A.P. (DIR Series) (2002-2003) Circular No. 66, Dated
13-1-2003, Issued
by Exchange Control Department, RBI
Attention
of authorised dealers is invited to Foreign Exchange Management (Transfer or
Issue of any Foreign Security) Regulations, 2000, notified by the Reserve Bank
vide Notification No. FEMA. 19/RB-2000, dated 3rd May, 2000 as amended from
time to time.
2. At present
residents are not permitted to make investments in equity of companies
registered overseas except by way of setting up joint ventures or wholly owned
subsidiaries. It has now been decided to permit relaxations as under :—
(i) Corporates
Listed
Indian companies are permitted to invest abroad in companies, (a) listed on a
recognised stock exchange and (b) which has the shareholding of at least 10 per
cent in an Indian company listed on a recognised stock exchange in India (as on
1st January of the year of the investment). Such investments shall not exceed
25 per cent of the Indian company’s net worth, as on the date of latest audited
balance sheet.
(ii) Individuals
Resident
individuals are permitted to invest in overseas companies indicated at (i)
above without any monetary limit.
(iii) Investment by Mutual Funds
At
present, Mutual Funds are permitted to invest in ADRs/GDRs of the Indian
companies and rated debt instruments, within an overall cap of USD 500 million.
It has now been decided to permit Mutual Funds to also invest in equity of
overseas companies indicated at (i) above. It has also been decided to enhance
the overall cap to USD 1 billion. Accordingly, Mutual Funds desirous of
availing of this facility may approach the Reserve Bank after obtaining the
necessary permission from SEBI in the matter.
3. The above
relaxations are subject to the following:—
(a) All
transactions are routed through a designated authorised dealer and rupee
payments received out of the bank account of the investor.
(b) Authorised
Dealer before allowing the remittances shall ensure that the investments are
made strictly in accordance with the conditions stipulated in paragraph 2
above, viz., that such investments are permitted in securities of companies
listed on recognised stock exchange abroad and that such companies in turn have
at least 10 per cent share holding in an Indian company listed on a recognised
stock exchange in India.
(c) Authorised
Dealers shall retain with them full particulars of investments such as
names/addresses of the investors, companies in which the investments are made
and details of securities held.
(d) Authorised
dealer shall forward to the Chief General Manager, Exchange Control Department,
Reserve Bank of India, Overseas Investment Division, Mumbai a monthly statement
on or before 10th of the succeeding month indicating the amount of remittances
allowed/received in respect of purchases/sales and the net investment
outstanding in respect of each of the categories mentioned above. Reporting
format is being advised separately.
4. The above
relaxations, subject to review, shall be effective for a period upto June 30,
2003.
5. Necessary
amendments to the Foreign Exchange Management Regulations, 2000 are being
issued separately.
6. Authorised
Dealers may bring the contents of this circular to the notice of their
constituents concerned.
7. 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).