Reserve Bank of India’s Clarifications on
New Rules & Regulations Framed under FEMA
The
Government of India, Ministry of Finance, vide Notification No. GSR 371(E),
dated 1st May, 2000 has notified that the Foreign Exchange Management Act, 1999
(42 of 1999) shall come into force on the 1st day of June, 2000. To give effect
to the provisions of the Act the Government of India have, among others, made
Foreign Exchange Management (Current Account Transactions) Rules, 2000 under
section 5 read with section 46 of the Act. The Reserve Bank has also made
Regulations/issued Notifications under various provisions of the Act. Copies of
the Foreign Exchange Management Act, 1999 (42 of 1999), Rules made by Government
and Regulations made/Notifications issued by the Reserve Bank under the Act are
enclosed. Authorised dealers may carefully study the provisions of the Act,
Rules/Regulations/Notifications since all foreign exchange transactions, taking
place with effect from 1st June, 2000, will be governed by the provisions of
the Foreign Exchange Management Act, 1999. Rules, Regulations,
Notifications/directions or orders made or issued thereunder. The Foreign
Exchange Regulation Act, 1973 stands repealed from 1st June, 2000.
2. The
synopsis of the important provisions of the Rules made by Government regulating
certain current account transactions and Regulations made by the Reserve Bank
under various provisions of the Act have been given in the Annexures as under
:—
|
Annexure I |
- |
Rules relating to Current Account transactions |
|
Annexure II |
- |
Regulations relating to Capital Account transactions |
|
Annexure III |
- |
Regulations relating to export of goods and services |
|
Annexure IV |
- |
Other regulations/notifications issued by Reserve
Bank. |
3. Pending
issue of further instructions authorised dealers may be guided by the existing
provisions of the Exchange Control Manual referred to in ‘Annexure V’ as also
in other Annexures to this circular.
4. In terms
of section 10(1) of the FEMA, 1999 Reserve Bank is empowered to authorise any
person to be known as authorised person to deal in foreign exchange as an
authorised dealer or money changer. All authorised dealers and money changers
who have been issued licenses by Reserve Bank and functioning as on 31st May,
2000 shall be deemed as authorised persons, authorised by Reserve Bank to deal
in foreign exchange as authorised dealers or as authorised money changers, for
the purpose of section 10(1) of the Act. The directions contained in this
circular shall be applicable, mutatis mutandis to Money Changers and they shall
continue to be governed by the provisions of Memorandum FLM/RLM, as amended
from time to time.
5. Attention
of authorised dealers is drawn to the provisions contained in sub- section (5)
of section 10 of the Act, which provides that before undertaking any
transaction in foreign exchange on behalf of any person, he is required to
obtain a declaration and such other information from the person (applicant) on
whose behalf the transaction is being undertaken that will reasonably satisfy
him that the transaction is not designed to contravene or evade the provisions
of the Act or any of the Rules or Regulations made or Notifications or
directions or orders issued under the Act. Authorised dealers should preserve
the information/documents obtained by them from the applicant before
undertaking the transactions for verification by the Reserve Bank.
6. With a
view to maintaining uniform practices authorised dealers may consider prescribing
requirements or documents to be obtained by their branches to ensure compliance
with provisions of sub-section (5) of section 10 of the Act.
7. The
above referred provision of the Act also provides that in case the person on
whose behalf the transaction is being undertaken refuses or does not give
satisfactory compliance of the requirements of an authorised person, he shall
refuse in writing to undertake the transactions. Where an authorised person has
reasons to believe that a contravention or evasion of the Act or the Rules or
Regulations made or Notifications issued thereunder was contemplated in the
transaction that he has refused to undertake, he shall report the matter to the
Reserve Bank.
8. Exporters
of goods may be advised that for the time being until new sets of GR/PP forms
are printed they may use the existing GR/PP forms by suitably modifying the
undertaking/declarations contained therein on the lines of
undertaking/declarations contained in the revised GR/PP forms attached to the
Schedule to Foreign Exchange Management (Export of Goods and Services)
Regulations, 2000.
9. Authorised
dealers may bring the contents of this circular to the notice of their
constituents concerned.
10. The
directions contained in this circular have been issued under section 10(4) and
section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
these shall come into force from 1st June, 2000. Any contravention or
non-observance of these directions is subject to the penalties prescribed under
the Act.
Government of India Notification No. GSR 381(E), dated 3rd May, 2000
1. In terms of provisions of section 5 of
Foreign Exchange Management Act, any person may sell or draw foreign exchange
to or from an authorised dealer if such sale or withdrawal is a current account
transaction.
The proviso to section 5 empowers Government of India,
in public interest and in consultation with the Reserve Bank to impose
reasonable restrictions on certain current account transactions.
2. The Government of India have accordingly
issued a Notification No. GSR 381(E), dated 3rd May, 2000 notifying the Foreign
Exchange Management (Current Account Transactions) Rules, 2000 in terms of
which drawal of exchange for certain transactions has been prohibited and
restrictions have been placed on certain transactions.
3. In terms
of the Rule 3, drawal of exchange for the following transactions is prohibited
:
(i) Travel
to Nepal or Bhutan.
(ii) Transactions with a person resident in
Nepal or Bhutan (unless specifically exempted by Reserve Bank by general or
special order).
(iii) Remittance out of lottery winnings.
(iv) Remittance
of income from racing/riding etc. or any other hobby.
(v) Remittance for purchases of lottery
tickets, banned/prescribed magazines, football pools, sweepstakes, etc.
(vi) Payment of commission on exports made
towards equity investment in Joint Ventures/Wholly Owned Subsidiaries abroad of
Indian companies.
(vii) Remittance of dividend by any company to
which the requirement of dividend balancing is applicable.
(viii) Payment of commission on exports under Rupee State Credit Route.
(ix) Payment
related to “Call Back Services” of telephones.
(x) Remittance of interest income on funds
held in Non-Resident Special Rupee (NRSR) account scheme.
4. Exchange facilities for transactions
included in Schedule II to the Rules may be permitted by authorised dealers
provided the applicant has secured the approval from the Ministry/Department of
Government of India indicated against the transactions.
5. In respect of transactions included in
Schedule III where the remittance applied for exceeds the limit, if any,
indicated in the Schedule or other transactions included in Schedule III for
which no limit have been stipulated would require prior approval of Reserve
Bank.
6. Remittances for all other current
transactions which are not specifically prohibited under the Rules or which are
not included in Schedule II or III may be permitted by authorised dealers without
any monetary/percentage ceilings subject to compliance with the provisions of
sub-section (5) of section 10 of the Act. Remittances for transactions included
in Schedule III may be permitted by authorised dealers upto the ceilings
prescribed therein.
7. For
removal of doubts, it is clarified that—
(i) The existing procedure to be followed
by Indian companies for entering into collaboration arrangements with overseas
collaborators would continue.
(ii) There would be no restriction regarding
receipt of advance payment or back to back letter of credit for merchanting
trade transactions.
(iii) In terms of Notification No. FEMA
3/2000-R.B. i.e., Foreign Exchange Management (Borrowing or Lending in Foreign
Exchange) Regulations, 2000 approval of Reserve Bank would be required for
importers availing of Supplier’s Credit beyond 180 days and Buyer’s Credit
irrespective of the period of credit.
(iv) Transactions relating to import of
shipstores into bond for supply to Indian/foreign flag vessels, Indian Naval ships,
foreign diplomatic personnel will no more be regulated by Reserve Bank.
(v) Remittance of surplus freight/passage
collections by shipping/airline companies or their agents, remittances by break
bulk agents, multimodal transport operators, remittance of freight pre-paid on
inward consolidation of cargo, operating expenses of Indian airline/shipping
companies etc. may be permitted by authorised dealers after verification of
documentary evidence in support of the remittance.
