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Category: Spotlight: Part C RBI/FEMA

A.P. (DIR Series) Circular No. 66, dated 13-1- 2012 — (I) Scheme for Investment by Qualified Foreign Investors in equity shares — (II) Scheme for Investment by Qualified Foreign Investors in Rupee Denominated Units of Domestic Mutual Funds — Revision.

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(I) Scheme for Investment by Qualified Foreign Investors (QFI) in equity shares

This Circular permits QFI (non-resident investors, other than SEBI-registered FII and SEBI-registered FVCI, who meet the KYC requirements of SEBI), from jurisdictions which are FATF compliant and with which SEBI has signed MOUs under the IOSCO framework, to purchase on repatriation basis equity shares of Indian companies, subject the following terms and conditions. Some of the important terms and conditions are:

(i) QFI can invest through SEBI-registered Depository Participants (DP) only:

(a) In equity shares of listed Indian companies through recognised brokers on recognised stock exchanges in India

(b) In equity shares of Indian companies which are offered to public in India in terms of the relevant and applicable SEBI guidelines/regulations.

(ii) QFI can also acquire equity shares by way of rights shares, bonus shares or equity shares on account of stock split/consolidation or equity shares on account of amalgamation, demerger or such corporate actions.

(iii) QFI are allowed to sell the equity shares so acquired by way of sale:

(a) Through recognised brokers on recognised stock exchanges in India; or

(b) In an open offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or

(c) In an open offer in accordance with the SEBI (Delisting of Securities) Guidelines, 2009; or

(d) Through buyback of shares by a listed Indian company in accordance with the SEBI (Buyback) Regulations, 1998.

(iv) A separate single rupee pool bank account must be maintained by the DP with an AD Category-I bank in India for QFI investments under this scheme.

(v) The individual and aggregate investment limits for the QFI will be 5% and 10%, respectively of the paid-up capital of an Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under the Portfolio Investment Scheme for foreign investment in India. However, wherever there are composite sectoral caps under the extant FDI policy, these limits for QFI investment in equity shares shall also be within such overall FDI sectoral caps.

(vi) QFI can remit foreign inward remittance through normal banking channel in any permitted currency (freely convertible) directly into single rupee pool bank account of the DP maintained with AD Category-I bank. Similarly, sale proceeds/dividends of equity shares will also be received in this single rupee pool bank account of the DP and must be repatriated to the designated overseas bank account of the QFI within five working days (including the date of credit of funds to the single rupee pool bank account by way of sale of equity shares) of having been received in the single rupee pool bank account of the DP, provided it is not reinvested within this period of five days.

(vii) Pricing of all eligible transactions and investment in all eligible instruments by QFI must be in accordance with the relevant and applicable SEBI guidelines only.

(II) Scheme for Investment by Qualified Foreign Investors in Rupee Denominated Units of Domestic Mutual Funds

This Circular has modified the Scheme for QFI investment in rupee denominated units of Domestic Mutual Funds under the Direct Route as follows:

1. The time period for which funds (by way of foreign inward remittance as well as by way of credit of redemption proceeds of the units of Domestic Mutual Funds) can be kept in the single rupee pool bank account of the DP under the scheme is five working days (including the day of credit of funds received).

2. Similarly, dividend received by QFI in the single rupee pool bank account must be remitted to the designated overseas bank accounts of the QFI within five working days (including the day of credit of such funds to the single rupee pool bank account). Dividend so received can be also utilised by the QFI, within these five working days, for fresh purchases of units of Domestic Mutual Funds under this scheme.

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A. P. (DIR Series) Circular No. 43 dated 13th September, 2013

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Export of Goods and Services–Simplification and Revision of Declaration Form for Exports of Goods/ Software

Presently, every exporter of goods or software has to give declaration in one of the forms (GR/PP/SDF/ SOFTEX/Bulk SOFTEX) and submit the same to the specified authority for certification.

This circular prescribes a common form called “Export Declaration Form” (EDF) for declaring all types of export of goods from Non-EDI ports and a common “SOFTEX Form” to declare single as well as bulk software exports. The EDF will replace the existing GR/PP form used for declaration of export of goods and as to be used on and from 1st October, 2013. Further, all exporters will have to declare all the export transactions, including those less than $25000, in the applicable form. The procedure relating to the exports of goods through EDI ports will remain the same and SDF form will be applicable as hitherto. The EDF and SOFTEX form have been given in Annex I and Annex II respectively. RBI will extend facilities to exporters for online generation of SOFTEX Form No. (Single as well as Bulk) for use in offsite software exports, in addition to EDF Form No. (Present web-based process of generation of GR Form No. gets replaced) through its website www.rbi.org.in. The specimen of online form and the advice are given in Annex III. Exporters have to complete the EDF/SOFTEX Form using the number so allotted and submit them to the specified authority first for certification and then to AD for necessary action as hitherto.

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A. P. (DIR Series) Circular No. 42 dated 12th September, 2013

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Notification No.FEMA.284/2013-RB dated 27th August, 2013 notified vide G.S.R.596 (E) dated 6th September, 2013

Foreign Investment in India–Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies

This circular has amended condition at (d) regarding downstream investments by an Indian company which is not owned and/or controlled by resident entity/entities. The amended condition is given in the table below:

 c.f. Annex to A.P.(DIR Series) Circular No. 1 dated 4th July, 2013

 Earlier Condition

 Revised Condition

 ParaE 6 (ii) (d)

 For the purpose of downstream investment, the Indian companies making the downstream investments would have to bring in requisite funds from abroad and not use funds borrowed in the domestic market. This: would, however, not preclude downstream operating companies from raising debt in the domestic market. Downstream investments through internal accruals are permissible by an Indian company engaged only in activity of investing in the capital of another Indian company/ ies, subject to the provisions above and as also elaborated below:

 For the purpose of downstream investment, the Indian companies making the d o w n s t r e a m investments would have to bring in requisite funds from abroad and not use funds borrowed in the domestic market. This would, however, not preclude d o w n s t r e a m operating companies from raising debt in the domestic market. Downstream investments through internal accruals are permissible by an Indian company, subject to the provisions of clause 6(i) and as also elaborated below:

A. P. (DIR Series) Circular No. 41 dated 10th September, 2013

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Overseas Direct Investment–Amendment
This circular has modified condition of clause (b) relating to obtaining prior permission under the Approval Route from the RBI for providing corporate guarantee by an Indian Party on behalf of second generation or subsequent level step down operating subsidiaries. The original and revised provisions are in the table:

Table regarding Overseas Direct Investment

 Original Provision

 Revised Provision

 (b) Further, it has also been decided that issue of corporate guarantee on behalf of second generation or subsequent level step down operating subsidiaries will be considered under the Approval Route, provided the Indian Party directly or indirectly holds 51% or more stake in the overseas subsidiary for which such guarantee is intended to be issued.

 (b) Further, it has also been decided that issue of corporate guarantee on behalf of second generation or subsequent level step down operating subsidiaries will be considered under the Approval Route, provided the Indian Party indirectly holds 51% or more stake in the overseas subsidiary for which such guarantee is intended to be issued.

A. P. (DIR Series) Circular No. 40 dated 10th September, 2013

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Notification No.FEMA.286/2013-RB dated 5th September, 2013 notified vide G.S.R.No.595 (E) dated 6th September, 2013 Overseas Foreign Currency Borrowings by Authorised Dealer Banks– Enhancement of limit

This circular permits banks to borrow funds, subject to certain conditions, from their Head Office, overseas branches and correspondents and overdrafts in Nostro accounts up to a limit of 100% of their unimpaired Tier-I capital as at the close of the previous quarter or $10 million (or its equivalent), whichever is higher, as against the existing limit of 50% (excluding borrowings for financing of export credit in foreign currency and capital instruments).

Further, banks can up to 30th November, 2013, enter into a swap transaction with the RBI in respect of the borrowings raised as above at a concessional rate of 100 basis points below the market rate for all fresh borrowing with a minimum tenor of one year and a maximum tenor of three years, irrespective of whether such borrowings are in excess of 50% of their unimpaired Tier I capital or not. Although banks are free to borrow in any freely convertible currency, the swap is available only for conversion of US $ equivalent into INR and the US $ equivalent shall be computed at the relevant cross rate prevailing on the date of the swap.

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A.P. (DIR Series) Circular No. 65, dated 12-1-2012 — Foreign Exchange Management Act, 1999 — Export of Goods and Services — Forwarders Cargo Receipt.

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Presently, banks are permitted to accept Forwarder’s Cargo Receipts (FCR) issued by IATA-approved agents, in lieu of bill of lading, for negotiation/collection of shipping documents, in respect of export transactions backed by letters of credit, only if:

1. the relative letter of credit specifically provides for negotiation of FCR in lieu of bill of lading and

2. the relative sale contract with the overseas buyer provides that FCR can be accepted in lieu of bill of lading as a shipping document.

This Circular has relaxed the above conditions, and provides that:

1. Banks can accept FCR issued by IATA-approved agents, in lieu of bill of lading, for negotiation/ collection of shipping documents, in respect of export transactions backed by letters of credit, if the relative letter of credit specifically provides for negotiation of this document in lieu of bill of lading even if the relative sale contract with the overseas buyer does not provide for acceptance of FCR as a shipping document, in lieu of bill of lading.

2. Banks can, at their discretion, also accept FCR issued by shipping companies of repute/IATAapproved agents (in lieu of bill of lading), for purchase/ discount/collection of shipping documents even in cases, where export transactions are not backed by letters of credit, provided the ‘relative sale contract’ with overseas buyer provides for acceptance of FCR as a shipping document in lieu of bill of lading.

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A. P. (DIR Series) Circular No. 39 dated 6th September, 2013

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Notification No.FEMA.258/2013-RB dated 15th February, 2013 notified vide G.S.R.No.480 (E) dated 12th July, 2013

Export and Import of Currency

Presently, a resident individual can take outside India or having gone out of India on a temporary visit, bring into India (other than to and from Nepal and Bhutan) Indian currency notes up to an amount not exceeding Rs. 7,500.

This circular has increased this limit from Rs. 7,500 to Rs. 10,000. As a result, any person resident in India:

i) Can take outside India (other than to Nepal and Bhutan) Indian currency notes up to an amount not exceeding Rs. 10,000 (rupees ten thousand only); and

ii) Who had gone out of India on a temporary visit, can bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), Indian currency notes up to an amount not exceeding Rs. 10,000 (rupees ten thousand only).

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A. P. (DIR Series) Circular No. 38 dated 6th September, 2013

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Notification No.FEMA.279/2013-RB dated 10th July, 2013 notified vide G.S.R.No.591 (E) dated 4th September, 2013

Notification No.FEMA.280 /2013-RB dated 10th July, 2013 notified vide G.S.R.No.531 (E), dated 5th August, 2013.

Purchase of shares on the recognised stock exchanges in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations

Presently, FIIs, QFIs and NRIs can acquire shares on recognised stock exchanges in terms of Schedule 3, 4, 5 and 8 of FEMA Notification No. 20. However, non-residents are not permitted to acquire shares on stock exchanges under FDI scheme under Schedule 1 of FEMA Notification No. 20.

