May 29, 2012
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1. Overseas Direct Investments by Indian Party - Online Reporting of Overseas Direct Investment in Form ODI: RBI vide RBI/2011-2012/585 A.P. (DIR Series) Circular No.131 dated 31st May, 2012 has decided to communicate the UIN in respect of cases under the Automatic Route to the ADs/Indian Party through an auto generated e-mail to the email-id made available by the AD/Indian Party. Accordingly, with effect from June 01, 2012, the auto generated e-mail, giving the details of UIN allotted to the JV / WOS under the automatic route, should be treated as confirmation of allotment of UIN, and no separate letter will be issued by the Reserve Bank to the Indian party and AD Category - I bank confirming the allotment of UIN. Further it has been specified that the subsequent remittances under the automatic route and remittances under the approval route are to be reported online in Part II of form ODI, only after receipt of the e-mail communication/confirmation conveying the UIN. 2. Foreign investment in NBFC Sector under the FDI Scheme – Clarification: RBI vide its circular A.P. (DIR Series) Circular No. 127 dated 15th May, 2012 has clarified that the activity ‘leasing and finance’, which is one among the eighteen NBFC activities wherein FDI up to 100 per cent is permitted under the automatic route, subject to minimum capitalisation norms, covers only ‘financial leases’ and not ‘operating leases’, in so far as the NBFC sector is concerned. 3. Exchange Earner's Foreign Currency (EEFC) Account : RBI has reviewed the EEFC Accounts scheme and there after issued a circular A. P. (DIR Series) Circular No. 124 dated 10th May, 2012 notifying as under: a) 50% of the balances in the EEFC accounts should be converted forthwith into rupee balances and credited to the rupee accounts as per the directions of the account holder. b) In respect of all future forex earnings, an exchange earner is eligible to retain 50% (as against the previous limit of 100%) in non-interest bearing EEFC accounts. The balance 50% shall be surrendered for conversion to rupee balances. c) The EEFC account holders henceforth will be permitted to access the forex market for purchasing foreign exchange only after utilising fully the available balances in the EEFC accounts. Further again RBI vide A.P. (DIR Series) Circular No. 128 dated 16th May, 2012 clarified that the conversion of the EEFC balances into rupee balances will only be applicable to available balances in the EEFC account which may be arrived at by netting off earmarked amounts on account of outstanding forward / option contracts booked before May 10, 2012. 4. Foreign investment in Commodity Exchanges and NBFC Sector - Amendment to the FDI Scheme: RBI vide its circular A. P. (DIR Series) Circular No.121 dated 8th May, 2012 reviewed the extant policy for foreign investment in commodity exchanges under Portfolio Scheme and decided that prior approval of the Government (FIPB) would be required only for FDI component and Government approval would not be required for investment by registered FIIs in commodity exchanges. Further, the RBI has also clarified that upto 100 % FDI is permitted under automatic route only in 'financial leases' and not in 'operating leases' 5. FDI in India - Issue of equity shares under the FDI scheme allowed under the Government route: RBI through its earlier circulars , had allowed the issue of equity shares/ preference shares under the Government route by conversion of import of capital goods / machineries / equipments (including second-hand machineries) and pre-operative / pre-incorporation expenses (including payments of rent, etc.), subject to certain terms and conditions. Now with a view to incentivising use of machinery embodying the latest state-of-the-art technology, compliant with international standards, in terms of being green, clean and energy efficient, RBI vide A. P. (DIR Series) Circular No.120 dated 8th May, 2012 has now decided to exclude conversion of imported second-hand machinery from the purview of this provision. 6. ECB Policy - Utilisation of ECB Proceeds for Rupee Expenditure: RBI vide A. P. (DIR Series) Circular No.119 dated 7th May, 2012 has decided that at the time of availing Loan Registration Number (LRN) from the Reserve Bank, borrowers should provide bifurcation of the utilization of the ECB proceeds towards foreign currency and Rupee expenditure in Form-83. 7. Release of Foreign Exchange for Miscellaneous Remittances : RBI has decided to further liberalizing the amount of foreign exchange that can be released for miscellaneous remittances. In the RBI circular A. P. (DIR Series) Circular No.118 dated 7th May, 2012, the limit for foreign exchange remittance for miscellaneous purposes without documentation formalities has been raised from USD 5000 to USD 25000 with immediate effect. However, the Authorised Dealers should be provided with the simple letter giving the basic information as long as the foreign exchange is being purchased for a current account transaction and the payment is made by a cheque drawn on the applicant's bank account or by Demand Draft. 8. Transfer of Funds from NRO Account to NRE Account: RBI vide A. P. (DIR Series) Circular No.117 dated 7th May, 2012 has decided that henceforth NRI as defined in Foreign Exchange Management (Deposit) Regulations,2000, shall be eligible to transfer funds from NRO account to NRE account within the overall ceiling of USD one million per financial year subject to payment of tax, as applicable (i.e. as applicable if funds were remitted abroad). Such credit of funds to NRE account shall be treated as eligible credit in terms of paragraph 3(j) of Schedule-1 of Notification No. FEMA.5/2000-RB dated 3rd May 2000.