Reserve Bank of India(RBI)

Overseas Investments by Resident Individuals – Liberalisation / Rationalisation: RBI vide circular RBI/2011-12/474,A. P. (DIR Series) Circular No.97 dated 28^th March, 2012 has granted general permission to the resident individuals for acquiring equity shares of a foreign entity by way of/ under   (i) qualification shares, (ii) professional services rendered and (iii) ESOP scheme, the details of which are outlined in the circular.

Overseas Direct Investments by Indian Party – Rationalisation: RBI vide circular RBI/2011-12/473,A.P. (DIR Series) Circular No. 96 dated 28^th March, 2012 has liberalized the various provisions/ regulations of  Notification No. FEMA 120/RB-2004 dated July 7, 2004[Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2004] (the Notification), as amended from time to time. 

 Foreign Exchange Management (Deposit) Regulations, 2000 – Credit to Non Resident (External) Rupee / Foreign Currency Non-Resident (Bank) Account: RBI vide circular RBI/2011-12/465, A. P. (DIR Series) Circular No.95 dated 21^st March, 2012 has decided that the monies borrowed by Indian residents  upto a sum not exceeding USD 250,000/- or its equivalent from her / his close relatives outside India can be repaid by crediting to the NRE / Foreign Currency Non-Resident (Bank) [FCNR(B)] account of the lender concerned subject to the condition that the loan to the resident individual was extended by way of inward remittance in foreign exchange through normal banking channels or by debit to the NRE / FCNR(B) account of the lender and the lender is eligible to open NRE / FCNR(B) account within meaning of the Foreign Exchange Management (Deposit) Regulations, 2000 notified vide Notification No. FEMA 5/2000-RB dated May 3, 2000, as amended from time to time. Such credit shall be treated as an eligible credit to the NRE / FCNR(B) account in terms of Para 3(j) of Schedule-1 read with Para 5 of Scheule-2 of Notification No. FEMA 5/2000-RB, ibid.

Clarification – Prior intimation to the Reserve Bank of India for raising the aggregate FII/ NRI limits for investments under PIS: RBI vide circular RBI/2011-12/453,A.P. (DIR Series) Circular No. 94 dated 19^th March, 2012 has clarified that the Indian company raising the aggregate FII investment limit of 24 per cent to the sectoral cap/ statutory limit, as applicable to the respective Indian company or raising the aggregate NRI investment limit of 10 per cent to 24 per cent, should necessarily intimate the same to the Reserve Bank of India, immediately, as hitherto, along with a Certificate from the Company Secretary stating that all the relevant provisions of the extant Foreign Exchange Management Act, 1999 regulations and the Foreign Direct Policy, as amended from time to time, have been complied with.

Investment in Indian Venture Capital Undertakings and /or domestic Venture Capital Funds by SEBI registered FVCI: RBI vide circular RBI/2011-12/452,A.P. (DIR Series) Circular No.93 dated 19^th March, 2012 has now been decided, to allow FVCIs to invest in the eligible securities (equity, equity linked instruments, debt, debt instruments, debentures of an IVCU or VCF, units of schemes / funds set up by a VCF) by way of private arrangement / purchase from a third party also, subject to terms and conditions as stipulated in Schedule 6 of Notification No. FEMA 20 / 2000 -RB dated May 3, 2000 as amended from time to time. It is also being clarified that SEBI registered FVCIs would also be allowed to invest in securities on a recognized stock exchange subject to the provisions of the SEBI (FVCI) Regulations, 2000, as amended from time to time, as well as the terms and conditions stipulated therein.

Foreign Institutional Investor (FII) investment in ‘to be listed’ debt securities: RBI vide circular RBI/2011-12/423, A.P. (DIR Series) Circular No. 89 dated 1^st March, 2012 as per SEBI circular SEBI registered FIIs/sub-accounts of FIIs can now invest in primary issues of Non-Convertible Debentures (NCDs)/ bonds only if listing of such bonds / NCDs is committed to be done within 15 days of such investment. In case the NCDs/bonds issued to the SEBI registered FIIs / sub-accounts of FIIs are not listed within 15 days of issuance to the SEBI registered FIIs / sub-accounts of FIIs, for any reason, then the FII/sub-account of FII shall immediately dispose of these bonds/NCDs either by way of sale to a third party or to the issuer and the terms of offer to FIIs / sub-accounts should contain a clause that the issuer of such debt securities shall immediately redeem / buyback the said securities from the FIIs/sub-accounts of FIIs in such an eventuality.

RBI shall issue necessary amendments to 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 separately.

Clarification – Establishment of Branch Offices (BO) / Liaison Offices (LO) in India by Foreign Entities – Delegation of Powers: RBI vide circular RBI/2011-12/421,A.P. (DIR Series) Circular No.88 dated 1^st March, 2012 with regard to A.P. (DIR Series) Circular No.24 dated December 30, 2009 has clarified that transfer of assets of Liaison / Branch Office to subsidiaries or other LO / BO or any other entity is permitted only with the specific approval of the Central Office of the Foreign Exchange Department, Reserve Bank of India.