This circular permits non-residents including NRIs to acquire shares of a listed Indian company on the stock exchange through a registered broker under FDI scheme if:

i. The non-resident investor has already acquired and continues to hold the control in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations.

ii. The amount of consideration for transfer of shares to non-residents consequent to purchase on the stock exchange must be paid as below:

a. by way of inward remittance through normal banking channels, or

b. by way of debit to the NRE/FCNR account of the person concerned maintained with an authorised dealer/bank; c. by debit to non-interest bearing Escrow account (in Indian rupees) maintained in India;

d. the consideration amount may also be paid out of the dividend payable by the Indian investee company, in which the said nonresident holds control as (i) above, provided the right to receive dividend is established and the dividend amount has been credited to specially designated non-interest bearing rupee account for acquisition of shares on the floor of a stock exchange.

iii. The pricing for subsequent transfer of shares to the non-resident shareholder shall be in accordance with the pricing guidelines under FEMA.

iv. The original and resultant investments must be in line with the extant FDI policy and FEMA regulations.

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A. P. (DIR Series) Circular No. 32 dated 4th September, 2013

Liberalised Remittance Scheme–Clarifications

The RBI has issued clarifications regards to the LRS (given hereafter):

In case of invocation of the guarantee, the bank is required to submit to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai 400 001, a report on the circumstances leading to the invocation of the guarantee.

A. P. (DIR Series) Circular No. 37 dated 5th September, 2013

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Notification No. FEMA.267/2013-RB dated 5th March, 2013 notified vide G.S.R. 573(E) dated 27th August, 2013
Issue of Bank Guarantee on behalf of person resident outside India for FDI transactions

Presently, non-resident acquirers, subject to certain conditions, can open Escrow account and Special account with a bank in India for acquisition/transfer of shares/convertible debentures of an Indian company through open offers/delisting/exit offers.

This circular permits a bank to issue bank guarantee, without prior approval of RBI, on behalf of a nonresident acquiring shares or convertible debentures of an Indian company through open offers/delisting/ exit offers, if:

a) The transaction is in compliance with the provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) [SEBI (SAST)] Regulations.

b) The guarantee is covered by a counter guarantee of a bank of international repute.

c) The guarantee will be valid for a tenure coterminus with the offer period only, as required under the SEBI (SAST) Regulations.

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A. P. (DIR Series) Circular No. 36 dated 4th September, 2013

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Risk Management and Inter-Bank Dealings

Presently, Indian residents are not allowed to cancel and rebook forward contracts, involving the rupee as one of the currencies, booked by them to hedge their current and capital account transactions. However, exporters are allowed to cancel and rebook forward contracts to the extent of 25% of the contracts booked by them in a financial year for hedging their contracted export exposures.

This circular has:
1. Increased the said limit of 25% to 50% for exporters. Hence, exporters can now cancel and rebook forward contracts up to 50% of the contracts booked by them in a financial year for hedging their contracted export exposures.

2. Importers are now permitted to cancel and rebook forward contracts entered into by them to the extent of 25% of the contracts booked in a financial year for hedging their contracted import exposures.

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A. P. (DIR Series) Circular No. 31 dated 4th September, 2013

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External Commercial Borrowings (ECB) from the foreign equity holder

Presently, ECB cannot be availed for general corporate purpose.

This circular permits eligible borrowers to avail ECB from their foreign equity holders for general corporate purposes under the Approval Route subject to the following conditions:

(a) Minimum paid-up equity of 25% must be held directly by the lender.
(b) Minimum average maturity of ECB must be 7 years.
(c) Such ECB cannot be used for any purpose not permitted under the extant ECB guidelines (including on-lending to their group companies/ step-down subsidiaries in India).
(d) Repayment of the principal can commence only after completion of minimum average maturity of 7 years. No prepayment will be allowed before maturity.

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A. P. (DIR Series) Circular No. 30 dated 4th September, 2013

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Overseas Direct Investments–Rationalisation/ Clarifications

This circular clarifies that:

(a) All the financial commitments made on or before 14th August, 2013, in compliance with the earlier limit of 400% of the net worth of the Indian Party under the automatic route will continue to be allowed. As a result, such investments will not be subject to any unwinding or approval from the RBI.

(b) Limit of financial commitments for an Indian Party (presently 100% of its net worth) will not apply to the financial commitments funded out of EEFC account of the Indian Party or out of funds raised by way of ADR/GDR by the Indian Party, as hitherto.

(c) Limit of 400% of the net worth of the Indian Party will apply in case the financial commitments are funded by way of eligible ECB raised by the Indian Party as per the extant ECB guidelines.

Certain additional/consequential clarifications are also annexed to this circular.

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A. P. (DIR Series) Circular No. 29 dated 20th August, 2013

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Investments by Non-resident Indians (NRIs) under Portfolio Investment Scheme (PIS) Liberalisation of Policy

Presently:

(a) An NRI can invest under PIS on repatriation and/or non-repatriation basis in shares and convertible debentures of listed Indian companies on a recognised stock exchange in India through a registered stock broker.

(b) An NRI can purchase and sell shares/convertible debentures under the PIS through a branch designated by an Authorised Dealer for the purpose and duly approved by the Reserve Bank of India.

This circular has made the following changes:

(a) Unique Code Number will be allotted only to Link office of the AD Category-I bank

(b) Allotment of Unique Code Number to each branch designated by that AD Category- I bank administering the Scheme is being dispensed with. Accordingly, banks are free, subject to certain terms and conditions, to permit their branches to administer the Portfolio Investment Scheme for NRIs.

Salient features of PIS for investments by an NRI are annexed to this circular.

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A. P. (DIR Series) Circular No. 28 dated 19th August, 2013

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Press Release–F. No.44/17/2004-BO.II Government of India, Ministry of Finance, Department of Financial Services dated 21st December, 2012

Foreign Investments in Asset Reconstruction Companies (ARC)

Presently: –

(a) Foreign Direct Investment (FDI) up to 49% in the equity capital of ARC is permitted subject to certain conditions.

(b) FIIs are not permitted to invest in the equity capital of ARC

(c) General permission is granted to an FII to invest in Security Receipts (SR) up to 49% of each tranche of scheme of SR. However, a single FII cannot invest more than 10% in each tranche of scheme of SR.

This circular has made the following changes:
(a) Ceiling for FDI in ARC has been increased from the present 49% to 74%. However, no sponsor can hold more than 50% of the shareholding in an ARC either by way of FDI or by routing through an FII. Foreign investment in ARC would need to comply with the FDI policy in terms of entry route conditionality and sectoral caps.

(b) The foreign investment limit of 74% in ARC would be a combined limit of FDI and FII.

(c) Prohibition on investment by FII in ARC is being removed. The total shareholding of an individual FII cannot exceed 10% of the total paid-up capital.

(d) The limit of FII investment in SR is being enhanced from 49% to 74% of the paid-up value of each tranche of scheme of SR issued by the ARC.

(e) Individual limit of 10% for investment of a single FII in each tranche of SR issued by ARC is being removed. However, such investment must be within the FII limit on corporate bonds and sectoral caps under the extant FDI regulations have to be complied with.

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A.P. (DIR Series) Circular No. 64, dated 5-1-2012 — External Commercial Borrowings (ECB).

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Presently, ECB limit for eligible borrowers under the Automatic Route, for permissible end-uses, is US $ 750 million or its equivalent

This Circular makes the following changes in ECB guidelines:

1. The revised average maturity guidelines under the Automatic Route are as follows:

(a) ECB up to US $ 20 million or equivalent in a financial year with minimum average maturity of three years; and

(b) ECB above US $ 20 million and up to US $ 750 million or equivalent with minimum average maturity of five years.

2. Requirement of average maturity period, prepayment and call/put options for additional amount of ECB of US $ 250 million [i.e., US $ 750 million minus US $ 500 million (earlier limit)] has been dispensed with.

3. Eligible borrowers under the Automatic Route can raise Foreign Currency Convertible Bonds (FCCB) up to US $ 750 million or equivalent per financial year for permissible end-uses.

4. Corporates in specified service sectors, viz. hotel, hospital and software, can raise FCCB up to US $ 200 million or equivalent for permissible end-uses during a financial year subject to the condition that the proceeds of the ECB should not be used for acquisition of land.

5. As a result of enhancement in the ECB limits under the Automatic Route, from US $ 500 million to US $ 750 million, ECB/FCCB availed of for the purpose of refinancing the existing outstanding FCCB will be reckoned as part of the limit of USD 750 million available under the Automatic Route.

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A.P. (DIR Series) Circular No. 63, dated 29-12-2011 — External Commercial Borrowings (ECB) denominated in Indian Rupees (INR) — Hedging facilities for non-resident entities

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Presently, certain eligible borrowers are permitted to avail of ECB in Indian Rupees. This Circular permits non-resident lenders to hedge their currency risk in respect of ECB denominated in Indian Rupees. Hedge using any of the following products is permitted:

1. Forward foreign exchange contracts with Rupee as one of the currencies.

2. Foreign currency-INR options.

3. Foreign currency-INR swaps.

Detailed guidelines in this respect are annexed to this Circular.

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A.P. (DIR Series) Circular No. 60, dated 22-12- 2011 — Know Your Customer (KYC) norms/ Anti-Money Laundering (AML) standards/ Combating the Financing of Terrorism (CFT) Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 — Money changing activities.

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This Circular has amended instructions related to documents that can be considered as proof of identity and proof of address from foreign tourists.
Customer Identification Procedure

Features to be verified and documents that may be obtained from customers:

Extant
guidelines

 

 

Revised
guidelines

 

 

 

 

 

 

Features

Documents

Features

Documents

 

 

 

 

 

 

Transactions
with

 

 

Transactions
with

 

 

individuals

(i)

Passport

individuals

 

 

—  Legal 
name  and  any

— Legal name and any
other

(i)

Passport

other names used

(ii)

PAN card

names used

(ii)

PAN card

 

 

 

(iii)

Voter’s Identity Card

 

(iii)

Voter’s identity card

 

(iv)

Driving licence

 

(iv)

Driving licence

 

(v)

Identity card (subject

 

(v)

Identity card (sub-

 

 

to the AP’s satisfac-

 

 

ject to the AP’s

 

 

tion)

 

 

satisfaction)

 

(vi)

Letter from a recogn-

 

(vi)

Letter from a recog-

 

 

ised public authority
or

 

 

nised public author-

 

 

public servant
verifying

 

 

ity or public servant

 

 

the identity and resi-

 

 

verifying the
identity

 

 

dence of the customer

 

 

and residence of the

 

 

to the satisfaction
of

 

 

customer to the sat-

 

 

the AP.

 

 

isfaction of the AP.

— Correct permanent ad-

(i)

Telephone bill

— Correct permanent ad-

(i)

Telephone bill

dress

(ii)

Bank account state-

dress

(ii)

Bank account

 

 

 

 

ment

 

 

statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Extant
guidelines

 

 

Revised
guidelines

 

 

 

 

 

 

 

 

 

Features

Documents

Features

Documents

 

 

 

 

 

 

 

(iii)

Letter from any rec-

 

(iii)

Letter from any rec-

 

 

ognised public
author-

 

 

ognised public
author-

 

 

ity

 

 

ity

 

 

 

(iv)

Electricity bill

 

(iv)

Electricity bill

 

 

 

(v)

Ration card

 

(v)

Ration card

 

 

 

(vi)

Letter from employer

 

 

 

 

 

(vi)

Letter from employer

 

 

(subject to satisfaction

 

 

(subject to satisfaction

 

 

of the AP). (Any one
of

 

 

 

 

the documents, which

 

 

of the AP). (Any one of

 

 

 

 

 

 

provides customer in-

 

 

the documents, which

 

 

formation to the
satis-

 

 

provides customer in-

 

 

faction of the AP
will

 

 

formation to the satis-

 

 

suffice).