8. The Reserve Bank will not prescribe the
documentation which should be verified by the authorised dealers while
permitting remittances for various transactions, particularly of current
account. In this connection attention of authorised dealers is drawn to
sub-section (5) of section 10 of the Foreign Exchange Management Act, 1999
which provides that an authorised person shall before undertaking any
transaction in foreign exchange on behalf of any person require that person to
make such a declaration and to give such information as will reasonably
satisfy him that the transaction will not involve and is not designed for the
purpose of any contravention or evasion of the provisions of the Act or of any
rule, regulation, notification, direction or order issued thereunder.
Authorised dealers are advised to keep on record any information/documentation
on the basis of which the transaction was undertaken for verification by the
Reserve Bank. The said clause further provides that where the said person
(applicant) refuses to comply with any such requirement or makes unsatisfactory
compliance therewith, the authorised person shall refuse in writing to
undertake the transaction and shall if he has reason to believe that any
contravention/evasion is contemplated by the person, report the matter to
Reserve Bank.
Section 6 of the Act provides powers to Reserve Bank
to specify in consultation with the Central Government the classes of permissible
Capital Account transactions and limits upto which exchange is admissible for
such transactions. Section 6(3) provides powers to Reserve Bank to prohibit
restrict or regulate various transactions referred to in the sub-clauses of
that sub-section, by making Regulations.
The contents of the Regulations made by the Reserve Bank to regulate Capital Account transactions of various types are explained in the following paragraphs.
1. These regulations have been made under
section 6(2) of the Act. In terms of these regulations investment in India by a
person resident outside India in any company or partnership firm or proprietary
concern which is engaged in the business of Chit Fund or as a Nidhi Company or
in Agricultural or Plantation activities or in Real Estate business (other than
development of townships, construction of residential/commercial premises,
roads or bridges) or construction of farm houses or trading in Transferable
Development Rights (TDRs) is prohibited.
Schedule I to the Regulations specifies the
permissible classes of Capital Account transactions of a person resident in
India and Schedule II specifies the permissible classes of such transactions by
a person resident outside India.
The extent upto which such transactions can be
undertaken by a person resident in India or by a person resident outside India,
the terms and conditions subject to which such transactions can be undertaken by
such persons have been specified in Regulations made under various clauses of
sub-section (3) of section 6 of the Act, as also under section 47 of the Act
which provides powers to Reserve Bank to make Regulations to carry out the
provisions of the Act.
Foreign Exchange Management (Issue of Security in India by a Branch, Office or Agency of a Person Resident Outside India) Regulations, 2000 - Notification No. FEMA 2/2000-RB, dated 3rd May, 2000
In terms of the above Regulations any transfer or
issue of any security or a foreign security in India by a branch, office or
agency in India of any person resident outside India which is not covered by
the provisions of the Act or Rules or Regulations made under the Act would
require prior approval of the Reserve Bank.
Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000 - Notification No. FEMA 3/2000-RB, dated 3rd May, 2000
(i) These regulations relate to the borrowing or lending in foreign exchange by a person resident in India. In terms of these Regulations approval of Reserve Bank would be necessary for any borrowing or lending in foreign exchange by any person resident in India except those covered in Regulation Nos. 4 and 5.
(ii) The existing schemes namely the US $ 5 million scheme, US $ 10 million scheme (cf. paragraph 7B.8A of ECM) and scheme for raising of foreign currency loans by residents from Non-resident Indians not exceeding US $ 2,50,000 (explained in the Schedule) would continue to be operated by Reserve Bank. Any foreign currency borrowing which is not covered by these schemes or by the provisions of Regulation Nos. 4 and 5 would require approval of Government of India as well as Reserve Bank of India. Any lending by a person resident in India to a person resident outside India which is not covered by Regulation Nos. 4 and 5 of these Regulations would also be subject to Reserve Bank’s approval.
(i) These regulations relate to borrowing and lending in rupees
by a person resident in India from/to a person resident outside India.
(ii) Regulation No. 4 provides for permission for borrowings in
rupees by a person resident in India on non-repatriation basis from NRIs
subject to the conditions referred to therein. This corresponds to general
permission granted vide erstwhile Notification No. FERA 200/99-RB, dated 30th
March, 1999 (cf. paragraph 10D. 8 of ECM).
(iii) Regulation No. 5 provides for general
permission for borrowings by an Indian company from NRIs/OCBs on
non-repatriation/repatriation basis subject to terms and conditions specified
therein by issue of non-convertible debentures. These provisions correspond to
the provisions of erstwhile Notification No. FERA 213/99-RB, dated 1st
November, 1999 [cf. paragraph 10C.7(ii) and 10C.15 of the ECM].
(iv) Regulation
No. 6 provides for restrictions on use of borrowed fund.
(v) Regulation No. 7 provides for general permission to authorised
dealers to grant rupee loans to NRIs against security of shares or immovable
property in India subject to the conditions specified therein [corresponding to
the provision of paragraph 10D.2(i) of the ECM.]
(vi) Regulation No. 8 provides for grant of rupee loans by authorised
dealer or housing finance institutions approved by National Housing Bank to
NRIs for acquisition of residential accommodations subject to the terms and
conditions referred to therein [corresponding to paragraph 10D.2(ii) and (iii)
of the ECM.]
(vii) Regulation No. 11 provides for permitting
an overdraft by an authorised dealer in rupee accounts of its overseas
branches/correspondents/Head office not exceeding five hundred lakhs in
aggregate. Authorised dealers may follow the instructions contained in the
paragraph 5A.10 of the ECM, in this regard.
(viii) Any borrowing or lending in rupees by a
person resident in India from/to a person resident outside India which is not
covered by the provisions of the Act or Rules or these Regulations would
require approval of Reserve Bank.
These regulations relate to the deposits between a
person resident in India and a person resident outside India—
(i) Regulation No. 4 contains permission
for opening rupee/foreign currency deposit accounts by certain persons, viz.,
(a) Rupee/foreign currency accounts by
foreign diplomatic missions and diplomatic personnel or their family members
with an authorised dealer subject to conditions mentioned in the Regulations.
(b) Deposits
with authorised dealers in rupees by a person resident in Nepal and Bhutan.
(c) Deposits with authorised dealers by
United Nations Organisation and its subsidiary/affiliate bodies in India and
its officials in India.
(ii) Regulation No. 5 provides for deposit
accounts opened with authorised dealers by a person resident in India under
various schemes. Details of the schemes have been given in the respective schedules.
(A) Schedule I - Non-Resident (External)
Account Scheme - The terms and conditions subject to which NRE accounts of
NRIs/OCBs can be maintained by authorised dealers or authorised banks have been
specified in the schedule. Generally, there is no change in the existing NRE
account scheme contained in Part B of Chapter 13 of ECM except that the limit
for permitting overdraft in the account has been raised from Rs. 20,000 to Rs.
50,000. For the purpose of reporting to Reserve Bank authorised dealer/banks
may follow the instructions contained in paragraph 13B.25 of ECM.
(B) Schedule II - Foreign Currency
(Non-Resident) Account (Banks) Scheme [FCNR(B) Scheme] - The terms and
conditions subject to which authorised dealers may open and maintain foreign
currency accounts of NRIs/OCBs under FCNR(B) schemes are specified in this
schedule. Generally, there is no change in the existing FCNR(B) scheme
contained in Part B of Chapter 14 of ECM.
As regards
submission of data on inflows, outflows and outstanding deposits under the
scheme authorised dealers may follow the procedure contained in paragraph
14B.10 of ECM.
(C) Schedule 3 - Non-Resident Ordinary Rupee
(NRO) Account Scheme - The terms and conditions subject to which authorised
dealers may open and maintain NRO accounts have been specified in this
schedule, which are similar to those contained in Part A - Section I of Chapter
13 of ECM, except that the ceiling on permitting overdraft in such accounts
has been dispensed with. Authorised dealers may permit overdraft in such
accounts as per their discretion and commercial judgment.
(D) Schedule 4 - Non-Resident
(Non-Repatriable) Rupee (NRNR) Deposit Scheme - The terms and conditions
subject to which such deposit accounts can be opened by authorised dealers in
the name of any non-resident are specified in this schedule which are similar
to those contained in Part C of Chapter 13 of ECM. Such accounts can be opened
by any non-resident.
