FCRA - easing up

RBI notification dated 27th February, 2019. Now foreign NGOs need not seek dual permission under the FCRA as well as from RBI. Approval from the former would be sufficient.

Establishment of Branch Office (BO) / Liaison Office (LO) / Project Office (PO) or any other place of business in India by foreign entities

Attention of the Authorised Dealer (AD - Category I) banks is invited to the Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any Other Place of Business) Regulations, 2016, notified by the Reserve Bank vide Notification No FEMA 22(R)/RB-2016 dated March 31, 2016, as amended from time to time.

2. In terms of extant Regulations, applications received from a Non-Government Organisation, Non-Profit Organization, Body/Agency/Department of a foreign Government for opening of a branch office or a liaison office or a project office or any other place of business in India are to be forwarded to the Reserve Bank for prior approval and be considered in consultation with the Government of India. This has since been reviewed and as notified through Notification No FEMA 22(R)(1), it is advised that if such an entity is engaged, partly or wholly, in any of the activities covered under Foreign Contribution (Regulation) Act, 2010 (FCRA), it shall obtain a certificate of registration under the said Act and shall not seek permission under FEMA 22(R).

3. Accordingly, the Form FNC has also been suitably modified and the following phrase added under the heading ‘Declaration’ in Part II clause (ii), at the end of the existing sentence.

“We will not undertake either partly or fully, any activity that is covered under Foreign Contribution Regulation Act, 2010 (FCRA) and we understand that any misrepresentation made or false information furnished by us in this behalf would render the approval granted under the Foreign Exchange Management (Establishment in India of a branch office or liaison office or a project office or any other place of business) Regulations, 2016, automatically as void ab initio and such approval by the Reserve Bank shall stand withdrawn without any further notice”.

4. All other provisions of the LO/BO/PO policy shall remain unchanged. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.

5. The Master Direction No. 10 dated January 1, 2016 is being updated simultaneously to reflect the changes.

6. The directions contained in this circular have been issued under Section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

Copy of the said notification can be found here

ECB reporting - ECB2

RBI has vide its circular dated 7th June, 2018 modified the monthly ECB-2 in respect of external commercial borrowings by capturing hedging of ECBs in the ECB2 return. Details of hedging in part E.1 of the return and foreign exchange earnings & expenditure in part E.2 of the return to be furnished in addition to the existing details in ECB-2

Gist of RBI circular given below:

Attention of Authorized Dealer Category I (AD Category I) banks is invited to Annex III of Part V of Master Direction No.18/2015-16 dated January 01, 2016 on Reporting under Foreign Exchange Management Act, 1999, as amended from time to time. The said Master Direction, inter alia, stipulates the reporting arrangement for ECBs through ECB-2 Return.

2. It has been decided to capture the details of the hedges for ECBs through a simplified format of ECB 2 Return. Part E of the Return, accordingly, is modified so as to include only standard information on hedged/unhedged ECB exposure (Annex). Details of hedging in Part E.1 of the Return and foreign exchange earnings and expenditure in Part E.2 of the Return should be furnished in additive format. Further, for reporting in respect of natural hedge, provisions contained in paragraph 2 (iii) of A.P. (DIR Series) Circular No. 15 dated November 07, 2016 should be followed.

3. Revised monthly reporting format of ECB 2 Return would be applicable from month-end June 2018. It is reiterated that any lapse at the time of reporting through this return and / or failure to adhere to the time line of its submission and / or any lapse at the time of reporting through Form 83 is a contravention of the provision of Foreign Exchange Management Act, 1999 (42 of 1999).

4. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers. The aforesaid Master Direction No. 18 dated January 01, 2016 is being updated to reflect the changes.

5. The directions contained in this circular have been issued under sections 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11296&Mode=0

Foreign Investment in India - Reporting

RBI circular dated 7th June, 2018 on the above subject - important for compliance by companies accepting foreign investment in India.

As announced in the First Bi-monthly Monetary Policy Review dated April 5, 2018, Reserve Bank, with the objective of integrating the extant reporting structures of various types of foreign investment in India, will introduce a Single Master Form (SMF). The SMF would be filed online.

