its swap obligations, the MFI / IFI concerned must bring in foreign currency funds to meet its corresponding liabilities to the counterparty bank in India.

(vi) Banks have to report the FCY-INR swaps transactions entered into with the MFI / IFI on a back-to-back basis on CCIL reporting platform.

A. P. (DIR Series) Circular No. 39 dated January 14, 2016

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Export of Goods and Services – Project Exports

This circular provides that: –

i) The ‘OCCI’ will now be known as ‘Project Export Promotion Council’ (PEPC).

ii) Civil construction contracts can include turnkey engineering contracts, process and engineering consultancy services and Project construction items (excluding steel & Cement) along with civil construction contracts.

The Memorandum of Instructions on Project and Service Exports (PEM) containing the above changes is enclosed with this circular.

FED Master Directions dated January 4, 2016

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On January 4, 2016 RBI has issued the following 17 Master Directions (There is no Master Direction 1 & Master Direction 11). Each Master Direction consolidates / complies various instructions issued by RBI, from time to time, with respect to the Regulations covered in the Master Directions.

RBI will continue to issue directions to Authorised Persons through A.P. (DIR Series) Circulars in regard to any change in the Regulations or the manner in which relative transactions are to be conducted and the Master Direction will also be amended suitably.

2. M aster Direction – Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Nonresident Exchange Houses 3. M aster Direction – Money Changing Activities

4. Master Direction – Compounding of Contraventions under FEMA, 1999 5. Master Direction – External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers

6. Master Direction – Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians / Persons of Indian Origin

7. M aster Direction – Liberalised Remittance Scheme (LRS)

8. M aster Direction – Other Remittance Facilities

9. M aster Direction – Insurance

10. M aster Direction – Establishment of Liaison / Branch /Project Offices in India by foreign entities

12. M aster Direction – Acquisition and Transfer of Immovable Property under Foreign Exchange Management Act, 1999

13. Master Direction – Remittance of assets

14. Master Direction – Deposits and Accounts

15. Master Direction – Direct Investment by Residents in Joint Venture (JV) / Wholly Owned Subsidiary (WOS) Abroad

16. Master Direction – Export of Goods and Services

17. Master Direction – Import of Goods and Services

18. Master Direction – Reporting under Foreign Exchange Management Act, 1999

19. Master Direction – Miscellaneous

A. P. (DIR Series) Circular No. 62 dated April 13, 2016

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Overseas Direct Investment (ODI) – Rationalization and reporting of ODI Forms

This
circular contains the changes made to information that needs to be
submitted with respect to Overseas Investment. Form ODI with respect to
Overseas Direct Investment. The new Form ODI is given in Annex 1 to this
circular.

1. The revised Form ODI will contain the following: –

Part I – Application for allotment of Unique Identification Number (UIN) and reporting of Remittances / Transactions:

Section A – Details of the IP / RI.

Section B – Capital Structure and other details of JV/ WOS/ SDS.

Section C – Details of Transaction/ Remittance/ Financial Commitment of IP/ RI.

Section D – Declaration by the IP/ RI.

Section E – Certificate by the statutory auditors of the IP/ self-certification by RI.

Part II – Annual Performance Report (APR)

Part III – Report on Disinvestment by way of

a) Closure / Voluntary Liquidation / Winding up/ Merger/ Amalgamation of overseas JV / WOS;

b) Sale/ Transfer of the shares of the overseas JV/ WOS to another eligible resident or non-resident;

c)
Closure / Voluntary Liquidation / Winding up/ Merger/ Amalgamation of
IP; and d) Buy back of shares by the overseas JV/ WOS of the IP / RI.

2.
New reporting formats, Annex II and Annex III, have been introduced for
Venture Capital Fund (VCF) / Alternate Investment Fund (AIF), Portfolio
Investment and overseas investment by Mutual Funds.

3. Post investment changes, subsequent to the allotment of UIN, are to be reported in Form ODI Part I.

4.
Form ODI Part I must be obtained bank before executing any ODI
transaction and the bank must report the relevant Form ODI in the online
OID application and obtain UIN at the time of executing the remittance.

5. A RI undertaking ODI can self-certify Form ODI Part I and
certification by Statutory Auditor or Chartered Accountant must not be
insisted upon.

6. A concept of AD Maker, AD Checker and AD Authorizer has been introduced in the online application process.

7.
Any non-compliance with the guidelines / instructions will be viewed
seriously penal action as considered necessary may be initiated.

A. P. (DIR Series) Circular No. 61 dated April 13, 2016

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Overseas Direct Investment – Submission of Annual Performance Report

Presently, an Indian Party (IP) which / Resident Individual (RI) who has made an Overseas Direct Investment under ODI / LRS is required to file an Annual Performance Report (APR) in Form ODI Part III with RBI by June 30, every year in respect of each Joint Venture (JV) / Wholly Owned Subsidiary (WOS) outside India set up or acquired by the IP / RI. However, in violation of the provisions of FEMA: –

a) IP / RI are either not regular in submitting the APR or are submitting it with delay.

b) Banks facilitate Remittance(s) and other forms of financial commitments under the automatic route even though APR in respect of all overseas JV / WOS of the IP / RI have not been submitted.

To avoid these problems, this circular states that: –

a) The online OID application has been suitably modified to enable the nodal office of the bank to view the outstanding position of all the APR pertaining to an applicant including for those JV / WOS for which it is not the designated bank. Henceforth the bank, before undertaking / facilitating any ODI related transaction on behalf of the eligible applicant, must necessarily check with its nodal office and confirm that all APR in respect of all the JV / WOS of the applicant have been submitted.

b) Certification of APR by the Statutory Auditor or Chartered Accountant must not be insisted upon in the case of Resident Individuals. Self-certification can be accepted.

c) In case multiple IP / RI have invested in the same overseas JV / WOS, the obligation to submit APR will lie with the IP / RI having maximum stake in the JV / WOS. Alternatively, the IP / RI holding stake in the overseas JV / WOS can mutually agree to assign the responsibility for APR submission to a designated entity which must acknowledge its obligation to submit the APR by furnishing an appropriate undertaking to the bank.

d) An IP / RI, which has set up / acquired a JV / WOS overseas has to submit, to the bank every year, an APR in Form ODI Part II in respect of each JV / WOS outside India and other reports or documents by 31st of December each year or as may be specified by RBI from time to time. The APR, so required to be submitted, must be based on the latest audited annual accounts of the JV / WOS unless specifically exempted by RBI.

Any non-compliance with the instruction relating to submission of APR will be treated as contravention of Regulation 15 of the Notification No. FEMA 120/RB-2004 dated July 07, 2004 as amended and viewed seriously.

A. P. (DIR Series) Circular No. 60 dated April 13, 2016

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Issuance of Rupee denominated bonds overseas

This circular has made the following changes with respect to issuance of Rupees Denominated Bonds overseas: –

a)
The maximum amount that can be borrowed by an entity in a financial
year under the automatic route by issuance of these bonds will be Rs. 50
billion and not US $ 750 million. Borrowing beyond Rs. 50 billion in a
financial year will require prior approval of RBI.

b) These
bonds can only be issued / transferred / offered as security overseas in
a country and can only be subscribed by a resident of a country:

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

b.
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

c. 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.

c) The minimum maturity period for these bonds
will be three years in order to align them with the maturity
prescription regarding foreign investment in corporate bonds through the
Foreign Portfolio Investment (FPI) route.

d) Borrowers have to
obtain the list of primary bond holders and so that the same can be
provided to Regulatory Authorities in India as and when required.

e)
Banks are required to report to the Foreign Exchange Department,
External Commercial Borrowings Division, Central Office, Shahid Bhagat
Singh Road, Fort, Mumbai – 400 001, the figures of actual drawdown(s) /
repayment(s) by their constituent borrowers quoting the related loan
registration number. However, reporting by email shall be made on the
date of transaction itself.

A. P. (DIR Series) Circular No. 59 dated April 13, 2016

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Acceptance of deposits by Indian companies from a person resident outside India for nomination as Director

This
circular clarifies that making a deposit, u/s. 160 of the Companies
Act, 2013, by a person who intends to nominate either himself or any
other person as a director in an Indian company is a Current Account
Transaction and does not require any approval from RBI.

Similarly,
refund of such deposit upon selection of the person as director or his /
her getting more than 25% votes is also a Current Account Transaction
and does not require any approval from RBI.

Notification No. FEMA 13 (R)/2016-RB dated April 01, 2016

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Foreign Exchange Management (Remittance of Assets) Regulations, 2016

This Notification repeals and replaces the earlier Notification No. FEMA 13/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Remittance of Assets) Regulations, 2000.

