Wednesday, July 13, 2011

Investment through Special Purpose Vehicle (SPV) under RBI Automatic Route

Investment through  SPV in UAE or other foreign countries under RBI automatic route

Investment through Special Purpose Vehicle (SPV) under RBI Automatic Route

(i) Investments in JV/WOS abroad by Indian parties through the medium of a Special Purpose Vehicle (SPV) are also permitted under the Automatic Route in terms of Regulation 6 of the Notification, subject to the conditions that the Indian party is not included in the Reserve Bank's caution list or is under investigation by the Directorate of Enforcement or included in the list of defaulters to the banking system circulated by the Reserve Bank/any other Credit Information company as approved by the Reserve Bank. Indian parties whose names appear in the Defaulters' list require prior approval of the Reserve Bank for the investment.

(ii) Setting up of an SPV under the Automatic Route is permitted for the purpose of making a investment in JV/WOS overseas.

Regulation 6
(1) Subject to the conditions specified in sub-regulation (2), (and Regulation 7 in case investment in financial services sector) an Indian party may make direct investment in a Joint Venture or Wholly Owned Subsidiary outside India.

(2) (i) The total financial commitment of the Indian party in Joint Ventures/Wholly Owned Subsidiaries shall not exceed 400% of the net worth of the Indian Party as on the date of the last audited balance sheet;
Explanation: - For the purpose of the limit of 100% of the net worth the following shall be reckoned, namely:
(a) cash remittance by market purchase and /or equivalent rupee investments in case of Nepal and Bhutan
(b) capitalisation of export proceeds and other dues and entitlements as mentioned in Regulation 11;
(c) fifty per cent of the value of guarantees issued by the Indian party to or on behalf of the joint venture company or wholly owned subsidiary.
(d) investment in agricultural operations through overseas offices or directly
(e) External Commercial Borrowing in conformity with other parameters of the ECB guidelines
Notwithstanding anything contained in these Regulations investment in Pakistan shall not be permitted.

(ii) The direct investment is made in an overseas JV or WOS engaged in a bonafide business activity.
(iii) The Indian Party is not on the Reserve Bank’s Exporters caution list /list of defaulters to the banking system circulated by the Reserve Bank or under investigation by any investigation /enforcement agency or regulatory body.
(iv) The Indian party has submitted up to date returns in form APR in respect of all its overseas investments;
(v) The Indian Party routes all transactions relating to the investment in a Joint Venture/Wholly Owned Subsidiary through only one branch of an authorised dealer to be designated by it.

For any further clarification or assistance, please feel free to contact and 919848915177.
Permission for Direct Investment in certain cases


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