2. SMF would provide a facility for reporting total foreign investment in an Indian entity {as defined in Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations 2017, dated November 7, 2017}, as also investment by persons resident outside India in an Investment Vehicle.

3. Prior to the implementation of the SMF, Reserve Bank would provide an interface to the Indian entities, to input the data on total foreign investment in a specified format. The interface will be available on RBI website www.rbi.org.in from June 28, 2018 to July 12, 2018. Indian entities not complying with this pre-requisite will not be able to receive foreign investment (including indirect foreign investment) and will be non-compliant with Foreign Exchange Management Act, 1999 and regulations made thereunder.

4. The entities may be in readiness with the requirements to be provided in the Entity Master at Annex 1. The format of the SMF is at Annex 2. The final form, when hosted, will be available in the Master Direction-Reporting under FEMA, 1999.

5. AD Category-I banks may bring the contents of this circular to the notice of their customers / constituents concerned.

6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.

RBI circular is available at
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11297&Mode=0

Monitoring of Foreign investment limits in listed Indian companies

SEBI circular dated 5th April, 2018

1. Foreign Investment in India is regulated in terms of clause (b) of sub-section 3 of section 6 and section 47 of the Foreign Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Transfer or Issue of a Security by a Person resident Outside India) Regulations, 2017 issued vide Notification No. FEMA 20(R)/2017-RB dated November 7, 2017. FEMA prescribes the various foreign investment limits in listed Indian companies. These include the aggregate FPI limit, the aggregate NRI limit and the sectoral cap. The RBI Master Direction (FED Master Direction No. 11/2017-18) dated January 04, 2018 provides a compilation of the instructions issued on Foreign Investment in India and its related aspects under FEMA.    

2. As per FEMA, the onus of compliance with the various foreign investment limits rests on the Indian company. In order to facilitate the listed Indian companies to ensure compliance with the various foreign investment limits, SEBI in consultation with RBI has decided to put in place a new system for monitoring the foreign investment limits. The architecture of the new system has been explained in Annexure A. 

3. The depositories (NSDL and CDSL) shall put in place the necessary infrastructure and IT systems for operationalizing the monitoring mechanism described at Annexure A. The Stock Exchanges (BSE, NSE and MSEI) shall also put in place the necessary infrastructure and IT systems for disseminating information on the available investment headroom in respect of listed Indian companies. 

4. The depositories shall issue the necessary circulars and guidelines for collecting data on foreign investment from listed companies. The system for collecting this data from the companies shall go live on the date of the issuance of this circular. The companies shall provide the necessary data (details of which have been mentioned in Annexure A) to the depositories latest by April 30, 2018. 

5. The new system for monitoring foreign investment limits in listed Indian companies shall be made operational on May 01, 2018. The existing mechanism for monitoring the foreign investment limits shall be done away with once the new system is operationalized. RBI shall issue the necessary guidelines in this regard. 

This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992. 

Startup Regulatory Relaxations - Issue of shares

RBI has vide its notification dated 11/2/2016 made a couple of clarifications w.r.t. issue of shares in case of start ups. One of the points is issue of shares without cash payment through sweat equity or issue of shares in lieu of payments due which are permissible transactions under FEMA. 

Accordingly, the following is clarified:

a. Issue of shares without cash payment through sweat equity: Reserve Bank of India vide Notification No. FEMA.344/2015 RB dated June 11, 2015 has permitted Indian companies to issue sweat equity, subject to conditions, inter-alia, that the scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act, 1992 in respect of listed companies or the Companies (Share Capital and Debentures) Rules, 2014 notified by the Central Government under the Companies Act 2013 in respect of other companies.

b. Issue of shares against legitimate payment owed: Reserve Bank of India vide Notification No. FEMA.315/2014-RB dated July 10, 2014, has permitted Indian companies to issue equity shares against any other funds payable by the investee company (e.g. payments for use or acquisition of intellectual property rights, for import of goods, payment of dividends, interest payments, consultancy fees, etc.), remittance of which does not require prior permission of the Government of India or Reserve Bank of India under FEMA, 1999 subject to conditions relating to adherence to FDI policy including sectoral caps, pricing guidelines, etc. and applicable tax laws (cf. paragraph 3 of Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2015).