Notification No. FEMA 5(R)/2016-RB dated April 01, 2016

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Foreign Exchange Management (Deposit) Regulations, 2016

This Notification repeals and replaces the earlier Notification No. FEMA 5/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Deposit) Regulations, 2000.

Notification No. FEMA 22(R) /RB-2016 dated March 31, 2016

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Foreign Exchange Management (Establishment in India of a branch office or a liaison office or a project office or any other place of business) Regulations, 2016

This Notification repeals and replaces the earlier Notification No. FEMA 22/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Establishment in India of branch or office or other place of business) Regulations, 2000.

A. P. (DIR Series) Circular No. 58 dated March 31, 2016

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Notification No.FEMA.366/ 2016-RB dated March 30, 2016
Foreign Direct Investment (FDI) in India – Review of FDI policy –Insurance sector

This circular makes the following changes in Annex B to Schedule 1 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 – Notification No. FEMA 20/2000-RB dated 3rd May 2000: -The existing entry F.7, F.7.1 and F.7.2 shall be substituted by the following:

A. P. (DIR Series) Circular No. 57 dated March 31, 2016

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Import of Rough, Cut and Polished Diamonds

Presently, banks can approve Clean Credit i.e. credit given by a foreign supplier to its Indian customer / buyer, without any Letter of Credit (Suppliers’ Credit) / Letter of Undertaking (Buyers’ Credit) / Fixed Deposits from any Indian financial institution for import of Rough, Cut and Polished Diamonds, for a period not exceeding 180 days from the date of shipment.

This circular permits banks, with immediate effect, to approve clean credit for a period exceeding 180 days from the date of shipment, subject to the following conditions: –

i) Banks must be satisfied about the genuineness of the reason and bonafides of the transaction and also that no payment of interest is involved for the additional period.

ii) The extension must be due to financial difficulties and / or quality disputes, as in the case of normal imports (for which such extension of time period for delayed payments has already been delegated to the AD banks).

iii) The importer requesting for such extension must not be under investigation / no investigation must be pending against the importer.

iv) The importer seeking extension must not be a frequent offender. Since there is a possibility that the importer may have dealings with more than one bank, the bank allowing extension must devise a mechanism based on their commercial judgement, to ensure this.

v) Banks can allow such extension of time up to a maximum period of 180 days beyond the prescribed period / due date, beyond which they must refer the case to respective Regional Office of RBI.

Banks must submit, customer-wise, a half yearly report of such extensions allowed, to the respective Regional Office of RBI.

A. P. (DIR Series) Circular No. 56 dated March 30, 2016

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External Commercial Borrowings (ECB) – Revised framework

This circular makes the following changes: –

1. ECB framework

i. Companies in infrastructure sector, Non-Banking Financial Companies -Infrastructure Finance Companies (NBFC-IFC), NBFC-Asset Finance Companies (NBFC-AFC), Holding Companies and Core Investment Companies (CICs) are also eligible to raise ECB under Track I of the framework with minimum average maturity period of 5 years, subject to 100% hedging.

ii. For the purpose of ECB, “Exploration, Mining and Refinery” sectors that are not presently included in the Harmonized list of infrastructure sector but which were eligible to take ECB under the previous ECB framework (c.f. A.P. (DIR Series) Circular No. 48 dated September 18, 2013) will be deemed to be in the infrastructure sector, and can access ECB as applicable to infrastructure sector under (i) above.

iii. Companies in the infrastructure sector must utilize the ECB proceeds raised under Track I for the end uses permitted for that Track. NBFC-IFC and NBFC-AFC are, however, allowed to raise ECB only for financing infrastructure.

iv. Holding Companies and CIC must use ECB proceeds only for on-lending to infrastructure Special Purpose Vehicles (SPV).

v. Individual limit of borrowing under the automatic route for aforesaid companies will be as applicable to the companies in the infrastructure sector (currently USD 750 million).

vi. Companies in infrastructure sector, Holding Companies and CIC will continue to have the facility of raising ECB under Track II of the ECB framework subject to the conditions prescribed therefore.

Companies added under Track I must have a Board approved risk management policy. Further, the bank has to verify that 100% hedging requirement is complied with during the currency of ECB and report the position to RBI through ECB 2 returns.

2. Clarification on Circular dated November 30, 2015

i. Banks can, under the powers delegated to them, allow refinancing of ECB raised under the previous ECB framework, provided the refinancing is at lower all-incost, the borrower is eligible to raise ECB under the extant ECB framework and residual maturity is not reduced (i.e. it is either maintained or elongated).

ii. ECB framework is not applicable in respect of the investment in Non-Convertible Debentures (NCD) in India made by Registered Foreign Portfolio Investors (RFPI).

iii. Minimum average maturity of Foreign Currency Convertible Bonds (FCCB) / Foreign Currency Exchangeable Bonds (FCEB) must be 5 years irrespective of the amount of borrowing. Further, the call and put option, if any, for FCCB must not be exercisable prior to 5 years.

iv. Only those NBFC which are coming under the regulatory purview of the Reserve Bank can raise ECB. Further, under Track III, the NBFC can raise ECB for on-lending for any activities including infrastructure as permitted by the concerned regulatory department of RBI.

v. The provisions regarding delegation of powers to banks are not applicable to FCCB / FCEB.

vi. In the forms of ECB, the term “Bank loans” shall be read as “loans” as foreign equity holders / institutions other than banks, also provide ECB as recognised lenders.

A. P. (DIR Series) Circular No. 46 [(1)/9(R)] dated February 4, 2016

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Notification No. FEMA.9(R)/2015-RB dated December 29, 2015

Foreign Exchange Management (Realisation, repatriation and surrender of foreign exchange) Regulations, 2015

This Notification repeals and replaces the earlier Notification No. FEMA 9/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Realisation, repatriation and surrender of foreign exchange) Regulations, 2000.

A. P. (DIR Series) Circular No. 45 [(1)/6(R)] dated February 4, 2016

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Notification No. FEMA.6(R)/2015-RB dated December 29, 2015

Foreign Exchange Management (Export and Import of Currency) Regulations, 2015

This Notification repeals and replaces the earlier Notification No. FEMA 6/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Export and Import of Currency) Regulations, 2000.

A. P. (DIR Series) Circular No. 44 [(1)/10(R)] dated February 4, 2016

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Notification No. FEMA 10(R)/2015-RB dated January 21, 2016

Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2015

This Notification repeals and replaces the earlier Notification No. FEMA 10/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2000.

A. P. (DIR Series) Circular No. 43 [(1)/7(R)] dated February 4, 2016

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Notification No. FEMA 7(R)/2015-RB dated January 21, 2016 Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2015

This Notification repeals and replaces the earlier Notification No. FEMA 7/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India) Regulations, 2000.

A. P. (DIR Series) Circular No. 42 dated February 4, 2016

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Settlement of Export/Import transactions in currencies not having a direct exchange rate

This circular provides that in respect of export and import transactions where the invoicing is in a freely convertible currency and the settlement takes place in the currency of the beneficiary which does not have a direct exchange rate, banks can permit settlement of such export and import transactions (excluding those put through the ACU mechanism), subject to the following: –

a) Exporter / Importer must be a customer of the Bank.
b) Signed contract / invoice must be in a freely convertible currency.
c) The beneficiary is willing to receive the payment in the currency of beneficiary instead of the original (freely convertible) currency of the invoice / contract / Letter of Credit as full and final settlement.
d) Bank is satisfied about the bonafide of the transactions.
e) The counterparty to the exporter / importer of the bank is not from a country or jurisdiction in the updated FATF Public Statement on High Risk & Non Cooperative Jurisdictions on which FATF has called for counter measures.

A. P. (DIR Series) Circular No. 40 dated February 1, 2016

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Foreign Direct Investment – Reporting under FDI Scheme, Mandatory filing of form AR F, FCGPR and FCTRS on e-Biz platform and discontinuation of physical filing from February 8, 2016

Presently, there is an option given to the investee entity / transferors / transferees to submit Advance Remittance Form, Form FCGPR and Form FCTRS either online or by way of physical filing.

This circular provides that on and from February 8, 2016 it will be mandatory for all concerned to submit Advance Remittance Form, Form FCGPR and Form FCTRS online through the e-Biz portal as physical filing of these forms will no longer be accepted.

A. P. (DIR Series) Circular No. 53 dated March 03, 2016

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Grant of EDF Waiver for Export of Goods Free of Cost

Presently, Status Holder exporters can export, free of coat, freely exportable items for export promotion annually up to Rs 10 lakh or 2% of average annual export realization during preceding three licensing years, whichever is higher.

