External Commercial Borrowings (ECB) Policy for 2G spectrum allocation

External Commercial Borrowings (ECB) Policy for 2G spectrum allocation

As per the extant policy, eligible borrowers in the telecommunication sector are permitted to avail of ECB for the purpose of payment for spectrum allocation, under the automatic route. Successful bidders of 3G auction were also permitted to make the payment for spectrum allocation initially out of Rupee resources to be refinanced with a long-term ECB under the approval route subject to certain conditions.

3. On a review of the ECB policy and keeping in view the large outlay of funds required to be paid directly to the Government within a limited period of time, the following relaxations are provided for the 2G spectrum auction:-

(i) Refinancing of Rupee resources

The successful bidders making the upfront payment for the award of 2G spectrum initially out of Rupee loans availed of from the domestic lenders would be eligible to refinance such Rupee loans with a long-term ECB, under the automatic route, subject to the following conditions:

1. the long term ECB shall be raised within a period of 18 months from the date of sanction of such Rupee loans for the stated purpose from the domestic lenders;
2. the designated AD Category I bank has evidenced the payment of upfront fees to GoI in the form of a receipt/challan from DoT; and
3. the designated AD - Category I bank shall monitor the end-use of funds.

(ii) Relaxation in ECB-liability ratio and percentage of shareholding

The successful bidders in the 2G auction will be allowed to avail of ECB under the ‘automatic route’ from their ultimate parent company without any maximum ECB liability-equity ratio subject to the condition that the lender holds minimum paid-up equity of 25 per cent in the borrower company, either directly or indirectly.

(iii) Bridge Finance facility

The successful bidders can avail of short term foreign currency loan in the nature of bridge finance under the ‘automatic route’ for the purpose of making upfront payment towards 2G spectrum allocation and replace the same with a long term ECB under the automatic route subject to the following conditions:-

1. the long term ECB is raised within a period of 18 months from the date of drawdown of bridge finance; and
2. the long term ECB is in compliance with all the extant guidelines on ECB.

4.The relaxations in respect of the ECB liability-equity ratio, percentage of shareholding by the ultimate parent, refinancing of Rupee loans and bridge finance are part of a special dispensation applicable only to the successful bidders in the upcoming 2G spectrum auction.

5. All other aspects of ECB policy, such as USD 750 million limit per company per financial year under the automatic route, eligible borrower, recognised lender, end-use, average maturity period, all-in-cost, prepayment, refinancing of existing ECB and reporting arrangements remain unchanged.

6. Reserve Bank has since amended the Regulations and notified vide Notification No.245 / 2012 RB dated November 12, 2012.


A.P. (DIR Series) Circular No. 54 dated November 26, 2012

Liaison Office (LO) / Branch Office (BO) in India by Foreign Entities – Reporting to Income Tax Authorities.

Liaison Office (LO) / Branch Office (BO) in India by Foreign Entities – Reporting to Income Tax Authorities.

In terms of A.P. (DIR Series) Circular No. 24 dated 30.12.2009 which LOs/BOs are required to furnish copy of the Annual Activity Certificate (AAC) to Director General of Income Tax (International Taxation), Drum Shaped Building, I.P. Estate, New Delhi 110002.

2. It is clarified that copies of the AACs submitted to the DGIT (International Taxation) should be accompanied by audited financial statements including receipt and payment account.

3. Further, at the time of renewal of permission of LOs by AD banks, they may note to endorse a copy of each such renewal to the office of the DGIT (international Taxation).

Ref -A.P. (DIR Series) Circular No. 55   dated November 26, 2012

ECB by Small Industries Development Bank of India (SIDBI) for Onlending to MSME Sector

ECB by Small Industries Development Bank of India (SIDBI) for Onlending to MSME Sector

On a review of the extant ECB policy, it has been decided to include SIDBI as an eligible borrower for availing of ECB for on-lending to MSME sector, as defined under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, subject to the following terms and conditions:-

 

(a) such on-lending by SIDBI shall be to the borrowers’ directly either in INR or in foreign currency (FCY);

1. the foreign currency risk shall be hedged by SIDBI in full in case of on-lending to MSME sector in INR; and
2. on-lending in foreign currency shall be subject to Regulation 5(5) of FEMA Notification No. 3/2000-RB dated May 03, 2000, as amended from time to time and shall only be to those beneficiaries which have natural hedge by way of foreign exchange earnings;

(b) availment of ECBs, including the outstanding ECBs, up to 50 per cent of their owned funds, for on-lending to MSME sector, will be under the automatic route and beyond 50 per cent of owned funds, will be under the approval route, subject to a ceiling of USD 500 million per financial year; and

(c) the proceeds of ECB availed by SIDBI, shall be used for on-lending to MSME sector only for the permissible end-uses as provided under the extant ECB policy.