Relaxations for start ups - acceptance of payments

RBI has vide its notification dated 11th February, 2016 made some clarifications regarding start ups, especially w.r.t to acceptance of payments by them from their overseas subsidiares.

In this connection, it is clarified as under:

1. A start-up in India with an overseas subsidiary is permitted to open foreign currency account abroad to pool the foreign exchange earnings out of the exports/sales made by the concerned start-up;
2. The overseas subsidiary of the start-up is also permitted to pool its receivables arising from the transactions with the residents in India as well as the transactions with the non-residents abroad into the said foreign currency account opened abroad in the name of the start-up;
3. The balances in the said foreign currency account as due to the Indian start-up should be repatriated to India within a period as applicable to realisation of export proceeds (currently nine months);
4. A start-up is also permitted to avail of the facility for realising the receivables of its overseas subsidiary or making the above repatriation through Online Payment Gateway Service Providers (OPGSPs) for value not exceeding USD 10,000 (US Dollar ten thousand) or up to such limit as may be permitted by the Reserve Bank of India from time to time under this facility; and
5. To facilitate the above arrangement, an appropriate contractual arrangement between the start-up, its overseas subsidiary and the customers concerned should be in place.

Realisation, Repatriation & Surrender of FEX regulations

RBI has recently updated its Foreign Exchange Management (Realisation, Repatriation & Surrender of Foreign Exchange) Regulations, 2015 vide its notification dated 4th February, 2016, 

The salient features of the regulations are:

A. Duty of persons to realise foreign exchange due:-

A person resident in India to whom any amount of foreign exchange is due or has accrued shall, save as otherwise provided under the provisions of the Act, or the rules and regulations made thereunder, or with the general or special permission of the Reserve Bank, take all reasonable steps to realise and repatriate to India such foreign exchange, and shall in no case do or refrain from doing anything, or take or refrain from taking any action, which has the effect of securing -

1. that the receipt by him of the whole or part of that foreign exchange is delayed; or
2. that the foreign exchange ceases in whole or in part to be receivable by him.

B. Manner of Repatriation :-

(1) On realisation of foreign exchange due, a person shall repatriate the same to India, namely bring into, or receive in, India and -

1. sell it to an authorised person in India in exchange for rupees; or
2. retain or hold it in account with an authorised dealer in India to the extent specified by the Reserve Bank; or
3. use it for discharge of a debt or liability denominated in foreign exchange to the extent and in the manner specified by the Reserve Bank.

(2) A person shall be deemed to have repatriated the realised foreign exchange to India when he receives in India payment in rupees from the account of a bank or an exchange house situated in any country outside India, maintained with an authorised dealer.

C. Period for surrender of realised foreign exchange:-

A person not being an individual resident in India shall sell the realised foreign exchange to an authorised person, within the period specified below :-

1. foreign exchange due or accrued as remuneration for services rendered, whether in or outside India, or in settlement of any lawful obligation, or an income on assets held outside India, or as inheritance, settlement or gift, within seven days from the date of its receipt;
2. in all other cases within a period of ninety days from the date of its receipt.

D. Period for surrender in certain cases:-

(1) Any person not being an individual resident in India who has acquired or purchased foreign exchange for any purpose mentioned in the declaration made by him to an authorised person under sub-section (5) of Section 10 of the Act does not use it for such purpose or for any other purpose for which purchase or acquisition of foreign exchange is permissible under the provisions of the Act or the rules or regulations or direction or order made thereunder, shall surrender such foreign exchange or the unused portion thereof to an authorised person within a period of sixty days from the date of its acquisition or purchase by him.

(2) Notwithstanding anything contained in sub-regulation (1), where the foreign exchange acquired or purchased by any person not being an individual resident in India from an authorised person is for the purpose of foreign travel, then, the unspent balance of such foreign exchange shall, save as otherwise provided in the regulations made under the Act, be surrendered to an authorised person -

1. within ninety days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of currency notes and coins; and
2. within one hundred eighty days from the date of return of the traveller to India, when the unspent foreign exchange is in the form of travellers cheques.

