Foreign Investments in Asset
Reconstruction Companies (ARC)
Previously.
(a) Foreign Direct Investment (FDI) upto 49%
in the equity capital of Asset Reconstruction Companies (ARCs) was permitted
subject to certain conditions. However, investment by Foreign Institutional
Investors (FIIs) in the equity capital of ARCs was not permitted; and
(b)
general permission was granted to Foreign Institutional Investors (FIIs) to
invest in Security Receipts (SRs) upto 49 per cent of each tranche of scheme of
Security Receipts subject to condition that investment of a single FII in each
tranche of scheme of SRs shall not exceed 10 per cent of the issue.
.
A review of the policy was undertaken and it has been decided as under:
i.
The
ceiling for FDI in ARCs has been increased from 49% to 74% subject to the
condition that no sponsor may hold more than 50% of the shareholding in an ARC either
by way of FDI or by routing through an FII. The foreign investment in
ARCs would need to comply with the FDI policy in terms of entry route
conditionality and sectoral caps.
ii.
The
foreign investment limit of 74% in ARC would be a combined limit of FDI and
FII. Hence, the prohibition on investment by FII in ARCs will be removed. The
total shareholding of an individual FII shall not exceed 10% of the
total paid-up capital.
iii.
The
limit of FII investment in SRs may be enhanced from 49% to 74% of the paid up
value of each tranche of scheme of Security Receipts issued by the Asset
Reconstruction Companies. Further, the individual limit of 10% for investment
of a single FII in each tranche of SRs issued by ARCs may be dispensed with.
Such investment should be within the FII limit on corporate bonds prescribed
from time to time, and sectoral caps under the extant FDI Regulations should be
complied with.
Investments by Non-resident
Indians (NRIs) under Portfolio
Investment Scheme (PIS) Liberalization of Policy
As
per the Schedule 3 of the Foreign Exchange Management (Transfer or Issue of
Security by a Person Resident outside India) Regulations, 2000
NRIs
can invest under PIS on repatriation and/or non-repatriation basis in shares
and convertible debentures of listed Indian companies on a recognized stock
exchange in India through a registered stock broker. Further, NRIs may purchase
and sell shares/convertible debentures under the PIS through a branch
designated by an Authorized Dealer for the purpose and duly approved by the
Reserve Bank of India.
Now
it has been decided to liberalize further
i)
allot Unique Code number only to Link office of the AD Category - I bank; and
ii)
dispense with the allotment of Unique Code number to each branch designated by
that AD Category - I bank administering the Scheme. Accordingly, henceforth in
accordance with the policy approved by the Board, AD Category - I bank shall be
free to permit its branches to administer the Portfolio Investment Scheme for
NRIs subject to the following:
a)
the AD Category - I bank while granting permission to NRI for investment under
PIS shall allow them to operate the scheme as per the terms and conditions
prescribed
b)
the designated link office shall continue to report on a daily basis PIS
transactions undertaken on behalf of NRIs for their entire bank to the Reserve
Bank under the Online Report Filing System (ORFS) in form LEC (NRI) as per
present practice in vogue web site (https://secweb.rbi.org.in/ORFSMainWeb/Login.jsp).;
c)
the AD Category - I bank shall provide to the Reserve Bank the complete contact
details of such link office in advance before commencing operations;
d)
the AD Category - I bank shall sensitise the branches administering the Scheme
to ensure that NRIs are not allowed to invest in any Indian company which is
engaged or proposes to engage in the business of chit fund, Nidhi company,
agricultural or plantation activities, real estate business (does not include
development of townships, construction of residential / commercial premises,
roads or bridges, educational institutions, recreational facilities, city and
regional level infrastructure, townships), construction of farm houses,
manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of
tobacco substitutes and trading in Transferable Development Rights (TDRs) and
in sectors/ activities as specified in terms of Notification No. FEMA.1/2000-RB
dated May 3, 2000,
as amended from time to time; and
e) ensure compliance with
instructions issued through A.D.(M.A. Series) Circulars, EC.CO.FID circulars A.D
(M.A. Series) Circular no 27 and
the regulatory requirements under FEMA, 1999. It may be noted that Overseas
Corporate Bodies( OCBs) have been derecognized as an eligible ‘class of
investor’ under various routes/scheme available under the extant Foreign
Exchange Management Regulations in terms of the Foreign Exchange Management
[withdrawal of General Permission to Overseas Corporate Bodies( OCBs)] Regulations,
2003 notified vide Notification No. FEMA.101/2003-RB
dated October 3, 2003.