3. All other conditions of ECB, such as recognized lender, all- in-cost, average maturity, prepayment, refinancing of existing ECB and reporting arrangements shall remain unchanged.

4. The amended ECB policy shall come into force with immediate effect and is subject to review based on the experience gained in this regard.

 

REF:A.P. (DIR Series) Circular No. 48 dated 6/11/2012

RBI Asks NBFCs to replace " post dated cheques" with 'CTS 2010' standard Cheques by December 31, 2012.

RBI Asks NBFCs to replace " post dated cheques" with 'CTS 2010' standard Cheques by December 31, 2012.

The Reserve Bank of India (RBI) today asked non-banking financial companies (NBFCs) to replace post-dated cheques issued to them by customers with new standardised cheques with improved security features.

NBFCs accept post-dated cheques from their customers for future monthly installment payments. For the purpose of standardisation and enhanced security features, the banks have been told by RBI to migrate to the 'CTS 2010' standard by December 31, 2012.

The non-CTS cheques would be out of circulation from December 31, 2012 and will not be acceptable at clearing system of the banks as well.

"NBFCs are, therefore, required to ensure the replacement of Non-CTS-2010 standard compliant cheques with CTS-2010 standard compliant cheques before December 31, 2012," RBI said in a notification.

'CTS 2010' standard is a set of benchmarks towards achieving standardisation of cheques issued by banks across the country.

These include provision of mandatory minimum security features on cheque forms like quality of paper, watermark, bank's logo in invisible ink, void pantograph and standardisation of field placements on cheques.

RBI further asked NBFCs to confirm to the regional office of the bank that a plan has been put in place for implementing the CTS 2010 standard within the prescribed timeline.

Source- Indian Express

Now , FIIs to approach any AD Category I bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India

Now , FIIs to approach any AD Category I bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India

As per the extant guidelines, only designated branches of AD Category I banks maintaining accounts of FIIs are allowed to act as market makers to FIIs for hedging their currency risk on the market value of entire investment in equity and/or debt in India as on a particular date.

 

It has now been decided to allow FIIs to approach any AD Category I bank for hedging their currency risk on the market value of entire investment in equity and/or debt in India as on a particular date subject to the following conditions:

 

The eligibility for cover may be determined on the basis of a valuation certificate provided by the designated AD category bank along with a declaration by the FII to the effect that its global outstanding hedges plus the derivatives contracts cancelled across all AD category banks is within the market value of its investments.

The FII should also provide a quarterly declaration to the custodian bank that the total amount of derivatives contract booked across AD Category banks are within the market value of its investments.

 

The hedges taken with AD banks other than designated AD banks, have to be settled through the Special Non-Resident Rupee A/c maintained with the designated bank through RTGS/NEFT.

Ref_ AP DIR Circular 45 dated 22 October 2012

Further Liberalisation for the Supply of Goods and Services by Special Economic Zones (SEZs) to Units

Supply of Goods and Services by Special Economic Zones (SEZs) to Units
in Domestic Tariff Areas (DTAs) against payment in foreign exchange

 

Attention of the Authorised Dealer (AD) Category - I banks is invited to A.P. (Dir Series) Circular No.105 dated June 16, 2003, in terms of which units in the Domestic Tariff Areas (DTAs) have been permitted to purchase foreign exchange from ADs for making payment towards goods supplied to them by units in the Special Economic Zones (SEZs).

The matter has since been reviewed in consultation with the Ministry of Commerce and Industry, Government of India and it has been decided to allow ADs to sell foreign exchange to a unit in the DTA for making payment in foreign exchange to a unit in the SEZ for the services rendered by it (i.e. a unit in SEZ) to a DTA unit. It may, however, be ensured that there is an enabling provision of supplying these goods/services by the SEZ unit to the DTA unit and for payment in foreign exchange for such goods/ services to the SEZ unit, in the Letter of Approval (LoA) issued to the SEZ unit by the Development Commissioner(DC) of the SEZ.
Ref _ AP DIR 46 dated 23 October 2012

Further Simplification and Revision of Softex Procedure

Simplification and Revision of Softex Procedure

A software exporter from any part of India , whose annual turnover is at least Rs.1000 crore or who files at least 600 SOFTEX forms annually on all India basis, will be eligible to submit a statement in excel format

Attention of the Authorised Dealers is invited to Regulation 6 of the Notification No. FEMA 23/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Export of Goods and Services) Regulations, 2000, as amended by the Notification No.FEMA.36/2001-RB dated February 27, 2001, in terms of which designated officials of the Ministry of Information Technology, Government of India at the Software Technology Parks of India (STPIs) or at Free Trade Zones (FTZs) or Export Processing Zones (EPZs) or Special Economic Zones (SEZs), had been authorized to certify exports declared through SOFTEX Forms.

