RESERVE BANK OF INDIA�S CLARIFICATIONS ON NEW RULES & REGULATIONS
FRAMED UNDER FEMA
A.D.
(M.A. SERIES) CIRCULAR NO. 11, DATED 16-5-2000
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Regulation Act, 1973 stands repealed from 1st June 2000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 moneychanger.
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 provisions 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 undertaken the transactions. Where an authorised person has reason 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 undertaken, 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.
ANNEXURE
I: REMITTANCE FOR CURRENT ACCOUNT TRANSACTIONS
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 form 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 3 rd 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.
(iv)
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 maybe 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 ship stores 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 verifications 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.
ANNEXURE
II: REGULATIONS RELATING TO CAPITAL ACCOUNT TRANSACTIONS
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.
Foreign Exchange Management (Permissible Capital Account Transactions)
Regulations, 2000-Notification No. FEMA 1/2000-RB, dated 3 rd May, 2000:
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.
2.
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 3 rd 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.
3.
Foreign Exchange Management (Borrowing or Lending in Foreign Exchange)
Regulations, 2000-Notification No. FEMA 3/2000-RB, dated 3 rd 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 Regulations 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.
4.
Foreign Exchange Management (Borrowing and Lending in
Rupees)-Regulations, 2000 Notification No.
FEMA 4/2000-RB, dated 3 rd May, 2000:
(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
22/99-RB, dated 30 th 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 1 st 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.
5.
Foreign Exchange Management (Deposit) Regulations, 2000-Notification
No. FEMA 5/2000-RB, dated 3 rd May, 2000:
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
deposits accounts by certain person, 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 30 th 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.
6.
Foreign Exchange Management (Acquisition and Transfer of Immovable
Property Outside India) Regulations, 2000-Notification No. FEMA 7/2000-RB
dated 3 rd May, 2000:
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 person 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.
7.
Foreign Exchange Management (Guarantees) Regulations, 2000-Notification
No. FEMA 8/2000-RB dated 3 rd May, 2000:
(i)
In terms of these Regulations, except with the permission of Reserve
Bank, giving a guarantee or a surety for 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 an 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.
8.
Foreign Exchange Management (Insurance) Regulation, 2000-Notification
No. FEMA 12/2000 �RB dated 3 rd May 2000:
(i)
The Regulations provided 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 REC 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.
9.
Foreign Exchange Management (Remittance of Assets) Regulation,
2000-Notification No. FEMA 13/2000-RB dated 3 rd May, 2000:
Remittance
of capital assets in India held 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 national 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.
10.
Foreign Exchange Management (Acquisition and Transfer of Immovable
Property in India) Regulations, 2000-Notification No. FEMA 21/2000-RB dated 3
rd 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.
(iv)
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.
(viii)
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.
11.
Foreign Exchange Management (Establishment in India of a Branch or
Office or Other Place of Business) Regulation, 2000 �Notification No. FEMA
22/2000-RB dated 3 rd May, 2000:
(i)
In terms of these Regulations establishment of a branch or liaison office
or project 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.
12.
Foreign Exchange Management (Investment in Firm or Proprietary Concern
in India) Regulation, 2000-Notification No. FEMA 24/2000-RB dated 3 rd
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 or 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.
13.
Foreign Exchange Management (Export and Import of Currency)
Regulations, 2000-Notification No. FEMA 6/RB-2000 dated 3 rd May,
2000:
The
Regulations relate to export and import of Indian currency and foreign currency
from/into India.
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. 5000 in
aggregate. Such a person is also
permitted to bring back in Indian currency notes not exceeding Rs. 5000 while
returning to India (Earlier these limits were Rs. 1000).
(ii)
Regulations for export and import of Indian currency to/from Nepal are
applicable to Bhutan also.
14.
Foreign Exchange Management (Transfer or Issue of any Foreign Security)
Regulations, 2000 Notification No. FEMA 19/RB-2000 dated 3 rd May,
2000:
(1)
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 fund 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
PART
I �DIRECT INVESTMENT ABROAD
(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$ 50mm. 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 India
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 JV/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 the sale-Sales 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 a 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
therefore 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.
15.
