RBI/2013-14/416
A.P. (DIR Series) Circular No.81
December 24, 2013
To
All Authorised Dealer Category - I Banks
Madam / Dear Sir
Borrowing and Lending in Rupees - Investments by persons resident outside India
in the tax free, secured, redeemable, non-convertible bonds
Attention of Authorized Dealer Category - I (AD Category - I) banks is invited
to the Regulation No. 6 (2) of Foreign Exchange Management (Borrowing and
Lending in Rupees) Regulations, 2000 (Notification No. FEMA 4/2000-RB dated May
03, 2000) which imposes restrictions on person resident in India who have
borrowed in Rupees from a person resident outside India to the effect that such
borrowed funds cannot be used for any investment, whether by way of capital or
otherwise, in any company or partnership firm or proprietorship concern or any
entity, whether incorporated or not, or for relending.
- On a review, it has been decided to permit such resident entities / companies
in India, authorised by the Government of India, to issue tax-free, secured,
redeemable, non-convertible bonds in Rupees to persons resident outside India to
use such borrowed funds for the following purposes:
(a) for on lending / re-lending to the infrastructure sector; and
(b) for keeping in fixed deposits with banks in India pending utilization by
them for permissible end-uses.
- AD Category-I banks may bring the contents of this circular to the notice of
their constituents and customers.
- Reserve Bank has since amended the subject Regulations accordingly through
the Foreign Exchange Management (Borrowing and Lending in Rupees) (Amendment)
Regulations, 2013 which have been notified vide
Notification No.
FEMA.287/2013-RB dated September 17, 2013, vide G.S.R. No. 645(E) dated
September 20, 2013, read with Corrigendum dated October 24, 2013 vide
G.S.R.No.741(E) dated November 19, 2013.
- The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager-In-Charge