RBI/2013-14/230
A.P. (DIR Series) Circular No.37
September 05, 2013
To,
All Category - I Authorised Dealer banks
Madam / Sir,
Issue of Bank Guarantee on behalf of person resident outside India for FDI
transactions
Attention of the Authorised Dealer Category – I (AD Category - I) banks is
invited to the Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident Outside India) Regulations, 2000, notified vide
Notification No. FEMA. 20/2000-RB dated May 3, 2000, as amended from time to time, read with
Regulation 5(2A) of the Foreign Exchange Management (Deposit) Regulations
notified vide
Notification No. FEMA. 5/2000-RB dated May 3, 2000, as amended
from time to time permitting AD Category – I banks to open Escrow account and
Special account on behalf of non-resident acquirer for acquisition/transfer of
shares/convertible debentures of an Indian company through open offers/
delisting/ exit offers, subject to compliance with the relevant SEBI
[Substantial Acquisition of Shares and Takeovers (SAST)] Regulations, 1997, as
amended from time to time and other applicable SEBI Regulations and subject to
terms and conditions stipulated in Schedule 8 to the Notification ibid.
Further, attention of AD Category – I banks is also invited to the Foreign
Exchange Management (Guarantee) Regulations, notified vide
Notification No.
FEMA. 8/2000-RB dated May 3, 2000, as amended from time to time, in terms of
which, AD Category-I banks are allowed to give guarantees for specified purposes
as stated therein.
- In order to provide operational flexibility and ease the procedures, it has
been decided to permit AD Category –I bank to issue bank guarantee, without
prior approval of the Reserve Bank, on behalf of a non-resident acquiring shares
or convertible debentures of an Indian company through open offers/
delisting/exit offers, provided :
- the transaction is in compliance with the provisions of the Securities and
Exchange Board of India (Substantial Acquisition of Shares and Takeover)
[SEBI(SAST)] Regulations;
- the guarantee given by the AD Category –I bank is covered by a counter
guarantee of a bank of international repute.
It may be noted that the guarantee shall be valid for a tenure co-terminus with
the offer period as required under the SEBI (SAST) Regulations.
- In case of invocation of the guarantee, the AD Category-I bank is required to
submit to the Chief General Manager-in-Charge, Foreign Exchange Department,
Reserve Bank of India, Central Office, Mumbai 400 001, a report on the
circumstances leading to the invocation of the guarantee.
- AD Category - I banks may bring the contents of the circular to the notice of
their customers/constituents concerned.
- Reserve Bank of India has since amended the relevant Regulations vide
Notification No.FEMA.265/2013-RB dated March 05, 2013, notified vide
G.S.R.No.532(E) dated August 05, 2013 and
Notification No. FEMA.267/2013-RB
dated March 5, 2013 notified vide G.S.R. 573(E) dated August 27, 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