 

 

 

 

 

 

 

 

 

 

faction of the AP will

 

Note: In case of foreign

 

 

suffice.)

 

 

 

 

tourists, copies of
passport

 

 

 

 

containing
identification par-

 

 

 

 

ticulars and address,
may be

 

 

 

 

accepted as
documentary

 

 

 

 

proof for both
identification

 

 

 

 

as well as address.
Further,

 

 

 

 

a copy of the visa of
non-

 

 

 

 

residents, duly
stamped by

 

 

 

 

Indian Immigration
authori-

 

 

 

 

ties may also be
obtained

 

 

 

 

and kept on record.

 

 

 

 

 

 

 

 

 

A.P. (DIR Series) Circular No. 59, dated 19-12-2011 — External Commercial Borrowings (ECB) for Micro Finance Institutions (MFIs) and Non-Government Organisations (NGOs) — Engaged in micro finance activities under Automatic Route.

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This Circular permits:

1. increased limit up to which Non-Government Organisations (NGO) can borrow funds from overseas lender by way of External Commercial Borrowings (ECB), under the Automatic Route, from US $ 5 million or its equivalent to US $ 10 million or equivalent during a financial year for permitted end-uses.

2. the following Micro Finance Institutions (MFI) to borrow funds from overseas lender by way of External Commercial Borrowings (ECB), under the Automatic Route, up to US $ 10 million or equivalent during a financial year for permitted end-uses from recognised lenders.

Eligible borrowers:

1. MFI registered under the Societies Registration Act, 1860.
2. MFI registered under Indian Trust Act, 1882.
3. MFI registered either under the conventional state-level cooperative acts, the national level multi-state cooperative legislation or under the new state-level mutually-aided cooperative acts (MACS Act) and not being a co-operative bank.
4. Non-Banking Financial Companies (NBFC) categorised as ‘Non-Banking Financial Company-Micro Finance Institutions’ (NBFC-MFI).
5. Companies registered u/s.25 of the Companies Act, 1956 and involved in micro finance activity.

Recognised lenders:
1. In case of NBFC-MFI — Multilateral institutions, such as IFC, ADB, etc./regional financial institutions/ international banks/foreign equity holders and overseas organisations.
2. In case of companies registered u/s.25 of the Companies Act, 1956 and involved in micro finance activity — International banks, multilateral financial institutions, export credit agencies, foreign equity holders, overseas organisations and individuals.
3. In case of other MFIs — International banks, multilateral financial institutions, export credit agencies, overseas organisations and individuals.

Permitted end-use — Lending to self-help groups or for micro-credit or for bona fide micro finance activity including capacity building.

credit agencies, overseas organisations and individuals. Permitted end-use — Lending to self-help groups or for micro-credit or for bona fide micro finance activity including capacity building.

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A.P. (DIR Series) Circular No. 132, dated 8-6-2012 — Money Transfer Service Scheme.

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Presently, a single individual beneficiary can receive for personal e up to 12 remittances not exceeding INR156,614 each in a calendar year. This Circular has increased the number of remittances that an individual can receive from 12 to 30.

Thus, an individual can now receive for personal use up to 30 remittances each, not exceeding US INR156,614 in a calendar year.

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A.P. (DIR Series) Circular No. 131, dated 31-5-2012 — Overseas Direct Investments by Indian Party — Online Reporting of Overseas Direct Investment in Form ODI.

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Presently, although banks can generate the UIN online for overseas investments under the Automatic Route, reporting of subsequent remittances for overseas investments under the Automatic Route as well as the Approval Route could be done online in Part II of Form ODI only after receipt of the letter from RBI confirming the UIN.

This Circular states that, in the case of overseas investments under the Automatic Route, UIN will be communicated through an auto-generated e-mail sent to the email-id made available by the Authorised Dealer/Indian Party. This auto-generated e-mail giving the details of UIN allotted to the JV/WOS will be treated as confirmation of allotment of UIN, and no separate letter will be issued with effect from June 1, 2012 by RBI, either to the Indian Party or to the Authorised Dealer. Subsequent remittances are to be reported online in Part II of form ODI, only after receipt of the e-mail communication/ confirmation conveying the UIN.

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A.P. (DIR Series) Circular No. 117, dated 7-5- 2012 — Transfer of Funds from Non- Resident Ordinary (NRO) Account to Non- Resident External (NRE) Account.

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Presently, transfer of funds from NRO to NRE account is not permitted. This Circular permits transfer funds from NRO account to NRE account within the overall ceiling of INR61,456,745 per financial year, subject to payment of appropriate tax as if funds were remitted abroad.

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A.P. (DIR Series) Circular No. 80, dated 15-2-2012 — Export of goods and services — Simplification and revision of Softex procedure.

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This Circular has revised the procedure for submission of SOFTEX Forms for software exporters having annual turnover of Rs.1,000 crore or who file at least 600 SOFTEX forms annually. The new form and revised procedure for submitting the same are annexed to this Circular.

As per the revised procedure, the eligible software exporter has to

(1) File a statement in Excel format giving all particulars along with quadruplicate set of SOFTEX form to the nearest STPI.

(2) STPI will then verify the details and decide on a percentage sample check of the documents in details.

(3) Software companies will have to submit all the documents on demand to STPI within 30 days of their advice or any reasonable/ extended time.

(4) STPI will certify the statement and SOFTEX forms in bulk on the ‘Top Sheet’ regarding the values, etc.

(5) STPI will forward the first copy of the revised SOFTEX format to the concerned Regional Office of RBI, the “duplicate copy along with bulk statement in Excel format to Authorised Dealers for negotiation/collection/settlement. The third copy to the exporter and the last copy will be retained by STPI for its own record”.

(6) Exporters, using the revised procedure, will have to provide information about all the invoices including the ones lesser than US $ 25,000, in the bulk statement in Excel format.

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A.P. (DIR Series) Circular No. 79, dated 15-2- 2012 — Clarification — Purchase of immovable property in India — Reporting requirement

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A non-resident who has set up a branch, office or other place of business In India (other than a liaison office), and who has acquired any immovable property in India has to file a declaration in form IPI with RBI within 90 days from the date of such acquisition. However, no such declaration has to be filed by an NRI or PIO when he acquires any immovable property in India.

Form IPI has been modified to reflect this position and the amended Form IPI is annexed to this Circular.

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A.P. (DIR Series) Circular No. 76, dated 9-2-2012 — Clarification — Establishment of project offices in India by foreign entities — General permission.

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Presently, general permission has been granted to a foreign entity for setting up a Project office in India, subject to certain conditions.

This Circular clarifies that despite the general permission, citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, cannot establish in India, a branch office or a liaison office or a project office or any other place of business by whatever name called, without the prior permission of RBI.

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A.P. (DIR Series) Circular No. 75, dated 7-2- 2012 — External Commercial Borrowings — Simplification of procedure.

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Presently, approval of RBI is required for:

(a) Reduction in amount of ECB.
(b) Changes in the drawdown schedule where the original average maturity period is not maintained.
(c) Reduction in the all-in-cost of the ECB after obtaining LRN. This Circular has granted powers to banks to approve changes in respect of the above i.e., reduction in all-in-cost, subject to certain conditions and changes in the drawdown schedule when original maturity period is not maintained.

(a) Reduction in amount of ECB

Banks can approve reduction in loan amount in respect of ECB availed under the Automatic Route, provided

(i) Consent of the lender for reduction in loan amount has been obtained;

(ii) Average maturity period of the ECB is maintained;

(iii) Monthly ECB-2 returns in respect of the LRN have been submitted to the Department of Statistics and Information Management (DSIM); and

(iv) There is no change in the other terms and conditions of the ECB.

(b) Changes/modifications in the drawdown schedule when original average maturity period is not maintained

Banks can approve requests for changes/modifications in the drawdown schedule resulting in the original average maturity period undergoing change in respect of ECB availed both under the Automatic and Approval Routes. However, any elongation/ rollover in the repayment, on expiry of the original maturity of the ECB, will continue to require the prior approval of RBI.

The approval can be granted provided:

(i) There are no changes/modifications in the repayment schedule of the ECB;
(ii) Average maturity period of the ECB is reduced as against the original average maturity period stated in the Form 83 at the time of obtaining the LRN;
(iii) Reduced average maturity period complies with the stipulated minimum average maturity period as per the extant ECB guidelines;
(iv) Change in all-in-cost is only due to the change in the average maturity period and the ECB complies with the extant guidelines; and
(v) Monthly ECB-2 returns in respect of the LRN have been submitted to DSIM.

(c) Reduction in the all-in-cost of ECB Banks can approve requests for reduction in allin- cost, in respect of ECB availed both under the Automatic and Approval Routes, provided

(i) Consent of the lender has been obtained and there are no other changes in the terms and conditions of the ECB; and

(ii) Monthly ECB-2 returns in respect of the LRN have been submitted to DSIM.

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A.P. (DIR Series) Circular No. 74, dated 1-2-2012 — Deferred Payment Protocols dated April 30, 1981 and December 23, 1985 between Government of India and erstwhile USSR.

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With effect from January 20, 2012 the Rupee value of the Special Currency Basket has been fixed at Rs.71.456679 as against the earlier value of Rs. 73.923372

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A.P. (DIR Series) Circular No. 73, dated 21-1- 2012 — Opening of Diamond Dollar Accounts (DDAs)

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Presently, banks are permitted to open and maintain Diamond Dollar Accounts (DDA) of eligible firms and companies, subject to certain terms and conditions.

This Circular requires banks to submit a statement giving the data on the DDA balances maintained by them on a fortnightly basis within 7 days of close of the fortnight to which it relates, to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Trade Division, 5th Floor, Amar Building, Mumbai-400001.

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A.P. (DIR Series) Circular No. 70, dated 25- 1-2012 — External Commercial Borrowings (ECB) Policy — Infrastructure Finance Companies (IFCs).

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Presently, Non-Banking Finance Companies (NBFC) categorised as Infrastructure Finance Companies (IFC) by RBI are permitted to avail of ECB, including the outstanding ECB, up to 50% of their owned funds under the Automatic Route. ECB by IFC above 50% of their owned funds are considered by RBI under the Approval Route.

This Circular requires banks to certify the leverage ratio (i.e., outside liabilities/owned funds) of IFC desirous of availing ECB under the Approval Route at the time of forwarding the proposal to RBI.

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A.P. (DIR Series) Circular No. 69, dated 25- 11-2012 External Commercial Borrowings — Simplification of procedure.

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Presently, approval of RBI is required for:

(a) Cancellation of Loan Registration Number (LRN); or
(b) Change in permissible end-use for an existing ECB

This Circular has granted powers to banks to approve changes in respect of the above i.e., cancellation of LRN and change in permissible end-use, subject to certain conditions.