Overseas Direct Investments –
Rationalization/Clarifications
All
the financial commitments made on or before August 14, 2013, in compliance with
the earlier limit of 400% of the net worth of the Indian Party under the
automatic route will continue to be allowed. In other words, such investments
shall not be subject to any unwinding or approval from the Reserve Bank.
Attention of Authorized Dealer Category - I
(AD Category - I) banks is also invited to the provisions under Regulation 6 of
the Notification ibid, in terms of which the limit
of financial commitments for an Indian Party (presently 100% of its net worth)
shall not apply to the financial commitments funded out of EEFC account of the
Indian Party or out of funds raised by way of ADRs / GDRs by the Indian Party,
as hitherto.
the limit of 400% of the net
worth of the Indian Party for the financial commitments funded by way of
eligible External Commercial Borrowing (ECB) raised by the Indian Party as per
the extant ECB guidelines issued by the Reserve Bank of India from time to time
is retained still.
External Commercial Borrowings
(ECB) from the foreign equity holder
As per the extant ECB policy, borrowings in
the form of ECB cannot be utilized for general corporate purpose.
On
a review, it has been decided to permit eligible borrowers to avail of ECB under the
approval route from their foreign equity holder company with minimum
average maturity of 7 years for general corporate purposes subject to the
following conditions:
i.
Minimum
paid-up equity of 25 per cent should be held directly by the lender;
ii.
Such
ECBs would not be used for any purpose not permitted under extant the ECB
guidelines (including on-lending to their group companies / step-down
subsidiaries in India); and
iii.
Repayment
of the principal shall commence only after completion of minimum average maturity
of 7 years. No prepayment will be allowed before maturity.
The above modifications to the ECB guidelines
will come into force with immediate effect. All other aspects of extant ECB
guidelines remain unchanged.
Issue of Bank Guarantee on behalf
of person resident outside India for FDI transactions
AD Category – I banks are
permitted to open Escrow account and Special account on behalf of non-resident
acquirer for acquisition/transfer of shares/convertible debentures of an Indian
company through open offers/ delisting/ exit offers, subject to compliance with
the relevant SEBI [Substantial Acquisition of Shares and Takeovers (SAST)]
Regulations, 1997, as amended from time to time and other applicable SEBI
Regulations and subject to terms and conditions of FEMA (Transfer or Issue of
Security by a Person Resident Outside India) Regulations, 2000 read with
FEM(Deposit) Regulations andAD Category-I banks are allowed to give guarantees
for specified purposes as stated in Foreign Exchange Management (Guarantee) Regulations.
In order to provide operational
flexibility and ease the procedures now the AD Category –I bank are permitted to issue
bank guarantee, without prior approval of the Reserve Bank, on behalf of a
non-resident acquiring shares or convertible debentures of an Indian company
through open offers/ delisting/exit offers, provided :
a)
the transaction is in compliance with the provisions of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeover)
[SEBI(SAST)] Regulations;
b)
the guarantee given by the AD Category –I bank is covered by a counter
guarantee of a bank of international repute.
It may be noted that the
guarantee shall be valid for a tenure co-terminus with the offer period as
required under the SEBI (SAST) Regulations.. In case of invocation of the
guarantee, the AD Category-I bank is required to submit to the Chief General
Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India, Central
Office, Mumbai 400 001, a report on the circumstances leading to the invocation
of the guarantee.