This circular now provides that Status Holder exporters can export, free of coat, freely exportable items for export promotion annually up to Rs 10 lakh or 2% of average annual export realization during preceding three licensing years, whichever is lower.

Notification No.FEMA.362/2016-RB dated February 15, 2016

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

This Notification has amended Notification No. FEMA. 20/2000-RB dated 3rd May 2000 as under: –

A. In Regulation 2 – new clause (viiAA) has been inserted as under: –

“(vii AA) “Manufacture”, with its grammatical variations, means a change in a non-living physical object or article or thing- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure.”

B. In Regulation 14 the following amendments have been made
a. In sub-regulation 1, existing clause (i) and clause (ia) have been amended.
b. In sub-regulation 3, existing sub-clause (D) in clause (iv) has been amended.
c. Sub-regulation 5 – Guidelines for establishment of Indian companies/ transfer of ownership or control of Indian companies, from resident Indian citizens to non-resident entities, in sectors under government approval route – has been amended.

d. In sub-regulation 6, the existing clause (ii) has been amended.

C. In Schedule 1 the following amendments have been made: –

a. In paragraph 2, paragraph beginning with “Provided further that the shares or convertible debentures…..” and ending with “…………permitted to the extent specified in Regulation 14.” has be deleted.

b. In paragraph 2, new clause (v), has been inserted as under: –

“(v) by way of swap of shares, provided the company in which the investment is made is engaged in an automatic route sector, subject to the condition that irrespective of the amount, valuation of the shares involved in the swap arrangement will have to be made by a Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the host country.
c. Note: A company engaged in a sector where foreign investment requires Government approval may issue shares to a non-resident through swap of shares only with approval of the Government”
d. In paragraph 3, the existing sub-paragraph (c) has been deleted.
e. In ‘Annex B’, the existing table – Foreign Investments caps and entry route in various sectors – has been substituted.

D. In Schedule 9 the following amendments have been made: –
a. Existing paragraph 4 – Entry Route – has been amended.
b. Existing paragraph 8 – Downstream Investment – has been deleted.

E. E xisting Schedule 11 – Investment by a person resident outside India in an Investment Vehicle – has been substituted.

Notification No.FEMA.361/2016-RB dated February 15, 2016

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

This Notification has amended Notification No. FEMA. 20/2000-RB dated 3rd May 2000 as under: –

A. Substituted clause (viia) in Regulation 2 as follows: – “(viia) Non-Resident Indian (NRI) means an individual resident outside India who is citizen of India or is an ‘Overseas Citizen of India’ cardholder within the meaning of section 7 (A) of the Citizenship Act, 1955.”

B. Substituted Regulation 5(3) as follows: – “(i) A Non- Resident Indian (NRI) may acquire securities or units on a Stock Exchange in India on repatriation basis under the Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3. (ii) A Non- Resident Indian (NRI) may acquire securities or units on a non-repatriation basis, subject to the terms and conditions specified in Schedule 4.”

C. Substituted Schedule 3.

D. Substituted Schedule 4.

A. P. (DIR Series) Circular No. 52 dated February 11, 2016

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Regulatory Relaxations for Startups – Clarifications relating to Issue of Shares

This circular, with respect to facilities available to start-ups, clarifies as follows: –

1. Issue of shares without cash payment through sweat equity

Indian companies can issue sweat equity under a scheme drawn either in terms regulations issued under: –

a. The Securities Exchange Board of India Act, 1992 in respect of listed companies; or
b. The Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013 in respect of other companies.

2. Issue of shares against legitimate payment owed

Indian companies can issue equity shares against any other funds payable by the investee company (e.g. payments for use or acquisition of intellectual property rights, for import of goods, payment of dividends, interest payments, consultancy fees, etc.), remittance of which does not require prior permission of the Government of India or RBI under FEMA, 1999 and complies with the FDI policy and applicable tax laws.

A. P. (DIR Series) Circular No. 51 dated February 11, 2016

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Regulatory relaxations for start-ups – Clarifications relating to acceptance of payments

This
circular clarifies that a start-up with an overseas subsidiary, which
has a appropriate contractual arrangement between itself, its overseas
subsidiary and the customers concerned, is permitted to: –

1. O pen foreign currency account abroad to pool the foreign exchange earnings out of the exports / sales made by it.

2.
Pool its receivables arising from the transactions with the residents
in India as well as the transactions with the non-residents abroad into
the said foreign currency account opened abroad in its name.

3.
Avail of the facility for realising the receivables of its overseas
subsidiary or making the above repatriation through Online Payment
Gateway Service Providers (OPGSPs) for value not exceeding US $ 10,000
or such limit as may be permitted by RBI from time to time.

Balances
in the said foreign currency account that are due to the Indian
start-up must be repatriated to India within a period as applicable to
realisation of export proceeds (currently nine months).

A. P. (DIR Series) Circular No. 50 dated February 11, 2016

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Compilation of R-Returns: Reporting under FETERS This circular proposes the following changes, which have to be implemented not later than April 1, 2016: –

1. Web-based data submission by AD banks
With regards to reporting under the Foreign Exchange Transactions Electronic Reporting System (FETERS) the following changes will come into effect with respect to transactions that are to be reported from April1, 2016: –

a. The present email-based submission will be replaced by web-portal based data submission.
b. Nodal offices of banks will have to access the webportal https://bop.rbi.org.in with the RBI-provided login-name and password, to submit the required data.
c. Banks have to download RBI-provided validator template from this portal on their computer and perform off-line check of their FETERS data-file for error, if any, before its submission on the portal.
d. On uploading validated files, banks will get acknowledgment.
e. Banks can report addition of AD code and update AD category for incorporation in the AD-master database with RBI.
f. With the discontinuation of ENC.TXT and SCH3to6. TXT files in FETERS, the purpose codes P0105 [Export bills (in respect of goods) sent on collection – other than Nepal and Bhutan] and P0107 [Realization of NPD export bills (full value of bill to be reported) – other than Nepal and Bhutan] have become defunct and are, therefore, discontinued.

2. Revision in Form A2

Transactions relating to the Liberalized Remittance Scheme (LRS) in FETERS and On-line Return Filing System (ORFS), must now be reported under their respective FETERS purpose codes (e.g. travel, medical treatment, purchase of immovable property, studies abroad, maintenance of close relatives; etc.) instead of reporting collectively under the purpose code S0023. The revised purpose codes are as under: –

Revised Form A2 introducing a check-box for LRS transactions as well as clubbing the ‘Application cum Declaration for purchase of foreign exchange under the Liberalised Remittance Scheme of USD 250,000’ is Annexed to this circular.

3. Online submission of Form A2 by the remitter

Banks offering internet banking facilities to their customers must allow online submission of Form A2 and also enable uploading/submission of documents, if and as may be necessary, to establish the permissibility of the remittances. Remittances that do not require any documentation (e.g. certain transactions under the LRS) must be put through on the basis of Form A2 alone.

To start with, remittances on the basis of online submission alone will be available for transactions with an upper limit of USD 25,000 (or its equivalent) for individuals and USD 100,000 (or its equivalent) for corporates.

A. P. (DIR Series) Circular No. 49 [(1)/18(R)] dated February 4, 2016

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Notification No. FEMA. 18(R)/2015-RB dated December 29, 2015

Post Office (Postal Orders / Money Orders), 2015

This Notification repeals and replaces the earlier Notification No. FEMA 18/2000-RB dated May 3, 2000 pertaining to Post Office (Postal Orders / Money Orders).

A. P. (DIR Series) Circular No. 48 [(1)/15(R)] dated February 4, 2016

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Notification No. FEMA.15(R)/2015-RB dated December 29, 2015

Definition of “Currency”, 2015

This Notification repeals and replaces the earlier Notification No. FEMA 15/2000-RB dated May 3, 2000 pertaining to the Definition of “Currency”.

A. P. (DIR Series) Circular No. 47 [(1)/11(R)] dated February 4, 2016

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Notification No. FEMA.11(R)/2015-RB dated December 29, 2015

Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2015

This Notification repeals and replaces the earlier Notification No. FEMA 11/2000-RB dated May 3, 2000 pertaining to Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000.

A. P. (DIR Series) Circular No. 35 dated 10th December, 2015

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Guidelines on trading of Currency Futures and Exchange Traded Currency Options in Recognised Stock Exchanges – Introduction of Cross-Currency Futures and Exchange Traded Option Contracts

Presently, residents and eligible non-residents can trade in US $ – INR, Euro – INR, GBP – INR and Yen JPY – INR currency futures contracts and US $ – INR currency option contract on recognised stock exchanges.