(E) Schedule 5 - Non-Resident (Special) Rupee
(NRSR) Account Scheme - The terms and conditions subject to which authorised
dealers can open and maintain NRSR account in the name of any NRI/PIO are
specified in this schedule, which are same as contained in Part A - Section II
of Chapter 13 of ECM. In terms of the provisions of this Schedule, NRSR
accounts will also be allowed to be opened and maintained by banks authorised
to maintain accounts of non-residents, subject to the provisions of the
Schedule.
(F) Schedule 6 - Acceptance of deposit by a
company in India from NRIs on repatriation basis - A company incorporated in
India including NBFC registered with Reserve Bank has been granted general
permission to accept deposits from NRIs on repatriation basis subject to terms
and conditions specified in the schedule. General permission has also been
granted for repayment of deposits by the company which has accepted deposits
under the Scheme by inward remittance or by credit to NRE/FCNR account
maintained with an authorised dealer/bank in India subject to the conditions
specified in paragraph (x) of the Schedule.
(G) Schedule 7 - Acceptance of deposits by
Indian proprietorship concern/firm or a company from NRIs on non-repatriation
basis - General permission has been granted to Indian proprietorship
concern/firm or a company (including Non-Banking Finance Company) registered
with Reserve Bank to accept deposits from NRIs on non-repatriation basis
subject to the terms and conditions specified in this Schedule. The terms and
conditions are similar to those stipulated in paragraph 10C.10(i) of ECM and
erstwhile notification No. FERA 196/99-RB, dated 30th March, 1999.
(iii) General permission has been granted for
retention of funds raised through external commercial borrowings or raising of
resources through ADRs/GDRs in deposit with a bank outside India pending their
utilisation or repatriation in India.
(iv) General permission has been granted to
Indian companies to accept deposits from NRIs/OCBs by issue of a commercial
paper subject to terms and conditions specified in Sub-Regulation (2) of
Regulation No. 8.
(v) Opening of an Escrow Account with an
authorised dealer in India for the purpose of routing counter-trade
transactions would require approval of Reserve Bank in terms of Regulation No.
9.
Any deposit between a person resident in India and a
person resident outside India which is not covered by the provisions of the Act
or these Regulations would require approval of Reserve Bank.
In terms of these Regulations, acquisition or transfer
of any immovable property outside India by a person resident in India would
require prior approval of Reserve Bank except in the following cases—
(i) Property
held outside India by a foreign citizen resident in India;
(ii) Property acquired by a person on or
before 8th July, 1947 and held with the permission of Reserve Bank;
(iii) Property acquired by way of gift or inheritance from persons
referred to in (ii) above;
(iv) Property
purchased out of funds held in RFC account.
General permission has also been granted to a person
resident in India for transfer of a property acquired by him in terms of
sub-paragraphs (iii) & (iv) above to his relative as specified in the
Explanation to Regulation No. 5, who is also a person resident in India.
(i) In terms of these Regulations, except with the permission of
Reserve Bank, giving a guarantee or a surety or undertaking any transaction
which has the effect of guaranteeing a debt or obligation or other liability
owned by a person resident in India to or incurred by a person resident outside
India, requires approval of Reserve Bank except where issue of such a
guarantee or surety is permissible under the Regulations.
(ii) General permission has been granted by Reserve Bank to
authorised dealers to issue guarantees in respect of transactions specified in
regulation No. 4.
(iii) In
terms of Regulation No. 5 general permission has also been granted to—
(a) Indian exporters executing projects for
giving performance guarantees and guarantees for availing of credit facilities
from banks/financial institutions outside India provided the approval for
executing the project abroad has been secured from the Working Group, Exim Bank
or an authorised dealer, as the case may be;
(b) an Indian company who is setting up a
joint venture or wholly owned subsidiary abroad in favour of or on behalf of
the overseas JV/WOS subject to compliance with the provisions of Regulations
governing direct investment in JV/WOS abroad. Such a guarantee can also be
issued by an authorised dealer on behalf of Indian company;
(c) agents in India of foreign shipping or
airline companies on behalf of their principals in favour of any statutory or
Government authority in connection with the obligations owned by the principals
to such authorities.
Foreign Exchange Management (Insurance) Regulations, 2000 - Notification No. FEMA 12/2000-RB, dated 3rd May, 2000
(i) The Regulations provide that except to the extent provided in
the Act or rules or regulations taking out of a general or life insurance
policy from an insurer outside India would require approval of Reserve Bank.
(ii) In terms of Regulation No. 4, a foreign national temporarily
resident in India can continue to hold insurance policy taken by him from an
insurer outside India if premium on such policy is paid out of his foreign
currency resources abroad.
(iii) General
permission has also been granted to a person resident in India to—
(a) take or hold a general insurance policy
issued by a foreign insurer provided the person has obtained Central Government’s
approval;
(b) continue to hold any insurance policy
issued by an insurer abroad when such person was resident outside India provided
premium on such policy is paid out of his foreign currency account abroad or
out of RFC account held with an authorised dealer in India. In such cases the
maturity proceeds/claims can be credited to the foreign currency account
maintained abroad or to RFC account with an authorised dealer in India.
If, however, such life insurance policy is in force
for not less than 3 years, the premium due thereon can be paid by remittance
from India through an authorised dealer. In such cases the amount of maturity
proceeds or claims have to be repatriated to India within seven days from
receipt thereof.
Foreign Exchange Management (Remittance of Assets) Regulation, 2000 - Notification No. FEMA 13/2000-RB, dated 3rd May, 2000
Remittance of capital assets in India hold by a person
whether resident in or outside India would require approval of the Reserve
Bank except to the extent provided in the Act or Rules or Regulations made
under the Act :
(i) Under the existing provisions
(paragraph 11D.5 of ECM) remittance of assets by foreign nationals not
permanently resident in India, on their retirement from India were allowed by
Reserve Bank in instalments. Similarly, foreign born widows of Indian nationals
were also permitted by Reserve Bank to transfer their assets by remittance from
India in instalments (cf. Paragraph 11D.6 of ECM).
(ii) In terms of Regulation No. 4, authorised
dealers have been permitted to allow remittance of assets of a person referred
to in sub-regulation (2) who has retired from India or who has inherited assets
from a person who was a resident of India, or remittance of assets in India of
a foreign born widow of an Indian national resident outside India in annual
instalments of Rs. 20 lakhs subject to the terms and conditions mentioned therein.
(iii) Authorised dealers have been permitted to
allow remittance of balance amount held in a bank account by a foreign student
after completion of his studies.
(iv) General permission has also been granted
to Indian entities to make remittance towards their share of contribution to
provident fund or superannuation/pension fund in respect of their expatriate
staff who are resident in India but not permanently resident therein.
(v) Remittance of winding up proceeds of a
branch in India, remittance of legacy, bequest or inheritance or remittance of
assets on hardship grounds would require approval of Reserve Bank as stated in
Regulation 6.
Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 - Notification No. FEMA 21/2000-RB, dated 3rd May, 2000
(i) Except under the provisions of the Act or rules or regulations
made thereunder, acquisition or transfer of immovable property in India by a
person including an Indian citizen resident outside India would require
approval of Reserve Bank.
(ii) In terms of section 6(5) of the Act a person resident outside
India can hold own or transfer immovable property in India if such property was
acquired by him when he was a resident in India or inherited from a person
resident in India.
(iii) In
terms of Regulation No. 3, an Indian citizen resident outside India is
permitted to —
(a) acquire any immovable property in India
other than agricultural/plantation property or a farm house;
(b) transfer
any property in India to a person resident in India;
(c) transfer any property other than
agricultural or plantation property or a farm house to an Indian citizen or a
person of Indian origin as defined in Regulation 2(c), resident outside India.