Purchase of shares on the recognised stock exchanges in accordance
with SEBI (Substantial Acquisition of Shares and Takeover) Regulations
Currently, Foreign Institutional Investors (FII), Qualified
Foreign Investors (QFI) and Non Resident Indians (NRI) are eligible to acquire
shares on the recognised stock exchanges in compliance with the conditions
under Schedule 3, 4, 5 and 8 of Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident outside
India) Regulations, 2000 ,A
non-resident is not permitted to acquire shares on stock exchange under FDI
scheme under the said notification.
The issue of acquisition of
shares under the FDI Scheme by a non-resident on a recognised stock exchange
has been reviewed and as a further measure of liberalization, it has been
decided that a Non resident including a Non Resident Indian may acquire shares of a
listed Indian company on the stock exchange through a registered broker under
FDI scheme provided that:
i. The non-resident investor has already acquired and continues to
hold the control in accordance with SEBI (Substantial Acquisition of Shares and
Takeover) Regulations;
ii. The amount of consideration for transfer of shares to
non-resident consequent to purchase on the stock exchange may be paid as below:
- by way of inward
remittance through normal banking channels, or
- by way of debit
to the NRE/FCNR account of the person concerned maintained with an
authorised dealer/bank;
- by debit to
non-interest bearing Escrow account (in Indian Rupees) maintained in India
with the AD bank in accordance with Foreign Exchange Management (Deposit)
Regulations, 2000;
- the
consideration amount may also be paid out of the dividend payable by
Indian investee company, in which the said non-resident holds control as
(i) above, provided the right to receive dividend is established and the
dividend amount has been credited to specially designated non –interest
bearing rupee account for acquisition of shares on the floor of stock
exchange.
iii. The pricing for subsequent transfer of shares to non-resident
shareholder shall be in accordance with the pricing guidelines under FEMA;
iv. The original and resultant investments are in line with the
extant FDI policy and FEMA regulations in respect of sectoral cap, entry route,
reporting requirement, documentation, etc;
Export and Import of Currency
As per Regulation (2) of Foreign Exchange Management (Export and
Import of Currency) (Amendment) Regulations, 2009, in terms of which,
any person resident in India may take outside India or having gone out of India
on a temporary visit, may bring into India (other than to and from Nepal and
Bhutan) currency notes of Government of India and Reserve Bank of India notes
up to an amount not exceeding Rs.7,500 per person.
Now the limit enhanced to Rs. 10,000 per person.
Accordingly, any person resident in India:
i) may take outside India (other than to Nepal and Bhutan)
currency notes of Government of India and Reserve Bank of India notes up to an
amount not exceeding Rs.10,000 (Rupees ten thousand only) per person; and
ii) who had gone out of India on a temporary visit, may bring into
India at the time of his return from any place outside India (other than from
Nepal and Bhutan), currency notes of Government of India and Reserve Bank of
India notes up to an amount not exceeding Rs.10,000 (Rupees ten thousand only)
per person.
Overseas
Direct Investment – Amendment
Overseas
Direct Investment – Liberalization / Rationalization providing Corporate
Guarantee for the Step down Subsidiary which reads as under:
Previously,
issue of corporate guarantee on behalf of second generation or subsequent level
step down operating subsidiaries will be considered under the Approval Route,
provided the Indian holding company directly
or indirectly holds
51 per cent or more stake in the overseas subsidiary for which such guarantee
is intended to be issued.
This has
been amended as follows
The issue of
corporate guarantee on behalf of second generation or subsequent level step
down operating subsidiaries will be considered under the Approval Route,
provided the Indian Party indirectly holds 51 per cent or more stake in the
overseas subsidiary for which such guarantee is intended to be issued.
Foreign Investment in India – Guidelines for
calculation of total foreign investment in Indian companies, transfer of
ownership and control of Indian companies and downstream investment by Indian
companies
Downstream investments by an Indian company which is not owned
and/or controlled by resident entity/ties.
