RUPEE LOAN REFINACNE IN POWER SECTOR UP TO 40% OF ECB PROCEEDS CAN USED UNDER APPROVAL ROUTE

Refinance of 40% of  Rupee Loan under Approal Route Through ECB Raised

Approval Route - ECB - Refinance of Rupee loan availed in India - for Power Sector





Earlier , Power sector was allowed up to 25% to refinance the Rupee loan availed India out of ECB proceeds availed . Now , it is allowed to raise upto 40% under Approval Route.

Indian companies in the power sector will be allowed to utilise 40 per cent of the fresh ECB raised towards refinancing of the Rupee loan/s availed by them from the domestic banking system, under the approval route, subject to the condition that at least 60 per cent of the fresh ECB proposed to be raised should be utilised for fresh capital expenditure for infrastructure project(s). All other terms and conditions relating to refinancing of Rupee loans mentioned in A.P. (DIR Series) Circular No. 25 dated September 23, 2011 remain unchanged.

RBI/2011-12/519- A. P. (DIR Series) Circular No. 111 dated April 20, 2012

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FEMA VIOLATIONS - PROSECUTION BY the DIRECTORATE OF ENFORCEMENT

FEMA Violations

The Foreign Exchange Management  Act, 1999 is a civil act in nature as such there is no provision for launching the prosecutions.  During the last three years i.e. 2009-10,2010-11 and 2011-12 (upto July 2011) , the Directorate of  Enforcement has issued 990 Show Cause Notices to various persons/firms under Foreign Exchange Management Act,1999 (FEMA), for initiating the adjudication proceedings.  The Zone-wise details of the Show Cause Notices issued during the last three years is as under: -

ZONE                                                                Number of Show Cause Notices Issued
AHAMADABAD                                                           39
BANGALORE                                                               62
CHANDIGARH                                                           102
CHENNAI                                                                    163
COCHIN                                                                       241
DELHI                                                                            20
HYDERABAD                                                               55
LUCKNOW                                                                   92
KOLKATA                                                                    84
MUMBAI                                                                      13
 From the above, we can understand that the Cochin leads in FEMA violations whereas Mumbai is the least infringer.
Press Information Bureau dated September 2, 2011.

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OPENING OF FOREIGN CURRENCY ACCOUNT BY A PARENT COMPANY TO INVEST IN ITS OVERSEAS SUBSIDIARY

An Indian party will now be allowed to open, hold and maintain Foreign Currency Account (FCA) abroad for the purpose of overseas direct investments subject to the following terms and conditions:
The Indian party is eligible for overseas direct investments in terms of Regulation 6 (Regulation 7, if applicable) of Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time.

The host country Regulations stipulate that the investments into the country is required to be routed through a designated account.

FCA shall be opened, held and maintained as per the regulation of the host country.

The remittances sent to the FCA by the Indian party should be utilized only for making overseas direct investment into the JV / WOS abroad.

Any amount received in the account by way of dividend and / or other entitlements from the subsidiary shall be repatriated to India within 30 days from the date of credit.

The Indian party should submit the details of debits and credits in the FCA on yearly basis to the designated AD bank with a certificate from the Statutory Auditors of the Indian party certifying that the FCA was maintained as per the host country laws and the extant FEMA regulations / provisions as applicable.

The FCA so opened shall be closed immediately or within 30 days from the date of disinvestment from JV / WOS or cessation thereof.

Ref Circular - RBI/2011-12/481-A. P. (DIR Series) Circular No.101 dated April 02, 2012

As per the extant Regulation 22(2) of the Notification ibid, General permission has been granted to a resident individual to purchase equity shares offered by a foreign company under its ESOP Schemes, if he is an employee, or, a Director of an Indian office or branch of a foreign company, or, of a subsidiary in India of a foreign company, or, an Indian company in which foreign equity holding, either direct or through a holding company/Special Purpose Vehicle (SPV), is not less than 51 per cent.

Accordingly, AD Category – I banks are permitted to allow remittances for purchase of shares by eligible persons under this provision irrespective of the method of operationalisation of the scheme i.e. where the shares under the scheme are offered directly by the issuing company or indirectly through a trust / a Special Purpose Vehicle (SPV) / step down subsidiary, provided:

   1. The company issuing the shares effectively, directly or indirectly, holds in the Indian company, whose employees / directors are being offered shares, not less than 51 per cent of its equity,

   2.The shares under the ESOP Scheme are offered by the issuing company globally on a uniform basis, and

   3.An Annual Return is submitted by the Indian company to the Reserve Bank through the AD Category – I bank giving details of remittances / beneficiaries, etc.

It has now been decided that resident employees or Directors may be permitted to accept shares offered under an ESOP Scheme globally, on uniform basis, in a foreign company irrespective of the percentage of the direct or indirect equity stake in the Indian company subject to:

   1.The shares under the ESOP Scheme are offered by the issuing company globally on a uniform basis, and

   2.an Annual Return is submitted by the Indian company to the Reserve Bank through the AD Category – I bank giving details of remittances / beneficiaries, etc.


