RESERVE BANK OF INDIA (RBI)

As per the existing regulations, applications by persons, firms and companies for making payments, exceeding USD 5,000 or its equivalent towards imports into India must be made in Form A-1.

Reserve Bank of India has vide its circular RBI/2014-15/467 A. P. (DIR Series) Circular No.76 dated February 12, 2015 communicated that in order to further liberalise and simplify the procedure, it has dispensed with the requirement of submitting request in Form A-1 to the AD Category –I Banks for making payments towards imports into India. AD Category –I may however, need to obtain all the requisite details from the importers and satisfy itself about the bonafides of the transactions before effecting the remittance.

Reserve Bank of India has vide its circular RBI//2014-15/468 A.P (DIR Series) Circular No.77 February 12, 2015 notified that with a view of promoting the ease of reporting of transactions under foreign direct investment, the Reserve Bank of India, under the aegis of the e-Biz project of the Government of India has enabled the filing of the following returns with the Reserve Bank of India viz.

• Advance Remittance Form (ARF) – used by the companies to report the foreign direct investment (FDI) inflow to RBI; and
• FCGPR Form – which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow.

The design of the reporting platform enables the customer to login into the e-Biz portal, download the reporting forms (ARF and FCGPR), complete and then upload the same onto the portal using their digitally signed certificates. The Authorised Dealer Banks (ADs) will be required to download the completed forms, verify the contents from the available documents, if necessary by calling for additional information from the customer and then upload the same for RBI to process and allot the Unique Identification Number (UIN). It has been decided that the ARF and FCGPR services of RBI will be operational on the e-Biz platform from February 19, 2015.

RBI has clarified that for the present, the online reporting on the e-Biz platform is an additional facility to the Indian companies to undertake their ARF and FCGPR reporting and the manual system of reporting as prescribed in terms of A.P. (DIR Series) Circular No. 102 dated February 11, 2014 would continue till further notice.

Reserve Bank of India has vide its circular RBI/2014-15/460 A. P. (DIR Series) Circular No.73 dated February 06, 2015 notified that all future investments by registered Foreign Portfolio Investors (FPIs) in the debt market in India will be required to be made with a minimum residual maturity of three years.

2. In this context, the Reserve Bank has been receiving some enquiries about the applicability of the aforesaid directions. The queries raised and clarifications thereon are as under:
   1. Query: The applicability of the directions to investment by FPIs in commercial papers (CPs).

      Clarification: In terms of the aforesaid directions, any fresh investments shall be permitted in any type of debt instrument in India with a minimum residual maturity of three years. Accordingly, FPIs shall not be allowed to make any further investment in CPs.

   2. Query: The applicability of these guidelines on debt instruments having maturity of three years and over but with optionality clause of less than three years.

      Clarification: FPIs shall not be allowed to make any further investments in debt instruments having minimum initial / residual maturity of three years with optionality clause exercisable within three years.

   3. Query: The applicability of these guidelines on amortised debt instruments having average maturity of three years and above.

      Clarification: FPIs shall be permitted to invest in amortised debt instruments provided the duration of the instrument is three years and above.

In accordance with schedule 5 of 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, registered Foreign Portfolio Investors (FPIs) may purchase, on repatriation basis Government securities and non-convertible debentures (NCDs) / bonds issued by an Indian company subject to such terms and conditions as mentioned therein and limits as prescribed for the same by the Reserve Bank of India and Securities and Exchange Board of India from time to time.

2. As per the announcement in the Sixth Bi-Monthly Monetary Policy Statement, 2014-15, issued on February 03, 2015,  reinvestment of coupons in Government securities will be enabled even when the existing limits are fully utilised.
3. Accordingly, FPIs shall be permitted to invest in government securities, the coupons received on their existing investments in government securities. These investments shall be kept outside the applicable limit (currently USD 30 billion) for investments by FPIs in government securities.

5. All other existing conditions for investment by FPIs in the Government securities market remain unchanged for this additional facility as well.

As per the existing regulations all future investments in government securities by registered Foreign Portfolio Investors (FPIs) shall be required to be made in government bonds with a minimum residual maturity of three years.

As per the announcement in the Sixth Bi-Monthly Monetary Policy Statement, 2014-15, issued on February 03, 2015 all future investment by FPIs in the debt market in India will be required to be made with a minimum residual maturity of three years.

RBI has vide its circular  RBI/2014-15/448 A.P.(DIR Series) Circular No. 71 dated February 03, 2015 notified that all future investments by an FPI within the limit for investment in corporate bonds shall be required to be made in corporate bonds with a minimum residual maturity of three years. Further, all future investments against the limits vacated when the current investment runs off either through sale or redemption, shall be required to be made in corporate bonds with a minimum residual maturity of three years.

4. FPIs shall not be allowed to make any further investment in liquid and money market mutual fund schemes.
5. There will, however, be no lock-in period and FPIs shall be free to sell the securities (including those that are presently held with less than three years residual maturity) to domestic investors.

Foreign Direct Investment (FDI) up to 100 per cent is permitted under automatic route for greenfield investments and FDI up to 100 per cent is permitted under Government approval route for brownfield investments (i.e. investments in existing companies) in pharmaceuticals sector.

Reserve Bank of India has vide its circular RBI/2014-15/441 A.P. (DIR Series) No.70 dated February 02, 2015 notified that the extant FDI policy for pharmaceutical sector has since been reviewed and it has now been decided with immediate effect that there would be a special carve out for medical devices which was earlier given the same treatment as pharmaceutical sector.