CHANGE IN THE WORKING OF ISSUE PRICE FOR THE ALLOTMENT OR TRANSFER OF UNLISTED COMPANIES FOR FDIs UNDER FEMA

CHANGE IN THE WORKING OF ISSUE PRICE FOR THE ALLOTMENT  OR TRANSFER OF UNLISTED COMPANIES FOR FDIs  UNDER FEMA 

The extant pricing guidelines in respect of transfer/issue of shares and for exit from investment in equity shares with or without optionality clauses of listed/unlisted Indian companies have since been reviewed so as to provide greater freedom and flexibility to the parties concerned under the FDI framework. The new pricing guidelines shall be as under:

(i) In case of listed companies

(a) The issue and transfer of shares including compulsorily convertible preference shares and compulsorily convertible debentures shall be as per the SEBI guidelines;

(b) The pricing guidelines for FDI instruments with optionality clauses shall continue to be in accordance with A.P. (DIR Series) Circular No. 86 dated January 9, 2014, i.e., the non-resident investor shall be eligible to exit at the market price prevailing on the recognised stock exchanges subject to lock-in period as stipulated, without any assured return.

(ii) In case of unlisted companies

The issue and transfer of shares including compulsorily convertible preference shares and compulsorily convertible debentures with or without optionality clauses shall be at a price worked out as per any internationally accepted pricing methodology on arm’s length basis. Thus, the guiding principle will be that the non-resident investor is not guaranteed any assured exit price at the time of making such investment/agreement and shall exit at a fair price computed as above at the time of exit subject to lock-in period requirement as applicable in terms of A.P. (DIR Series) Circular No. 86 dated January 9, 2014.

4. The changes in the existing pricing guidelines for FDI applicable to transfer/issue of shares and for exit from foreign direct investment with optionality clauses for the unlisted Indian companies are given in the Annex 1 and Annex 2 respectively.

5. An Indian company taking on record in its books any transfer of its shares or convertible debenture by way of sale from a resident to a non-resident and a non-resident to a resident shall disclose in its balance sheet for the financial year, in which the transaction took place, the details of valuation of share or convertible debentures, the pricing methodology adopted for the same as well as the agency that has given/certified the valuation.


Ref: A. P. (DIR Series) Circular No. 4 July 15, 2014

Liberalised Remittance Scheme (LRS) for resident individuals-Increase in the limit from USD 75,000 to USD 125,000

Liberalised Remittance Scheme (LRS) for resident individuals-Increase in the limit from USD 75,000 to USD 125,000

It was decided vide A.P.(DIR Series) Circular No. 138 dated June 3, 2014, to increase the limit to USD 125,000 per financial year (April-March) from USD 75,000. Accordingly, AD Category –I banks have been allowed to remit up to USD 125,000 per financial year, under the Scheme, for any permitted current or capital account transaction or a combination of both. Further, it is clarified that the Scheme can now be used for acquisition of immovable property outside India.


All other terms and conditions shall remain unchanged.

Ref

A.P. (DIR Series) Circular No.5 dated 17 July 2014

Switching Over to NIC 2008 from NIC 1987 for reporting FC-GPR / FC-TRS purpose- Reporting of FDI -

Foreign Direct Investment –

Reporting under FDI Scheme- Switching Over to NIC  2008 from NIC 1987 for reporting FC-GPR / FC-TRS purpose

Attention of Authorised Dealers Category-I (AD Category - I) banks is invited to the provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations 2000, notified by the Reserve Bank vide Notification No.FEMA20/2000-RB, dated 3rd May 2000, as amended from time to time.

2. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India has, vide Press Note 4 (2014 Series) dated June 26, 2014 decided to switch over to the National Industrial Classification 2008 (NIC 2008) from the NIC 1987 version, for the purpose of classification of activities under the industrial classification system. In terms of Para 9 (1) B of Schedule I to the FEMA Notification No. 20 dated May 03, 2000 as amended from time to time, Indian companies are required to report the details of the issue of shares, convertible debentures, partly paid shares and warrants in form FC-GPR, to the Regional Office concerned, within 30 days of issue of shares / convertible debentures. In terms of Para 10 of the Schedule ibid, transfer of shares, convertible debentures, partly paid shares and warrants by way of sale from a person resident in India to a person resident outside India or vice versa, are required to be reported by the transferor/transferee resident in India to the AD Bank in form FCTRS, within 60 days from the date of receipt or payment of the amount of consideration. Indian companies are required to report the NIC Codes in the FCGPR and FCTRS forms as per the NIC 2008 version, henceforth.

3. It has also been decided to introduce a uniform State and District code list for reporting of details of foreign direct investment by Indian companies in Form FCGPR. The list can be accessed on the RBI website (www.rbi.org.in → FEMA – State and District Code List).


Ref -A.P. (DIR Series) Circular No. 6 (RBI/2014-15/133) dated 18 July 2014

Modification in the Format of ECB-2 Return

Modification in the Format of ECB-2 Return 

In order to capture details of the financial hedges contracted by corporates, of their foreign currency exposure relating to ECB and their foreign currency earnings and expenditure, the format of ECB-2 Return has been modified (Part-E) and the same has been given in the Annex. The reporting in the modified ECB-2 Return will be applicable from the return of the month April 2014 onwards.

There is no change in the reporting procedure and corporates raising ECB continue to submit ECB-2 Return on a monthly basis duly certified by the designated AD Category-I bank so as to reach Department of Statistics and Information Management (DSIM) of Reserve Bank of India within seven working days from the close of month to which it relates.

You may access the ECB-2 Form by clicking the following link:

