LATESTRBIPOLICYGUIDELINESONINTERNATIONALBANKING
EDPMS - Issue of eBRC
As per circular dated 01.01.2016, related to As per RBI circular dated 01.01.2016, related to implementation and operationalisation
of Export Data Processing and Monitoring System (EDPMS) of RBI as also circular dated 28.07.14, reporting of data related to
realisation of export proceeds i.e. ENC and Schedule 3 to 6 files was discontinued with effect from the first fortnight of September
2014 after implementation of EDPMS. In terms of circrulated dated May 26, 2016, banks were advised to carry out appropriate
changes in their IT system / operating procedure immediately, report subsequent export transactions in EDPMS and also capture
the details of advance remittances (including old outstanding inward remittances) received for exports in EDPMS.
AD Category-I banks have been directed by RBI on Sept 15, 2017, to update the EDPMS with data of export proceeds on “as and
when realised basis” and, with effect from October 16, 2017 generate Electronic Bank Realisation Certificate (eBRC) only from the
data available in EDPMS, to ensure consistency of data in EDPMS and consolidated eBRC.
Investment by Foreign Portfolio Investors (FPI) in Govt. Securities: Medium Term Framework Revision of Limits for the quarter
Oct-Dec 2017 On Sept 28, 2017, RBI increased the limits for investment by FPIs for the quarter October-December 2017 by INR 80
billion in Central Government Securities and INR 62 billion in State Development Loans. The revised limits are allocated as per the
framework modified by RBI on 03.07.17 is given as under.
Limits for FPI investment in Government Securities Existing limit : (Rs. in billion)
General Long Term Total Grand Total
Central Govt. 1877 543 2420
State Govts 285 46 331 2751
Limite for Quarter Dec 2017
Central Govt. 1897 603 2500
State Govts 300 93 393 2893
The revised limits will be effective from October 3, 2017.
Issuance of Rupee Denominated Bonds (RDBs) Overseas On Sept 22, 2017, RBI brought modification relating to issuance of Rupee
denominated bonds overseas under External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency. In
terms of the revision in consultation with the Government of India, the amount of issuances of RDBs from the limit for investments
by FPIs in corporate bonds with effect from October 3, 2017 is to be excluded. Consequently, reporting requirement in the form of
additional email for RDB transactions for onward reporting to
Investment by Foreign Portfolio Investors in Corporate Debt Securities – Review Currently, the limit for investment by Foreign
Portfolio Investors (FPIs) in corporate bonds is Rs. 244,323 crore. This includes issuance of Rupee denominated bonds overseas
(Masala Bonds) by resident entities of Rs. 44,001 crore (including pipeline). The Masala Bonds are presently reckoned both under
Combined Corporate Debt Limit (CCDL) for FPI and External Commercial Borrowings (ECBs).
On a review and to further harmonise norms for Masala Bonds issuance with the ECB guidelines, RBI made the following changes on
Sept 22, 2017:
1. With effect from October 3, 2017, Masala bonds will no longer form a part of the limit for FPI investments in corporate
bonds. They will form a part of the ECBs and will be monitored accordingly. Eligible Indian entities proposing to issue
Masala Bonds may approach Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai.
2. The amount of Rs.44,001 crore arising from shifting of Masala bonds will be released for FPI investment in corporate
bonds over the next two quarters as specified hereunder:
Limit for FPI Investments in Corporate Bonds Amount( Rs.crore)
1. Current FPI limits for corporate bonds (including masala bonds) : 2,44,323
(a) of which Masala bonds (including pipeline): 44,001
2. FPI limit after shifting Masala bonds to ECB (1-(a)) : 2,00,322
3. Additional limit for Q3 FY18 : 27,000
4. FPI limit for corporate bonds from 03 Oct 2017 (2+3) : 2,27,322
(of which reserved for investment by long term FPIs in infrastructure : 9,500)
5. Additional limit for Q4 FY18 : 17,001
FPI limit for corporate bonds from January 01, 2018 (4+5) : 2,44,323 (of which reserved for investment by long term
ForeignDirect Investment (FDI-LLP) inLimitedLiabilityPartnerships (LLP)
RBI notified the Foreign ExchangeManagement (Transfer or Issue of Security by a Person Resident
outsideIndia) (2ndAmendment)Regulations,2017on03.03.2017, relating toForeignDirect Investment (FDILIP) inLimitedLiabilityPartnerships (LIP).
Thesummary isprovided.
1. Eligible Investors: A person resident outside India or an entity incorporated outside India (other than in
PakistanorBangladesh), not being a Foreign Portfolio
Investor or Foreign Institutional Investor or Foreign Venture Capital Investor registered as per SEBI
guidelines,may contributeforeigncapitalbywayof capital contributionoracquisition/ transferofprofit sharesinthecapital structureof anLLP.