(iv) In
terms of Regulation No. 4 a person of Indian origin has been permitted to—
(a) acquire immovable property other than
agricultural land/plantation property or a farm house by way of purchase subject
to the conditions mentioned in clause (a) of the Regulation;
(b) acquire any immovable property other than
agricultural land/plantation property/farm house by way of gift from an Indian
citizen resident outside India or from a PIO;
(c) acquire property by inheritance subject
to the conditions stipulated in clause (c) of the Regulation;
(d) transfer by way of sale any immovable
property other than agricultural/plantation property or a farm house by way of
sale to a person resident in India;
(e) transfer agricultural land/farm house or
plantation property by way of gift or sale to an Indian citizen resident in
India.
(v) A branch or office in India of a foreign entity other than a
liaison office has been permitted to acquire immovable property which is
necessary for or incidental to the activity carried on in India by such branch
or office subject to the terms and conditions mentioned in Regulation No. 5.
Such property can also be mortgaged to an authorised dealer as a security for
any borrowing by a branch or office.
(vi) Authorised dealers have been permitted to allow remittance of
sale proceeds of property other than agricultural/plantation property or a
farm house to an Indian citizen resident outside India or a PIO as defined in
clause (c) of Regulation No. 2 who has sold the property in India subject to
the terms and conditions stipulated in Regulation No. 6.
(vii) A person who is a citizen of Pakistan,
Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan requires
approval of Reserve Bank for acquisition or transfer of property in India other
than lease not exceeding 5 years, in terms of Regulation No. 7.
Foreign Exchange Management (Establishment in India of a Branch or Office or other Place of Business) Regulations, 2000 - Notification No. FEMA 22/2000-RB, dated 3rd May, 2000
(i) In terms of these Regulations establishment of a branch or
liaison office or project office or any other place of business in India by
any entity resident outside India other than a banking company requires
approval of Reserve Bank. The application for permission should be made to
Reserve Bank, Central Office in Form FNC 1. A banking company registered or
incorporated outside India has been permitted to open a branch or office in
India if it has obtained necessary permission under the Banking Regulation Act,
1949.
(ii) In terms of Regulation No. 4, persons who are citizen of
Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China require approval of
Reserve Bank for opening of a branch or office or a place of business in India.
(iii) The list of permissible activities which
can be undertaken by a branch or a liaison office have been specified in the
schedules. A project or site office has been permitted to undertake activities
relating and incidental to execution of project in India.
(iv) Authorised dealers have been permitted to allow remittance of
profit by a branch and remittance of surplus after completion of the project by
the project office subject to terms and conditions specified in Regulation No.
7.
Foreign Exchange Management (Investment in Firm or Proprietary Concern in India) Regulation, 2000 - Notification No. FEMA 24/2000-RB, dated 3rd May, 2000
(i) These regulations provide that except as otherwise provided
in the Act or rules or regulations made or directions or orders issued
thereunder, any investment by way of contribution to the capital of a firm or a
proprietary concern or association of persons in India by a person resident
outside India requires prior approval of Reserve Bank.
(ii) In terms of Regulation No. 4, Reserve Bank has granted general
permission to an Indian citizen or a PIO [as defined in Regulation 2(vi)]
resident outside India to make investment by way of contribution to the capital
of a firm or a proprietary concern in India on non-repatriation basis subject
to conditions mentioned therein.
(iii) In terms of Regulation No. 5, general
permission has also been granted to a firm or proprietary concern to make
payment in rupees to or for credit of the non-resident Indian or a person of
Indian origin the amount invested in the said firm/concern and income accruing
on such investment by way profit of such person.
(iv) There is no change in the existing regulations governing such
investment by NRIs/PIOs in a firm/proprietary concern on non-repatriation
basis.
Foreign Exchange Management (Export and Import of Currency) Regulations, 2000 - Notification No. FEMA 6/RB-2000, dated 3rd May, 2000
The Regulations relate to export and import of Indian
currency and foreign currency from/into India.
(2) There is no change in the existing regulations for
export/import of Indian currency/foreign currency from/into India contained in
Part G of Chapter 6 and Part D of Chapter 7 of ECM except that—
(i) A person is permitted to take out of
India while on a visit to a foreign country other than Nepal or Bhutan Indian
currency notes upto Rs. 5,000 in aggregate. Such a person is also permitted to
bring back in Indian currency notes not exceeding Rs. 5,000 while returning to
India (Earlier these limits were Rs. 1,000).
(ii) Regulations for export and import of
Indian currency to/from Nepal are applicable to Bhutan also.
Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2000 - Notification No. FEMA 19/RB-2000, dated 3rd May, 2000
These regulations seek to regulate acquisition and
transfer of a foreign security by a person resident in India i.e. investment
by Indian entities in overseas joint ventures and wholly owned subsidiaries as
also investment by a person resident in India in shares and securities issued
outside India.
(2) (i) In terms of
Regulation No. 4, general permission has been granted to residents for purchase/acquisition of securities—
(a) out
of funds held in RFC account;
(b) issued as bonus shares on existing
holding of foreign currency shares; and
(c) sale
of shares/securities so acquired.
(ii) General permission has also been granted to a person resident
in India for purchase of securities out of their foreign currency resources
outside India as also for sale of securities so acquired.
(3) For the purpose of investment in foreign securities in other
cases the Regulations have been divided in two parts viz.—
Part I - Direct Investment outside India
Part II - Investment in Foreign
securities other than by way of Direct investment.
(4) Any Indian party [as defined in clause (k) of Regulation 2] has
been permitted to make investment in overseas joint venture/wholly owned subsidiary
to the extent and subject to the conditions mentioned below :—
(a) Investment upto US $ 50 mn. or its
equivalent in a block of three financial years, except investment in Nepal and
Bhutan;
(b) Investment in Indian Rupees upto Rs. 120
crores in Nepal and Bhutan in a block of three financial years.
Explanation
- The ceiling will include contribution to the capital of the overseas JV/WOS,
loan granted to the JV/WOS, and 50% of guarantees issued to or on behalf of the
JV/WOS;
(c) The investment should be in a foreign
entity engaged in the same core activity [as defined in clause (d) of
Regulation No. 2] carried on by Indian company;
(d) The
Indian party should have earned net profit during preceding three accounting
years;
(e) The Indian party should not have been on
Reserve Bank’s caution list or under investigation by Enforcement Directorate;
(f) All transactions relating to a joint
venture/wholly owned subsidiary should be routed through a branch of an authorised
dealer to be designated by the Indian party.
(5) Such an
investment may be funded out of one or more of the following sources:—
(i) Balances
held in EEFC account of Indian party;
(ii) By remittance from India upto the extent
of 25 per cent of Indian party’s net worth as on the last audited balance
sheet;
(iii) Utilisation of 50 per cent of proceeds of
foreign currency funds raised through ADR/GDR issues.
Where the investment is entirely funded out of
balances in EEFC account and/or out of proceeds of ADR/GDR issues the
conditions referred to in clause (c) and (d) of paragraph 4 will not apply.
(6) Investment out of funds raised through ADR/GDR issues : An
Indian party is permitted to make direct investment without any monetary limit
to the extent of 50 per cent of funds raised through ADRs/GDRs (inclusive of
any investment already made out of proceeds of ADRs/GDRs), in terms of
Regulation No. 6(6).
(7) Investment in Financial Sector - Where the Indian party seeks
to make investment in an entity outside India engaged in financial sector it
should also fulfil the conditions specified in Regulation No. 7.
(8) Investment under swap or exchange of shares arrangement - An
Indian party engaged in any of the sectors included in Schedule I to these
Regulations is permitted to acquire shares of a company outside India which is
also engaged in the same activity in exchange of ADRs/GDRs issued to the latter
for the shares so acquired, provided—
(a) the
investment does not exceed US $ 100 mn. or its equivalent or
(b) an amount equivalent to 10 (ten) times
the export earnings of Indian party during preceding financial year inclusive
of any other direct investment made during the same financial year, including
investment made under (a) above.
The Indian party acquiring shares under swap or
exchange of shares arrangement should comply with the conditions specified in
sub-regulation (1) of Regulation No. 8.