This circular now permits with immediate effect,

1. Residents and FPI to also take positions, within the position limits as prescribed by the exchanges, in,

(a) Cross-currency futures in the currency pairs of EUR-USD, GBP-USD and USD-JPY

(b) E xchange traded cross-currency option contracts in EUR-INR, GBP-INR and JPY-INR in addition to the existing USD-INR option contract.

The above contracts are in addition to the existing contracts that can be undertaken without having to establish underlying exposure.

2. Banks to undertake trading in all permitted exchange traded currency derivatives within their Net Open Position Limit (NOPL) subject to limits stipulated by the exchanges.

Detailed terms and conditions are Annexed to this circular as under: –

Annex I Currency Futures (Reserve Bank) (Amendment) Directions, 2015 Notification No. FMRD. 1/ED(CS)-2015 dated December 10, 2015

Annex II Exchange Traded Currency Options (Reserve Bank) (Amendment) Directions, 2015 Notification No. FMRD. 2 /ED(CS)-2015 dated December 10, 2015

Annex III Position Limits for market participants in the Exchange Traded Currency Derivatives

Notification No. FEMA 357/2015-RB dated 7th December, 2015

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Foreign Exchange Management (Manner of Receipt and Payment) (Amendment) Regulations, 2015

This Notification has amended the Regulation 5 of Notification No. FEMA 14/2000-RB dated 3rd May, 2000, (Manner of Receipt and Payment), as under: –

After sub-regulation (2)(b) following shall be added at (c), namely: – ‘Any other mode of payment in accordance with the directions issued by the Reserve Bank of India to authorised dealers from time to time.’

Notification No. FEMA 358/2015-RB dated 2nd December, 2015

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Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) (Amendment) Regulations, 2015

This Notification has amended the Regulation 3 of Notification No. FEMA. 120/2000-RB dated May 3, 2000 (Transfer or Issue of Any Foreign Security), as under: –

Amendment of the Schedule I

In Schedule I, after paragraph 3, the following shall be inserted, namely: –

4. Provided that under these Regulations, the Reserve Bank may, in consultation with the Government of India, prescribe for the automatic route, any provision or proviso regarding various parameters listed in paragraphs 1 to 3 above of this Schedule or any other parameter as prescribed by the Reserve Bank and also prescribe the date from which any or all of the existing proviso will cease to exist, in respect of borrowings from overseas, whether in foreign currency or Indian Rupees, such as addition / deletion of borrowers eligible to raise such borrowings, overseas lenders / investors, purposes of such borrowings, change in amount, maturity and all-in-cost, norms regarding security, pre-payment, parking of ECB proceeds, reporting and drawal of loan, refinancing, debt servicing, etc.”

Amendment to the Schedule II

In Schedule II, after paragraph 5, the following shall be inserted, namely: –

6. Provided that under these Regulations, the Reserve Bank may, in consultation with the Government of India, prescribe for the approval route, any provision or proviso regarding various parameters listed in paragraphs 1 to 5 above of this Schedule or any other parameter as prescribed by the Reserve Bank and also prescribe the date from which any or all of the existing provisions will cease to exist, in respect of borrowings from overseas, whether in foreign currency or Indian Rupees, such as addition / deletion of borrowers eligible to raise such borrowings, overseas lenders / investors, purposes of such borrowings, change in amount, maturity and all-in-cost, norms regarding security, pre-payment, parking of ECB proceeds, reporting and drawal of loan, refinancing, debt servicing, etc.”

Notification No. FEMA 359/2015-RB dated 2nd December, 2015

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Foreign Exchange Management (Transfer or Issue of Any Foreign Security) (Amendment) Regulations, 2015

This Notification has amended the Regulation 21 of Notification No. FEMA. 120/2004-RB dated July 7, 2004 (Transfer or Issue of Any Foreign Security), as under: –

Amendment of the Regulation 21 (2) (ii)

After Regulation 21 (2) (ii), the following proviso shall be inserted, namely: –

“Provided that under these Regulations, the Reserve Bank may, in consultation with the Government of India, change / prescribe for the automatic as well as the approval route of FCCBs, any provision or proviso for issuance of FCCBs”.

Amendment to the Regulation 21 (2) (iii)

After Regulation 21 (2) (iii), the following proviso shall be inserted, namely: –

“Provided that under these Regulations, the Reserve Bank may, in consultation with the Government of India, change / prescribe any provision or proviso for issuance of FCEBs”.

A. P. (DIR Series) Circular No. 32 dated 30th November, 2015

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External Commercial Borrowings (ECB) Policy – Revised framework

The circular contains the revised framework for External Commercial Borrowings. The framework will be reviewed after one year.

The revised ECB framework, which will apply in totality, comprises of the following three tracks:

Track I: Medium term foreign currency denominated ECB with Minimum Average Maturity (MAM) of 3 / 5 years.

Track II: Long term foreign currency denominated ECB with MAM of 10 years.

Track III: Indian Rupee denominated ECB with MAM of 3 / 5 years.

Involvement of Indian banks and their overseas branches / subsidiaries in relation to ECB to be raised by Indian entities is subject to prudential guidelines issued by RBI. Overseas branches / subsidiaries of Indian banks will not be permitted as lenders under Track II and III.

Entities raising ECB under the present framework can raise the said loans by March 31, 2016 provided the agreement in respect of the loan is already signed by the date the new framework comes into effect.

For raising of ECB under the following carve outs, the borrowers will, however, have time up to March 31, 2016 to sign the loan agreement and obtain the Loan Registration Number (LRN) from the Reserve Bank by this date: –
(i). ECB facility for working capital by airlines companies.
(ii). ECB facility for consistent foreign exchange earners under the USD 10 billion Scheme. (iii). ECB facility for low cost affordable housing projects (low cost affordable housing projects as defined in the extant Foreign Direct Investment policy). 55 The following 3 Forms for ECB have also be been revised and Annexed to this circular as under: –

Form 83 – Annex I
Form ECB – Annex II
Form ECB 2 – Annex III

A. P. (DIR Series) Circular No. 31 dated 26th November, 2015

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Investment by Foreign Portfolio Investors (FPI) in Corporate Bonds

This circular permits FPI to acquire NCD / bonds, which are under default, either fully or partly, in the repayment of principal on maturity or principal installment in the case of amortising bond provided: –

1. The revised maturity period of such restructured NCD / bonds, is three years or more.

2. The FPI discloses to the Debenture Trustees the terms of their offer to the existing debenture holders / beneficial owners from whom they are acquiring the NCD / bonds.

3. The investment must be within the overall limit prescribed for corporate debt from time to time (currently Rs. 2,443.23 billion).

A. P. (DIR Series) Circular No. 30 dated 26th November, 2015

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Advance Remittance for Import of aircrafts / helicopters / other aviation related purchases

This circular states that, requisite approval of DGCA only is required for making advance remittance without bank guarantee or an unconditional, irrevocable standby letter of credit up to US $ 50 million for import of aircrafts / helicopters by a company for operating Scheduled or Non-Scheduled Air Transport Services (including Air Taxi Services). Thus, the approval from Ministry of Civil Aviation is no longer required to be obtained.

A. P. (DIR Series) Circular No. 29 dated 26th November, 2015

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Import of Goods into India – Evidence of Import

Presently, either of the following documents can be submitted as proof of import of goods into India: – (a) Exchange control copy of the Bill of Entry for home consumption. (b) Exchange control copy of the Bill of Entry for warehousing, in the case of 100% Export Oriented Units (EOU). (c) Customs Assessment Certificate / Postal Appraisal Form as declared by the importer to the Customs Authorities. This circular provides that the following can also be submitted as proof of import of goods into India, in addition to the documents that are considered as proof of import at present: – (a) Ex-Bond Bill of Entry issued by Customs Authorities or by any other similar nomenclature, as evidence for physical import of goods. (b) Courier Bill of Entry.

DIPP – Press Note No. 12 (2015 Series) dated 24th November, 2015

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Review of Foreign Direct Investment (FDI) policy on various sectors

This Press Note has made major changes, with immediate effect, to the FDI Policy. Overall there are approximately 24 changes – both major and minor. Some of the important areas where changes have been made are – investment in LLP, real estate sector, defense sector, single brand retail trading, investment in banks.

A. P. (DIR Series) Circular No. 55 dated March 29, 2016

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Investment by Foreign Portfolio Investors (FPI) in Government Securities

This circular contains the increased limits for investment by FPI in Government Securities over the next 2 quarters as under: –


Any limit which remains unutilised by the long term investors at the end of a half-year will be available as additional limit to the investors in the open category for the following half-year. Accordingly, limits for the long term investors remaining unutilized at the end of half year ending Sept 30, 2016 will be released for investment under the open category in October, 2016.