(a) Cancellation of LRN

Banks can directly approach DSIM for cancellation of LRN for ECBs availed, both under the automatic and approval routes, provided

(i) No draw-down for the said LRN has taken place; and
(ii) Monthly ECB-2 returns till date in respect of the LRN have been submitted to DSIM.

(b) Change in the end-use of ECB proceeds

Banks can approve requests for change in end-use in respect of ECB availed under the Automatic Route, provided

(i) The proposed end-use is permissible under the automatic route;
(ii) There is no change in the other terms and conditions of the ECB;
(iii) ECB is in compliance with the extant guidelines; and
(iv) Monthly ECB-2 returns till date in respect of the LRN have been submitted to DSIM.

However, RBI approval will be required for change in the end-use of ECB availed under the Approval Route.

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A. P. (DIR Series) Circular No. 51 dated 20th September, 2013

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Export of Goods and Services–Project Exports

Presently, the time limit for submitting form DPX 1, PEX-1 and TCS-1 is 30 days of entering contract for grant of post-award approval.

This circular has done away with the requirement of submission of forms DPX1, PEX-1, TCS-1 and DPX-3, to the concerned regional office of the RBI (Foreign Exchange Department) by the Approving Authority (AA). However, these forms may continue to be submitted to ECGC and Exim Bank where their participatory interests by way of funded/non-funded facilities, insurance/risk cover, etc., are involved.

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A. P. (DIR Series) Circular No. 48 dated 18th September, 2013

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Notification No. FEMA 281/2013-RB dated 19th July, 2013 notified vide G.S.R. No. 627(E) dated 12th September, 2013

External Commercial Borrowings (ECB) Policy–Liberalisation of definition of Infrastructure Sector

This circular has expanded the definition of infrastructure sectors and sub-sectors for the purpose of ECB. The expanded definition is as under:

(a) Energy which will include (i) electricity generation, (ii) electricity transmission, (iii) electricity distribution, (iv) oil pipelines, (v) oil/gas/liquefied natural gas (LNG) storage facility (includes strategic storage of crude oil) and (vi) gas pipelines (includes city gas distribution network);

(b) Communication which will include (i) mobile telephony services/companies providing cellular services, (ii) fixed network telecommunication (includes optic fibre/cable networks which provide broadband/ Internet) and (iii) telecommunication towers;

(c) Transport which will include (i) railways (railway track, tunnels, viaducts, bridges and includes supporting terminal infrastructure such as loading/ unloading terminals, stations and buildings), (ii) roads and bridges, (iii) ports, (iv) inland waterways, (v) airport and (vi) urban public transport (except rolling stock in case of urban road transport);

(d) Water and sanitation which will include (i) water supply pipelines, (ii) solid waste management, (iii) water treatment plants, (iv) sewage projects (sewage collection, treatment and disposal system), (v) irrigation (dams, channels, embankments, etc.) and (vi) storm water drainage system;

(e) (i) mining, (ii) exploration and (iii) refining;

(f) Social and commercial infrastructure which will include (i) hospitals (capital stock and includes medical colleges and paramedical training institutes), (ii) Hotel sector which will include hotels with fixed capital investment of Rs. 200 crore and above, convention centres with fixed capital investment of Rs. 300 crore and above and three-star or higher category classified hotels located outside cities with population of more than 1 million (fixed capital investment is excluding of land value), (iii) common infrastructure for industrial parks, SEZ, tourism facilities, (iv) fertiliser (capital investment), (v) post-harvest storage infrastructure for agriculture and horticulture produce including cold storage, (vi) soil-testing laboratories and (vii) cold chain (includes cold room facility for farm level pre-cooling, for preservation or storage of agriculture and allied produce, marine products and meat.

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A. P. (DIR Series) Circular No. 46 dated 17th September, 2013

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Overseas forex trading through electronic/internet trading portals

This circular reiterates the prohibition on undertaking online trading in foreign exchange through portals/websites by residents. Further, it warns of stern action, as prescribed under FEMA, against the residents undertaking these transactions as well as banks which continue to allow the residents to undertake these transactions and fail to report these violations to the RBI.

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A.P. (DIR Series) Circular No. 67, dated 13-1- 2012 — Foreign investment in Single Brand Retail Trading — Amendment to the Foreign Investment (FDI) Scheme. Press Note No. 1 (2012 Series), dated 10-1-2012.

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Presently, FDI in retail trade is permitted up to 51%, subject to conditions specified under paragraph 6.2.16.4 of ‘Circular 2 of 2011 — Consolidated FDI Policy’.

The said paragraph 6.2.16.4 of ‘Circular 2 of 2011 — Consolidated FDI Policy’ has been replaced as under:

 

6.2.16.4

 Single Brand product retail trading

100%

 

Government

 

 

 

 

 

 

 

 

 

          
     

(1)    Foreign Investment in Single Brand product retail trading is aimed at attracting investments in produc    tion and marketing, improving the availability of such goods for the consumer, encouraging increased   sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to   global designs, technologies and management practices.

(2)    FDI in Single Brand product retail trading would be subject to the following conditions:
 
(a)  Products to be sold should be of a ‘Single Brand’ only.

 

 

 

 

 

(b)        Products
should be sold under the same brand internationally i.e., products should be
sold under the same brand in one or more countries other than India.

 

(c)        ‘Single
Brand’ product-retail trading would cover only products which are branded
during manufacturing.

 

(d)       The
foreign investor should be the owner of the brand.

 

(e)        In
respect of proposals involving FDI beyond 51%, mandatory sourcing of at least
30% of the value of products sold would have to be done from Indian ‘small
industries/village and cottage industries, artisans and craftsmen’. ‘Small
industries’ would be defined as industries which have a total invest-ment in
plant & machinery not exceeding US $ 1.00 million. This valuation refers
to the value at the time of installation, without providing for depreciation.
Further, if at any point in time, this valuation is exceeded, the industry
shall not qualify as a ‘small industry’ for this purpose. The compliance of
this condition will be ensured through self-certification by the company, to
be subsequently checked, by statutory auditors, from the duly certified
accounts, which the company will be required to maintain.

 

(3)        Application
seeking permission of the Government for FDI in retail trade of ‘Single
Brand’ products would be made to the Secretariat for Industrial Assistance
(SIA) in the Department of Industrial Policy & Pro-motion. The
application would specifically indicate the product/product categories which
are proposed to be sold under a ‘Single Brand’. Any addition to the product/product
categories to be sold under ‘Single Brand’ would require a fresh approval of
the Government.

 

(4)        Applications
would be processed in the Department of Industrial Policy & Promotion, to
determine whether the products proposed to be sold satisfy the notified
guidelines, before being considered by the FIPB for Government approval.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A. P. (DIR Series) Circular No. 45 dated 16th September, 2013

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Memorandum of Instructions governing moneychanging activities–Location of Forex Counters in International Airports in India

This circular states that non-residents can carry Indian currency up to a maximum of Rs. 10,000 beyond Immigration/Customs desk to the Duty Free Area/Security Hold Area (SHA) in the departure hall in international airports in India for meeting miscellaneous expenditures. However, they must dispose of Indian currency before boarding the plane.

Further, in order to provide money-changing facility to non-residents to convert unspent Indian rupees with them, Foreign Exchange Counters can be opened in the Duty Free Area/SHA beyond the Immigration/Customs desk in the departure halls in international airports in India.

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A. P. (DIR Series) Circular No. 44 dated 13th September, 2013

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Notification No. FEMA. 285/2013-RB dated 30th August, 2013 vide G.S.R. No.597 (E)

Foreign Direct Investment (FDI) in India–Review of FDI policy–definition for control and sector specific conditions

This circular contains the following information:

1. Revised definition of the term ‘control’—’Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.

2. The State Governments of Himachal Pradesh and Karnataka have given consent to implement the FDI policy on Multi-Brand Retail Trading in Himachal Pradesh and Karnataka respectively. As a result the list of States stands modified with the addition of the names of the above two States.

3. The Central Government has issued the new Consolidated FDI Policy which has come into effect from 5th April, 2013. The RBI has accordingly revised and updated the FDI caps and routes for various sectors in order to bring the same in uniformity with the sectoral classification for FDI as notified under the Consolidated FDI Policy Circular.

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A.P. (DIR Series) Circular No. 113, dated 24-4-2012 — External Commercial Borrowings (ECB) for Civil Aviation Sector.

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Presently, ECB cannot be raised to finance working capital requirements. This Circular, however, permits companies in the civil aviation sector to avail ECB for working capital requirements under the Approval Route, subject to the following:

(i) Airline companies must be registered under the Companies Act, 1956 and possess scheduled operator permit licence from DGCA for passenger transportation.

 (ii) ECB will be allowed to the airline companies based on the cash flow, foreign exchange earnings and its capability to service the debt.

(iii) The ECB for working capital must be raised within 12 months from the date of issue of this Circular.

(iv) ECB must be raised with a minimum average maturity period of three years.

(v) The overall ECB ceiling for the entire civil aviation sector would be one billion and the maximum permissible ECB that can be availed by an individual airline company will be INR18,437 million. This limit can be utilised for working capital as well as refinancing of the outstanding working capital Rupee loan(s) availed of from the domestic banking system.

(vi) Foreign exchange required for repayment of ECB cannot be raised from Indian markets and the liability can be extinguished only out of the foreign exchange earnings of the borrowing company.

(vii) No roll-over of ECB availed for working capital/refinancing of working capital will be allowed.

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A.P. (DIR Series) Circular No. 112, dated 20-4-2012 — External Commercial Borrowings (ECB) Policy — Refinancing/Rescheduling of ECB.

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This Circular permits borrowers to refinance, under the Approval Route, an existing ECB by raising fresh ECB at a higher all-in-cost/reschedule an existing ECB at a higher all-in-cost. However, the enhanced all-in-cost must not exceed the current all-in-cost ceiling.

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A.P. (DIR Series) Circular No. 111, dated 20-4-2012 — External Commercial Borrowings (ECB) Policy — Liberalisation and Rationalisation.

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This Circular has modified the ECB guidelines with immediate effect as under:

(i) Enhancement of refinancing limit for power sector

 Indian companies in the power sector can now, under the Approval Route, utilise up to 40% of the fresh ECB raised by them towards refinancing of the Rupee loans availed by them from domestic banks/institutions. The balance amount raised b way of fresh ECB must be utilised for fresh capital expenditure for infrastructure projects.

 (ii) ECB for maintenance and operation of toll systems for roads and highways

ECB can be raised, under the automatic route, for capital expenditure in respect of the maintenance and operations of toll systems for roads and highways provided they form part of the original project.

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A.P. (DIR Series) Circular No. 109, dated 18-4-2012 — Authorised Dealer Category II — Permission for additional activity and opening of Nostro account.

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This Circular suggests that Authorised Dealers Category-II wanting to open Nostro accounts must approach RBI for a one-time approval to open and operate Nostro accounts.

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A.P. (DIR Series) Circular No. 108, dated 17-4-2012 — Anti-Money Laundering (AML)/ Combating the Financing of Terrorism (CFT) Standards — Cross Border Inward Remittance under Money Transfer Service Scheme.

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This Circular advises authorised persons, their agents/franchisees to consider the information contained in the Statement issued by the FATF on February 16, 2012 on the above subject.

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A.P. (DIR Series) Circular No. 107, dated 17-4-2012 — Anti-Money Laundering (AML)/ Combating the Financing of Terrorism (CFT) Standards — Money changing activities.