“For the purpose of downstream investment, the Indian companies making
the downstream investments would have to bring in requisite funds from abroad
and not use funds borrowed in the domestic market. This would, however, not
preclude downstream operating companies, from raising debt in the domestic
market. Downstream investments through internal accruals are permissible by an
Indian company, subject to the provisions of conditions stipulated in the Guidelines for calculation of total foreign
investment in Indian companies, transfer of ownership and control of Indian
companies and downstream investment by Indian companies as per A.P.DIR
(Circular) No.1 dated July 04, 2013.
Export of
Goods and Services- Simplification
and Revision of Declaration Form for Exports of Goods/Software
As per the
existing provisions every exporter of goods or softwares has to give
declaration in one of the forms (GR/PP/SDF/SOFTEX/Bulk SOFTEX) and submit it to
the specified authority for certification.
In order to
simplify the existing form used for declaration of exports of Goods/Softwares,
a common form called “Export Declaration Form” (EDF) has
been devised to declare all types of export of goods from Non-EDI ports and a common “SOFTEX Form” to
declare single as well as bulk software exports.
The EDF will
replace the existing GR/PP form used for declaration of export of Goods. The
procedure relating to the exports of goods through EDI ports will remain the
same and SDF form will be applicable as hitherto.
Under the
revised procedure, the exporters will have to declare all the export
transactions, including
those less than US$25000, in the form as applicable.
. The
Foreign Exchange Management Act (FEMA) requires exporters to complete the EDF/SOFTEX Form using the number so allotted and
submit them to the specified authority first for certification and then to AD
for necessary action as hitherto.
The above
instruction will come into force from October 1, 2013.
Foreign Direct Investment (FDI) in India – Review of FDI policy –
definition for control and sector specific conditions
The definition of the term “Control” under the Foreign Investment in India – Guidelines for calculation of
total foreign investment in Indian companies, transfer of ownership and control
of Indian companies and downstream investment by Indian companies has been modified as follows.
'Control' shall include the right to appoint a
majority of the directors or to control the management or policy decisions
including by virtue of their shareholding or management rights or shareholders
agreements or voting agreements.
Government of Himachal Pradesh and Karnataka have given consent to
implement the FDI policy on Multi Brand Retail Trading in Himachal Pradesh and
Karnataka respectively. As such, the list of States/Union Territories which
have conveyed their concurrence stands modified.
External
Commercial Borrowings (ECB) Policy – Liberalisation of definition of Infrastructure
Sector
The
definition or infrastructure sector for the purpose of availing ECB has been
modified ,taking into account the Harmonised
Master List of Infrastructure sub-sectors and Institutional Mechanism for
its updation approved by Government of India vide Notification F. No.
13/06/2009-INF dated March 27, 2012.
The expanded
infrastructure sector and sub-sectors for the purpose of ECB include:
(a) Energy
which will include (i) electricity generation, (ii) electricity transmission,
(iii) electricity distribution, (iv) oil pipelines, (v) oil/gas/liquefied
natural gas (LNG) storage facility (includes strategic storage of crude oil)
and (vi) gas pipelines (includes city gas distribution network);
(b)
Communication which will include (i) mobile telephony services / companies
providing cellular services, (ii) fixed network telecommunication (includes
optic fibre / cable networks which provide broadband / internet) and (iii)
telecommunication towers;
(c) Transport which will include (i) railways (railway track, tunnel, viaduct,
bridges and includes supporting terminal infrastructure such as loading /
unloading terminals, stations and buildings), (ii) roads and bridges, (iii)
ports, (iv) inland waterways, (v) airport and (vi) urban public transport
(except rolling stock in case of urban road transport);
(d) Water
and sanitation which will include (i) water supply pipelines, (ii) solid waste
management, (iii) water treatment plants, (iv) sewage projects (sewage
collection, treatment and disposal system), (v) irrigation (dams, channels,
embankments, etc.) and (vi) storm water drainage system;
(e) (i)
mining, (ii) exploration and (iii) refining;
(f) Social
and commercial infrastructure which will include (i) hospitals (capital stock
and includes medical colleges and para medical training institutes), (ii) Hotel
Sector which will include hotels with fixed capital investment of Rs. 200 crore
and above, convention centres with fixed capital investment of Rs. 300 crore
and above and three star or higher category classified hotels located outside
cities with population of more than 1 million (fixed capital investment is
excluding of land value), (iii) common infrastructure for industrial parks,
SEZs, tourism facilities, (iv) fertilizer (capital investment), (v) post
harvest storage infrastructure for agriculture and horticulture produce
including cold storage, (vi) soil testing laboratories and (vii) cold chain
(includes cold room facility for farm level pre-cooling, for preservation or
storage or agriculture and allied produce, marine products and meat.