A. P. (DIR Series) Circular No. 54 dated March 23, 2016

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Diamond Dollar Account (DDA) – Reporting Mechanism

Presently, banks are required to submit to RBI: –
1. Quarterly reports giving details of the name and address of the firm / company in whose name a Diamond Dollar Account is opened, along with the date of opening / closing the said Account.

2. Fortnightly statements giving data on DDA balances maintained by them.

This circular states that, with immediate effect, the above two reports / statements are not required to be submitted to RBI. However, banks are required to maintain the said database at their end and submit the same to RBI whenever called upon to do.

DIPP Press Note No. 10 (2015 Series) dated September 22, 2015

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Streamlining the Procedure for Grant of Industrial License

Presently,
the initial validity period of an Industrial License for the Defence
Sector is 7 years, which can be further extended to 10 years.

This
Press Note provides that the initial validity period of an Industrial
License for the Defence Sector will now be 15 years, which can be
further extended to 18 years. In case the License has expired the
Licensee can apply for a fresh License.

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DIPP Clarification dated September 15, 2015

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Clarification on FDI Policy on Facility Sharing Arrangements between Group Companies

This Press Note clarifies as under: –

Facility sharing agreement between group companies through leasing / sub-leasing arrangements for larger interest of business will not be treated as ‘real estate business’ within the provisions of the Consolidated FDI Policy Circular 2015, provided such arrangements are at arm’s length price in accordance with the provisions of Income Tax Act 1961, and annual lease rent earned by the lessor company does not exceed 5% of its total revenue.

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DIPP Press Note No. 9 (2015 Series) dated September 15, 2015

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Review of existing Foreign Direct Investment policy on Partly Paid Shares and Warrants

This Press Note makes the following two changes to the Consolidated FDI Policy Circular of 2015 with immediate effect: –

1. Para 2.1.5 is amended to read as under: –

‘Capital’ means equity shares; fully, compulsorily & mandatorily convertible preference shares; compulsorily & mandatorily convertible debentures and warrants.

2. Insertion of new para after para 3.3.3 of Consolidated FDI Policy Circular of 2015: –

3.3.3 bis: Acquisition of Warrants and Partly Paid Shares – An Indian Company issues warrants and partly paid shares to persons resident outside India subject to terms and conditions as stipulated by the Reserve Bank of India, from time to time.

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A. P. (DIR Series) Circular No. 13 dated September 10, 2015

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Trade Credit Policy – Rupee (INR ) Denominated trade credit

This circular permits Indian importers to enter into loan agreements with overseas lenders to avail trade credit in Rupees (INR) based on the guidelines mentioned below: –

i. Trade credit can be raised for import of all items (except gold) permissible under the extant Foreign Trade Policy.

ii. Trade credit period for import of non-capital goods can be up to one year from the date of shipment or up to the operating cycle, whichever is lower.

iii. Trade credit period for import of capital goods can be up to five years from the date of shipment.

iv. Banks cannot permit roll-over/extension beyond the permissible period.

v. Banks can permit trade credit up to US $ 20 million or its equivalent per import transaction.

vi. Banks can give guarantee, Letter of Undertaking or Letter of Comfort in respect of trade credit for a maximum period of three years from the date of the shipment.

vii. The all-in-cost of such Rupee (INR) denominated trade credit must be commensurate with prevailing market conditions.

viii. All other guidelines for trade credit will be applicable for such Rupee (INR) denominated trade credits.

Overseas lenders can hedge their exposure in Rupees through permitted derivative products in the on-shore market with a bank in India.

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A. P. (DIR Series) Circular No. 12 dated September 10, 2015

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Guidelines for Grant of Authorisation for Additional Branches of FFMC/AD Cat. II

This circular has, with immediate effect, modified the guidelines for opening of additional branches by FFMC / AD Cat. II as under: –

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A. P. (DIR Series) Circular No. 11 dated September 10, 2015

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Exchange Earners’ Foreign Currency (EEFC) Account – Discontinuation of Statement pertaining to trade related loans and advances

Presently, banks are required to report transactions relating to loans / advances from EEFC account on a quarterly basis to the Regional Office of RBI.

This circular states that banks are, with immediate effect, not required to submit the quarterly statement of loans / advances from EEFC account to the Regional Office of RBI.

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A. P. (DIR Series) Circular No. 9 dated August 21, 2015

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Foreign Direct Investment – Reporting under FDI Scheme on the e-Biz platform

This circular states that from August 24, 2015 Form FCTRS (Foreign Currency Transfer of Shares) pertaining to transfer of shares, convertible debentures, partly paid shares and warrants from a person resident in India to a person resident outside India or vice versa can be filed online on the eBiz portal of the Government of India. This facility for online filing is an additional facility and the manual system of reporting will continue till further notice.

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DIPP – undated

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Clarification on FDI Policy on Single Brand Retail Trading

This clarification issued in respect of FDI in Single Brand Retail Trade – para 6.2.16.3 of Consolidated FDI Policy Circular of 2015, states as under: –


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A. P. (DIR Series) Circular No. 6 dated 16th July, 2015

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Foreign Investment in India by Foreign Portfolio Investors

This circular clarifies that in the case of investment by FPI in security receipts (SR) issued by the Asset Reconstruction Companies (ARC): –

1. Restriction on investments with less than three years residual maturity will not be applicable.
2. Investment in SR must be within the overall limit prescribed for corporate debt from time to time.

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DIPP – Press Note No. 8 (2015 Series) dated July 30, 2015 Introduction of Composite Caps for Simplification of Foreign Direct Investment (FDI) policy to attract foreign investments

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This Press Note has made the following amendments
to the Consolidated FDI Policy issued on May 12, 2015, with immediate
effect: –

2. Para 3.6.2 (vi) of the Consolidated FDI Policy Circular of 2015, is amended to read as under:

3.6.2
(vi) It is also clarified that Foreign investment shall include all
types of foreign investments, direct and indirect, regardless of whether
the said investments have been made under Schedule 1 (FDI), 2 (FII), 2A
(FPI), 3 (NRI), 6 (FVCI), 8 (QFI), 9 (LLPs) and 10 (DRs) of FEMA
(Transfer or Issue of Security by Persons Resident Outside India)
Regulations. FCCBs and DRs having underlying of instruments which can be
issued under Schedule 5, being in the nature of debt, shall not be
treated as foreign investment. However, any equity holding by a person
resident outside India resulting from conversion of any debt instrument
under any arrangement shall be reckoned as foreign investment.

3. Para 4.1.2 of the Consolidated FDI Policy Circular of 2015, is amended to read as under:

4.1.2
For the purpose of computation of indirect foreign investment, foreign
investment in an Indian company shall include all types of foreign
investments regardless of whether the said investments have been made
under Schedule 1 (FDI), 2 (FII holding as on March 31), 2A (FPI holding
as on March 31), 3 (NRI), 6 (FVCI), 8 (QFI holding as on March 31), 9
(LLPs) and 10 (DRs) of FEMA (Transfer or Issue of Security by Persons
Resident Outside India) Regulations. FCCBs and DRs having underlying of
instruments which can be issued under Schedule 5, being in the nature of
debt, shall not be treated as foreign investment. However, any equity
holding by a person resident outside India resulting from conversion of
any debt instrument under any arrangement shall be reckoned as foreign
investment.

4. Para 3.1.4 (i) of the Consolidated FDI Policy Circular of 2015, is amended to read as under:

3.1.4
(i) An FII/FPI/QFI (Schedule 2, 2A and 8 of FEMA (Transfer or Issue of
Security by Persons Resident Outside India) Regulations, as the case may
be) may invest in the capital of an Indian company under the Portfolio
Investment Scheme which limits the individual holding of an FII/FPI/QFI
below 10% of the capital of the company and the aggregate limit for
HI/FPI/OR investment to 24% of the capital of the company. This
aggregate limit of 24% can be increased to the sectoral cap/statutory
ceiling, as applicable, by the Indian company concerned through a
resolution by its Board of Directors followed by a special resolution to
that effect by its General Body and subject to prior intimation to RBI.
The aggregate FII/FPI/ QFI investment, individually or in conjunction
with other kinds of foreign investment, will not exceed
sectoral/statutory cap.

