RESERVE BANK OF INDIA (RBI)

Requirement for obtaining prior approval of RBI in cases of acquisition/ transfer of control of NBFCs

Reserve Bank of India has vide its circular DNBS (PD) CC.No.376/03.10.001/2013-14 dated May 26, 2014 notified that NBFCs both Deposit accepting and non-deposit accepting registered with RBI will requiring prior written approval of the Reserve Bank in the following cases:–

Overseas Direct Investments – Limited Liability Partnership (LLP) as Indian Party

Reserve Bank of India vide its circular A.P. (DIR Series) Circular No.131 dated May 19, 2014 has  notified that a Limited Liability Partnership (LLP), registered under the Limited Liability Partnership Act, 2008 (6 of 2009), as an “Indian Party”,  may henceforth undertake financial commitment to / on behalf of a JV / WOS abroad in terms of the extant FEMA provisions under Regulations.

The AD banks shall report the financial commitment/s undertaken by an LLP in Form ODI Part I and II and also other reporting (APR, disinvestments, etc.) as per the extant reporting requirements

External Commercial Borrowings (ECB) from Foreign Equity Holder – Simplification of Procedure

As per the extant ECB policy, ECBs from direct foreign equity holders (FEHs) are considered both under the automatic and the approval routes, as the case may be. ECBs from indirect equity holders and group companies and ECBs from direct FEH for general corporate purpose are, however, considered under the approval route. Further, any request for change of the ECB lender in case of FEH requires RBI’s approval.

Reserve Bank of India vide its circular RBI/2013-14/594 A.P. (DIR Series) Circular No.130 dated May 16, 2014 has as a measure of simplification of the existing procedure, decided to delegate powers to AD banks to approve the following cases under the automatic route:

1. Proposals for raising ECB by companies belonging to manufacturing, infrastructure, hotels, hospitals and software sectors from indirect equity holders and group companies.
2. Proposals for raising ECB for companies in miscellaneous services from direct / indirect equity holders and group companies. Miscellaneous services mean companies engaged in training activities (but not educational institutes), research and development activities and companies supporting infrastructure sector. Companies doing trading business, companies providing logistics services, financial services and consultancy services are, however, not covered under the facility.
3. Proposals for raising ECB by companies belonging to manufacturing, infrastructure, hotels, hospitals and software sectors for general corporate purpose.ECB for general corporate purpose (which includes working capital financing) is, however, permitted only from direct equity holder.
4. Proposals involving change of lender when the ECB is from FEH – direct / indirect equity holders and group company.

 
External Commercial Borrowings (ECB) Policy – Refinance / Repayment of Rupee loans raised from domestic banking system

Reserve Bank of India vide its circular A.P. (DIR Series) Circular No.129 dated May 9, 2014 decided that eligible Indian companies will not be permitted to raise ECB from overseas branches / subsidiaries of Indian banks for the purpose of refinance / repayment of the Rupee loans raised from the domestic banking system in respect of the following:

The changes to the ECB policy will come into force with immediate effect.

External Commercial Borrowings (ECB) Policy: Re-schedulement of ECB – Simplification of procedure

Reserve Bank of India vide its circular RBI/2013-14/584 A.P. (DIR Series) Circular No. 128 dated May 9, 2014 has as a measure of simplification of the existing procedures, decided to delegate the power to the designated AD Category – I bank to allow re-schedulement of ECB due to changes in draw-down schedule and / or repayment schedule with the following conditions:

1. Changes, if any, in all-in-cost (AIC) is only on account of the change in average maturity period (AMP) due to re-schedulement of ECB and post re-schedulement, the AIC and the AMP are in conformity with applicable guidelines. There should not be any increase in the rate of interest and no additional cost (in foreign currency / Indian Rupees) should be involved.
2. The re-schedulement is allowed only once, before the maturity of the ECB.
3. If the lender is an overseas branch of a domestic bank, the prudential norms applicable on account of re-schedulement should be complied with.
4. The changes on account of re-schedulement should be reported to DSIM through revised Form 83.
5. The ECB should be in compliance with all applicable guidelines related to eligible borrower, recognised lender, AIC, AMP, end-uses, etc.
6. The borrower should not be in the default / caution list of RBI and should not be under the investigation of Directorate of Enforcement.

The facility will be available for ECBs raised both under the automatic and approval routes.

Foreign Direct Investment (FDI) in India – Reporting mechanism for transfer of equity shares/ fully and mandatorily convertible preference shares/ fully and mandatorily convertible debentures

Reserve Bank of India vide its circular RBI/2013-14/577 A.P. (DIR Series) Circular No.127 dated May 2, 2014 has decided

1. to rationalise the existing procedure, in cases where the NR investor including an NRI acquires shares on the stock exchanges in terms of A.P. (DIR Series) Circular No. 38 dated September 6, 2013, the investee company would have to file form FC-TRS with the AD Category-I bank.
2. In order to facilitate operational convenience, it has been decided that the AD Category-I bank may approach Regional Office concerned of Reserve Bank of India, Foreign Exchange Department to regularize the delay in submission of form FC-TRS, beyond the prescribed period of 60 days and in all other cases, form FC-TRS shall continue to be scrutinised at AD bank level as per extant practice.
3. The AD banks shall continue to comply with the consolidated reporting requirement as stipulated in terms of Para 6.4 of A. P. (DIR Series) Circular No. 16 dated October 4, 2004.

These directions will become operative from 2^nd May, 2014, being the date of this circular.