http://rbidocs.rbi.org.in/rdocs/content/pdfs/105AP170214_A.pdf

Ref:A. P. (DIR Series) Circular No. 105 dated February 17, 2014

Reporting dates and Due dates for Returns to be submitted by NBFCs

Reporting dates and Due dates for Returns to be submitted by NBFCs

Sr No	Name of the Return	Short Name	Periodicity	Reference Date	Reporting Time	Due on	Purpose	To be submitted by
1.	Quarterly Returns By deposit taking NBFCs (As required by “Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998”.)	NBS1	Quarterly	31st March/ 30th June/ 30th Sept/ 31st Dec	15 days	15th April/ 15th July/ 15th Oct/ 15th Jan	Details of Assets And Liabilities	NBFCs-D
2.	Quarterly  Statement of Capital Funds, Risk Assets etc as required under the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions 2007 By deposit taking NBFCs	NBS2	Quarterly	31st March/ 30th June/ 30th Sept/ 31st Dec	15 days	15th April/ 15th July/ 15th Oct/ 15th Jan	Capital Funds, Risk Assets, Asset Classification etc	NBFCs-D
3.	Quarterly Return on Statutory Liquid Assets as per Section 45 IB of the Act By Deposit Taking NBFCs	NBS3	Quarterly	31st March/ 30th June/ 30th Sept/ 31st Dec	15 days	15th April/ 15th July/ 15th Oct/ 15th Jan	Statutory Liquid Assets	NBFCs-D
4.	Annual Return on Repayment of Deposits by the Rejected Companies holding Public Deposits (The return was subsequently simplified for better response)	NBS4	Annual	March 31	30 days	May 01	Details of Public Deposits, Other Liabilities	NBFCs holding public deposits whose application for Certificate of Registration under Section 45-IA of RBI Act, 1934 have been rejected
5.	Monthly Return on Capital Market Exposure	NBS6	Monthly	As at the end of the month	7days	7th day of next month	Details of Capital Market Exposure	NBFCs-D
6.	Quarterly Return of Capital Funds, Risk-Asset Ratio from NBFCs-ND-SI (Supervisory Return)	NBS7	Quarterly	31st March/ 30th June/ 30th Sept/ 31st Dec	15 days	15th April/ 15th July/ 15th Oct/ 15th Jan	Capital Funds, Risk Assets, Risk Weighted off-balance sheet items (Non-Funded Exposures), Asset Classification etc.	NBFCs-ND-SI
7.	Asset-Liability Management (ALM) Return	ALM	Half yearly	31st March/ 30th Sept	1 month	30th April/ 30th Oct	Structural Liquidity, Short-term dynamic liquidity, Interest Rate sensitivity etc.	NBFCs-D having public deposit of Rs 20 crore and/or asset size of more than Rs. 100 crore
8.	A Statement of short term dynamic liquidity in format ALM -NBS-ALM1	ALM-1	Monthly	As at end of the month	10 days	10th day of next month	Short-term dynamic liquidity	NBFC-ND-SI
9.	Statement of structural liquidity in format ALM – NBS-ALM2	ALM-2	Half yearly	31st March/ 30th Sept	20 days	20th April/ 20th Oct	Structural liquidity	NBFC-ND-SI
10.	Statement of Interest Rate Sensitivity in format ALM-NBS-ALM3.	ALM-3	Half yearly	31st March/ 30th Sept	20 days	20th April/ 20th Oct	Interest Rate sensitivity	NBFC-ND-SI
11.	Monthly Return on Important Financial Parameters of NBFCs not accepting/holding public deposits and having asset size of Rs.100 crore and above	100 Crore NBFCs-ND-SI	Monthly	end of every month	7days	7th of next month	Sources and Application of Funds, Profit and Loss Account,  Asset Classification, Bank's/FIs exposure on the company, Details of Capital Market Exposure, Foreign Sources etc.	NBFC-ND-SI
12.	Quarterly return to be submitted by non-deposit taking NBFCs with asset size of Rs 50 crore and above but less than Rs 100 crore,		Quarterly.	31st March/ 30th June/ 30th Sept/ 31st Dec	within a period of one month from the close of the quarter		Basic information like name of the company, address. NOF, profit / loss during the last  three years
13	Quarterly Return to be submitted by NBFCs having overseas investment		Quarterly.	31st March/ 30th June/ 30th Sept/ 31st Dec	within a period of one month from the close of the quarter		Name of the WOS/JV, Country and date of incorporation Date of NoC from DNBS, Business undertaken	All NBFCs

Various Returns to be Submitted by NBFC TO RBI - COMPLIANCES BY NBFC

VARIOUS RETURNS TO BE FILED BY NBFC - AN Analysis 

NBFCs are required to submit various returns to RBI w.r.t their deposit acceptance, prudential norms compliance, ALM etc. Detailed instructions regarding submission of returns by NBFCs have been issued through various company circulars. A list of such returns to be submitted by NBFCs-D, NBFCs-ND-SI and others is as under:
A. Returns to be submitted by deposit taking NBFCs

1. NBS-1 Quarterly¹ Returns on deposits in First Schedule.²

1. NBS-2 Quarterly³ return on Prudential Norms is required to be submitted by NBFC accepting public deposits.⁴

1. NBS-3 Quarterly return on Liquid Assets  by deposit taking NBFC.⁵

1. NBS-4 Annual return of critical parameters by a rejected company holding public deposits

1. NBS-5 stands withdrawn as submission of NBS 1 has been made quarterly⁶.

1. NBS-6 Monthly return on exposure to capital market by deposit taking NBFC with total assets of Rs 100 crore and above .⁷

1. Half-yearly ALM return by NBFC holding public deposits of more than  Rs.20 crore or asset size of more than Rs. 100 crore.⁸

1. Audited Balance sheet and Auditor’s Report by NBFC accepting public deposits.⁹

B. Returns to be submitted by NBFCs-ND-SI

1. NBS-7 A Quarterly¹⁰ statement of capital funds, risk weighted assets, risk asset ratio etc., for NBFC-ND-SI¹¹

1. Monthly Return on Important Financial Parameters of NBFCs-ND-SI¹²

1. ALM returns:

1. (i) Statement of short term dynamic liquidity in format ALM [NBS-ALM1] -Monthly,