5. Para 6.2 of the Consolidated FDI Policy Circular of 2015 is amended to read as under:

a)
In the sectors/activities as per Annexure, foreign investment up to the
limit indicated against each sector/activity is allowed, subject to the
conditions of the extant policy on specified sectors and applicable
laws/regulations; security and other conditionalities. In
sectors/activities not listed therein, foreign investment is permitted
up to 100% on the automatic route, subject to applicable
laws/regulations; security and other conditionalities. Wherever there is
a requirement of minimum capitalization, it shall include share premium
received along with the face value of the share, only when it is
received by the company upon issue of the shares to the non-resident
investor. Amount paid by the transferee during post-issue transfer of
shares beyond the issue price of the share, cannot be taken into account
while calculating minimum capitalization requirement.

b)
Sectoral cap i.e. the maximum amount which can be invested by foreign
investors in an entity, unless provided otherwise, is composite and
includes all types of foreign investments, direct and indirect,
regardless of whether the said investments have been made under Schedule
1 (FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 8 (QFI), 9 (LLPs) and 10
(DRs) of FEMA (Transfer or Issue of Security by Persons Resident
Outside India) Regulations. FCCBs and DRs having underlying of
instruments which can be issued under Schedule 5, being in the nature of
debt, shall not be treated as foreign investment. However, any equity
holding by a person resident outside India resulting from conversion of
any debt instrument under any arrangement shall be reckoned as foreign
investment under the composite cap. Sectoral cap is as per Annexure
referred above.

c) Foreign investment in sectors under
Government approval route resulting in transfer of ownership and/or
control of Indian entities from resident Indian citizens to non-resident
entities will be subject to Government approval. Foreign investment in
sectors under automatic route but with conditionalities, resulting in
transfer of ownership and/or control of Indian entities from resident
Indian citizens to non-resident entities, will be subject to compliance
of such conditionalities.

d) The sectors which are already under 100% automatic route and are without conditionalities would not be affected.

e)
Notwithstanding anything contained in paragraphs a) and c) above,
portfolio investment, upto aggregate foreign investment level of 49% or
sectoral/statutory cap, whichever is lower, will not be subject to
either Government approval or compliance of sectoral conditions, as the
case may be, if such investment does not result in transfer of ownership
and/or control of Indian entities from resident Indian citizens to
nonresident entities. Other foreign investments will be subject to
conditions of Government approval and compliance of sectoral conditions
as laid down in the FDI policy.

f) Total foreign investment, direct and indirect, in an entity will not exceed the sectoral/statutory cap.

g)
Any existing foreign investment already made in accordance with the
policy in existence would not require any modification to conform to
these amendments.

h) The onus of compliance of above provisions will be on the investee company.

6.
It is clarified that there are no sub-limits of portfolio investment
and other kinds of foreign investments in commodity exchanges, credit
information companies, infrastructure companies in the securities market
and power exchanges.

7 In Defence sector, portfolio investment
by FPIs/FIls/ NRIs/QFIs and investments by FVCIs together will not
exceed 24% of the total equity of the investee/joint venture company.
Portfolio investments will be under automatic route. 8. In Banking-
Private sector, where sectoral cap is 74%, FII/ FPI/ QFI investment
limits will continue to be within 49% of the total paid up capital of
the company.

9. There is no change in the entry route i.e.
Government approval requirement to bring foreign investment in a
particular sector/activity. Further, subject to the amendments mentioned
in this Press Note, there is no change in other conditions mentioned in
the Consolidated FDI Policy Circular of 2015 and subsequent Press
Notes.

10. Relevant provisions of the FDI policy and subsequent
Press Notes will be read in harmony with the above amendments in
Consolidated FDI Policy Circular of 2015.

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DIPP – Press Note No. 7 (2015 Series) dated June 3, 2015

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Review of Foreign Direct Investment (FDI) Policy on Investments by Non-Resident Indians (NRIs), Person of Indian Origin (PIOs) and Overseas Citizens of India (OCIs)

This Press Note has made the following two amendments to the Consolidated FDI Policy issued on May 12, 2015, with effect from June 18, 2015: –

(i) Para 2.1.27 is amended to read as below:
‘Non-Resident Indian’ (NRI) means an individual resident outside india who is a citizen of Indian or is an Overseas Citizen of India cardholder within the meaning of section 7 (A) of the citizenship Act, 1995. ‘Person of indian origin cardholders registered as such under notification No. 26011/4/98 F.I, dated 19.8.2008, issued by the Central Government are deemed to be ‘Overseas Citizen of India’ Card holders.

(ii) Insertion of a new para 3.6.2(vii), after a para 3.6.2(vi) of the consolidated FDI policy Circular of 2015:

Investment by NRIs under Schedule 4 of FEMA ( Transer or issue of security by persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.

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A. P. (DIR Series) Circular No. 21 dated 8th October, 2015

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Memorandum of Procedure for channeling transactions through Asian Clearing Union (ACU)

This circular permits the use of the Nostro accounts of commercial banks of the ACU member countries, i.e., the ACU Dollar and ACU Euro accounts, for settling the payments of both exports and imports of goods and services among the ACU countries and reiterates that all eligible export/import transactions with other ACU member countries (except in the case of certain countries where specific exemptions have been provided by the Reserve Bank of India) must invariably be settled through the ACU mechanism.

As a consequence, payments for all eligible: –

a) Export transactions must be made by debit to the ACU Dollar/ACU Euro account in India of a bank of the member country in which the other party to the transaction is resident or by credit to the ACU Dollar/ACU Euro account of the authorised dealer maintained with the correspondent bank in the other member country.
b) Import transactions must be made by credit to the ACU Dollar/ACU Euro account in India of a bank of the member country in which the other party to the transaction is resident or by debit to the ACU Dollar /ACU Euro account of an authorised dealer with the correspondent bank in the other member country.

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A. P. (DIR Series) Circular No. 20 dated 8th October, 2015

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Risk Management & Inter-Bank Dealings: Booking of Forward Contracts – Liberalisation

Presently,
to manage/hedge their foreign exchange exposures arising out of actual
or anticipated remittances, both inward and outward, resident
individuals, firms and companies, are allowed to book forward contracts,
without production of underlying documents, up to a limit of US $
250,000 based on self-declaration.

This circular has increased
the said limit to US $ 1 million. Hence, all resident individuals, firms
and companies, who have actual or anticipated foreign exchange
exposures, are now allowed to book foreign exchange forward and FCY-INR
options contracts up to US $ 1,000,000 (US $ one million) without any
requirement of documentation on the basis of a simple declaration.
Although contracts booked under this facility will normally be on a
deliverable basis, cancellation and rebooking of contracts is permitted.
However, depending upon the track record of the entity, the concerned
bank can call for underlying documents, if considered necessary, at the
time of rebooking of cancelled contracts.

The existing
facilities in terms of A.P. (DIR Series) Circular No. 15 dated 29th
October, 2007 for Small and Medium Enterprises (SMEs) will remain
unchanged.

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A. P. (DIR Series) Circular No. 19 dated October 6, 2015

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Investment by Foreign Portfolio Investors (FPI) in Government Securities

This circular has increased the investment limit in Government Securities as under: –

The
security-wise limit for FPI investments will be monitored on a day-end
basis and those Central Government securities in which aggregate
investment by FPI exceeds the prescribed threshold of 20% will be put in
a negative investment list. No fresh investments by FPI in these
securities will be permitted till they are removed from the negative
list.

There will be no security-wise limit for SDL for now.

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Notification No. FEMA. 353 /2015-RB dated 6th October, 2015

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Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Ninth Amendment) Regulations, 2015

This Notification has amended Schedule 5 of Notification No. FEMA 20/2000-RB dated 3rd May 2000 as under: –

(A) in paragraph 2,
(i) the existing sub-paragraph (3) shall be re-numbered as Paragraph 2C (ii) after the existing sub-paragraph (2), the following shall be added namely: –
“(3) A Non- Resident Indian may subscribe to National Pension System governed and administered by Pension Fund Regulatory and Development Authority (PFRDA), provided such subscriptions are made through normal banking channels and the person is eligible to invest as per the provisions of the PFRDA Act. The annuity/ accumulated saving will be repatriable.”
(iii) after adding sub-paragraph (3) in paragraph 2, the existing paragraph 2C shall be re-numbered as sub-paragraph (4) in Paragraph 2.

(B) In paragraph 3, after the existing sub-paragraph (2), the following shall be inserted namely: –
“(2A) A non-resident Indian who subscribes to the National Pension System, under sub-paragraph (3) of paragraph (2) of this Schedule shall make payment either by inward remittance through normal banking channels or out of funds held in his NRE/FCNR/NRO account.”

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DIPP Press Note No. 11 (2015 Series) dated 1st October, 2015

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Foreign Direct Investment (FDI) up to 100% in White Label ATM Operations under Automatic Route

This Press Note states that the Government of India has permitted 100% investment under the Automatic Route in White Label ATM Operations, with immediate effect.