E. Period for surrender of received/realised/unspent/unused foreign exchange by Resident individuals.-

A person being an individual resident in India shall surrender the received/ realised/ unspent/ unused foreign exchange whether in the form of currency notes, coins and travellers cheques, etc. to an authorised person within a period of 180 days from the date of such receipt/ realisation/ purchase/ acquisition or date of his return to India, as the case may be.

F. Exemption:-

Nothing in these regulations shall apply to foreign exchange in the form of currency of Nepal or Bhutan.

Export and Import of Currency Regulations

RBI has vide its notification dated 4th February, 2016 updated the Foreign Exchange Management (Export and Import of Currency) Regulations, 2015. Accordingly, the gist of the regulations provides that

A. Export and import of Indian currency and currency notes

a) Any person resident in India,

1. may take outside India (other than to Nepal and Bhutan) currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.25,000 (Rupees Twenty Five Thousand only) per person.
2. may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.

Explanation:

'Commemorative Coin' includes coin issued by Government of India Mint to commemorate any specific occasion or event and expressed in Indian currency.

3. who had gone out of India on a temporary visit, may bring into India at the time of his return from any place outside India (other than from Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.25,000 (Rupees Twenty Five Thousand only) per person.

b) Any person resident outside India, not being a citizen of Pakistan or Bangladesh, and visiting India,

1. may take outside India currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.25,000 (Rupees Twenty Five Thousand only) per person
2. may bring into India currency notes of Government of India and Reserve Bank of India notes up to an amount not exceeding Rs.25,000 (Rupees Twenty Five Thousand only) per person

B. Import of Foreign Exchange into India

A person,

1. may send into India without limit foreign exchange in any form other than currency notes, bank notes and travelers cheques;
2. may bring into India from any place outside India without limit foreign exchange (other than unissued notes) subject to the condition that such person makes, on arrival in India, a declaration to the Customs authorities in Currency Declaration Form (CDF). It shall not be necessary to make such declaration where the aggregate value of the foreign exchange in the form of currency notes, bank notes or travelers cheques brought in by such person at any one time does not exceed US$10,000 (US Dollars ten thousand) or its equivalent and/ or the aggregate value of foreign currency notes brought in by such person at any one time does not exceed US$ 5,000 (US Dollars five thousand) or its equivalent.

C. Export of Foreign Exchange and Currency Notes

1. An authorised person may send out of India foreign currency acquired in normal course of business,
2. any person may take or send out of India, -
1. Cheques drawn on foreign currency account maintained in accordance with Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000;
2. foreign exchange obtained by him by drawal from an authorised person in accordance with the provisions of the Act or the rules or regulations or directions made or issued thereunder;
3. currency in the safes of vessels or aircrafts which has been brought into India or which has been taken on board a vessel or aircraft with the permission of the Reserve Bank;
3. any person may take out of India, -
1. foreign exchange possessed by him in accordance with the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 ;
2. unspent foreign exchange brought back by him to India while returning from travel abroad and retained in accordance with the Foreign Exchange Management (Possession and Retention of Foreign Currency) Regulations, 2000 ;
4. any person resident outside India may take out of India unspent foreign exchange not exceeding the amount brought in by him and declared in Currency Declaration Form (CDF).

D. Export and Import of currency to or from Nepal and Bhutan

A person may-

1. take or send out of India to Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India notes (other than notes of denominations of above Rs.100 in either case) provided that an individual travelling from India to Nepal or Bhutan can carry Reserve Bank of India currency notes of denomination Rs.500/- and/or Rs.1000/- up to a limit of Rs.25,000/- ;
2. bring into India from Nepal or Bhutan, currency notes of Government of India and Reserve Bank of India notes (other than notes of denominations of above Rs.100 in either case) ;
3. take out of India to Nepal or Bhutan, or bring into India from Nepal or Bhutan, currency notes being the currency of Nepal or Bhutan.

E. Prohibition on Export of Indian Coins

No person shall take or send out of India the Indian coins which are covered by the Antique and Art Treasure Act, 1972.