1. (ii) Statement of structural liquidity in format ALM [NBS-ALM2] Half Yearly

1. (iii) Statement of Interest Rate Sensitivity in format ALM -[NBS-ALM3], Half yearly.¹³

C. Quarterly return on important financial parameters of non deposit taking NBFCs having assets of more than Rs.50 crore and above but less than Rs 100 crore
Basic information like name of the company, address, NOF, profit / loss during the last three years has to be submitted quarterly by non-deposit taking NBFCs with asset size between Rs 50 crore and Rs 100 crore.¹⁴D. Other Returns
1. As at the end of March every year, all NBFCs are required to submit an annual certificate duly certified by the Statutory Auditors that the company is engaged in the business of NBFI requiring it to hold the CoR. The certificate shall also indicate the asset / income pattern of the NBFC for making it eligible for classification as AFC, Investment Company, or Loan Company.¹⁵2. An NBFC with FDI has to submit a half yearly ( half year ending March and September) certificate to the effect that it has complied with the minimum capitalisation norms and that its activities are restricted to the activities prescribed under FEMA.¹⁶3. ¹⁷With regard to overseas investment a Quarterly Return is to be submitted by all NBFCs to the Regional Office of DNBS and also Department of Statistics and Information Management (DSIM)

Ref:DNBS.PD.CC.No.335/03.10.042/2013-14 1st July 2013

Foreign Direct Investment (FDI) into a Small Scale Industrial Undertakings (SSI) / Micro & Small Enterprises (MSE) and in Industrial Undertaking manufacturing items reserved for SSI/MSE

Foreign Direct Investment (FDI) into a Small Scale Industrial Undertakings (SSI) / Micro & Small Enterprises (MSE) and in Industrial Undertaking manufacturing items reserved for SSI/MSE

Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to Schedule 1 of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified by the Reserve Bank vide Notification No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time. 

2. In terms of the Schedule 1 of the Notification, ibid, an Indian company which is a small scale industrial unit and which is not engaged in any activity or in manufacture of items included in Annex A, may issue shares or convertible debentures to a person resident outside India, to the extent of 24% of its paid -up capital provided that such company may issue shares in excess of 24% of its capital if:
(a) it has given up its small scale status,
(b) it is not engaged or does not propose to engage in manufacture of items reserved for small scale sector, and
(c) it complies with the ceilings specified in Annex B to Schedule I of the Notification.
3. With the promulgation of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, the extant policy for foreign direct investment (FDI) in Small Scale Industrial unit and in a company which has de-registered its small scale industry status and is not engaged or does not propose to engage in manufacture of items reserved for small scale sector, has since been reviewed and it has been decided that;

1. a company which is reckoned as Micro and Small Enterprises (MSE) (earlier Small Scale Industries) in terms of MSMED Act, 2006 and not engaged in any activity/sector mentioned in Annex A to schedule 1 to the Notification, ibid may issue shares or convertible debentures to a person resident outside India, subject to the limits prescribed in Annex B to schedule 1, in accordance with the entry routes specified therein and the provision of Foreign Direct Investment Policy, as notified by the Ministry of Commerce & Industry, Government of India, from time to time.
2. any Industrial undertaking, with or without FDI, which is not an MSE, having an industrial license under the provisions of the Industries (Development & Regulation) Act, 1951 for manufacturing items reserved for manufacture in the MSE sector may issue shares in excess of 24 per cent of its paid up capital with prior approval of the Foreign Investment Promotion Board of the Government of India.

4. Further, in terms of the provisions of MSMED Act, (i) in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951, a micro enterprise means where the investment in plant and machinery does not exceed twenty five lakh rupees; a small enterprise means where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees; (ii) in the case of the enterprises engaged in providing or rendering services, a micro enterprise means where the investment in equipment does not exceed ten lakh rupees; a small enterprise means where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees.
5. Copy of Press Note No. 6(2009) dated September 4, 2009 issued by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India in this regard is enclosed.