Accordingly, a new sub-paragraph 6.2.18.8.3 has been inserted in paragraph 6.2.18.8 of the Consolidated FDI Policy as under: –

Other conditions: –
1. Any non-bank entity intending to set-up WLA should have a minimum net worth of Rs. 100 crore per the latest financial year’s audited balance sheet, which is to be maintained at all times.
2. In case the entity is also engaged in any other 18 NBFC activities, then the foreign investment in the company setting up WLA, shall also have to comply with the minimum capitalisation norms for foreign investments in NBFC activities, as provided in Para 6.2.18.8.2.
3. FDI in the WLAO will be subject to the specific criteria and guidelines issued by RBI vide Circular No. DPSS. CO.PD. No. 2298/02.10.002/2011-2012, as amended from time to time.

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A. P. (DIR Series) Circular No. 18 dated 30th September, 2015

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Notification No. FEMA . 348 /2015-RB dated 25th September, 2015 Regularisation of assets held abroad by a person resident in India under Foreign Exchange Management Act, 1999

This circular clarifies that in the case of persons resident in who have held assets abroad in violation of FEMA and who have made a declaration under the provisions of the Black Money Act, and have paid the tax and penalty due thereon: –

a) No proceedings will lie under the Foreign Exchange Management Act, 1999 (FEMA) against the declarant with respect to an asset held abroad for which taxes and penalties under the provisions of Black Money Act have been paid.
b) No permission under FEMA is required to dispose of the asset so declared and bring back the proceeds to India through banking channels within 180 days from the date of declaration.
c) In case the declarant wishes to hold the asset so declared, she/ he has to apply to RBI within 180 days from the date of declaration if such permission is necessary as on date of application. Such applications will be dealt by RBI as per extant regulations. In case such permission is not granted, the asset will have to be disposed of within 180 days from the date of receipt of the communication from RBI conveying refusal of permission or within such extended period as may be permitted and the proceeds brought back to India immediately through the banking channel.

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A. P. (DIR Series) Circular No. 17 dated 24th September, 2015

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External Commercial Borrowings (ECB) Policy – Issuance of Rupee denominated bonds overseas

This circular contains guidelines with respect to the overseas issuance of Rupee denominated bonds within the ECB Policy. The guidelines are as under: –

1. Eligibility of borrowers
Any corporate or body corporate is eligible to issue Rupee denominated bonds overseas. Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) coming under the regulatory jurisdiction of the Securities and Exchange Board of India are also eligible.

2. Type of instrument
Only plain vanilla bonds issued in a Financial Action Task Force (FATF) compliant financial centres; either placed privately or listed on exchanges as per host country regulations.

3. Recognised investors
Any investor from a FATF compliant jurisdiction. Banks incorporated in India will not have access to these bonds in any manner whatsoever. Indian banks, however, can act as arranger and underwriter. In case of underwriting, holding of Indian banks cannot be more than 5 % of the issue size after 6 months of issue. Further, such holding shall be subject to applicable prudential norms.

4. Maturity
Minimum maturity period of 5 years. The call and put option, if any, shall not be exercisable prior to completion of minimum maturity.

5. All-in-cost
The all-in-cost of such borrowings should be commensurate with prevailing market conditions. This will be subject to review based on the experience gained.

6. End-uses
The proceeds can be used for all purposes except for the following: –
i. R eal estate activities other than for development of integrated township/affordable housing projects;
ii. Investing in capital market and using the proceeds for equity investment domestically;
iii. A ctivities prohibited as per the foreign direct investment (FDI) guidelines;
iv. O n-lending to other entities for any of the above objectives; and v. Purchase of land.

7. Amount
Under the automatic route the amount will be equivalent of USD 750 million per annum. Cases beyond this limit will require prior approval of the Reserve Bank.

8. Conversion rate
The foreign currency – Rupee conversion will be at the market rate on the date of settlement for the purpose of transactions undertaken for issue and servicing of the bonds.

9. Hedging
The overseas investors will be eligible to hedge their exposure in Rupee through permitted derivative products with AD Category – I banks in India. The investors can also access the domestic market through branches/subsidiaries of Indian banks abroad or branches of foreign bank with Indian presence on a back to back basis.

10. Leverage
The leverage ratio for the borrowing by financial institutions will be as per the prudential norms, if any, prescribed by the sectoral regulator concerned.

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A. P. (DIR Series) Circular No. 16 dated 24th September, 2015

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Processing and settlement of import and export related payments facilitated by Online Payment Gateway Service Providers

Presently, banks are permitted to offer repatriation facility with respect to export related remittances pertaining to export of goods and services by entering into standing arrangements with Online Payment Gateway Service Providers (OPGSP).

This circular: –
1. Now permits banks to offer similar facilities for import payments by entering into standing arrangements with the OPGSP.
2. This circular contains revised guidelines for facilitating payments of exports and imports by entering into standing arrangements with OPGSP.

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A. P. (DIR Series) Circular No. 15 dated September 24, 2015

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Opening of foreign currency accounts in India by ship-manning/crew management agencies

Presently, ship-manning/crew managing agencies that are rendering services to shipping/airline companies incorporated outside India, are permitted to open, hold and maintain non-interest bearing foreign currency account with a bank in India for meeting the local expenses in India of such shipping or airline company.

This circular states that the under mentioned guidelines in respect of such accounts need to be strictly followed: –

a) Credits to such foreign currency accounts can only be by way of freight or passage fare collections in India or inward remittances through normal banking channels from the overseas principal.
b) Debits will be towards various local expenses in connection with the management of the ships / crew in the ordinary course of business.
c) No credit facility (fund based or non-fund based) must be granted against security of funds held in such accounts.
d) The bank must meet the prescribed ‘reserve requirements’ in respect of balances in such accounts.
e) No EEFC facility can be allowed in respect of the remittances received in these accounts.
f) These foreign currency accounts can be maintained only during the validity period of the agreement.

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DIPP – Press Note No. 6 (2015 Series) dated June 3, 2015

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Review of Foreign Direct Investment (FDI) Policy on Investments by Non-Resident Review of the investment limit for cases requiring prior approval of the Foreign Investment Promotion Board (FIPB) / Cabinet Committee on Economic Affairs (CCEA)

This Press Note has revised Paragraph 5.2 of the Consolidated FDI Policy issued on May 12, 2015, with effect from June 18, 2015: –

5.2 Levels of Approvals for Cases under Government Route

5.2.1 The Minister of Finance who is in charge of FIPB would consider the recommendations of FIPB on proposals with total foreign equity inflow up to Rs. 3000 crore.

5.2.2 The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs. 3000 crore would be placed for consideration of Cabinet Committee on Economic Affairs (CCEA)

5.2.3 The CCEA would also condier the proposals which may be referred to it by the FIPB/the Minister of Finance ( in-charge of FIPB).

5.2.4 The FIPB Secretariat in Department of Economic Affairs will process the recommendations of FIPB to obtain the approval of Minister of Finance and CCEA.

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A. P. (DIR Series) Circular No. 110 dated June 18, 2015

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BEF statement – Submission under XBR L

This circular has made the following two amendments with regards to submission of BEF Statement: –

1. With effect from the half year ending June 2015, BEF has to be submitted online and Bank-wise (instead of the present system of branch-wise submission) to the respective Regional Offices of RBI.

2. Banks have to submit data in a single format giving details of all remittances for import exceeding USD 100,000, as on end of June and December of every year, in respect of which importers have defaulted in submission of appropriate document evidencing import within 6 months from the date of remittance.

Details of the same can be accessed at https://secweb. rbi.org.in/orfsxbrl/. The formats for the same are also Annexed to this Circular.

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A. P. (DIR Series) Circular No. 109 dated June 11, 2015

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External Commercial Borrowings (ECB) for Civil Aviation Sector

Presently, eligible borrowers in India could avail of ECB for working capital as a permissible end-use, under the Approval Route, up to March 31, 2015.

This circular has extended the period up to which ECB can be availed under the Approval Route by eligible borrowers in India from March 31, 2015 to March 31, 2016.

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A. P. (DIR Series) Circular No. 108 dated June 11, 2015

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External Commercial Borrowings (ECB) for low cost affordable housing projects

Presently, eligible borrowers in India could avail of ECB for low cost affordable housing projects, under the Approval Route, up to March 31, 2015.

This circular has extended the period up to which ECB can be availed under the Approval Route by eligible borrowers in India from March 31, 2015 to March 31, 2016.

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A. P. (DIR Series) Circular No. 107 dated June 11, 2015

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Notification No. FEMA.337/2015-RB dated March 2, 2015
Notification No. FEMA.338/2015-RB dated March 2, 2015
Subscription to chit funds by Non-Resident Indian on non-repatriation basis

Presently, a person resident outside India cannot make investment in India, in any form, in a company or partnership firm or proprietary concern or any entity, whether incorporated or not, which is engaged or proposes to engage “in the business of chit fund”.

