ECB for repayment of outstanding Rupee loan(s) availed of from the domestic banking system and / or for fresh Rupee capital expenditure under the Approval Route for Indian Companies who have foreign WOS , JV

ECB for repayment of outstanding Rupee loan(s) availed of from the domestic banking system and / or for fresh Rupee capital expenditure under the Approval Route for Indian Companies who have foreign WOS , JV

As per the extant guidelines, Indian companies in the manufacturing, infrastructure sector (as defined under the extant ECB policy) and hotel sector, which are consistent foreign exchange earners, are allowed to avail of ECB for repayment of outstanding Rupee loan(s) availed of from the domestic banking system and / or for fresh Rupee capital expenditure under the Approval Route.

On a review, it has been decided to extend the benefit of USD 10 billion scheme to Indian companies in the aforesaid sectors which have established Joint Venture (JV) / Wholly Owned Subsidiary (WOS) / have acquired assets overseas in compliance with extant regulations under FEMA, 1999 subject to the conditions as under:

(a) ECB can be availed of for repayment of all term loans having average residual maturity of 5 years and above / credit facilities availed of by Indian companies from domestic banks for overseas investment in JV/WOS, in addition to ‘Capital Expenditure’;

(b) ECB can be availed of within the scheme based on the higher of 75 per cent of the average foreign exchange earnings realized during the past three financial years and / or 75 per cent of the assessment made about the average of foreign exchange earnings potential for the next three financial years of the Indian companies from the JV / WOS / assets abroad as certified by Statutory Auditors / Chartered Accountant / Certified Public Accountant / Category I Merchant Banker registered with SEBI / an Investment Banker outside India registered with the appropriate regulatory authority in the host country;

(c) ECB availed of under the scheme will have to be repaid out of forex earnings from the overseas JV / WOS / assets. 

The past earnings in the form of dividend/repatriated profit/ other forex inflows like royalty, technical know-how, fee, etc from overseas JV/WOS/assets will be reckoned as foreign exchange earnings for the purpose of US$ 10 billion scheme.

Ref-A.P. (DIR Series) Circular No.12 dated 15 July 2013

VARIOUS MASTER CIRCULARS ISSUED BY RBI ON 1st JULY 2013

VARIOUS MASTER CIRCULARS ISSUED BY RBI ON 1st JULY 2013

Dear Friends,

RBI , today , has updated its various master circulars and the same is given under for your reference:

11.       Master Circular on Miscellaneous Remittances from India – Facilities for Residents

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8122&Mode=0

2.       Master Circular on Foreign Investment in India- (FDI)

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8104&Mode=0

3.       Master Circular on Import of Goods and Services

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8103&Mode=0

4. Master Circular on Exports of Goods and Services

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8102&Mode=0

5.Master Circular on External Commercial Borrowings and Trade Credits

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8101&Mode=0

6. Master Circular on Direct Investment by Residents in Joint Venture (JV) /Wholly Owned Subsidiary (WOS) Abroad

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8100&Mode=0

7. Master Circular on Compounding of Contraventions under FEMA, 1999

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8098&Mode=0

8. Master Circular on Establishment of Liaison / Branch / Project Offices in India by Foreign Entities

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8097&Mode=0

9. Master Circular on Remittance Facilities for Non-Resident Indians / Persons of Indian Origin / Foreign Nationals

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8096&Mode=0

10. Master Circular on Acquisition and Transfer of Immovable Property in India by NRIs/PIOs/Foreign Nationals of Non-Indian Origin

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8095&Mode=0

All About Investment by an Indian Company in its Foreign JV OR WOS

How much an Indian Company can invest in the shares of a foreign company? How much an Indian Resident can invest in shares of a foreign company?

As per RBI Master Circular No.05/2010-11 dated July 01, 2010, in terms of Regulation 6 of the Notification, an Indian party has been permitted to make investment in overseas Joint Ventures (JV) / Wholly Owned Subsidiaries (WOS), not exceeding 100 per cent of the net worth of the Indian party, i.e. a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act, 1932, making investment in a JV/WOS abroad and includes any other entity in India excluding individuals as may be notified by the Reserve Bank as on the date of the last audited balance sheet.

How much it can invest ?

Under automatic route , up-to 100% net worth of investing company in its foreign subsidiary or JV Company.
Financial commitment means the amount of direct investment outside India by way of contribution to equity and loans and 100% of the amount of guarantee issued by an Indian Party to or on behalf of its overseas Holding company.

Payment should be routed through your authorised dealer (banker).

No prior registration with the Reserve Bank is necessary for making direct investments under the automatic route. After the report of the first remittance/investment in form ODI is received by the Reserve Bank, from the designated Authorized Dealer, an Identification Number for that particular JV/WOS will be issued for the purpose of taking on record the overseas direct investment with the objective of maintaining a database for monitoring the outflows/inflows in respect of the overseas entities. Subsequent investments in the same project can be made only after allotment of the Identification Number.

Loans can be made by a subsidiary to foreign holding company and Form ODI has to be submitted to Authorised dealer. Under FEMA , investment in equity , lending loan and extending guarantee will all fall under ODI.

A subsidiary can make direct investment outside India by way of contribution to equity and loans and 100% of the amount of guarantee issued by an Indian Party to or on behalf of its overseas Holding company.
However , the holding company cannot make further investment in the subsidiary if it is making a loan to the holding company..

Can an Indian Company invest in shares of a Foreign Company where there is no JV or WOS?

Yes. As per RBI guidelines , if there is no JV or WOS , an Indian companies can invest up to 50 % of their net worth as on the date of the last audited Balance Sheet in overseas companies, listed on a recognized stock exchange, or by way of rated debt securities issued by such companies.

If the investing company is an Indian  company , then it can invest in any foreign listed company up to 50% of its net worth under automatic route else it has get the prior approval from RBI if it wants to invest in unlisted foreign company , or if the Indian company is not a listed company.

Can proceeds raised through ECB are allowed to invest in Equity shares of JV or WOS in abroad?


ECB proceeds can be utilised for overseas direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) subject to the existing guidelines on Indian Direct Investment in JV/WOS abroad.