(9) Approval of Reserve Bank - In all other cases of direct investment
abroad which are not covered by general permission referred to in previous paragraphs,
Reserve Bank’s approval would be required in terms of Regulation No. 9(1). For
this purpose applications should be made in—
(a) Form
ODI if investment in overseas JV/WOS
(b) Form
ODB if the investment is by way of swap or exchange of shares.
(10) Capitalisation of exports and other dues - The Indian party is
permitted to capitalise the payments due from the foreign entity towards
exports made to it (other than those which have remained outstanding for more
than 6 months) as also fees, royalties or any other payments due from the
foreign entity within the ceilings applicable for investment in overseas
JVs/WOS in terms of clause (ii) of sub-regulation (3) of Regulation No. 6. The
procedure to be followed for capitalisation of payments for exports has been
specified in Regulation No. 12. The declaration forms and other documents
specified in this Regulation should be routed through the designated branch of
an authorised dealer.
(11) The Indian party before giving consent to the decisions relating
to subject-matters specified in clauses (a), (b) and (c) of sub-regulation (1)
of Regulation No. 13 obtain the permission of Reserve Bank under the
circumstances specified in that sub-regulation.
(12) Acquisition of a foreign company through bidding or tender
procedure - Authorised dealers have been permitted to remit earnest money
deposit or issue a bid bond guarantee on behalf of an Indian party for
acquisition of a foreign company through bidding and tender procedure and also
allow subsequent remittances subject to the provisions of Regulation No. 14.
(13) Obligation of Indian Party - The Indian party which has made
direct investment abroad under these Regulations is under obligation to (a)
receive shares certificate or any other document as an evidence of investment,
(b) repatriate to India the dues receivable from foreign entity and (c) submit
the documents/Annual Performance Report to Reserve Bank, as specified in
Regulation No. 15.
(14) Transfer of shares by way of sale - Sale of shares of JV/WOS
abroad held by an Indian party would require prior approval of Reserve Bank, in
terms of Regulation No. 16.
(15) The Indian party has been permitted to pledge the shares of
JV/WOS to an authorised dealer or a financial institution in India for availing
of any credit facility for itself or for the JV/WOS abroad.
(16) Any investment made in terms of Regulations contained in Part I
should be reported to Reserve Bank in form ODA as specified in the relevant
Regulations.
Part II
Investment in foreign securities other
than by way of direct investment
(17) An Indian company or a body corporate which has obtained necessary approval of Government of India, Ministry of Finance, Department of Economic Affairs has been permitted to issue Foreign Currency Convertible Bonds (FCCBs) to a person resident outside India. Such a company or body corporate is required to submit to Reserve Bank a report within 30 days from issue of FCCBs as specified in Regulation No. 18(3).
(18) General
permission has been granted to a person resident in India—
(a) to
acquire foreign securities as a gift from any person resident outside India;
(b) to acquire shares under Cashless
Employees Option Scheme issued by a company outside India;
(c) to
acquire shares by way of inheritance from a person whether resident in or
outside India;
(d) who is an employee or a director of
Indian office or branch of a foreign company or of a subsidiary in India of a
foreign company or of an Indian company in which foreign equity is not less
than 51 per cent to purchase equity shares offered by the said foreign company
under the Employee Stock Option Scheme provided (a) such shares are issued at a
concessional price and (b) the amount of consideration for purchase of shares
does not exceed US $ 10,000 or its equivalent in a block of 5 calendar years.
Authorised dealers have been permitted to allow remittances for purchase of
shares under the scheme by eligible persons.
(19) The shares acquired by persons resident in India in accordance
with the provisions of the Act, Rules or Regulations made thereunder are
allowed to be pledged for obtaining credit facilities in India from an
authorised dealer.
(20) Reserve Bank would consider applications from residents for
acquisition of foreign securities in following cases—
(a) Acquisition
of qualification shares for becoming a director of a company outside India.
(b) Purchase of rights shares of a company
outside India provided the consideration therefor does not exceed US $ 10,000
in a block of five calendar years.
(c) Purchase of shares of a JV/WOS abroad by
employees/directors of an Indian promoter company in the field of software
subject to the conditions specified in proviso to clause (c) of Regulation No.
21(1).
(d) Purchase of foreign securities under ADR/GDR
linked stock option scheme by resident employees of Indian software companies
including working directors provided purchase consideration does not exceed US
$ 50,000 or its equivalent in a block of five calendar years.
(21) Reserve Bank would, on application permit Mutual Funds in India
to purchase foreign securities subject to such terms and conditions as it may
stipulate.
Foreign Exchange Management (Transfer or
Issue of Security by a Person Resident Outside India) Regulation, 2000 -
Notification No. FEMA 20/2000-RB, dated 3rd May, 2000
These regulations seek to regulate investment in India
by persons resident outside India i.e., issue of any security by an Indian
entity to a person resident outside India and purchase, sale of Indian
securities by a person resident outside India.
(2) For the purpose of these Regulations the investment in India by
person resident outside India has been divided in five categories and the
regulations applicable have been specified in respective schedules, as
under :
Schedule 1 - Investment
under Foreign Direct Investment Scheme
Schedule 2 - Investment by
Foreign Institutional Investors under Portfolio Investment Scheme
Schedule 3 - Investment by
NRIs/OCBs under Portfolio Investment Scheme
Schedule 4 - Purchase and sale
of shares by NRIs/OCBs on Non-repatriation basis
Schedule 5 - Purchase
and sale of securities other than shares or convertible debentures of an Indian company by
persons resident outside India
(3) Citizens of Bangladesh, Pakistan or Sri Lanka resident outside
India and entities in Bangladesh or Pakistan are not permitted to purchase
shares or debentures issued by Indian companies or any other Indian security
without the prior approval of Reserve Bank, in terms of Regulation No. 5.
(4) General permission has been granted in Regulation No. 6 to any
person resident outside India to purchase shares/convertible debentures offered
on right basis by an Indian company which satisfies the conditions stipulated
in sub-regulation (2) of the said Regulation. The right shares so acquired
shall be subject to same conditions regarding repatriability as are applicable
to original shares.
(5) General permission has been granted to the transferee company
or a new company consequent on merger or de-merger or amalgamation of Indian
companies subject to the conditions specified in Regulation No. 7.
(6) An Indian company has been permitted to issue shares to its
employees or employees of its joint venture/subsidiary abroad, who are resident
outside India either directly to such employees or through a Trust subject to
the provisions of Regulation No. 8.
(7) General permission has been granted in terms of Regulation No.
9 for transfer of shares/convertible debentures by a person resident outside
India as under—
(i) for transfer of shares/convertible
debentures held by a person resident outside India other than NRI/OCB to any
person resident outside India, provided that the transferee should have
obtained permission of Central Government if he had any previous venture or tie-up
in India through investment in any manner or a technical collaboration or trade
mark agreement in the same field or allied field in which the Indian company
whose shares are being transferred is engaged;
(ii) NRIs/OCBs are permitted to transfer
shares or convertible debentures of Indian company to another NRI/OCB;
(iii) A person resident outside India is
permitted to transfer shares/debentures of an Indian company to a resident by
way of gift.
(8) (i) Transfer
of any security by a person resident in India to a person resident outside
India would require approval of Reserve Bank.
(ii) For transfer of existing shares/convertible debentures of an
Indian company by a resident to a non-resident by way of sale, the transferor
should obtain an approval of the Central Government and thereafter apply to
Reserve Bank. In such cases the Reserve Bank may permit the transfer subject to
such terms and conditions including the price at which sale may be made.
(iii) Any other transfer not covered by the abovereferred
provisions or the provisions of the Schedules would require the prior approval
of Reserve Bank for which the application should be made on Form TSI. For
arriving at the sale price of the shares in such cases the procedure indicated
in Regulation 10B.2 should be followed.
