December 1, 2014
1. Routing of funds raised abroad to India Reserve Bank of India (“RBI”) has vide Circular No. 41 dated 25th November, 2014 clarified that Indian companies or their AD Category – I banks are not allowed to issue any direct or indirect guarantee or create any contingent liability or offer any security in any form for such borrowings by their overseas holding / associate / subsidiary / group companies except for the purposes explicitly permitted in the relevant Regulations. Further clarified, funds raised abroad by overseas holding / associate / subsidiary / group companies of Indian companies with support of the Indian companies or their AD Category – I banks as mentioned at (i) above cannot be used in India unless it conforms to the general or specific permission granted under the relevant Regulations. Further RBI has clarified that the Indian companies or their AD Category – I banks using or establishing structures which contravene the above shall render themselves liable for penal action as prescribed under FEMA, 1999. 2. External Commercial Borrowings (“ECB”) Policy – Parking of ECB proceeds Reserve Bank of India (“RBI”) has vide its Circular No. 39 dated 21st November, 2014 permitted AD Category -I banks to allow eligible External Commercial Borrowing (“ECB”) borrowers to park ECB proceeds (both under the automatic and approval routes) in term deposits with AD Category- I banks in India for a maximum period of six months pending utilisation for permitted end uses subject to certain conditions as laid down in the Circular. 3. Release of Foreign Exchange for Haj/ Umrah pilgrimage Reserve Bank of India (“RBI”) has vide Circular No. 40 dated 21st November, 2014 allowed Authorised Dealers and Full Fledged Money Changers to release the full amount of BTQ entitlement in cash or up to the cash limit specified by the Haj Committee of India, to the Haj/ Umrah pilgrims. 4. Acquisition/Transfer of Immovable property – Payment of taxes Reserve Bank of India (“RBI”) has issued Circular No. 38 dated 20th November, 2014 with regard to requirement of payment of taxes while undertaking property transactions under Foreign Exchange Management (Acquisition and Transfer of immovable property in India) Regulations, 2000 as amended from time to time. In this regard RBI has clarified that transactions involving acquisition of immovable property under above said regulations shall be subject to the applicable tax laws in India.