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This Circular advises authorised persons, their agents/franchisees to consider the information contained in the Statement issued by the FATF on February 16, 2012 on the above subject.

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A.P. (DIR Series) Circular No. 129, dated 21-5-2012 — Risk Management and Inter-Bank Dealings.

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This Circular provides that:

(i) The current Net Overnight Open Position Limit (NOOPL) of banks as applicable to the positions involving Rupee as one of the currencies will not include the positions undertaken in the Currency Futures/Options segment in the exchanges.

(ii) The positions in the exchanges (both Futures and Options) cannot be netted/offset by undertaking positions in the OTC market and vice versa. The positions initiated in the exchanges mt be liquidated/closed in the exchanges only.

(iii) The position limit for the Banks in the exchanges for trading Currency Futures and Options will be US INR6,265 million or 15% of the outstanding open interest, whichever is lower.

Further, Banks, whose positions are not in line with the above requirements, are required to bring down their positions to the above limits by June 30, 2012.

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A.P. (DIR Series) Circular No. 128, dated 16-5-2012 — Exchange Earner’s Foreign Currency (EEFC) Account.

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This Circular clarifies that conversion of the EEFC balances into Rupee balances will only be applicable to available balances in the EEFC account which may be arrived at by netting off earmarked amounts on account of outstanding forward/option contracts booked before May 10, 2012.

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A.P. (DIR Series) Circular No. 127, dated 15-5-2012 — Foreign investment in NBFC Sector under the Foreign Direct Investment (FDI) Scheme — Clarification.

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This Circular clarifies that the activity ‘leasing and finance’, which is one among the eighteen NBFC activities wherein FDI up to 100% is permitted under the Automatic Route covers only ‘financial leases’ and not ‘operating leases’, insofar as the NBFC sector is concerned.

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A.P. (DIR Series) Circular No. 124, dated 10-5-2012 — Exchange Earner’s Foreign Currency (EEFC) Account.

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Presently, all foreign exchange earners are permitted to retain 100% of their foreign exchange earnings in their EEFC account. This Circular has modified the position as under, for holding of foreign exchange in EEFC account, Resident Foreign Currency (RFC) Account or Diamond Dollar Account (DDA):

(a) 50% of the balances in these accounts must be converted within 15 days from the date of this Circular into Rupee balances and credited to the Rupee accounts as per the directions of the account holder.

(b) In respect of all future foreign exchange earnings, an exchange earner is eligible to retain 50% (as against the previous limit of 100%) in non-interest bearing foreign currency accounts. The balance 50% shall be surrendered for conversion to Rupee balances.

(c) EEFC account holders henceforth will be permitted to access the foreign exchange market for purchasing foreign exchange only after utilising fully the available balances in the EEFC accounts.

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A.P. (DIR Series) Circular No. 123, dated 10-5-2012 — Risk Management and Inter-Bank Dealings.

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This Circular provides that the intra-day open position/ daylight limit of authorised dealers will be five times the Net Overnight Open Position Limit available to them or the existing intra-day open position limit as approved by RBI, whichever is higher, for positions involving Rupee as one of the currencies.

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A.P. (DIR Series) Circular No. 122, dated 9-5-2012 — Risk Management and Inter-Bank Dealings.

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Presently, banks are permitted to deploy foreign currency funds for granting loans to their resident customers for meeting their foreign exchange requirements or for their rupee working capital/capital expenditure needs, subject to the prudential/interestrate norms, credit discipline and credit monitoring guidelines in force.

This Circular has modified the said policy and banks can now, subject to the prudential/interestrate norms, credit discipline and credit monitoring guidelines in force, use funds in FCNR(B) accounts with them for making loans to resident customers for meeting:

(i) their foreign exchange requirements or

(ii) for the Rupee working capital/capital expenditure needs of exporters/corporates who have a natural hedge or a risk management policy for managing the exchange risk.

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A.P. (DIR Series) Circular No. 121, dated 8-5-2012 — Foreign investment in Commodity Exchanges and NBFC Sector — Amendment to the Foreign Direct Investment (FDI) Scheme.

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Presently, foreign investment in commodity exchanges is permitted subject to a composite ceiling of 49% with FDI limit of 26% and FII limit of 23% under Portfolio Investment Scheme (PIS).

This Circular clarifies that:

(a) With respect to foreign investment in commodity exchanges, the FDI component of 26% will be under the Approval Route whereas FII investment of 23% under PIS will be under the Automatic Route.

(b) 100% FDI under the Automatic Route is permitted only in case of ‘financial leases’ (financial leasing activity) and the Automatic Route is not available in case of ’operating leases’ (operating leasing activity).

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A.P. (DIR Series) Circular No. 120, dated 8-5-2012 — Foreign Direct Investment (FDI) in India — Issue of equity shares under the FDI scheme allowed under the Government Route.

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Presently, under the Approval Route, equity shares/ preference shares can be issued against import of second-hand machinery. This Circular provides that now onwards equity shares/preference shares cannot be issued against import of second-hand machinery.

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A.P. (DIR Series) Circular No. 119, dated 7-5-2012 — External Commercial Borrowings (ECB) Policy — Utilisation of ECB proceeds for Rupee expenditure.

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Presently, ECB proceeds can be utilised for permissible foreign currency expenditure as well as Rupee expenditure.

This Circular requires borrowers to provide bifurcation of the utilisation of the ECB proceeds towards foreign currency and Rupee expenditure in Form-83 at the time of availing Loan Registration Number (LRN). Borrowers must repatriate to India, immediately after drawn down, for credit to their Rupee accounts proceeds meant for Rupee expenditure in India. Any contravention will be viewed seriously and will invite penal action under FEMA.

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A.P. (DIR Series) Circular No. 118, dated 7-5-2012 — Release of foreign exchange for miscellaneous remittances.

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Presently, up to INR307,284 or its equivalent can be remitted abroad for all permissible transactions on the basis of a simple letter from the applicant containing the basic information, viz., names and the addresses of the applicant and the beneficiary, amount to be remitted and the purpose of remittance.

This Circular has increased this limit from INR307,284 or its equivalent to INR1,536,419 or its equivalent. No documents, including Form A-2, except a simple letter containing basic information as stated above is required provided the conditions mentioned below are fulfilled:

 (a) Foreign exchange is being purchased for a permitted current account transaction.

(b) Amount does not exceed INR1,536,419 or its equivalent.

(c) Payment is made by a cheque drawn on the applicant’s bank account or by a Demand Draft.

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A.P. (DIR Series) Circular No. 93, dated 19-3- 2012 — Investment in Indian Venture Capital Undertakings and/or domestic Venture Capital Funds by SEBI registered Foreign Venture Capital Investors.

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Presently subject to certain terms and conditions, a SEBI-registered Foreign Venture Capital Investor (FVCI) can invest in equity, equity linked instruments, debt, debt instruments, debentures of an Indian Venture capital Undertaking (IVCU) or of a Venture Capital Funds (VCF) through Initial Public Offer or Private Placement or in units of schemes/funds set up by a VCF.

This Circular permits, subject to certain terms and conditions, all FVCI to invest in eligible securities (equity, equity-linked instruments, debt, debt instruments, debentures of an IVCU or VCF, units of schemes/funds set up by a VCF) by way of private arrangement/ purchase from a third party also. This Circular further clarifies that, subject to certain terms and conditions, SEBI-registered FVCI are also permitted to invest in securities on a recognised stock exchange.

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A.P. (DIR Series) Circular No. 92, dated 13- 3-2012 — Opening of Diamond Dollar Accounts (DDAs) — Change in periodicity of the reporting.

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Presently, banks are required to submit a monthly report to RBI, giving details of the name and address of the firm/company in whose name the Diamond Dollar Account is opened, along with the date of opening/closing the Diamond Dollar Account, by the 10th of the following month to which it relates.

This Circular has reduced the periodicity of reporting from monthly basis to quarterly basis with effect from the quarter ending March 31, 2012. As a result, banks are required to submit details of the name and address of the firm/company in whose name the Diamond Dollar Account is opened, along with the date of opening/closing the Diamond Dollar Account by the 10th of the month following the quarter to which it relates.

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A.P. (DIR Series) Circular No. 90, dated 6-3- 2012 — Clarification — Liberalised remittance scheme for resident individuals.

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With regards to the Liberalised Remittance Scheme (LRS), this Circular clarifies that:

(i) This facility is available to all resident individuals including minors. Where the remitter is a minor, the LRS declaration form should be countersigned by the minor’s natural guardian.

(ii) Remittances under LRS can be consolidated in respect of family members. However, individual family members must comply with the terms and conditions of the scheme.

(iii) Remittances under LRS can, subject to provisions of other applicable laws, be used for purchasing objects of art.

The modified LRS application-cum-declaration form is also annexed to this Circular.

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A.P. (DIR Series) Circular No. 89, dated 1-3-2012 — Foreign Institutional Investor (FII) investment in ‘to be listed’ debt securities.

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Presently, SEBI registered FII are allowed to invest only in listed non-convertible debentures (NCD)/ bonds issued by an Indian company.

This Circular permits SEBI registered FII/sub-accounts of FII to invest in primary issues of to be listed NCD/ bonds only if listing of such NCD/bonds is committed to be done within 15 days of such investment. In case the NCD/bonds are not listed within 15 days of issuance, then the FII/sub-account of FII must immediately dispose of these NCD/bonds either by way of sale to a third party or to the issuer. The terms of offer must contain a clause stating that the issuer will immediately redeem/buy back the said securities from the FII/sub-accounts of FII if they are not listed within 15 days of issuance.

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A.P. (DIR Series) Circular No. 88, dated 1-3- 2012 — Clarification — Establishment of Branch Offices (BO)/Liaison Offices (LO) in India by Foreign Entities — Delegation of powers.

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Presently, the following powers have been delegated by RBI to banks:

(i) Acceptance of Annual Activity Certificate from BO/LO.
(ii) Extension of the validity period of LO.
(iii) Closure of BO/LO of foreign entities in India.

This Circular clarifies that powers regarding transfer of assets of LO/BO to others have not been delegated by RBI to banks. Hence, approval from Foreign Exchange Department, Central Office, RBI is required for transfer of assets by LO/BO to subsidiaries or other LO/BO or any other entity.

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A.P. (DIR Series) Circular No. 87, dated 29-2-2012 — Know Your Customer (KYC) norms/Anti-Money Laundering (AML) Standards/ Combating the Financing of Terrorism (CFT) Obligation of Authorised Persons under Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009 — Cross-Border Inward Remittance under Money Transfer Service Scheme.

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This Circular requires, Authorised Persons (Indian Agents) to take additional steps to identify and assess their ML/TF risk for customers, countries and geographical areas as also for products/services/ transactions/delivery channels.

Authorised Persons (Indian Agents) must have policies, controls and procedures, duly approved by their boards, in place to effectively manage and mitigate their risk adopting a risk-based approach as discussed above. They must also design risk parameters according to their activities for risk-based transaction monitoring, which will help them in their own risk assessment.

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A.P. (DIR Series) Circular No. 85, dated 29- 2-2012 — External Commercial Borrowings (ECB) for Infrastructure facilities within National Manufacturing Investment Zone (NMIZ).