This circular now permits Non-Resident Indians (NRI) to subscribe to the chit funds, without limit, on non-repatriation basis, provided: –

i. The chit fund is authorized by the appropriate Authority to accept subscription from Non-Resident Indians on nonrepatriation basis.
ii. The subscription to the chit funds must be brought in through normal banking channel, including through an account maintained with a bank in India.

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A. P. (DIR Series) Circular No. 106 dated June 1, 2015

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Notification No. FEMA 341/2015-RB dated May 26, 2015
Ministry of Finance – Dept. of Economic Affairs – G.S.R. 426(E) dated May 26, 2015

I.
Liberalised Remittance Scheme (LRS) for resident individuals- increase
in the limit from USD 125,000 to USD 250,000 and rationalisation of
current account transactions
II. Remittance facilities for persons other than individuals

Notification
No. FEMA 341/2015 has substituted provisos to the existing
sub-regulation (a) of Regulation 4 of the Foreign Exchange Management
(Permissible Capital Account Transactions) Regulations, 2000.

G. S. R. 426(E) has substituted: –
a. Rule 5 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000.
b. Schedule III of the Foreign Exchange Management (Current Account Transactions) Rules, 2000.

This circular has made the following changes: –

1. Limits & facilities under the Liberalized Remittance Scheme (LRS)

a.
A resident individual can now remit up to US $ 250,000 per financial
year (as against the present limit of US $ 125,000) for any permitted
current or capital account transaction or a combination of both (except
for making remittances for any prohibited or illegal activities such as
margin trading, lottery, etc.). If an individual has already remitted
any amount during the current financial year under the LRS, then the
amount so remitted has to be reduced from the present limit of US $
250,000 for the financial year and the individual can remit the balance
amount.

b. All facilities for remittances under the Schedule III
of the Foreign Exchange Management (Current Account Transactions)
Rules, 2000 (including drawal of foreign exchange for personal /
business visits overseas) have now been merged / subsumed within the
said limit of US $ 250,000.

c. Application-cum-declaration for
remittance / drawal of foreign exchange for personal / business visits
has to be made in the Form annexed to this circular.

d. No part
of the foreign exchange of US $ 250,000 can be used for remittance
directly or indirectly to countries notified as non-cooperative
countries and territories by the Financial Action Task Force (FATF).

2. Permissible transactions under LRS

Permissible capital account transactions by an individual under LRS are: –

i) Opening of foreign currency account abroad with a bank;

ii) Purchase of property abroad;

iii) Making investments abroad;

iv) Setting up Wholly owned subsidiaries and Joint Ventures abroad;

v)
Extending loans including loans in Indian Rupees to Non-resident
Indians (NRIs) who are relatives as defined in Companies Act, 2013.

Permissible current account transactions by an individual under LRS are: –

(i) Private visits to any country (except Nepal and Bhutan);
(ii) Gift or donation;
(iii) Going abroad for employment;
(iv) Emigration;
(v) Maintenance of close relatives abroad;
(vi)
Travel for business, or attending a conference or specialised training
or for meeting expenses for meeting medical expenses, or check-up
abroad, or for accompanying as attendant to a patient going abroad for
medical treatment / check-up;
(vii) Expenses in connection with medical treatment abroad;
(viii) Studies abroad;
(ix) Any other current account transaction.

However,
for the purposes mentioned at item numbers (iv), (vii) and (viii), the
individual can avail of exchange facility for an amount in excess of the
limit prescribed under the LRS if it is so required by the country of
emigration, medical institute offering treatment or the university,
respectively.

3. Facilities for persons other than individuals

As
per the provisions of amended Schedule III, persons other than
individuals can make remittances, within the limits and subject to
conditions laid down therein, for:
i) Donations to educational institutions;
ii) Commissions to agents abroad for sale of residential flats / commercial plots in India;
iii) Remittances for consultancy services and
iv) Remittances for reimbursement of pre-incorporation expenses.

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A. P. (DIR Series) Circular No. 103 dated May 21, 2015

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External Commercial Borrowings (ECB) denominated in Indian Rupees (INR) – Mobilisation of INR

Presently, residents can avail ECB in Indian Rupees from recognized non-resident lenders if the lenders have mobilized Indian Rupees through a swap undertaken with a bank in India.

This circular states that recognized non-resident lenders can now lend in Indian Rupees by entering into a swap transaction with their overseas bank which will, in turn, enter into a back-to-back swap transaction with any bank in India, subject to complying with KYC and other procedures as prescribed.

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A. P. (DIR Series) Circular No. 102 dated May 21, 2015

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Rupee Drawing Arrangement – Increase in trade related remittance limit

This circular has increased the limit for trade transactions under the Rupee Drawing Arrangements (RDA) with respect to Vostro Accounts of Non-resident Exchange Houses from Rs. 500,000 to Rs. 1,500,000 with immediate effect.

Banks have been authorized, subject to certain conditions, to regularize payments exceeding the prescribed limit under RDA if they are satisfied with the bonafide of the transaction. Banks are also required to take the following steps: –

1. Ensure the remittances received under RDA are from FATF compliant countries.

2. Take care of KYC / AML / CFT and other due diligence concerns.

3. Review individual Exchange Houses that are frequently sending large value trade related remittances and report them to RBI.

4. Contact their correspondents that maintain accounts for or facilitate transactions on behalf of Exchange Houses in order to request additional information regarding high value trade related transactions and the parties involved. The collected details must be kept on record and it must be made available for scrutiny,

5. Ensure that the proceeds of export payment through RDA is applied to the outstanding export finance if any, availed by the exporter from any bank for the concerned export transaction and obtain a declaration to that effect from the exporter.

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A. P. (DIR Series) Circular No. 5 dated 16th July, 2015

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Export factoring on non-recourse basis

This circular now permits banks to factor export receivables on a “non-recourse” basis (as against the present practice of factoring of export receivables on “with recourse” basis), subject to certain terms and conditions. The following is the gist of the terms and conditions: –

a) Banks must ensure that their client is not over financed and the invoices purchased must be genuine trade invoices.

b) Where export financing has not been done by the Export Factor, the Export Factor must pass on the net value to the financing bank/Institution after realising the export proceeds.

c) The bank that is the Export Factor, must have an arrangement with the Import Factor for credit evaluation & collection of payment.

d) Notation must be made on the invoice to the effect that the importer must make payment to the Import Factor.

e) After factoring, the Export Factor must close the export bills and report the same in the EDPMS to RBI.

f) When an Import Factor overseas is not involved, the Export Factor must obtain credit evaluation details from the correspondent bank abroad.

g) E xport Factor must conduct due diligence of the exporter.

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A. P. (DIR Series) Circular No. 4 dated 16th July, 2015

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Issue of shares under Employees Stock Options Scheme and/or sweat equity shares to persons resident outside India

Presently, an Indian Company can issue shares to its employees or employees of its joint venture or wholly owned overseas subsidiary/subsidiaries who are resident outside India, directly or through a Trust under Employees’ Stock Option (ESOP) Scheme, if: –

1. The scheme is drawn under the SEBI Act, 1992; and

2. The face value of the shares to be allotted under the scheme to non-resident employees did not exceed 5% of the paid up capital of the issuing company.

This circular now provides that an Indian company can issue “employees’ stock option” and/or “sweat equity shares” to its employees/directors or employees/directors of its holding company or joint venture or wholly owned overseas subsidiary/subsidiaries who are resident outside India, if: –

1. The scheme has been drawn either under: – (a) The Securities Exchange Board of India Act, 1992; or (b) The Companies (Share Capital and Debentures) Rules, 2014.

2. The “employee’s stock option”/“sweat equity shares” are in compliance with the sectoral cap applicable to the said company.

3. Issue of “employee’s stock option”/“sweat equity shares” in a company where foreign investment is under the approval route will require prior approval of FIPB.

4. Issue of “employee’s stock option”/“sweat equity shares” under the applicable rules/regulations to an employee/director who is a citizen of Bangladesh/ Pakistan will require prior approval of FIPB.

5. The issuing company must furnish a return as per the Form-ESOP (Annexed to this circular) to the concerned Regional Office of RBI within 30 days from the date of issue of employees’ stock option or sweat equity shares.

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A. P. (DIR Series) Circular No. 2 dated 3rd July, 2015

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Investment in companies engaged in tobacco related activities

This circular clarifies that prohibition with respect to Foreign Direct Investment (FDI) applies only in case of manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes. In case of other activities viz. wholesale cash and carry, retail trading, etc., concerning cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes, FDI will be governed by the sectoral restrictions laid down in the FDI policy as amended from time to time.

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