Opening of
Trading Office / Non-Trading Office / Branch Office/ Representative Office
abroad
Since April
20,2002 as per A.P. (DIR Series)
Circular No. 39 ,a statement
in Form ORA (Offices & Representatives Abroad) was to be submitted to the
Regional Offices of Reserve Bank on half yearly basis instead of on a monthly basis
by the Authorized Dealers when an Indian party opens a Trading office /Non Trading Office Branch Office/ Representative Office abroad.
Now the
practice of forwarding the statement in Form ORA to the respective Regional
Office of Reserve Bank by the Authorized Dealers has been discontinued.
Authorized Dealers may, however, continue to maintain the particulars of
approvals granted for opening of Trading Office / Non-Trading Office / Branch
Office/ Representative Office at their end.
Trade Credits for Import into India
As per the extant guidelines, AD Category - I banks may approve
availing of trade credit not exceeding USD 20 million up to a maximum period of
five years (from the date of shipment) for companies in the infrastructure
sector, subject to certain terms and condition.
previously the AD Category - I banks are not permitted to issue
Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort
(LoC) in favour of overseas supplier, bank and financial institution for the
extended period beyond three years. No roll-over/extension is permitted beyond
the permissible period.
Now, companies in all sectors are allowed to
avail of trade credit not exceeding USD 20 million up to a maximum period of
five years for import of capital goods as classified by Director General of
Foreign Trade (DGFT). It has also been decided to relax the ab-initio contract
period of 15 (fifteen) months for all trade credits to 6 (six)
months.
AD Category - I banks are, however, not permitted to issue Letters
of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) in
favour of overseas supplier, bank and financial institution for the extended
period beyond three years.
External
Commercial Borrowings (ECB) Policy – ECB proceeds for acquisition of shares
under the Government’s disinvestment programme of PSUs - Clarification
ECB proceeds
is permitted to be used in the first stage acquisition of shares in the
disinvestment process and also in the mandatory second stage offer to the
public under the Government’s disinvestment programme of the public sector undertakings
(PSUs) shares.
Now that the
ECB is allowed for all subsequent stages
of acquisition of shares in the disinvestment process under the Government’s
disinvestment programme of the PSU shares; in other words, facility of ECB
is available for multiple rounds of disinvestment of PSU shares under the
Government disinvestment programme.
External
Commercial Borrowings (ECB) Policy –Refinancing / Rescheduling of ECB
As per the
extant ECB guidelines, the eligible borrowers desirous of refinancing an
existing ECB can raise fresh ECB at a higher all-in-cost / reschedule an
existing 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 extant guidelines.
Now it has
been decided to discontinue this facility allowing eligible borrowers to raise
ECB at a higher all-in-cost to refinance / reschedule an existing ECB with effect
from October 01, 2013.
The scheme
of refinance of existing ECB by raising fresh ECB at lower all-in-cost, subject
to the condition that the outstanding maturity of the original ECB is either
maintained or extended, will continue as hitherto under the automatic route and
approval route as the case may be.
