October 8, 2012
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- Foreign Direct Investment (FDI) in India - Allotment of Shares to person resident outside India under Memorandum of Association (MoA) of an Indian company - Pricing guidelines :RBI has vide its circular RBI/2012-13/223 A.P. (DIR Series) Circular No. 36 dated September 26, 2012 has intimated that in cases, where non-residents (including NRIs) make investment in an Indian company in compliance with the provisions of the Companies Act, 1956, by way of subscription to Memorandum of Association, such investments may be made at face value subject to their eligibility to invest under the FDI scheme.
- Foreign investment in Single–Brand Product Retail Trading/ Multi-Brand Retail Trading / Civil Aviation Sector / Broadcasting Sector / Power Exchanges - Amendment to the Foreign Direct Investment Scheme – RBI has issued a notification bearing RBI/2012-13/217 A. P. (DIR Series) Circular No. 32 dated September 21, 2012 reviewing the extant Foreign Direct Investment policy as follows:
- FDI up to 100% is now permitted in Single–Brand Product Retail Trading by only one non-resident entity, whether owner of the brand or otherwise, under the Government route subject to the terms and conditions stipulated in Press Note No. 4 (2012 Series) dated September 20, 2012 issued by the DIPP.
- FDI up to 51% is now permitted in Multi-Brand Retail Trading under the Government route, subject to the terms and conditions as stipulated in Press Note No. 5 (2012 Series) dated September 20, 2012 issued by the DIPP.
- Foreign airlines are permitted FDI up to 49% in the capital of Indian companies in Civil Aviation Sector, operating scheduled and non-scheduled air transport, under the automatic/Government route subject to the terms and conditions as stipulated in Press Note No. 6 (2012 Series) dated September 20, 2012 issued by DIPP.
- FDI limits in companies engaged in providing Broadcasting Carriage Services under the automatic/Government route have been reviewed and the same would be subject to the terms and conditions as stipulated in Press Note No. 7 (2012 Series) dated September 20, 2012 issued by the DIPP.
- FDI up to 49% is permitted in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010, under the Government route, subject to the terms and conditions as stipulated in Press Note No. 8 (2012 Series) dated September 20, 2012 issued by the DIPP.
- Establishment of Liaison Office (LO) / Branch Office (BO) / Project Office (PO) in India by Foreign Entities – Clarification – RBI has vide notification RBI/2012-13/211 A. P. (DIR Series) Circular No. 31 dated September 17, 2012 clarified that the permission to establish offices, in India by foreign Non-Government Organisations/Non-Profit Organisations/Foreign Government Bodies/Departments, by whatever name called, are under the Government Route as specified in A. P. (DIR Series) Circular No. 23 dated December 30, 2009 and such entities are required to apply to the Reserve Bank for prior permission to establish an office in India, whether Project Office or otherwise.
- Overseas Direct Investments by Indian Party – Rationalisation – RBI has vide its notification: RBI/2012-13/203 A.P. (DIR Series) Circular No. 29 dated September 12, 2012 decided to amend the guidelines relating to submission of Annual Performance Report (APR) as under:An Indian party, which has set up / acquired a Joint Venture (JV) or Wholly Owned Subsidiary (WOS) overseas in terms of the Regulations of the Notification ibid, shall submit, to the designated Authorised Dealer every year, an Annual Performance Report (APR) in Form ODI Part III in respect of each JV or WOS outside India and other reports or documents as may be specified by the Reserve Bank from time to time, on or before the 30th of June each year. The APR, so required to be submitted, has to be based on the latest audited annual accounts of the JV / WOS, unless specifically exempted by the Reserve Bank.
- Trade Credits for Import into India – The Present guidelines AD banks may approve trade credits up to USD 20 million per import transaction with a maturity period of more than one year and less than three years (from the date of shipment) subject to the terms and conditions specified. RBI has vide its notification RBI/2012-13/202 A.P. (DIR Series) Circular No. 28 dated September 11, 2011 decided to allow companies in the infrastructure sector to avail of trade credit up to a maximum period of five years for import of capital goods as classified by DGFT subject to the terms and conditions mentioned in the circular.
- External Commercial Borrowings (ECB) Policy – Bridge Finance for infrastructure sector - The existing guidelines allow Indian companies in the infrastructure sector to import capital goods by availing of short term credit (including buyers’ / suppliers’ credit) in the nature of 'bridge finance', under the approval route, subject to the conditions specified. RBI has now vide its circular No. RBI/2012-13/201 A.P. (DIR Series) Circular No. 27 dated 11th September, 2012 decided to allow refinancing of such bridge finance (if in the nature of buyers’/suppliers’ credit) availed of, with an ECB under the automatic route subject to the conditions specified in the circular.
- External Commercial Borrowings (ECB) Policy – Repayment of Rupee loans and/or fresh Rupee capital expenditure – USD 10 billion scheme – As per the existing guidelines, the maximum permissible ECB that can be availed of by an individual company under the scheme is limited to 50 per cent of the average annual export earnings realised during the past three financial years. RBI vide its notification RBI/2012-13/200 A.P. (DIR Series) Circular No. 26 dated September 11, 2012 decided :
- to enhance the maximum permissible limit of ECB that can be availed of to 75 per cent of the average foreign exchange earnings realized during the immediate past three financial years or 50 per cent of the highest foreign exchange earnings realized in any of the immediate past three financial years, whichever is higher;
- that in case of Special Purpose Vehicles (SPVs), which have completed at least one year of existence from the date of incorporation and do not have sufficient track record/past performance for three financial years, the maximum permissible ECB that can be availed of will be limited to 50 per cent of the annual export earnings realized during the past financial year; and
- the maximum ECB that can be availed by an individual company or group, as a whole, under this scheme will be restricted to USD 3 billion.
- Overseas Investment by Indian Parties in Pakistan - In terms of Regulation 6 (2) of the Notification No. FEMA 120/RB 2004 dated 7th July, 2004, investment in Pakistan is not permitted. RBI has vide its circular RBI/2012-13/198 A. P. (DIR Series) Circular No. 25 dated September 7, 2012 decided that the overseas direct investment by Indian Parties in Pakistan shall henceforth be considered under the approval route under Regulation 9 of the Notification.
- Foreign Direct Investment by citizen / entity incorporated in Pakistan – In terms of sub-regulation (1) of Regulation 5 of the Notification No. FEMA 20/2000- RB dated May 3, 2000 as amended from time to time, a person resident outside India who is a citizen of Pakistan or an entity incorporated outside India in Pakistan, was not allowed to purchase shares or convertible debentures of an Indian company under Foreign Direct Investment Scheme.RBI has now vide its notification RBI/2012-13/173 A. P. (DIR Series) Circular No. 16 informed that a person who is a citizen of Pakistan or an entity incorporated in Pakistan may, with the prior approval of the Foreign Investment Promotion Board of the Government of India, purchase shares and convertible debentures of an Indian company under Foreign Direct Investment Scheme, subject to the terms and conditions specified in Schedule 1 of the Notification. The Indian company, receiving such foreign direct investment, should not be engaged or shall not engage in sectors / activities pertaining to defence, space and atomic energy and sectors/ activities prohibited for foreign investment.
- Issue of Indian Depository Receipts (IDRs) - Limited two way fungibilty – RBI has vide its notification RBI/2012-13/178 A. P. (DIR Series) Circular No. 19 decided to allow a limited two way fungibility for IDRs (similar to the limited two way fungibility facility available for ADRs/GDRs) subject to the terms and conditions mentioned in the circular.