Remittance of assets( savings ) by foreign nationals- Opening and Operation of NRO Accounts

1.The foreign nationals employed in India holding valid visas are eligible to maintain resident accounts with an Authorised Dealer Category - I (AD Category-I) bank in India. The AD Category-I banks are required to close the resident accounts of such foreign nationals on their leaving the country and transfer their assets to their accounts maintained abroad.

In this connection, attention of the AD Category-I banks is invited to paragraph 8 of Schedule 3 to the Notification No. FEMA 5 /2000-RB dated 3rd May 2000, viz. Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time, in terms of which when a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment, or for carrying on business or vocation outside India or for any other purpose indicating her / his stay outside India for an uncertain period, her / his existing account should be designated as a Non-Resident (Ordinary) [NRO] Account.

2. The extant instructions have been reviewed so as to facilitate the foreign nationals to collect their pending dues in India. AD Category-I banks may, therefore, permit such foreign nationals to re-designate their resident account maintained in India as NRO account on leaving the country after their employment to enable them to receive their pending bonafide dues, subject to the following conditions:

a) AD Category-I bank should obtain the full details from the account holder about his legitimate dues expected to be received into his account.

b) AD Category-I bank has to satisfy itself as regards the credit of amounts which have to be bonafide dues of the account holder when she / he was a resident in India.

c) The funds credited to the NRO account should be repatriated abroad immediately, subject to the AD Category-I bank satisfying itself regarding the payment of the applicable Income tax and other taxes in India.

d) The amount repatriated abroad should not exceed USD one million per financial year.

e) The debit to the account should be only for the purpose of repatriation to the account holder’s account maintained abroad.

f) There should not be any other inflow / credit to this account other than that mentioned at point (a) above

Reference -RBI/2010-11/ 560   A.P. (DIR Series) Circular No.70  dated June 9, 2011

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Issue of guarantee by an Indian Party to step down subsidiary of JV /WOS under general permission

Issue of guarantee by an Indian Party to step down subsidiary of JV /WOS under general permission

(a) Currently Indian Parties are permitted to issue corporate guarantees on behalf of their first level step down operating JV /WOS set up by their JV /WOS operating as a Special Purpose Vehicle (SPV) under the Automatic Route, subject to the condition that the financial commitment of the Indian Party is within the extant limit for overseas direct investment. As a measure of further liberalization, it has been decided that irrespective of whether the direct subsidiary is an operating company or a SPV, the Indian promoter entity may extend corporate guarantee on behalf of the first generation step down operating company under the Automatic Route, within the prevailing limit for overseas direct investment. Such guarantees will have to be reported to the Reserve Bank in Form ODI, as hitherto, through the designated AD concerned.

(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 per cent or more stake in the overseas subsidiary for which such guarantee is intended to be issued.

Disinvestment by the Indian Parties of their stake in an overseas JV/WOS involving write-off

Disinvestment by the Indian Parties of their stake in an overseas JV/WOS involving write-off

(a) Currently, in terms of Regulation 16 of the Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time, all disinvestment involving ‘write off’, i.e., where the amount repatriated on disinvestment is less than the amount of original investment, need prior approval of the Reserve Bank. In terms of A.P. (DIR Series) Circular No. 29 dated March 27, 2006 it was decided to allow the under-noted categories of disinvestment under the Automatic Route without prior approval of the Reserve Bank, subject to the following conditions:

i) In cases where the JV/WOS is listed in the overseas stock exchange;
ii) In cases where the Indian promoter company is listed on a stock exchange in India and has a net worth of not less than Rs.100 crore; and
iii) Where the Indian promoter company is an unlisted company and the investment in the overseas venture does not exceed USD 10 million.

In partial modification of the above, it has now been decided to include listed Indian promoter companies with net worth of less than Rs.100 crore and investment in an overseas JV/WOS not exceeding USD 10 million, for disinvestment under the Automatic Route with the requirement that the Indian Party shall report the disinvestment through its designated AD Category I bank within 30 days from the date of disinvestment.

(b) It is also clarified that disinvestment cases falling under the Automatic Route would also include cases where the amount repatriated after disinvestment is less than the original amount invested, provided the corporate falls under the above mentioned categories.