LAW & POLICY
RBI Circular No. 83
January 03, 2014
Overseas Direct Investments – Rollover of Guarantees
The RBI clarified that renewal or rollover of an existing overseas guarantee shall not be treated as a fresh financial commitment provided certain conditions are fulfilled.
- Original guarantee must have been issued as per FEMA guidelines.
- No change in end-use of the guarantee.
- No modification in amount or terms except validity period.
- Reporting to continue through Form ODI.
- Investigation agencies must be informed where applicable.
RBI Circular No. 84
January 06, 2014
Issue of Non-Convertible / Redeemable Bonus Preference Shares or Debentures
Indian companies may issue non-convertible or redeemable preference shares or debentures to non-resident shareholders from general reserves under a court-approved Scheme of Arrangement.
- Applicable to non-resident shareholders including ADR/GDR depositories.
- Requires no-objection from Income Tax Authorities.
- Aims to simplify and rationalize approval procedures.
RBI Circular No. 85
January 06, 2014
ECB Policy – Infrastructure Sector Liberalisation
The definition of infrastructure sector was expanded for ECB purposes.
- Maintenance, Repairs and Overhaul (MRO) activities included as airport infrastructure.
- MRO treated as part of the Airport Sub-Sector under Transport Infrastructure.
- Other ECB provisions remain unchanged.
RBI Circular No. 86
January 09, 2014
FDI Pricing Guidelines for Instruments with Optionality Clauses
Optionality clauses were permitted in equity shares and compulsorily convertible instruments issued to non-residents under FDI.
- Minimum lock-in period of one year or sector-specific lock-in.
- No assured return permitted to investors.
- Listed companies: Exit at prevailing market price.
- Unlisted companies: Exit price based on Return on Equity methodology.
- CCD and CCPS exits allowed using internationally accepted valuation methods.
RBI Circular No. 87
January 09, 2014
Resident Bank Accounts – Joint Holder Liberalisation
NRI close relatives may now be added as joint holders in resident accounts on an “Either or Survivor” basis.
- Account remains a resident account.
- NRI cannot credit personal funds into the account.
- NRI may operate the account only on behalf of the resident holder.
- Upon becoming sole survivor, account converts into an NRO account.
RBI Circular No. 88
January 09, 2014
Expansion of Rupee Drawing Arrangements (RDA)
Additional permitted transactions were introduced under RDAs.
- Payments to utility providers such as electricity, water, internet and television.
- Tax payments in India.
- EMI payments to banks and NBFCs.
- Existing permitted transactions continue.
RBI Circular No. 90
January 09, 2014
Clarifications under Section 6(4) of FEMA, 1999
The RBI clarified assets and investments that residents may continue to hold abroad.
- Foreign currency accounts opened while resident outside India.
- Income earned abroad from employment, business or investments.
- Inherited foreign assets and related income.
- Freedom to reinvest or utilize eligible foreign assets without RBI approval.
RBI Circular No. 93
January 15, 2014
Foreign Entities Establishing Offices in India
Entities from Hong Kong and Macau require prior RBI approval for setting up Liaison, Branch or Project Offices in India.
RBI Circular No. 94
January 16, 2014
Conversion of ECB and Royalty into Equity
The RBI clarified exchange rate treatment for conversion of foreign liabilities into equity shares.
- Exchange rate prevailing on the date of agreement may be used.
- Fair value of equity determined on conversion date.
- Applicable to ECBs, royalty payments and similar liabilities.
RBI Circular No. 100
February 04, 2014
Third Party Payments for Export/Import Transactions
The RBI further liberalised third-party payment procedures.
- Tripartite agreement requirement relaxed.
- Documentary evidence can support third-party payments.
- USD 100,000 cap for import transactions withdrawn.
- AD banks must verify transaction genuineness.
RBI Circular No. 102
February 11, 2014
FDI Reporting – Revised Form FC-GPR
The RBI revised Form FC-GPR to capture additional details on Greenfield and Brownfield investments.
RBI Circular No. 105
February 17, 2014
ECB Reporting Arrangements
ECB-2 Return format was modified to capture foreign currency hedging information.
- Modified reporting effective from April 2014.
- Monthly ECB-2 filing requirement continues.
RBI Circular No. 106
February 18, 2014
NRI/PIO Remittance Reporting
Reporting frequency for NRO account remittances changed from quarterly to monthly.
- Includes transfers from NRO to NRE accounts.
- Reports to be submitted within seven days of month-end.
RBI Circular No. 107
February 20, 2014
FDI in MSEs and SSI Units
FDI policy for Micro and Small Enterprises was aligned with the MSMED Act, 2006.
- MSEs may receive FDI subject to sectoral limits.
- Non-MSE units manufacturing reserved items require FIPB approval for foreign investment beyond 24%.
DIPP UPDATES
Press Note No. 1 of 2014
January 08, 2014
FDI in Pharmaceutical Sector
- Existing FDI policy retained.
- Non-compete clauses prohibited except with FIPB approval in special circumstances.
Press Note No. 2 of 2014
February 04, 2014
Insurance Sector FDI Policy Amendment
- 26% FDI cap continued under automatic route.
- Applicable to insurance companies, brokers, TPAs and surveyors.
- IRDA licensing remains mandatory.
MCA UPDATES
General Circular No. 02/2014
February 11, 2014
Use of the Word “National” in Company Names
- Only Government companies may use the word “National”.
- Use of “Bank” requires RBI NOC.
- Use of “Stock Exchange” or “Exchange” requires SEBI NOC.
General Circular No. 03/2014
February 14, 2014
Clarification on Section 185 of Companies Act, 2013
Guarantees or securities provided by holding companies for subsidiary borrowings remain exempt under specified conditions until Section 186 becomes effective.
CSR Notification
February 27, 2014
Schedule VII Amendments under Companies Act, 2013
- Poverty eradication and healthcare.
- Education and skill development.
- Women empowerment and social welfare.
- Environmental sustainability.
- Protection of heritage and culture.
- Support for armed forces veterans.
- Promotion of sports.
- Rural development projects.
- Technology incubators.
Effective from April 01, 2014.