(9) Reserve Bank has granted general permission for remittance of
net sale proceeds (net of applicable taxes) of a security sold by a person
resident outside India provided—
(a) the
security is held on repatriation basis;
(b) security is sold on recognised stock
exchange or the Reserve Bank’s permission for sale of security and remittance
of sale proceeds has been obtained; and
(c) a NOC/Tax Clearance Certificate from
Income-tax authorities or an undertaking/declaration as per the provisions of
paragraph 3B.10 of ECM has been produced.
(10) The various Schemes available to persons resident outside India
for investment in Indian securities contained in the schedules are explained
below.
(i) Reserve
Bank’s automatic route
An Indian
company which is not engaged in the activity or manufacture of items listed in
Annexure A to this Schedule is permitted to issue shares to a person resident
outside India upto the extent specified in Annexure B, on repatriation basis,
provided—
(a) The
issuer company does not require an industrial licence;
(b) The shares are not being issued for
acquiring existing shares of another Indian company;
(c) If the person resident outside India to
whom the shares are being issued proposes to be a collaborator, he should have
obtained Central Government’s approval if he had any previous
investment/collaboration/tie up in India in the same or allied field in which
the Indian company issuing shares is engaged.
(ii) Subject to compliance with the
provisions of paragraph (i) above an Indian company which proposes to undertake
activities in Annexure ‘B’ is permitted to issue shares/convertible debentures
to persons resident outside India out of fresh capital issued for financing
expansion programme for carrying on such activities.
(iii) A trading company is permitted to issue
shares/converitble debentures to the extent of 51 per cent of its capital to
persons resident outside India. The remittance of dividend in respect of such
shares would be permissible only when the company secures registration as an
Export/Trading/Star Trading House.
(iv) A SSI Unit which is not engaged in
activity or manufacture of items included in Annexure ‘A’ to this Schedule may
issue shares to non-residents upto 24 per cent of its capital. Such a company
is permitted to issue shares beyond 24 per cent subject to ceilings specified
in Annexure ‘B’ if (a) it gives up SSI status and (b) it is not engaged or does
not propose to engage in manufacturing of items reserved for SSI sector.
(v) EOUs or units in Free Trade Zones or in
Software/Electronic Hardware Technology Parks are permitted to issue shares to
persons resident outside India beyond 24 per cent subject to compliance with
ceilings indicated in Annexure ‘B’.
(vi) Issue of shares by an Indian company to a
person resident outside India which are not covered by the provisions of
sub-paragraphs (i) to (v) above would require approval of SIA or FIPB.
(vii) An Indian company is permitted to issue
fresh shares to the depository abroad for the purpose of raising resources
through ADR or GDR mechanism subject to the conditions specified in paragraph
No. 4 of the Schedule.
(viii) The price of shares to be issued by the
Indian company to persons resident outside India should be in accordance with
the provisions of paragraph No. 5 of the Schedule.
(ix) The remittance of dividend to the persons
resident outside India by an Indian company which is engaged in any of the
industries in the consumer sector specified in Annexure ‘E’ or any other activity
to which dividend balancing requirement under the Industrial Policy notified by
Government of India is applicable, would be subject to the provisions of
paragraph No. 6 of the Schedule.
(x) The rate of dividend on preference
shares issued by an Indian company to a person resident outside India should
not exceed 300 basis points over State Bank of India’s prime lending rate, in
terms of paragraph No. 7 of the Schedule.
(xi) The consideration for issue of shares to
persons resident outside India under this scheme should be received either by
way of inward remittance through normal banking channels or out of funds held
in NRE/FCNR accounts of NRI/OCB investor.
(xii) The Indian company issuing shares to
non-residents under this scheme should submit to Reserve Bank, reports as
specified in paragraph 9 of the schedule.
(xiii) Reserve Bank’s permission is necessary for
retention abroad of share subscription received by Indian company from
non-residents.
(xiv) It may be noted that there are no separate
schemes for NRIs/OCBs for direct investment in India on repatriation basis.
NRIs/OCBs are now on par with any other foreign investor and they may invest in
the shares/convertible debentures issued by an Indian company under the Foreign
Direct Investment Scheme.
B. Schedule 2 - Investment by Foreign
Institutional Investors (FIIs) under Portfolio Investment Scheme
(i) The existing regulations and procedure
for investment by FIIs under Portfolio Investment Scheme remain unchanged.
(ii) Reserve Bank would also consider
applications form a domestic asset management company or a portfolio manager
registered with SEBI as FII for managing the sub-account to make investment
under the Portfolio Investment Scheme on behalf of persons resident outside
India who are foreign citizens and body corporates registered outside India, as
indicated in paragraph 4 of this Schedule. Such investment would be restricted
to 5 per cent of the equity capital or 5 per cent of the paid up value of each
series of convertible debentures within the overall ceiling of 24 per cent or
40 per cent as applicable for FIIs for the purpose of Portfolio Investment
Scheme.
C. Schedule 3 - Portfolio Investment
Scheme for NRIs/OCBs on repatriation/non-repatriation basis
There is no change in the existing scheme for
portfolio investment by NRIs/OCBs on repatriation/non-repatriation basis
except that the requirement of grant of approval by designated branch of an
authorised dealer valid for a period of 5 years at a time has been dispensed
with.
D. Schedule 4 - Purchase/Sale of
shares and convertible debentures by NRIs/OCBs on non-repatriation basis
There is no change in the existing
procedures/regulations for purchase and sale of shares/convertible debentures
by NRIs/OCBs on non-repatriation basis.
E. Schedule 5 - Purchase and sale of
securities other than shares/debentures by non-residents
There are no major changes in the regulations or
procedure applicable for purchase and sale of other securities by NRIs/OCBs on
repatriation/non-repatriation basis and by FIIs on repatriation basis.
Annexure III
Regulations
relating to export of goods and services
Foreign Exchange Management (Export of
Goods and Services) Regulations, 2000 - Notification No. FEMA 23/2000-RB, dated
3rd May, 2000
1. In terms of section 7 of the Act the Reserve Bank has been
empowered to regulate receipt of payments for goods or services exported from
India by prescribing a form of declaration. Accordingly, the Reserve Bank has
in terms of the abovereferred regulations prescribed the following forms for
declaration of goods/software as specified
in the Schedule annexed to the Regulations:—
(i) Form
GR
(ii) Form
SDF
(iii) Form PP
(iv) Form
SOFTEX
These forms are almost similar to the existing Form
GR, SDF, PP and SOFTEX except that the declaration/undertaking to be furnished
by the exporter has been suitably modified. Form VP/COD has been dispensed
with.
2. Though the Act provides powers to
Reserve Bank to specify a form for declaration for export of services, no such
form has been prescribed. In this connection, attention is drawn to
Sub-Regulation (3) of Regulation No. 3.
3. Regulation No. 4 specifies the
categories of exports for which a declaration need not be completed. The exemptions,
among others, include—
(a) export
of goods/software not exceeding Rs. 25,000 in value.
(b) export
by way of gift not exceeding Rs. one lakh in value.
(c) export of goods not exceeding US $ 1,000
or its equivalent per transaction to Myanmar under Barter Trade Agreement.
4. In terms of Regulation No. 9, the export
proceeds are required to be realised within a period of 6 months from the date
of shipment. In the case of exports to a warehouse established abroad with the
approval of Reserve Bank, the proceeds have to be realised within 15 months
from the date of shipment. The requirement of repatriation of proceeds on due
date has been dispensed with. An enabling provision has been made in this
regulation to delegate powers to authorised dealers to allow extension of time.
5. Export of goods on elongated credit
terms beyond six months requires prior approval of Reserve Bank, in terms of
Regulation No. 10.
6. Approval of an appropriate authority
viz., Working Group or Exim Bank or authorised dealer would be required for
export of goods or services on deferred payment terms or for execution of a
turnkey project or civil construction contracts in terms of Regulation No. 18.
These proposals would be considered by the authority concerned in accordance with
the guidelines issued by Reserve Bank in Memorandum PEM as amended from time to
time.