2. Considering the spurt in the volume of software exports from India in recent times, the complexity of work contracts involved, the voluminous nature of contract agreements and the duration involved in execution of each contract as well as the time-consuming process involved in the certification of SOFTEX forms, simplified and revised Softex procedure was introduced vide A.P. (DIR Series) Circular No.80 dated February 15, 2012. Initially the revised procedure was applicable in STPI at Bangalore, Hyderabad, Chennai, Pune and Mumbai with effect from April 01, 2012.

3. Since the revised procedure is running successfully at the 5 designated centres, it has been decided to implement the revised procedure in all the STPIs in India with immediate effect.

4. As per the revised procedure, a software exporter, whose annual turnover is at least Rs.1000 crore or who files at least 600 SOFTEX forms annually on all India basis, will be eligible to submit a statement in excel format as detailed in our A.P. (DIR Series) Circular No.80 dated February 15, 2012

Ref- AP DIR- 47 dated 23 October 2012

Loans to Non Residents / third parties against security of Non Resident (External) Rupee Accounts [NR (E) RA] / Foreign Currency Non Resident (Bank) Accounts [FCNR (B)] Deposits

Loans to Non Residents / third parties against security of Non Resident (External) Rupee Accounts [NR (E) RA] / Foreign Currency Non Resident (Bank) Accounts [FCNR (B)] Deposits

The Committee to review the facilities for individuals under FEMA, 1999 (Chairperson: Smt. K.J.Udeshi) has recommended that the banks may sanction Rupee loans in India or foreign currency loans outside India to either the account holder or a third party to the extent of the balance in the NRE/FCNR (B) account subject to margin requirements. The existing position in this regard has been reviewed and it has been decided, in exercise of powers under paragraph 6(d) of Schedule-1 read with para 9(1) of Schedule-2 of the Foreign Exchange Management (Deposit) Regulations, 2000, that the banks may now grant loans against NR(E)RA and FCNR(B) deposits either to the depositors or the third parties as under:-

	Existing provision	Proposed provision
Rupee loans* in India
Loans against NRE/FCNR(B) Fixed Deposits	Rs. 100 lakhs ceiling applicable	Rupee loans to be allowed to depositor/third party without any ceiling subject to usual margin requirements**
Foreign Currency loan* in India/ outside India
Loans against NRE/FCNR(B) Fixed Deposits	Rs. 100 lakhs ceiling applicable	Foreign Currency loans to be allowed to depositor/third party without any ceiling subject to usual margin requirements **

* The term ‘loan’ shall include all types of fund based/non-fund based facilities.

** In case of FCNR deposits, the margin requirement shall be notionally calculated on the rupee equivalent of the deposits in accordance with para 9(2) of Schedule-2 of Foreign Exchange Management (Deposit) Regulations, 2000.

Further, the facility of premature withdrawal of NRE/FCNR deposits shall not be available where loans against such deposits are to be availed of. This requirement may specifically be brought to the notice of the deposit holder at the time of sanction of the loan. The existing loans which are not in conformity with the above instructions shall continue for their existing term and shall not be rolled over/renewed. Other conditions as regards grant of loan against NRE/FCNR deposits shall remain unchanged

Foreign investment in NBFC Sector - Further Liberalisation for establishing step down subsidiaries by NBFCs with FDI

Foreign investment in NBFC Sector - Further Liberalisation for establishing step down subsidiaries by NBFCs with FDI

Ref: RBI AP DIR 41 dated October 10, 2012


RBI has revised the conditions for the establishing step down subsidiraries by NBFCs with FDI as per details below

No. 137 dated June 28, 2012	Earlier Condition	Revised condition
Sr.No.24.2 (1) (iv)	10 100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1, therefore, shall not apply to downstream subsidiaries.	NBFCs (i) having foreign investment more than 75% and up to 100%, and (ii) with a minimum capitalisation of US$ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital.The minimum capitalization condition as mandated by para 3.10.4.1 of DIPP Circular 1of 2012 dated April 10, 2012 on Consolidated FDI Policy, therefore, shall not apply to downstre am subsidiaries

External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling

External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling

 

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to A.P. (DIR Series) Circular No. 99 dated March 30, 2012 relating to ECB.

2. It has been decided that the all-in-cost ceiling as specified in A.P. (DIR Series) Circular No. 99 dated March 30, 2012 will continue to be applicable until further review.


:

Average Maturity Period	All-in-cost over 6 month LIBOR*
Three years and up to five years	350 bps
More than five years	500 bps
* for the respective currency of borrowing or applicable benchmark

3. All other aspects of ECB policy remain unchanged and AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers.

Reference A.P. (DIR Series) Circular No. 40 dated October 09, 2012