LAW & POLICY
A.P. (DIR Series) Circular No. 68
November 01, 2013
Foreign Direct Investment (FDI) in India – Definition of ‘Group Company’
The Reserve Bank of India reviewed the extant FDI Policy and incorporated the definition of a ‘Group Company’ under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000.
‘Group Company’ means two or more enterprises which, directly or indirectly, are in a position to:
- Exercise twenty-six percent (26%) or more of voting rights in another enterprise; or
- Appoint more than fifty percent (50%) of the members of the Board of Directors in another enterprise.
A.P. (DIR Series) Circular No. 69
November 08, 2013
Amendment to the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993
Unlisted Indian companies that had not previously accessed the ADR/GDR/FCCB route were earlier required to obtain prior or simultaneous domestic listing.
Upon review, the RBI permitted unlisted Indian companies to raise capital abroad without prior or subsequent listing in India for an initial period of two years, subject to specified conditions.
A.P. (DIR Series) Circular No. 70
November 08, 2013
Third Party Payments for Export / Import Transactions
The RBI liberalized procedures relating to third-party payments in export and import transactions.
Export Transactions
AD Banks may allow payments for export of goods and software to be received from a third party subject to the following conditions:
- Firm irrevocable order backed by a tripartite agreement.
- Third-party payment should originate from a FATF-compliant country through banking channels.
- Exporter must declare third-party remittance in the Export Declaration Form.
- Exporter remains responsible for realization and repatriation of export proceeds.
- Outstanding reporting shall continue under the exporter’s name with the declared third party reflected in XOS reporting.
- For exports to Restricted Cover Group II countries, payment may be received from an Open Cover Country.
Import Transactions
AD Banks may make payments to a third party for import transactions subject to the following conditions:
- Firm irrevocable purchase order or tripartite agreement must exist.
- Third-party payment must be made to a FATF-compliant country through banking channels.
- Invoice must specify that payment is to be made to the named third party.
- Bill of Entry must mention the shipper and third-party payment details.
- Importer must comply with all applicable import regulations.
- Transaction value eligible for third-party payment must not exceed USD 100,000.
A.P. (DIR Series) Circular No. 72
November 11, 2013
Foreign Direct Investment in Financial Sector – Transfer of Shares
The RBI waived the requirement of obtaining No Objection Certificates (NOCs) from financial sector regulators for transfer of shares from residents to non-residents in financial services companies from the FEMA perspective.
- No NOC is required to be filed along with Form FC-TRS.
- Fit and proper / due diligence requirements prescribed by sectoral regulators must continue to be complied with.
- All other existing FEMA instructions remain unchanged.
A.P. (DIR Series) Circular No. 75
November 19, 2013
Trade Credit for Imports into India – Online Submission of Data on Guarantees / LoUs / LoCs
The RBI shifted reporting of guarantees, Letters of Undertaking (LoU) and Letters of Comfort (LoC) from manual reporting to the XBRL platform.
- XBRL reporting became mandatory from the quarter ended September 30, 2013.
- Manual submissions and Excel-based reporting were discontinued.
- Reports are required to be filed through XBRL by the 10th day of the succeeding month.
A.P. (DIR Series) Circular No. 78
December 03, 2013
External Commercial Borrowings (ECB) by Holding Companies / Core Investment Companies for SPVs
Holding Companies and Core Investment Companies (CICs) under RBI regulation were permitted to raise ECBs for project use in infrastructure Special Purpose Vehicles (SPVs).
- SPV must operate exclusively in the infrastructure sector.
- ECB proceeds may be used for fresh capital expenditure or refinancing eligible rupee loans.
- ECB can be raised up to three years after the Commercial Operations Date.
- SPV must undertake that no other funding source is used for the same capital expenditure.
- ECB proceeds must be maintained in a separate escrow account.
- CIC leverage limits must be complied with.
- CICs with assets below ₹100 crore must fully hedge ECB borrowings.
A.P. (DIR Series) Circular No. 81
December 24, 2013
Borrowing and Lending in Rupees – Tax-Free Non-Convertible Bonds
The RBI permitted authorized Indian entities to issue tax-free, secured, redeemable, non-convertible rupee bonds to persons resident outside India.
Funds raised may be utilized for:
- On-lending or re-lending to the infrastructure sector.
- Placement in fixed deposits pending utilization for permissible end uses.
DIPP
Press Note No. 7 (2013 Series)
December 03, 2013
Amendment to FCCB / ADR / GDR Policy for Unlisted Indian Companies
Unlisted companies were allowed to raise capital abroad without prior or subsequent listing in India for a period of two years subject to the following conditions:
- Listing only on exchanges located in IOSCO/FATF compliant jurisdictions.
- Submission of regulatory filings to SEBI for PMLA compliance.
- Compliance with prevailing FDI Policy.
- Funds raised abroad may be utilized for overseas debt repayment and overseas operations.
- Unused funds must be remitted back to India within 15 days and parked with AD Category-I Banks.