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For the purposes of ECB, infrastructure sector includes: (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport, (vi) industrial parks, (vii) urban infrastructure (water supply, sanitation and sewage projects), (viii) mining, refining and exploration and (ix) cold storage or cold room facility, including for farm-level precooling, for preservation or storage of agricultural and allied produce, marine products and meat.

Presently, developers of SEZ are allowed to avail ECB to provide such infrastructure facilities within the SEZ.

This Circular permits developers of NMIZ also to avail of ECB under the Approval Route for providing infrastructure facilities within the NMIZ.

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A.P. (DIR Series) Circular No. 83, dated 27-2-2012 — Import of gold on loan basis — Tenor of loan and opening of stand-by letter of credit.

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Presently, the maximum tenor of gold loan, as per the Foreign Trade Policy 2004-2009 of the Government of India, is 240 days — 60 days for manufacture and exports +180 days for fixing the price and repayment of gold loan.
The Foreign Trade Policy 2009-2014 of the Government of India has increased the period of completion for export from 60 days to 90 days. As a result, the maximum tenor of gold loan is increased from 240 days to 270 days — 90 days for manufacture and exports +180 days for fixing the price and repayment of gold loan.

Further, this Circular requires banks to see that:

(i) Maximum period of gold loan must be as per the Foreign Trade Policy 2009-14 or as notified by the Government of India from time to time.

(ii) Tenor of stand-by letter of credit, for import of gold on loan basis, wherever required, must also be in line with the tenor of gold loan.

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A.P. (DIR Series) Circular No. 82, dated 21- 2-2012 — Release of foreign exchange for imports — Further liberalisation.

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Presently, advance towards imports up to US $ 500 or its equivalent can be issued for any current account transaction without any documentation formalities.

This Circular has increased that limit from US $ 500 or its equivalent to US $ 5,000 or its equivalent. Hence, advance towards imports can be made up to US $ 5,000 or its equivalent for any current account transaction without submitting any documents except for a simple letter containing basic information such as the name and address of the applicant, name and address of the beneficiary, amount to be remitted and the purpose of remittance and the application is accompanied by a cheque drawn on the applicant’s bank or demand draft.

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A.P. (DIR Series) Circular No. 81, dated 21- 2-2012 — Export of goods and services — Receipt of advance payment for export of goods involving shipment (manufacture and ship) beyond one year.

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Presently, an exporter is required to obtain prior
approval of RBI for receiving advance from the foreign buyer where the
export agreement permits shipment of goods beyond one year from the date
of receipt of advance.

This Circular has granted powers to
banks to permit exporters to receive advance from the foreign buyer
where the export agreement permits shipment of goods beyond one year
from the date of receipt of advance, subject to the following
conditions:

(i) KYC and due diligence exercise has been done by the bank for the overseas buyer.
(ii) Compliance with the Anti-Money Laundering Standards has been ensured.
(iii)
Export advance received by the exporter must be utilised to execute
export and not for any other purpose i.e., the transaction is a bona
fide transaction.
(iv) Progress payment, if any, must be directly received from the overseas buyer strictly in terms of the contract.
(v) Rate of interest, if any, payable on the advance payment must not exceed LIBOR + 100 basis points.
(vi) Exporter should not have refund of amount exceeding 10% of the advance payment received in the last three years.
(vii) Documents covering the shipment must be routed through the same bank.
(viii)
If the exporter is unable to make the shipment, partly or fully, he
will have to obtain prior approval of RBI before remittance towards
refund of unutilised portion of advance or towards interest payment is
made to the foreign buyer.

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15 A. P. (DIR Series) Circular No. 31 dated 17th September, 2012

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Establishment of Liaison Office (LO)/Branch Office (BO)/Project Office (PO) in India by Foreign Entities – Clarification.

This circular clarifies that foreign Non-Government Organisations/Non-Profit Organisations/Foreign Government Bodies/Departments, by whatever name called can set-up/establish offices in India (liaison/ branch/project) only after obtaining prior approval of RBI under the Approval Route.

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A. P. (DIR Series) Circular No. 30 dated 12th September, 2012

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Comprehensive Guidelines on Over the Counter (OTC) Foreign Exchange Derivatives – Cost Reduction Structures

Presently, use of cost reduction structures, i.e., cross currency option cost reduction structures and foreign currency – INR option cost reduction structures, is permitted only to hedge exchange rate risk arising out of trade transactions and the External Commercial Borrowings (ECB).

This circular permits the use of cost reduction structures, additionally, for hedging the exchange rate risk arising out of foreign currency loans availed of domestically against FCNR (B) deposits.

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A. P. (DIR Series) Circular No. 29 dated 12th September, 2012

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Overseas Direct Investments by Indian Party – Rationalisation

 This circular has amended the guidelines relating to submission of Annual Performance Report (APR) as under: –

An Indian party, which has set up/acquired a Joint Venture (JV) or Wholly Owned Subsidiary (WOS) overseas, will have to submit to its designated Bank every year, an Annual Performance Report (APR) in Form ODI Part III in respect of each JV or WOS outside India and other reports or documents as may be specified by the Reserve Bank from time to time, on or before the 30th of June each year.

The APR so required to be submitted, has to be based on the latest audited annual accounts/unaudited accounts, as the case maybe, of the JV/WOS, unless specifically exempted by the Reserve Bank.

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A. P. (DIR Series) Circular No. 28 dated 11th September, 2012 Trade Credits for Import into India

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Presently, trade credits upto INRNaN million per import transaction with a maturity period of more than one year and less than three years (from the date of shipment) can be availed of for the import of capital goods. This circular permits companies in the infrastructure sector to avail trade credit upto five years (instead of upto three years) for import of capital goods subject to the following: –

(i) The trade credit must be initially contracted for a period not less than 15 months and must not be in the nature of short-term roll overs.

(ii) Banks cannot issue Letters of Credit/Guarantees / Letter of Undertaking (LOU)/Letter of Comfort (LPC) in favour of the overseas supplier/bank /financial institution for the period beyond three years. The all-in-cost ceiling of the trade credit, with maturity period upto five years will be 350 basis points over six months, LIBOR for the respective currency of credit or applicable benchmark. The all-in-cost ceiling will include arranger fee, upfront fee, management fee, handling/processing charges, out of pocket and legal expenses, if any.

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A. P. (DIR Series) Circular No. 27 dated 11th September, 2012 External Commercial Borrowings (ECB) Policy – Bridge Finance for infrastructure sector

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Presently, Indian companies in the infrastructure sector can, under the Approval Route, import capital goods by availing of short term credit (including buyers’/suppliers’ credit) in the nature of ‘bridge finance’, subject to the following conditions:-

(i) Bridge finance must be replaced with a long term ECB.

(ii) ECB must comply with all the extant norms.

 (iii) Prior approval of RBI will have to be obtained for replacing the bridge finance with long term ECB.

This circular permits replacement of bridge finance (including buyers’/suppliers’ credit) availed of for import of capital goods with ECB under the Automatic Route subject to the following: –

 i. Buyers’/suppliers’ credit is refinanced through an ECB before the end of the maximum permissible period of trade credit.

 ii. Import of capital goods must be verified from the Bill of Entry by the Bank.

 iii. Buyers’/suppliers’ credit availed of is compliant with the extant guidelines on trade credit. iv. The goods that are imported, comply with the DGFT policy on imports. v. The proposed ECB must be compliant with all extant ECB guidelines. vi. Banks in India cannot provide any form of guarantees for the ECB. However, the borrower will still have to obtain prior approval of RBI (under Approval Route) for availing of bridge finance.

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A. P. (DIR Series) Circular No. 26 dated 11th September, 2012 External Commercial Borrowings (ECB) Policy – Repayment of Rupee loans and/or fresh Rupee capital expenditure – $ 10 billion scheme

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Presently, an Indian company in the manufacturing and infrastructure sector, which has consistent foreign exchange earnings during the last three years ,can avail, under Approval Route, ECB up to 50% of the average annual export earnings realised during the past three financial years (within the overall of ECB ceiling of INRNaN billion) for repayment of Rupee loan(s) availed of from the domestic banking system and/or for fresh Rupee capital expenditure, provided the companies are not in the default list/ caution list of the Reserve Bank of India. This circular has modified the above facility as under: –

(a) An Indian company in the manufacturing and infrastructure sector, which has consistent foreign exchange earnings during the last three years can avail ECB; i. upto 75% of the average foreign exchange earnings realised during the immediate past three financial years; or ii 50% of the highest foreign exchange earnings realised in any of the immediate past three financial years, whichever is higher.

(b) A Special Purpose Vehicles (SPV), which have completed at least one year of existence from the date of incorporation and do not have sufficient track record/past performance for three financial years, can avail ECB upto 50% of the annual export earnings realised during the past financial year.

(c) The maximum ECB that can be availed of by an individual company or group, as a whole, under this scheme is INRNaN billion.

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A. P. (DIR Series) Circular No. 25 dated 7th September, 2012 Overseas Investment by Indian Parties in Pakistan

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Presently, investment in Pakistan is not permitted. This circular permits Indian parties to invest in Pakistan under the Approval Route of ODI Scheme in terms Regulation 9 of Notification No. FEMA 120/ RB-2004 dated 7th July, 2004 [Foreign ExchangeManagement (Transfer or Issue of any Foreign Security).

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A. P. (DIR Series) Circular No. 21 dated 31st August, 2012 Foreign investment by Qualified Foreign Investors (QFIs) – Hedging facilities

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This circular permits Qualified Foreign Investors (QFI) to hedge their currency risk for the following: –

 i) Entire investment in equity and/or debt in India as on a particular date through foreign currency – INR options.

ii) Initial Public Offers (IPO) related transient capital flows under the Application Supported by Blocked Amount (ASBA) mechanism through Foreign Currency – INR swaps.

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A. P. (DIR Series) Circular No. 20 dated 29th August, 2012

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Non-resident guarantee for non-fund based facilities entered between two resident entities.

 Presently, a non-resident can issue a guarantee to a resident lender as security for funds lent to a resident borrower. RBI has granted general permission to resident borrower to make payment to the non-resident guarantor who has met the liability under the guarantee.

This circular grants general permission to a nonresident to issue a guarantee to a resident provider of non-fund based facilities, such as Letters of Credit/ Guarantees/Letter of Undertaking/Letter of Comfort, etc., to a resident borrower. General permission has also been granted to a resident borrower to make payment to the non-resident guarantor who has met the liability under the guarantee.

Further, annexed to this circular is a format introduced by RBI for reporting, on a quarterly basis, the issue and invocation of such guarantees. This format has to reach the Chief General Manager, Foreign Exchange Department, ECB Division, Reserve Bank of India, Central Office Building, 11th floor, Fort, Mumbai – 400 001, not later than 10th day of the following month.

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A. P. (DIR Series) Circular No. 16 dated 22nd August, 2012

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Foreign Direct Investment by citizen/entity incorporated in Pakistan. Press Note No.3 (2012 Series) Press Note No.3 (2012 Series) dated: 1st August, 2012.

Presently, a citizen of Pakistan or an entity incorporated in Pakistan, is not allowed to purchase shares or convertible debentures of an Indian company under Foreign Direct Investment (FDI) Scheme.

