ECB UNDER APPROVAL ROUTE FOR WORKING CAPITAL PURPOSES FOR AVIATION SECTOR

 As per the extant guidelines, availing of ECB for working capital is not a permissible end-use. On a review of the policy related to ECB and keeping in view the announcement made in the Union Budget for the Year 2012-13, it has been decided to allow ECB for working capital as a permissible end-use for the civil aviation sector, under the approval route, subject to the following conditions:
Airline companies registered under the Companies Act, 1956 and possessing scheduled operator permit license from DGCA for passenger transportation are eligible to avail of ECB for working capital;

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

The ECB for working capital should be raised within 12 months from the date of issue of the circular;

The ECB can be raised with a minimum average maturity period of three years; and

The overall ECB ceiling for the entire civil aviation sector would be USD one billion and the maximum permissible ECB that can be availed by an individual airline company will be USD 300 million. This limit can be utilized for working capital as well as refinancing of the outstanding working capital Rupee loan(s) availed of from the domestic banking system. Airline companies desirous of availing of such ECBs for refinancing their working capital Rupee loans may submit the necessary certification from the domestic lender/s regarding the outstanding Rupee loan/s.

3. ECB availed for working capital/refinancing of working capital as above will not be allowed to be rolled over.

4. The application for such ECB should be accompanied by a certificate from a chartered accountant confirming the requirement of the working capital loan and the projected foreign exchange cash flows/earnings which would be used for servicing the loan. Authorised Dealer should ensure that the foreign exchange for repayment of ECB is not accessed from Indian markets and the liability is extinguished only out of the foreign exchange earnings of the borrowing company.

REF:RBI/2011-12/523-A. P. (DIR Series) Circular No. 113 dated April 24, 2012

RAISING OF FRESH ECB TO LIQUIDATE THE EXISTING ECB -UNDER APPROVAL ROUTE NOW

Due to interest savings and to avail more finance , now , Indian companies are allwed to raise fresh ECB's to repay the existing ECBs.

As per the extant guidelines, existing ECB may be refinanced by raising a fresh ECB, subject to the condition that the fresh ECB is raised at a lower all-in-cost.

3. On a review, it has been decided that the borrowers desirous of refinancing/rescheduling an existing ECB can raise fresh ECB at a higher all-in-cost under the approval route subject to the condition that the enhanced all-in-cost does not exceed the all-in-cost ceiling prescribed as per the extant guidelines.

Reference RBI Circular RBI/2011-12/520 ----A. P. (DIR Series) Circular No. 112

For any clarification or further information please contact rvsekar2007@gmail.com or 098489115177

ECB for Maintenance and Operation of Toll systems for Roads and Highways under Automatic Route

                   ECB for Maintenance and Operation of Toll systems for Roads and Highways

ECBs would also be allowed for capital expenditure under the automatic route for the purpose of maintenance and operations of toll systems for roads and highways provided they form part of the original project.






All other aspects of the ECB policy, such as, maximum permissible limit under the automatic route, eligible borrower, recognised lender, average maturity, all-in-cost, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged.

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

For more clarification and details  , please contact rvseckar2007@gmail.com or 09848915177

Regards

R.V.Seckar

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

For any clarifications or further informations, please contact at rvsekar2007@gmail.com or 09848915177

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.

For any assitance or clarification please feel free to call  09848915177 or mail to rvsekar2007@gmail.com.

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