RTGS charges for customers - revision

RBI has vide its notification dated 4th february, 2016 revised the RTGS charges for bank members and customers alike. The variation in charges for customers which will come into effect from 1st
april, 2016 is as follows:

1) Processing charges per transaction: - There will be a flat processing charge of Rs.0.50 per outward transaction and a time varying charge as follows:

Between 8 to 11 hours - NIL
From 11 hours to 13 hours - Rs.2 per transaction
From 13 hours to 1630 hours - Rs.5 per transaction
After 1630 hours - Rs. 10 per transaction

The time is reckoned as settlement at RBI. All charges are out outward transactions, NONE for inward transaction. All rates mentioned above are exclusive of service tax.

2) The maximum anount that the member can recover from its customer (if it so desires) will remain unchanged as under:

For inward transactions NIL
For outward transactions
Amount between Rs.2 lakhs to Rs.5 lakhs - Rs.25 plus applicable time varying charge, subject to maximum of Rs.30/-
Amount above Rs.5 lakhs - Rs.50 plus applicable time varying charge, subject to maximum of Rs.55/-

The RBI notification is available here i.e. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10260&Mode=0

Safe deposit locker facility from NBFCs

RBI has vide its notification dated 28th January, 2016 clarified that safe deposit locker facilities being offered by certain NBFCs is a fee based service and shall not be reckoned as part of the financial business provided by NBFCs and further that this facility is not being regulated by RBI. NBFCs have to disclose to their customers that this activity is not regulated by RBI. 

Acquisition & transfer of immoveable property outside India

RBI has vide its notification dated 21st January, 2016 upgraded the FEM (Acqusition and transfer of immoveable property outside India) REgulations 2015. 

As per these regulations:

3. Restriction on acquisition or transfer of immovable property outside India:-

Save as otherwise provided in the Act or in these regulations, no person resident in India shall acquire or transfer any immovable property situated outside India without general or special permission of the Reserve Bank.

4. Exemptions:-

Nothing contained in these regulations shall apply to the property -

1. held by a person resident in India who is a national of a foreign state;
2. acquired by a person resident in India on or before 8th July 1947 and continued to be held by him with the permission of the Reserve Bank.

5. Acquisition and Transfer of Immovable Property outside India:-

(1) A person resident in India may acquire immovable property outside India, -

(a) by way of gift or inheritance from a person referred to in sub-section (4) of Section 6 of the Act, or referred to in clause (b) of regulation 4;

(b) by way of purchase out of foreign exchange held in Resident Foreign Currency (RFC) account maintained in accordance with the Foreign Exchange Management (Foreign Currency accounts by a person resident in India) Regulations, 2015;

(c) jointly with a relative who is a person resident outside India, provided there is no outflow of funds from India;

(2) A person resident in India may acquire immovable property outside India, by way of inheritance or gift from a person resident in India who has acquired such property in accordance with the foreign exchange provisions in force at the time of such acquisition.

(3) A company incorporated in India having overseas offices, may acquire immovable property outside India for its business and for residential purposes of its staff, in accordance with the direction issued by the Reserve Bank of India from time to time.

Explanation:

For the purposes of these regulations, 'relative' in relation to an individual means husband, wife, brother or sister or any lineal ascendant or descendant of that individual.

Possession and Retention of Foreign Currency

RBI has vide its notification dated 4/2/2016 updated the Foreign Exhange Management (Possession and Retention of Foreign Currency) Regulations 2015 whereby limits for possession and retention of foreign currency in the form of notes, coins & travellers cheques have been laid down. 

A. Following are the limits for possession or retention of foreign currency or foreign coins, namely :-

1. possession without limit of foreign currency and coins by an authorised person within the scope of his authority ;
2. possession without limit of foreign coins by any person;
3. retention by a person resident in India of foreign currency notes, bank notes and foreign currency travellers' cheques not exceeding US$ 2000 or its equivalent in aggregate, provided that such foreign exchange in the form of currency notes, bank notes and travellers cheques;

1. was acquired by him while on a visit to any place outside India by way of payment for services not arising from any business in or anything done in India; or
2. was acquired by him, from any person not resident in India and who is on a visit to India, as honorarium or gift or for services rendered or in settlement of any lawful obligation; or
3. was acquired by him by way of honorarium or gift while on a visit to any place outside India; or
4. represents unspent amount of foreign exchange acquired by him from an authorised person for travel abroad.