Circular - RBI/2011-12/474A. P. (DIR Series) Circular No.97 dated 28 March 2012

NO PRIOR APPROVAL FROM RBI IS NEEDED FOR FOR ACQUISITION OF SHARES OF A FOREIGN COMPANY FOR PROFESSIONAL SERVICES RENDERED ABROAD

Presently, Regulation 20 of the Notification ibid prescribes that a Resident individual may apply to the Reserve Bank for permission to acquire shares in a foreign entity offered as consideration for professional services rendered to the foreign entity and the Reserve Bank may, after taking into account certain factors, grant permission subject to such terms and conditions as are considered necessary.

It has been decided to grant General Permission to the resident individuals to acquire shares of a foreign entity in part / full consideration of professional services rendered to the foreign company or in lieu of Director’s remuneration. The limit of acquiring such shares in terms of value shall be within the overall ceiling prescribed for the resident individuals under the Liberalized Remittance Scheme (LRS) in force at the time of acquisition.

Reference :
RBI/2011-12/474-A. P. (DIR Series) Circular No.97 dated March 28, 2012

Prior intimation is needed to the Reserve Bank of India for raising the aggregate Foreign Institutional Investors / Non-Resident Indian limits for investments under the Portfolio Investment Scheme

 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 (PMS)



As of now ,registered Foreign Institutional Investors (FII) and Non-Resident Indians (NRI) are allowed to purchase/sale shares and convertible debentures of an Indian company (through registered brokers) on recognized stock exchanges in India subject to, inter-alia, aggregate investment limit of 24 per cent and 10 per cent, respectively, of the paid up equity capital or value of each series of convertible debentures of the Indian company.

. It is hereby clarified that the Indian company raising the aggregate FII investment limit of 24 per cent to the sectoral cap/ statutory limit, as applicable to the respective Indian company or raising the aggregate NRI investment limit of 10 per cent to 24 per cent, should necessarily intimate the same to the Reserve Bank of India, immediately, as hitherto, along with a Certificate from the Company Secretary stating that all the relevant provisions of the extant Foreign Exchange Management Act, 1999 regulations and the Foreign Direct Policy, as amended from time to time, have been complied with.
3. It may also be noted that the Reserve Bank of India monitors the ceilings on FII/ NRI/ PIO investments in Indian companies on a daily basis. For effective monitoring of foreign investment ceiling limits, the Reserve Bank has fixed cut-off points that are two percentage points lower than the actual ceilings. Once the aggregate net purchases of equity shares of the company by FIIs/NRIs/PIOs reaches the cut-off point of 2 per cent below the overall limit, the Reserve Bank cautions all the designated bank branches not to purchase any more equity shares of the respective company on behalf of any FIIs/ NRIs/ PIOs without prior approval of the Reserve Bank. The link offices are then required to intimate the Reserve Bank about the total number and value of equity shares/ convertible debentures of the company proposed to be bought on behalf of their FIIs /NRIs /PIOs clients. On receipt of such proposals, the Reserve Bank gives clearances on a first-come-first served basis till such investments in companies reaches the respective limits (such as, 10 / 24 / 30 / 40/ 49 per cent limit or the sectoral caps/statutory ceilings), as applicable. On reaching the aggregate ceiling limit, the Reserve Bank advises all designated bank branches to stop purchases on behalf of their FIIs/ NRIs/ PIOs clients. The Reserve Bank also informs the general public about the `caution’ and the `stop purchase’ in these companies through a press release and an updated list regarding the same is placed on the RBI website (www.rbi.org.in).


As per extant provisions, for  raising the limits as mentioned above, board resolution followed by special  resolution is required. After this notification, the companies raising limits  have to arrange a certificate from Company Secretary regarding compliance of  applicable provisions along with plain paper intimation about such increase  in limits.
Ref: RBI/2011-12/453- A.P. (DIR Series) Circular No. 94- March 19, 2012

FORMAT OF APPLICATION UNDER LIBERALISED REMITTANCE SCHEME

Application cum Declaration for purchase of foreign exchange under the
Liberalised Remittance Scheme of USD 75,000  for Resident individuals

(To be completed by the applicant)

I. Details of the applicant
a. Name …………………………..
b. Address…………………………
c. Account No……………………..
d. PAN No………………………….
II. Details of the foreign exchange required
1. Amount (Specify currency)………………………………
2. Purpose ……………………………………………………

III. Source of funds: ………………………………………….

IV. Nature of instrument
Draft………………………..
Direct remittance…………

V. Details of the remittance made under the Scheme in the financial year
(April- March) 20__ – 20__
Date :………………
Amount :………….