This circular permits, under the Approval Route, a person who is a citizen of Pakistan or an entity incorporated in Pakistan to purchase shares and convertible debentures of an Indian company under FDI Scheme. However, the Indian company in which FDI is received must not be engaged/must not engage in sectors/activities pertaining to defense, space and atomic energy and sectors/activities prohibited for foreign investment.

RBI HAS ISSUED NEW MASTER CIRCULARS ON 2nd JULY, 2012.

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A. P. (DIR Series) Circular No. 15 dated 21st August, 2012

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Overseas Direct Investments – Rationalisation of Form ODI

The circular has amended Part E & Part F of Form ODI by adding new items to the same. The amended new Form ODI is annexed to this circular.

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A. P. (DIR Series) Circular No. 12 dated 31st July, 2012

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Exchange Earner’s Foreign Currency (EEFC) Account, Diamond Dollar Account (DDA) & Resident Foreign Currency (RFC) Account – Review of Guidelines.

This circular permits EEFC/DDA/RFC account holders to credit 100% of their foreign exchange earnings to the respective accounts. However, the sum total of the accruals in the account during a calendar month will have to be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments.

As a result, balances outstanding in the said accounts as on 31st July, 2012 together with balances accruing on and from 1st August, 2012 to 31st August, 2012, will have to be converted into Rupee balances on or before close of business on 30th September, 2012. Similar procedure will have to be followed for accruals to the respective accounts in subsequent months.

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A. P. (DIR Series) Circular No. 11 dated 31st July, 2012

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Foreign Exchange Management Act, 1999 (FEMA)- Compounding of Contraventions under FEMA, 1999.

This circular clarifies that, whenever a contravention is identified by RBI or brought to its notice the entity concerned by way of a reference other than through the prescribed application for compounding, RBI will continue to decide: –

(i) Whether a contravention is technical and/or minor in nature and, as such, can be dealt with by way of an administrative/cautionary advice;

(ii) Whether it is material and, hence, is required to be compounded, for which the necessary compounding procedure has to be followed; or

(iii) Whether the issues involved are sensitive/serious in nature and, therefore, need to be referred to the Directorate of Enforcement (DOE).

However, once a suo moto compounding application is filed, by the entity concerned, admitting the contravention, the same will not be considered as ‘technical’ or ‘minor’ in nature and the compounding process will be initiated.

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A. P. (DIR Series) Circular No. 8 dated 18th July, 2012

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Exchange Earner’s Foreign Currency (EEFC) Account

This circular states that the provisions of A. P. (DIR Series) Circular No. 124 dated May 10, 2012 will not apply to the Resident Foreign Currency (RFC) Accounts. As a result, the RFC account holder can now retain 100% of his/her foreign exchange earnings in the said account.

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A. P. (DIR Series) Circular No. 7 dated 16th July, 2012

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Scheme for Investment by Qualified Foreign Investors (QFIs) in Indian corporate debt securities.

Presently, QFI are permitted to invest only in rupee denominated units of domestic Mutual Funds and listed equity shares.

This circular has revised the definition of QFI and permitted them to also invest on repatriation basis debt securities subject to certain terms and conditions. QFI can now invest up to $ 1 billion in corporate debt securities (without any lock-in or residual maturity clause) and Mutual Fund debt schemes. This limit shall be over and above $ 20 billion for FII investment in corporate debt. For this purpose, QFI must open a single non-interest bearing Rupee Account with a bank in India for investment in all ‘eligible securities for QFI’. As per the revised definition, QFI shall mean a person who fulfills the following criteria:

(a) Resident in a country that is a member of Financial Action Task Force (FATF) or a member of a group which is a member of FATF; and
(b) Resident in a country that is a signatory to IOSCO’s MMoU (Appendix A Signatories) or a signatory of a bilateral MoU with SEBI.

PROVIDED that the person is not resident in a country listed in the public statements issued by FATF, from time to time, on jurisdictions having a strategic AML/ CFT deficiencies to which counter measures apply or that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies;

PROVIDED that such person is not resident in India;

PROVIDED FURTHER that such person is not registered with SEBI as a Foreign Institutional Investor (FII) or Sub-Account of an FII or Foreign Venture Capital Investor (FVCI).

Explanation – For the purposes of this clause:

(1) “Bilateral MoU with SEBI” shall mean a bilateral MoU between SEBI and the overseas regulator that, inter alia, provides for information sharing arrangements.
(2) Member of FATF shall not mean an associate member of FATF.

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A. P. (DIR Series) Circular No. 5 dated 12th July, 2012

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Foreign Exchange Management Act, 1999 – Submission of Revised A-2 Form.

RBI has revised the purpose codes for submitting R-Returns by Banks. As a consequence of this revision, purpose codes in Form A-2 have also been revised. Annexed to this circular is the revised list of purpose codes along with Form A-2.

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A. P. (DIR Series) Circular No. 1 dated 5th July, 2012

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Buyback/Prepayment of Foreign Currency Convertible Bonds (FCCBs). This circular states that RBI will permit buyback of FCCB under the approval route upto 31st March, 2013, subject to: –

a) The buyback value of the FCCB must be at a minimum discount of 5% on the accreted value.

b) In case the buyback is to be financed by foreign currency borrowing, all FEMA rules/regulations relating to foreign currency borrowing shall be complied with.

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A. P. (DIR Series) Circular No. 137 dated 28th June, 2012

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Foreign Investment in India – Sector Specific conditions.

Annexed to this circular is the revised Annex A and Annex B of Schedule 1 to Notification No. FEMA 20/2000-RB dated 3rd May 2000. The revision has been made to bring uniformity in the sectoral classification position for FDI as notified under the Consolidated FDI Policy Circular 1 of 2012 dated April 10, 2012 and FEMA Regulations.

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A. P. (DIR Series) Circular No. 136 dated 26th June, 2012

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External Commercial Borrowings (ECB) – Rationalisation of Form-83.

Attached to this circular is the new Form 83. This new Form 83 has to be submitted to RBI from 1st July, 2012 for obtaining Loan Registration Number (LRN).

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A. P. (DIR Series) Circular No. 135 dated 25th June, 2012

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Foreign investment in India by SEBI registered FIIs in Government securities and SEBI registered FIIs and QFIs in infrastructure debt.

This circular has increased the present limits for investment by FII and other foreign investors (Sovereign Wealth Funds (SWFs), Multilateral agencies, endowment funds, insurance funds, pension funds and foreign Central Banks) in Government Securities from $ 15 billion to $ 20 billion.
Conditions for investment in Infrastructure Debt Funds (IDF), within the overall limit of $ 25 billion, have been changed as under: –

  • The lock-in period for investments has been uniformly reduced to one year; and
  • The residual maturity of the instrument at the time of first purchase by an FII/eligible IDF investor must be at least fifteen months.

QFI can now invest in MF schemes that hold at least 25% of their assets (either in debt or equity or both) in the infrastructure sector, under the current $ 3 billion sub-limit for investment in mutual funds related to infrastructure.

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A. P. (DIR Series) Circular No. 134 dated 25th June, 2012

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External Commercial Borrowings (ECB) – Repayment of Rupee loans.

This circular permits Indian companies in the manufacturing and infrastructure sector who have consistent foreign exchange earnings during the last three years to avail, under Approval Route, ECB for repayment of Rupee loan(s) availed of from the domestic banking system and/or for fresh Rupee capital expenditure, provided the companies are not in the default list/caution list of the Reserve Bank of India.

The overall ceiling for such ECB will be US $ 10 (ten) billion and the maximum permissible ECB that can be availed of by an individual company, based on its foreign exchange earnings and its ability to service, is limited to 50% of the average annual export earnings realized during the past three financial years. Draw down of the entire facility must be undertaken within a month after taking the Loan Registration Number (LRN) from RBI.

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A. P. (DIR Series) Circular No. 133 dated 20th June, 2012

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Annual return on Foreign Liabilities and Assets Reporting by Indian Companies – Revised format.

This circular contains the new format of the annual return on Foreign Liabilities and Assets that is required to be submitted by all the Indian companies which have received FDI and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year. This annual return has to be submitted every year on or before 15th July, 2012, directly by Indian companies to the Director, External Liabilities and Assets Statistics Division, Department of Statistics and Information Management (DSIM), Reserve Bank of India, C-8, 3rd floor, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051. The new form can be duly filled-in, validated and sent by e-mail to RBI.

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A. P. (DIR Series) Circular No. 132 dated 8th June, 2012 Money Transfer Service Scheme

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Presently, a single individual beneficiary can receive for personal use upto 12 remittances not exceeding US $ 2,500 each in a calendar year.

This circular has increased the number of remittances that an individual can receive from 12 to 30. Thus, an individual can now receive for personal use upto 30 remittances each not exceeding $ 2,500 in a calendar year.

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A. P. (DIR Series) Circular No. 131 dated 31st May, 2012

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Overseas Direct Investments by Indian Party – Online Reporting of Overseas Direct Investment in Form ODI.

Presently, although banks can generate the UIN online for overseas investments under the Automatic Route, reporting of subsequent remittances for overseas investments under the Automatic Route as well as the Approval Route, could be done online in Part II of Form ODI only after receipt of the letter from RBI confirming the UIN.

This circular states that, in the case of overseas investments under the Automatic Route, UIN will be communicated through an auto generated e-mail sent to the email-id made available by the Authorized Dealer/Indian Party. This auto generated e-mail giving the details of UIN allotted to the JV/WOS will be treated as confirmation of allotment of UIN, and no separate letter will be issued with effect from 1st June, 2012 by RBI either to the Indian party or to the Authorized Dealer. Subsequent remittances are to be reported online in Part II of form ODI, only after receipt of the e-mail communication/ confirmation conveying the UIN.

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A. P. (DIR Series) Circular No. 41 dated October 10, 2012

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Foreign investment in NBFC Sector – Amendment to the Foreign Direct Investment (FDI) Scheme.
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A. P. (DIR Series) Circular No. 40 dated 9th October, 2012

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External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling.

This circular states that the below mentioned all-incost ceiling for ECB will continue till further notice: –

 Sr. No.

  Average Maturity Period

 All-in-cost over 6 month LIBOR for the respective currency of borrowing or applicable benchmark

 1.

  Three years and up to
five years

 350 bps

 2.

 More than five years

  500 bps

A. P. (DIR Series) Circular No. 19 dated 28th August, 2012

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Issue of Indian Depository Receipts (IDRs)

 – Limited two way fungibilty. Presently, automatic fungibility of IDR is not permitted. This circular, subject to compliance with SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, permits a limited two way fungibility for IDR. It imposes an overall ceiling of INRNaN billion on raising of capital by foreign companies by issuance of IDR. It also states that re-issuance of IDR would be allowed only to the extent of IDR that have been redeemed/converted into underlying shares and sold.

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A. P. (DIR Series) Circular No. 39 dated 9th October, 2012

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Trade Credits for Imports into India – Review of all-in-cost ceiling.

This circular states that the below mentioned all-incost ceiling for trade credit for imports into India will continue till further notice: –

 Maturity period 

 All-in-cost ceilings over 6 months LIBOR for the respective currency of credit or applicable benchmark

 Up to 1 year

 350 basis points

 More than 1 year and up to 3 years

 More than 3 years and up to 5 years

A. P. (DIR Series) Circular No. 36 dated 26th September, 2012

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Foreign Direct Investment (FDI) in India – Allotment of Shares to person resident outside India under Memorandum of Association (MoA) of an Indian company–Pricing guidelines.

