RBI SAYS NO OVERSEAS FDI OR ODI IF OLD LAPSES NOT FIXED

 

RBI SAYS NO OVERSEAS FDI OR ODI IF 

OLD LAPSES NOT FIXED

The RBI  will be cracking down on corporates with unresolved ODI of FDI violations, setting an August 25, 2025 deadline.

NON-RECTIFICATION PAST LAPSES

Companies failing to rectify past lapses face compounding or adjudication before making further foreign financial commitments.

FACE ADJUDICATION BY THE ENFORCEMENT DIRECTORATE

In an email sent in late April, the RBI instructed bank compliance heads to notify all corporate clients that failure to rectify past lapses by August 25, 2025, would require them to either undergo the compounding process or face adjudication by the Enforcement Directorate before making any further foreign financial commitments, according to banking industry sources.

WHAT ARE THE UNREPORTED  ODIs

·      Incorporating an offshore subsidiary company

·      Acquiring a stake in an unlisted foreign company

·      Acquiring in excess of 10% of any foreign listed company

·      Extending loans  or guarantee to a foreign company

At present  an company Indian company can invest as ODI 4 times of its net-worth.

Contraventions pertain to a company’s failure to disclose financial details of earlier ODIs either inadvertently or due to lack compliance.

Now companies have to rectify past lapses by August 25, 2025 else they can not make any further ODI investments.

R V Seckar FCS , LLB 79047 19295

RBI CAPS FEMA VIOLATION PENALTY AT RS 2 LAKH TO SIMPLIFY COMPLIANCE BURDEN

 RBI CAPS FEMA VIOLATION PENALTY AT

 RS2 LAKH TO SIMPLIFY COMPLIANCE

 BURDEN

 RBI CAPS FEMA VIOLATION PENALTY AT RS 2 LAKH TO SIMPLIFY COMPLIANCE BURDEN

PENALTY FOR FEMA VIOLATIONS NOW

 CAPPED -RBI

RBI has capped the penalty amount for FEMA violations to Rs 2 lakh, down from a percentage of the amount of violations earlier in an easing of regulations. Violations including

·       use of liberalised remittance scheme (LRS) proceeds not reinvested within 180 days,

·       exports not made within one year of advance receipt

·       and gifting high value shares without RBI permission will now be penalised to a maximum of Rs 2 lakhs versus 0.30% to 0.75% of the violation amount earlier.

AMENDMENT TO MASTER CIRCULAR BY RBI

The changes were made in the master directions on FEMA by RBI on Thursday. “…based on the nature of contravention, exceptional circumstances/ facts involved in case, and in wider public interest, the maximum compounding amount imposed may be capped at Rs 2 lakh for contravention of each regulation/ rule (applied in a compounding application)…” RBi said.

FEMA rules prevents for example

·       Foreign property to be bought on a mortgage abroad,

·       Overseas direct investment (ODI) sale without a valuation report

·       or ODI sale proceeds not repatriated within 90 days,

·        resident Indians gifting high value shares to non-resident relatives without RBI permission

·       and agricultural property purchases by NRIs.

“Rationalization of the penalty amount would significantly ease the burden on individuals and corporations involved in high-value contraventions.

Key Highlights of the New FEMA Penalty Framework

Penalty Cap: The maximum penalty for any FEMA contravention has been capped at ₹2 lakh.

Reporting Contraventions: For reporting-related violations, such as non-submission or delayed submission of forms like FCGPR, FLA Returns, or APR, the penalty structure is as follows:

Fixed Amount: ₹10,000 per contravention.

Variable Amount: Calculated based on the amount involved and the duration of the contravention.

Ceiling: The total penalty is subject to a ceiling of ₹2 lakh.

Project Offices: For Project Offices, the penalty is calculated at 10% of the total project cost.

Non-Reporting Contraventions: For other violations, such as non-allotment of shares or contraventions by Liaison Offices (LO), Branch Offices (BO), or Project Offices (PO), the penalty includes:

Fixed Amount: ₹30,000 per contravention.

Variable Amount: A percentage of the amount under contravention, varying based on the duration of the contravention.

Ceiling: The total penalty is subject to a ceiling of ₹2 lakh.

Benefits of the Revised Framework

Simplified Compliance: The cap on penalties reduces the financial uncertainty for businesses, making it easier to comply with FEMA regulations.

Encouragement for Voluntary Compliance: The predictable penalty structure encourages businesses to voluntarily rectify violations without prolonged litigation.

Streamlined Procedures: The revised framework aims to expedite the compounding process, reducing administrative delays.

These changes are part of the government's broader initiative to ease the compliance burden on businesses and promote a more investor-friendly environment.

If you require assistance in calculating potential penalties for specific contraventions or need guidance on the compounding process, feel free to ask.

Courtesy: ECONOMIC TIMES

R V SECKAR FCS,LLB 79047 19295