7. Pending issue of further instructions
authorised dealers may be guided by the provisions of following paragraphs of
Chapter 6 of ECM :
|
6A.1(i) |
Trade and Exchange Control |
|
6A.4 |
Numbering of forms (except VP/COD) |
|
6A.5 |
Importer-exporter code number |
|
6A.8 |
Exports under Trade Agreements/Rupee Credits |
|
6A.9 |
Protection against transit risks under FOB, C & F,
etc. contracts |
|
6A.13 |
Counter Trade arrangements |
|
6A.14 |
Export of goods on lease hire, etc. |
|
6A.16 |
Project exports and service exports |
|
6A.17 |
Export on elongated credit terms (except that Form ECT has
been dispensed with. The application giving full particulars may be made on
the applicant’s letterhead) |
|
6A.18 |
Forfaiting |
|
6B.1(i) |
|
|
6B.1(ii) } |
Disposal of copies of GR form |
6B.2 |
Shut out/short shipments |
|
6B.3 |
Exports by air |
|
6B.5 |
Export by barges/country crafts/road transport |
|
6C.1 |
Counter-signature of PP Form |
|
6C.2 |
Delay in submission of shipping documents |
|
6C.3 |
Check list for scrutiny of forms |
|
6C.4 |
Transfer of documents (Refer to Regulation No. 12) |
|
6C.5 |
Trade discount |
|
6C.6 |
Advance payments against exports |
|
6C.7 |
Part drawings |
|
6C.8 |
Consignment exports |
|
6C.9 |
Despatch of shipping documents |
|
6C.10 |
Handing over negotiable copy of bill of lading to master
of vessel/trade representative |
|
6C.11 |
Export Bills register |
|
6C.12(i) |
Follow up of overdue bills |
|
6C.12(ii) |
XOS statements |
|
6C.13A |
Reduction in invoice value on account of pre-payment of
usance bills |
|
6C.13B |
Reduction in value |
|
6C.14 |
Write-off of unrealised bills |
|
6C.15 |
Change in buyer/consignee |
|
6C.17 |
Shipments lost in transit |
|
6C.18 |
Payment of claims by ECGC |
|
6C.19 |
Return of documents to exporters |
|
Part D of Chapter 6 |
Export of software |
Annexure IV
Other Regulations
Foreign Exchange Management (Realisation,
Repatriation and Surrender of Foreign Exchange) Regulations, 2000 -
Notification No. FEMA 9/2000-RB, dated 3rd May, 2000
(i) In terms of Regulation No. 3 a person resident in India to
whom any foreign exchange is due or has accrued is under duty to take
reasonable steps to realise and repatriate to India such foreign exchange
unless an exemption has been provided in the Act and rules or regulations made
thereunder or under the general or special permission of Reserve Bank.
(ii) The
manner of repatriation of foreign exchange has been specified in Regulation No.
4.
(iii) Regulation No. 5 provides that any foreign
exchange due or accrued as remuneration for services rendered or in settlement
of any lawful obligation or an income on assets held outside India or as
inheritance, settlement or gift should be sold to an authorised person within
a period of seven days of its receipt and in all other cases within 90 days of
its receipt.
(iv) In terms of Regulation No. 6(1) any person who has drawn
exchange for any purpose but has not utilised it for the same or any other
purpose permissible under the provisions of the Act or rules or regulations
made thereunder should surrender such foreign exchange or unutilised foreign
exchange to an authorised person within a period of 60 days from the date of
acquisition. Where, however, exchange was drawn for travel abroad, the unutilised
exchange in excess of the limit upto which foreign exchange is permitted to be
retained, should be surrendered to an authorised person within 90 days from
the date of return of the traveller to India if unspent exchange is in the
form of foreign currency notes and within 180 days if it is in the form of travellers’
cheques.
(v) These regulations are not applicable to foreign exchange in
the form of currency of Nepal and Bhutan.
Foreign Exchange Management (Foreign
Currency Accounts by a Person Resident in India) Regulations, 2000 -
Notification No. FEMA 10/2000-RB, dated 3rd May, 2000
(i) These regulations seek to regulate opening and maintenance
of foreign currency accounts in or outside India by a person resident in India.
(ii) Except to the extent provided in the Act, and Rules or Regulations
made thereunder, opening and maintenance of a foreign currency account in India
or outside India by a person resident in India would require approval of
Reserve Bank.
(iii) In terms of sub-section (h) of section 6
of the Act a person who has acquired foreign currency when he was resident
outside India or who has inherited foreign exchange from a person who was
resident outside India, has been permitted to hold, own, transfer the foreign
currency so acquired.
(iv) In terms of Regulation No. 4 a person resident in India who
receives foreign exchange has been permitted to maintain Exchange Earners’
Foreign Currency Account with an authorised dealer in India subject to the
terms and conditions specified in the Schedule.
(v) In terms of Regulation No. 5, Reserve Bank has granted general
permission to residents to maintain Resident Foreign Currency Accounts with an
authorised dealer in India out of sources of receipt of foreign exchange
mentioned in clauses (a) to (d) of Sub-Regulation (1). There is no restriction
on utilisation of funds in RFC accounts.
(vi) General permission has been granted to foreign airline or
shipping companies or their agents in India to open foreign currency account
with an authorised dealer subject to the conditions mentioned in Regulation 6.
(vii) General permission has also been granted to
the following categories of persons to maintain foreign currency accounts with
a bank outside India subject to the conditions mentioned in Regulation 7,
(a) by
an authorised dealer with its correspondents/branches/Head Office outside India;
(b) by a branch outside India of an
authorised dealer with a bank outside India for carrying on normal banking
business outside India;
(c) by
Indian shipping or airline company;
(d) by Life Insurance Corporation of India or
General Insurance Corporation of India for the purpose of carrying on
life/general insurance business outside India;
(e) by an exporter who is exporting goods and
services on deferred payment terms or executing a turnkey project or civil
construction contract abroad;
(f) by
a student going abroad for studies or a person who is on a visit to a foreign
country;
(g) by
a person going abroad to participate in an exhibition/trade fair.
Foreign Exchange Management (Possession and
Retention of Foreign Currency) Regulations, 2000 - Notification No. FEMA
11/2000-RB, dated 3rd May, 2000
In terms of provisions of section 9 of the Act, the
Reserve Bank has specified the limit for possession and retention of foreign
currency by a person resident in India, under these Regulations.
(a) Authorised persons have been permitted to
possess foreign currency and coins in accordance with the limits, if any,
advised to them by the Reserve Bank.
(b) There
is no restriction on possession of foreign coins by any person.
(c) Any person resident in India is permitted
to retain in aggregate foreign currency not exceeding US $ 2000 or its equivalent
in the form of currency notes/bank notes or travellers cheques acquired by him
from sources referred to in clauses (a) to (d) of sub-regulation (iii) of
Regulation No. 3.
(d) A person resident in India but not
permanently resident therein is permitted to possess foreign currency notes,
bank notes and travellers cheques without limit if the foreign currency was
acquired when he was resident outside India and was brought into India and
declared to Customs authorities where such declaration was required to be made.
Foreign Exchange Management (Manner of
Receipt and Payment) Regulations, 2000 - Notification No. FEMA 14/2000-RB,
dated 3rd May, 2000
(i) These regulations specify the manner of receipt and payments
or methods of receipt and payment which correspond to the provisions contained
in paragraphs 2.5 and 2.6 of the ECM.
(ii) There is no change in the existing regulations relating to the
methods of receipt of foreign exchange and payment of foreign exchange.
(iii) Pending issue of further
directions/instructions authorised dealers may be guided by the provisions of
the following paragraphs of ECM :—
Permitted currencies
Authorised dealers’ responsibility
in regard to other currencies
Choice of contracting currencies in
international transactions
Authorised dealers’ foreign
currency accounts
Payment in approved/conforming
manner
Asian Clearing Union
Memorandum of Procedure (ACM)
Channelling through ACU obligatory.
Foreign Exchange Management (Foreign
Exchange Derivative Contracts) Regulations, 2000 - Notification No. FEMA
25/RB-2000, dated 3rd May, 2000
(i) Except to the extent permitted in the Regulations any person
resident in India or outside India proposing to enter into a foreign exchange
derivative contract would require prior permission of Reserve Bank.