Presently, a non-resident, under the FDI Scheme, can purchase shares or convertible debentures of an Indian company based on the valuation method prescribed under paragraph 5 of Schedule 1 of Notification No. FEMA 20/2000 -RB dated May 3, 2000.

This circular has relaxed the said guidelines and permits eligible non-residents (including NRI) investors who are subscribers to Memorandum of Association of the investee company to subscribe for shares at face value.

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A. P. (DIR Series) Circular No. 35 dated 25th September, 2012

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Establishment of Liaison Offices (LO)/Branch Offices (BO)/Project Offices (PO) in India by Foreign Entities– Reporting requirement.

This circular has prescribed certain additional reporting requirements both for new as well as existing LO /BO/PO. The format for reporting the information is annexed to this circular.

New LO/BO/PO
The new LO/BO/PO will have to submit the information (as per the annexed format) within 5 working days of the LO/BO/PO becoming functional to the DGP of each state in which LO/BO/PO has established its office.

Existing/New LO/BO/PO
They will have to submit a copy of the information (as per the annexed format) with the DGP of each state as well as its Bank on an annual basis along with a copy of the Annual Activity Certificate/Annual report, as the case may be.

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A. P. (DIR Series) Circular No. 34 dated 24th September, 2012

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Foreign Exchange Management Act, 1999 – Import of gold in any form including jewellery made of gold/ precious metals or/and studded with diamonds/semi precious/precious stones – clarification

This circular clarifies that trade credit way of Suppliers’/ Buyers’ credit, including the usance period of Letters of Credit, for import of gold in any form including jewellery made of gold/precious metals or /and studded with diamonds/semi-precious /precious stones must not exceed 90 days, from the date of shipment.

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A. P. (DIR Series) Circular No. 32 dated September 21, 2012 Foreign investment in Single–Brand Product Retail Trading/ Multi- Brand Retail Trading/Civil Aviation Sector/ Broadcasting Sector/Power Exchanges – Amendment to the Foreign Direct Investment Scheme

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Amendment of existing policy on Foreign Direct Investment in Single-Brand Product Retail Trading Press Note No. 4 (2012 Series) dated 20th September, 2012

Single-Brand Product Retail Trading
Press Note No. 4 has modified the existing conditions in respect of the Foreign Investment in Single- Brand Product Retail Trading by removing the Brand Ownership criteria and providing that only one non-resident entity, whether owner of the brand or otherwise, will be permitted to undertake single brand product retail trading in the country, for that specific brand. It also provides that the company receiving FDI cannot undertake retail trading, in any form, by means of e-commerce.

Review of the policy on Foreign Direct Investment – allowing FDI in Multi-Brand Retail Trading

Press Note No. 5 (2012 Series) dated September 20, 2012

Multi-Brand Retail Trading
Press Note No. 5 has: –

a. Substituted the list of ‘Prohibited Sectors’ i.e. sectors in which FDI is prohibited. The new Paragraph 6.1 of “Circular 1 of 2012 – Consolidated FDI Policy” issued on April 10, 2012 reads as follows: –

“6.1 Prohibited Sectors:

FDI is prohibited in:
 
(a) Lottery Business, including Government/ private lottery, online lotteries, etc.
(b) Gambling and Betting, including casinos etc.
(c) Chit funds
(d) Nidhi company
(e) Trading in Transferable Development Rights (TDRs)
(f) Real Estate Business or Construction of Farm Houses
(g) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
(h) Activities/sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems).

Foreign technology collaboration in any form, including licensing for franchise, trademark, brand name, management contract, is also prohibited for Lottery Business and Gambling and Betting activities.”

b. It has inserted a new Paragraph 6.2.16.5 in the “Circular 1 of 2012 – Consolidated FDI Policy” issued on 10th April, 2012 containing the terms and conditions relating to FDI in Multi-Brand Retail Trading. The broad guidelines are: –

a. This is an enabling clause in regard to implementation of the policy and the State Governments/Union Territories will have to decide for themselves whether to permit the same or not.
b. FDI up to 51% is permitted under the Approval Route.
c. Multi-Brand retailing will be permitted in all products, subject to certain terms and conditions.
d. Minimum investment by the foreign investor will be US $ 100 million.
e. At least 50% of the total FDI will have to be invested in ‘back-end’ infrastructure, excluding land cost and rentals, within 3 years of bringing in the 1st tranche of FDI.
f. At least 30% of the value of manufactured /processed products purchased by the company will have to be from Indian ‘small industries’.
g. Retail sales outlet can be set-up in cities with a population of more than 10 lakh as per 2011 Census only.
h. Retail trading, in any form, by means of e-commerce cannot be undertaken by the company.

Review of policy on Foreign Direct Investment in the Civil Aviation sector

Press Note No. 6 (2012 Series) dated 20th September, 2012

Civil Aviation Sector

Press Note No. 6 has amended Paragraph 6.2.9.3 of “Circular 1 of 2012 – Consolidated FDI Policy” issued on 10th April, 2012, so as to permit foreign airlines to invest up to 49% under the Approval Route, subject to certain terms and conditions, in the capital of Indian companies operating scheduled and non-scheduled air transport services. The investment limit of 49% will include FDI as well as FII investment.

Review of the policy on Foreign Investment (FI) in companies operating in the Broadcasting Sector

Press Note No. 7 (2012 Series) dated 20th September, 2012

Broadcasting Sector

Press Note No. 7 has substituted Paragraph 6.2.7 of “Circular 1 of 2012 – Consolidated FDI Policy” issued on April 10, 2012. Major changes in the substituted Paragraph pertain to: –

a. Teleports (setting up up-linking HUBs Teleports); Direct to Home (DTH); Cable Networks (MSOs operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability):

In this case, limit on Foreign Investment has been increased from 49% to 74%. Foreign investment up to 49% is permitted under the Automatic Route, while foreign investment beyond 49% and up to 74% is permitted under the Approval Route.

b. Mobile TV:

Foreign Investment is permitted up to 74%. Foreign investment up to 49% is permitted under the Automatic Route, while foreign investment beyond 49% and up to 74% is permitted under the Approval Route.

The above investment is also subject to the terms and conditions issued by the Ministry of Information & Broadcasting.

Policy on foreign investment in Power Exchanges

Press Note No. 8 (2012 Series) dated 20th September, 2012

Power Exchanges
Press Note No. 8 has inserted a new Paragraph 6.2.26 in the “Circular 1 of 2012 – Consolidated FDI Policy” issued on April 10, 2012 containing the terms and conditions relating to FDI in Power Exchanges. Major terms and conditions are: –

a. The Power Exchange must be registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010.
b. Foreign investment up to 49% is permitted – FDI 26% under Approval Route & FII 23% under Automatic Route.
c. FII purchases must be restricted to secondary markets only.
d. No single non-resident investor/entity, including persons acting in concert, can hold more than 5% of the equity of the Power Exchange Company.

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A.P. (DIR Series) Circular No. 45, dated 15-3-2011 — Introduction of annual return on foreign liabilities and assets reporting by Indian companies and discontinuation of the Part B of Form FC-GPR.

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Presently, Part B of Form FC-GPR containing details of all investments made in the company during a financial year, is required to be submitted by 30th June directly by the company to the Director, Balance of Payment Statistics Division, Department of Statistics and Information Management, Reserve Bank of India, C-9, 8th floor, Bandra-Kurla Complex, Bandra (E), Mumbai-400051, by June 30th of every year.

 However, from this year onwards filing of Part B is being discontinued and in its place a separate ‘Annual Return on Foreign Liabilities and Assets’ is to be submitted by 15th July of every year to the Director, Balance of Payment Statistics Division, Department of Statistics and Information Management (DSIM), Reserve Bank of India, C-9, 8th floor, Bandra-Kurla Complex, Bandra (E), Mumbai-400051. This new return is to be submitted by all the Indian companies which have received FDI and/or made overseas investment (ODI) in the previous year(s) including the current year.

The new Form is given as Annex-I and the concepts and definitions is given as Annex-II to this Circular.

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A.P. (DIR Series) Circular No. 41, dated 11-2-2011 — Deferred Payment Protocols dated 30th April, 1981 and 23rd December, 1985 between Government of India and erstwhile USSR.

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With effect from January 31, 2011 the Rupee value of the special currency basket has been fixed at Rs.64.7004, as against the earlier value of Rs.62.788607.

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A.P. (DIR Series) Circular No. 95, dated 21- 3-2012 —Foreign Exchange Management (Deposit) Regulations, 2000 — Credit to Non- Resident (External) Rupee Accounts.

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Presently, an individual resident in India is permitted borrow up to US $ 250,000 or its equivalent from her/his close relatives outside India. The repayment of the said loan has to be by way of credit to the NRO account of the lender.

This Circular now permits repayment of such loans to be credited to the NRE/Foreign Currency Non- Resident (Bank) [FCNR(B)] account of the lender provided the loan was extended by way of inward remittance in foreign exchange through normal banking channels or by debit to the NRE/FCNR(B) account of the lender and the lender is eligible to open NRE/ FCNR(B) account.

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A. P. (DIR Series) Circular No. 44 dated 12th October, 2012

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Foreign Exchange Management (Deposit) Regulations, 2000 – Loans to Non Residents/third parties against security of Non Resident (External) Rupee Accounts [NR(E)RA]/Foreign Currency Non Resident (Bank) Accounts [FCNR (B)] Deposits

Presently, banks are permitted to grant loans in Indian rupees/foreign currency against NRE/FCNR(B) deposits to the deposit holder/third party up to Rs. 100 lac.

This circular has removed the ceiling of Rs. 100 and provides for grant of loans without any ceiling, subject to appropriate margin requirements. Loans will include all types of fund bases as well as nonfund based facilities. The table reads as follows: –

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Press Note No.9 (2012 Series) dated 3rd October , 2012

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Setting up of step down (operating) subsidiaries by NBFCs having foreign investment above 75% and below 100% and with a minimum capitalisation of US$ 50 million – amendment of paragraph 6.2.24.2 (1) (iv) of ‘Circular 1 of 2012 – Consolidated FDI Policy.

Presently, 100% foreign owned NBFC with a minimum capitalisation of US $ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital.

This circular has relaxed the limit 100% holding and provides that NBFC having foreign investment of more than 75% and a minimum capitalisation of US $ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital.

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A.P. (DIR Series) Circular No. 94, dated 19-3- 2012 — Clarification — Prior intimation to the Reserve Bank of India for raising the aggregate Foreign Institutional Investors/Non- Resident Indian limits for investments under the Portfolio Investment Scheme.

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Presently, Foreign Institutional Investors (FII) and Non-Resident Indians (NRI) are allowed to purchase/ sell shares and convertible debentures of an Indian company (through registered brokers) on recognised stock exchanges in India within the aggregate investment limit of 24 and 10%, respectively, of the paid-up equity capital or value of each series of convertible debentures of the Indian company.

This Circular requires all Indian companies raising the aggregate FII & NRI investment limit to the sectoral cap/statutory limit, to immediately intimate the said increase in limits to RBI along with a Certificate from the Company Secretary stating that all the relevant provisions of FEMA and the Foreign Direct Investment Policy have been complied with.

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