B. A person resident in India but not permanently resident therein may possess without limit foreign currency in the form of currency notes, bank notes and travellers cheques, if such foreign currency was acquired, held or owned by him when he was resident outside India and, has been brought into India in accordance with the regulations made under the Act.

Explanation: for the purpose of this clause, 'not permanently resident' means a person resident in India for employment of a specified duration (irrespective of length thereof) or for a specific job or assignment, the duration of which does not exceed three years.

The notification has come into force from December, 29, 2015. 

Online filing of FDI forms

RBI has vide its notification dated 1st February 2016 mandated that all forms for Foreign Direct Investment reporting i.e. Advance Remittance Form (ARF), FC-GPR and FC-TRS should be mandatorily filed with the online e-biz platform of RBI. Physical forms have been discontinued with effect from 8th February, 2016.

The relevant extracts of RBI notification is given below:

2. With a view to promoting the ease of reporting of transactions related to Foreign Direct Investment (FDI), the Reserve Bank of India, under the aegis of the e-Biz project of the Government of India has enabled online filing of the following returns with the Reserve Bank of India viz.

- Advance Remittance Form (ARF) which is used by the companies to report the FDI inflows to RBI;

- 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; and

- FCTRS Form which is submitted to RBI for transfer of securities between resident and person outside India.

3. At present both the options, i.e. online filing and physical filing of abovementioned forms, are available to the users.

4. Based on the experience it has been decided that beginning February 8, 2016 the physical filing of forms ARF, FCGPR and FC-TRS will be discontinued and forms submitted in online mode only through e-Biz portal will be accepted.

Remittance of salary outside India - clarifications

RBI has clarified that remittance of salary outside India can be allowed even for an employee who is deputed to a group company in India, and also for foreign employees of Limited Liability Partnerships in India.  A copy of their notification clarifying this aspect can be found here i.e. http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9509&Mode=0

The remittance is allowed to the extent of 100% of salary as per this notification i.e. http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5462&Mode=0.

This is in respect of a foreign citizen resident in India, employed with an Indian company, they are allowed to hold foreign currency account with a bank outside India and remit their salaries to this account 

Revised pricing guidelines on issue/ transfer of securities to non residents

RBI has vide its circular no. 4 dated 15th July 2014 revised the pricing guidelines in respect of issue/ transfer of shares to non residents.

While the pricing guidelines in respect of listed companies will remain the same i.e. SEBI guidelines, the changes have been made in respect of unlisted companies.

In such unlisted companies, the fair valuation of shares shall be done as per any internationally accepted pricing methodology for valuation of shares on arm's length basis duly certified by a chartered accountant or a SEBI registered merchant banker. The guiding principle is that the non resident is not guaranteed any assured exit price at the time of making such investment/ subscription and shall exit at fair price subject to lock in period requirement, if any.

The Indian company recording the sale of its shares or convertible debentures from resident to non resident or vice versa shall record in its balance sheet for the financial year in which the transaction takes place the details of the valuation of shares or debentures, the pricing methodology adopted for the same and the agency which gave the certificate/ valuation.

The RBI circular is available here

ODI limit restored for Indian companies

RBI has vide its notification dated 3rd July 2014 here restored the limits upto which Indian companies can make investments via Overseas Direct Investment or Wholly owned subsidiaries abroad. The limit which was 400% of the networth as on the last audited balance sheet date was brought down to 100% of the net worth vide RBI circular dated 14th August, 2013 here.

However RBI has decided that any financial commitment by the Indian party exceeding USD 1 billion in any financial year shall require the prior approval of the RBI even though the total financial commitment is within the aforesaid limits of 400% of net worth.

The operative part of the July 2014 circular reads as follows:

2. On a review, it has been decided to restore the limit of Overseas Direct Investments (ODI)/ Financial Commitment (FC) to be undertaken by an Indian Party under the automatic route to the limit prevailing, as per the extant FEMA provisions, prior to August 14, 2013. It has, however, been decided that any financial commitment exceeding USD 1 (one) billion (or its equivalent) in a financial year would require prior approval of the Reserve Bank even when the total FC of the Indian Party is within the eligible limit under the automatic route (i.e., within 400% of the net worth as per the last audited balance sheet).