VI. Details of the Beneficiary
1. Name ……………………..
2. Address ……………………
3. Country ……………………
4*. Name and address of the bank……………………….
5*. Account No……………………………………………..
(* Required only when the remittance is to be directly credited to the bank account of the beneficiary)

This is to authorize you to debit my account and effect the foreign exchange remittance/ issue a draft as detailed above (strike out whichever is not applicable).

Declaration

I, ………………. …………(Name), hereby declare that the total amount of foreign exchange purchased from or remitted through, all sources in India during the financial year as per item No. V of the Application, including utilisation of the said limit on account of loan extended or gift made in rupees credited to NRO account of non-resident close relative(s), is within the limit of USD 200,000/- (US Dollar Two hundred thousand only), which is the limit prescribed by the Reserve Bank for the purpose and certify that the source of funds for making the said remittance belongs to me and will not be used for prohibited purposes.

Signature of the applicant

(Name)

Signature of the natural guardian of the applicant @

(Name)

@ Where the applicant is minor, the application should be countersigned by minor’s natural guardian

Certificate by the Authorised Dealer

This is to certify that the remittance is not being made by/ to ineligible entities and that the remittance is in conformity with the instructions issued by the Reserve Bank from time to time under the Scheme.

Name and designation of the authorised official:

Place:

Signature:

Date:

Stamp and Seal

RBI/2011-12/430                A.P. (DIR Series) Circular No. 90 DATED March 06, 2012-

Transfer of assets of Liaison / Branch Office to subsidiaries or other Liaison Office / Branch Office or any other entity is permitted only with the specific approval of the Central Office of the Foreign Exchange Department, Reserve Bank of India

 Transfer of assets of Liaison / Branch Office to subsidiaries or other Liaison Office / Branch Office  or any other entity is permitted only with the specific approval of the Central Office of the Foreign Exchange Department Reserve Bank of India.

Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to A.P. (DIR Series) Circular No.24 dated December 30, 2009 in terms of which powers have been delegated to the AD Category-I bank regarding submission of Annual Activity Certificate by BO / LOs, extension of the validity period of LOs and closure of BO / LOs of foreign entities in India.

2. In the A.P. (DIR Series) Circular mentioned above, powers as regards the transfer of assets of LO / BO to others have not been delegated. It is, therefore, clarified that transfer of assets of Liaison / Branch Office to subsidiaries or other LO / BO or any other entity is permitted only with the specific approval of the Central Office of the Foreign Exchange Department, Reserve Bank of India.

Ref- RBI/2011-12/421- A.P. (DIR Series) Circular No.88 dated 1 March 2012

REPORTING OF CHANGE OF INFORMATION BY A BRANCH OFFICE OF A FOREING COMPANY TO MINISTRY OF CORPORATE AFFAIRS (MCA)

WHAT FORM IS TO BE SUBMITTED TO BRANCH OFFICE OF A FOREING COMPANY IN INDIA TO MINISTRY OF CORPORATE AFFAIRS (MCA).

A foreign company can change its information by filing Form 49 and Form 52.
Form 49 is required when there is -

• Alteration in the charter, statute or memorandum and articles of association,
• Alteration in Address of the registered or principal office
• Alteration in directors and secretary of a foreign company.

Similarly, Form 52 is required to give notice in case of -

(A) Alteration in names and addresses of persons resident in India authorized to accept service on behalf of a foreign company (B) Alteration in the address of principal place of business in India of a foreign company (C) Annual accounts and list of places of business established in India by a foreign company (D) Cessation to have a place of business in India.

Release of Foreign Exchange for Imports – Further Liberalisation- up to USD 5000 under Automatic Route without Form A-1

Release of Foreign Exchange for Imports – Further Liberalisationup to USD 5000 under Automatic Route without Form A-1

Attention of all the Authorised Dealers (ADs) in foreign exchange is invited to the A.P.(DIR Series) Circular No. 106 dated June 19, 2003 in terms of which applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent towards imports into India must be made in Form A-1.

2. Based on suggestions received from the various stake holders, the said limit has been reviewed and it has been decided as a measure of liberalization to raise the above limit for foreign exchange remittance towards imports without any documentation formalities, from USD 500 or its equivalent to USD 5000 or its equivalent, with immediate effect.

3. It is clarified that the ADs need not obtain any document, including Form A-1, except a simple letter from the applicant containing the basic information viz., the name and the address of the applicant, name and address of the beneficiary, amount to be remitted and the purpose of remittance, as long as the exchange being purchased is for a current account transaction (and is not included in the Schedules I and II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 framed by Government of India vide Notification No. G.S.R.381 (E) dated May 3, 2000, as amended from time to time, the amount does not exceed USD 5000 or its equivalent and the payment is made by a cheque drawn on the applicant's bank account or by a Demand Draft.

4. Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers concerned.

5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Ref- RBI/2011-12/404--A.P. (DIR Series) Circular No. 82-----February 21, 2012