GRANT
OF LOANS BY INDIAN COMPANIES TO THE EMPLOYEES OF THEIR BRANCHES OUTSIDE INDIA
A.P. (DIR Series) (2003-04) Circular No. 74, dated 20-2-2004
Grant of loans by Indian Companies to the Employees of their
Branches outside India
Attention of Authorised Dealers is invited to A.D.
(MA Series) Circular No. 11 dated May 16, 2000. In Regulation 5 of Foreign
Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations,
2000 vide Notification No. FEMA 3/2000-RB dated May 3, 2000 contained
thereat, borrowing and lending in foreign currency by persons other than
Authorised Dealers is envisaged.
2. At present loans granted
by the Indian companies to the employees of their branches outside India
require permission of the Reserve Bank since such loans are treated as loans by
a resident to a non-resident.
3. It is clarified that
though branches of Indian companies outside India are treated as residents as
per the definition, the employees of such branches are treated as persons
resident outside India.
4. As a further measure of
liberalisation and procedural simplification, it has been decided to grant
general permission to the Indian Companies in India to grant loans in foreign
currency to the employees of their branches outside India for personal purposes
in accordance with the lender’s Staff Welfare Scheme/Loan Rules and other terms
and conditions as applicable to its staff resident in India and abroad.
5. Notification No. FEMA
80/2003-RB dated January 8, 2003 has been issued, amending the provisions of
Notification No. FEMA 3/2000-RB dated May 3, 2000 (Sub-regulation 6 of the
amended Notification may please be read as No. 7. A Corrigendum is 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 sections 10(4) and 11(1) of FEMA 1999
(42 of 1999).