(ii) (a) The persons
resident in India may enter into forward contracts with an authorised dealer for the transactions and subject to
the terms and conditions mentioned in Part A of Sched ule I.
(b) A person resident in India may enter into a foreign exchange
derivative contract other than forward contract for the transactions and
subject to the terms and conditions mentioned in Part B of Schedule I.
(iii) Categories of persons resident outside
India mentioned in Schedule II are permitted to enter into forward contracts
with an authorised dealer in India to hedge the transactions specified in that
Schedule subject to the terms and conditions mentioned therein.
(iv) The applications for hedging of commodity price risks are
required to be made to Reserve Bank for prior approval through the
International Divisions of an authorised dealer. The procedure to be followed
by the applicant and the authorised dealer and the documents to be furnished
with the applications have been explained in Schedule III.
(v) There is no change in the existing regulations relating to the
forward contracts, other derivative products or hedging of commodity price
risk.
Foreign Exchange Management (Receipt and
Payment to a Person resident outside India) - Notification No. FEMA 16/RB-2000,
dated 3rd May, 2000
(i) In pursuance of provisions of section 3 of the Act the
Reserve Bank has granted general permission to any person to receive any
payment—
(a) made in rupees by order or on behalf of a
person resident outside India during his stay in India by converting the
foreign exchange into rupees by sale to an authorised person.
(b) made by means of a cheque drawn on a bank
outside India or a bank draft or travellers cheques issued outside India or
made in foreign currency notes directly, from out of India provided the
cheques, drafts or foreign currency is sold to an authorised person within
seven days of its receipt.
(c) by
means of a postal order or postal money order issued by a post office outside
India.
(ii) Reserve Bank has also granted general permission to a person
resident in India to make payment in rupees—
(a) for extending hospitality to a person
resident outside India;
(b) to a person resident outside India for
purchase of gold or silver imported by such person in accordance with the provisions
of any order issued by Central Government under the Foreign Trade (Development
and Regulation) Act, 1992 or under any law or rules or regulations in force.
(iii) General permission has also been granted
to a company in India to make payment of sitting fees or commission or
remuneration or travel expenses to and from or within India to its whole time
director who is on a visit to India for company’s work subject to the terms and
conditions mentioned in paragraph 3 of the Notification.
Transactions with Nepal and Bhutan -
Notification No. FEMA 17/RB-2000, dated 3rd May, 2000
The Reserve Bank has directed that the restrictions
imposed in clauses (b), (c) and (d) of section 3 relating to making payment to
or for credit of any person resident outside India, or receiving otherwise
through an authorised person any payment by order or on behalf of a person
resident outside India, or entering into any financial transactions in India as
consideration for or in association with acquisition or creation or transfer of
a right to acquire any asset outside India will not be applicable for any
transaction entered into in Indian rupees by or with (a) citizen of India,
Nepal or Bhutan resident in Nepal or Bhutan, (b) a branch in Nepal or Bhutan of
a company or corporation in India or Nepal or Bhutan or (c) a branch in Nepal
or Bhutan of a partnership firm or otherwise of citizens of India, Nepal and
Bhutan.
Permission to buy foreign exchange from
Post Office in India in the form of Postal Order or Money Order - Notification
No. FEMA 18/RB-2000, dated 3rd May, 2000
The Reserve Bank has in pursuance of clause (a) of
section 3 of the Act granted general permission to any person to buy foreign
exchange from any post office in India in the form of postal order or money
order.
Definition of currency - Notification No.
FEMA 15/2000-RB, dated 3rd May, 2000
The Reserve Bank has in pursuance of clause (h) of section
2 of the Act notified debit cards, ATM cards or any other instrument which can
be used to create a financial liability as currency.
Annexure V
Pending issue of further directions authorised dealers
may be guided by the following provisions of the Exchange Control Manual
|
Chapter |
Paragraph No. |
Subject-matter |
|
1. |
1.4 |
Authorised dealers in foreign exchange |
|
|
1.5 |
Authorised Co-operative/Commercial Banks (These banks will
now be permitted to also maintain NRSR Accounts) |
|
|
1.6 |
Authorised Money Changers |
|
|
1.7 |
Revocation of licences/authorisation granted by Reserve
Bank |
|
|
1.16 |
Marking of documents |
|
|
1.17 |
Organisation of Exchange Control Department |
|
|
1.22 |
Breach of regulations by non-resident branches/correspondents
of authorised dealers |
|
|
1.24 |
Employment of Brokers |
|
3. |
3A.1 |
Purchase of TTS, MTs, etc. from Public |
|
|
3A.5 |
Foreign Inward Remittance Payment System |
|
|
3A.6 |
Issue of bank certificates |
|
|
3A.7 |
Refund of inward remittance |
|
|
3B.3(i) |
Procedure for making applications |
|
|
3B.3(iii) |
-do- |
|
|
3B.5 |
Manner of payment of rupees against sale of foreign
exchange |
|
|
3B.10 |
Undertaking/Certificate regarding payment of Income-tax |
|
|
3D.2 |
Purchases from Public |
|
|
3D.3 |
Purchases against Currency Declaration Form |
|
|
3D.4 |
Encashment Certificates |
|
|
3D.5 |
Purchase on Authorised Dealer’s own responsibility |
|
|
3D.6 |
Import of Foreign Currency notes |
|
|
3D.8 |
Reconversion of Indian currency |
|
|
3D.9 |
Sales to Foreign Tourists |
|
|
3D.9A |
Providing
Foreign Currency Travellers Cheques and notes to the
Master/Captain of foreign vessels against inward remittance |
|
|
3D.11 |
Sales to other authorised dealers, Exchange Bureaux and
Money Changers |
|
|
3D.12 |
Rates of Exchange |
|
|
3D.13 |
Display of exchange rates |
|
|
3D.14 |
Regulation of authorised dealers’ sales to travellers |
|
|
3D.15 |
Export of surplus currency notes and coins |
|
|
3D.16 |
Records to be maintained by Exchange Bureaux |
|
|
3D.17 |
Reporting of transactions by Exchange Bureaux |
|
4 |
4.1 to 4.8 |
Provisions relating to authorised dealer’s dealings with
Reserve Bank |
|
5 |
Part A 5A1 to 5A11 |
Rupee accounts of non-resident banks |
|
|
Part B 5B.1 to 5B.6 |
Inter-bank dealings |
|
|
Annexure |
Guidelines for foreign exchange exposure limits to
authorised dealers |
|
7 |
7A.1(i) and (ii) |
General |
|
|
7A.2 |
Import licences |
|
|
7A.4 |
Manner of rupee payment |
|
|
7A.5 |
Letter of authority |
|
|
7A.6 |
Attestation of invoices by authorised dealers |
|
|
7A.7 |
Form A1 |
|
|
7A.8 |
Imports financed in rupees |
|
|
7A.9 |
Import licence for CIF value |
|
|
7A.9A |
Imports by Government/Public Sector Undertakings, etc. |
|
|
7A.10 |
Advance Remittance (except that amount of US $ 15,000 or
its equivalent may be amended as US $ 25,000 or its equivalent) |
|
|
7A.11 |
Time limit for settlement of import payments |
|
|
7A.12 |
Interest on import bills |
|
|
7A.15 |
Endorsement on Import Licences |
|
|
7A.20 |
Evidence of Imports |
|
|
7A.21 |
Precautions for handling import documents |
|
8 |
8A.1(d) |
Sale of exchange - Endorsement on passport |
|
|
8A.1(e) |
Issue of Travellers Cheques |
|
|
8A.1(f) |
Sale of exchange in the form of foreign currency notes |
|
|
8A.1(g) |
Retention of Form A2 |
|
|
8A.3(ii) |
Endorsement of unspent exchange on the passport |
|
|
8A.9 |
Remittances for tour arrangements |
|
16 |
16.1 to 16.9 |
Returns and Statements (including Guide to authorised
dealers for compilation of ‘R’ returns) |