Foreign Exchange Management (Transfer or Issue of Security by a person
resident outside India) Regulation, 2000-Notification No. FEMA 20/2000-RB
dated 3 rd May 2000:
(1)
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 condition 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.
(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 Regulations 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 above referred 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.
A.
Schedule 1- Foreign Direct Investment Scheme
(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 up to
the extent specified in Annexure B, on repatriation basis, provided-
(a)
The issuer company does not require an industrial licence;
(b)
The shares not being issued for acquiring existing shares of another Indian
company;
(c)
If the person resident outside 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 / convertible debentures
to the extent of 51 %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 Exports/ 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 % of its capital. Such a company is permitted to issue shares beyond 24 %
subject to ceilings specified in Annexure B if (a) it gives up SSI status
and (b) it is 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%subject to compliance with ceilings indicated in Annexure B�
(iv)
Issue of shares by an Indian company to a person resident outside India
which are not covered by the provisions of sub paragraph (i) to (v) above would
require approval of STA 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 issue 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 from 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 citizen and
body corporates registered outside India as indicated in paragraph 4 of this
Schedule. Such investment would be restricted to 5% of the equity capital or 5%
of the paid up value of each series of convertible debentures within the overall
ceiling 24 % or 40 % 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 or 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 above referred 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 25000 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 with a period of 6 months from the date of shipment. In 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.
Exports 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 contract 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)
|
6A5
|
Importer-exporter
code number
|
6A.8
|
Exporter
under Trade Agreement /Rupee Credits
|
6A.9
|
Protection
against transit risks under FOB, C&F etc. contracts
|
6A.13
|
Counter
Trade arrangements
|
6A14
|
Exporter
of goods on lease hire, etc.
|
6A.16
|
Project
exports and service exports
|
6A.17
|
Exports
on elongated credit terms (except that Form ECT) have been dispensed with.
The application giving full particulars may
be
made on the applicant�s letterhead)
|
6A.18
|
Forfaiting
|
6B.1(i)}
6B.
(ii) }
|
Disposal
of copies of GR form
|
6B.2
|
Shut
out/ shorts shipments
|
6B.3
|
Exports
by air
|
6B.5
|
Exports
by barges/ country crafts / road transport
|
6C.1
|
Country
- signature of PP Form
|
6C.2
|
Delay
in submission of shipment 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
|
Exports
Bills register
|
6C.12
(i)
|
Follow
up of overdue bills
|
6C.12(ii)
|
XOS
statements
|
6C.13
A
|
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
|
Payments
of claims by ECGC
|
6C.19
|
Return
of documents to exporters
|
Part
D of
Chapter
6
|
Export
of software
|
ANNEXURE
IV: OTHER REGULATIONS
1.
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 from of travellers� cheques.
(v)
These regulations are not applicable to foreign exchange in the form of
currency of Nepal and Bhutan.
2.
Foreign Exchange Management (Foreign Currency Accounts by a Person
Resident in India) Regulation, 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.
3.
Foreign Exchange Management (Possession and Retention of Foreign
Currency) Regulations, 2000-Notificiation 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 person 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.
4.
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 payments, 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 paragraph of ECM.
2.1 Permitted currencies.
2.2 Authorised dealers� responsibility in
regard to other currencies.
2.3
Choice of contracting currencies in international transactions.
2.4 Authorised dealers� foreign currency
accounts.
2.7 Payment in approved/conforming manner
2.8 Asian Clearing Union
2.9 Memorandum of Procedure (ACM)
2.10 Channelling through ACU obligatory
5.
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 person 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 Schedule 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 has been explained in Schedule III.
(v)
These is no change in the existing regulations relating to the forward
contracts, other derivative products or hedging of commodity price risk.
6.
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,
1922 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.
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.
The
Reserve Bank has in pursuance of clause (a) of section 3 of the Act
granted general permission to any person to any foreign exchange from any post
office in India in the form of postal order or money order.
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 used be sued to create a
financial liability as currency.
ANNEXURE
V: PENDNG 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
|
Authorise
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
|
Purchase
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 Under-takings, 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
|
8A.1(d)
|
Sales
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 arrangement
|
16
|
16.1
to 16.9
|
Returns
and Statements (including Guide to authorised dealers for compilation of
�R� returns)
|
|