2.Eligibleinvestment:Contributiontothecapitalwouldbeaneligibleinvestment.Theinvestmentbywayof`profitshare'willfallunderthecategoryof
reinvestmentofearnings
3. Eligibility of a LLP : FDI is permitted, subject to following conditions;
a) FDI ispermittedunder theautomatic routeinLLPsoperating insectorswhere100%FDI is allowedthroughtheautomatic route.
b) An Indian company or an LLP, having foreign investment,will be permitted tomake downstream
investment inanother company or LP engagedin sectors inwhich 100%FDI is allowed under theautomatic route.Onus shall be on theIndian
company / LLPacceptingdownstreaminestment to ensure compliancewiththeabove conditions.
c) AcompanyhavingforeignnvestmentcanbeconvertedintoanLIPundertheautomaticrouteonlyifitisengagedinasectorwhereforeign
investmentupto100%ispermittedunderautomaticroute.
4.Pricing: FDIbywayof capital contributionorbywayof acquisition/ transferofprofit shares,wouldhaveto
bemorethan or equal to the fair priceasworked out
withinternationallyaccepted/adoptednorms aspermarketpracticeanda valuationcertificatetothateffect
shallbeissuedbytheCharteredAccountantorCostAccountantorbyanapprovedvaluerfromthepanelmaintainedbytheCentralGovernment.
Incaseof transferof capital contribution/profit share fromaresident toanon-resident, thetransfer shallbefor a consideration equal to or more
than the fair price of capital contribution / profit share of an LLP. Further, in case of transfer of capital contribution / profit share from
a non-resident to resident, the transfer shall be for a consideration which is less than or equal to the fair price of the capital
contribution / profit share of an LLP.
5. Mode of payment : Payment shall be made:
(i) by way of inward remittance through banking channels; or
(ii) by debit to NRE / FCNR(B) account of the person concerned, with an AD - I bank in accordance with Foreign Exchange
Management (Deposit) Regulations, 2016, as amended from time to time.
6. Reporting : (i) Reporting of investment in LLPs and disinvestment/transfer of capital contribution or profit shares between a
resident and a non-resident may be made in a manner as prescribed by RBI.
(ii) All LLPs having received FDI in previous year(s) including the current year, shall submit to RBI, by 15th day of July of each
year, a report titled 'Annual Return on Foreign Liabilities and Assets' as specified by RBI.
Funding Limits of FLCs
As per circular dated March 02, 2017, RBI had advised banks that FLCs and rural branches can avail funding support from the
Financial Inclusion Fund (FIF) for the financial literacy camps to the extent of 60% of the expenditure of the camp subject to a
maximum of Rs.15,000/- per camp.
On a review, the FIF Advisory Board has revised (on 13.07.17) the funding support available to banks to the extent of 60% of the
expenditure of the camp subject to a maximum of Rs.5,000/- per camp
Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 :RBI on 04.02.16, issued following
clarifications: A. Export and import of Indian currency and currency notes
a) Any person resident in India,
i. may take outside India (other than to Nepal and Bhutan) currency notes of Govt.
of India and RBI notes up to an amount not exceeding Rs.25,000.
ii. may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.
iii. 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 Govt. of India and RBI notes up to an amount of Rs.25,000.
b) Any person resident outside India, not being a citizen of Pakistan or Bangladesh, and visiting India,
i. may take outside India currency notes of Govt. of India and RBI notes up to an
amount not exceeding Rs.25,000 per person
ii. may bring into India currency notes of Govt. of India and RBI 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,
i. may send into India without limit foreign exchange in any form other than currency
notes, bank notes and travelers cheques;
ii. may bring into India from any place outside India without limit foreign exchange
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 and Import of currency to or from Nepal and Bhutan A person may
i. take or send out of India to Nepal or Bhutan, currency notes of Govt. of India and
RBI 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 RBI notes of denomination Rs.500/- and/or Rs.1000/- up to a limit of Rs.25,000/- ;
ii. bring into India from Nepal or Bhutan, currency notes of Govt. of India and RBI notes (other than notes of denominations
of above Rs.100 in either case) ;
iii. 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.
D. 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.
INDIAN PAR TY FROM MAKING DI R EC T INVESTMENT PROHIBITED *EXTANT GUIDELINES: At present, there is no
restriction on an Indian party with regard to the countries, where it can make Overseas Direct Investment.
*REVISED GUYIDELINES: In order to align the instructions with the objectives of Financial Action Task Force (FATF), the Reserve
Bank on January 25, 2017, on a review, has decided to prohibit an Indian party from making direct investment in an overseas entity
(set up or acquired abroad directly as Joint Venture/Wholly Owned Subsidiary (JV/ WOS) or indirectly as step down subsidiary
located in the countries identified by the FATF as “non co-operative countries and territories”.
TRANSFER OR ISSUE OF ANY FOREIGN SECURITY AMENDED :The Reserve Bank on Jan. 17, 2016 has decided to make the following
amendments in the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004: ‘Indian Party shall
make no direct investment in an overseas entity [set up or acquired abroad directly as JV/WOS or indirectly as Step Down
Subsidiary] located in the countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and
territories” as per list available on FATF website or as notified by the RBI of India from time to time.’
TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA AMENDED :The Reserve Bank on January 10, 2017 has
made the following amendments in the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside
India) Regulations, 2000. In the amended version, the following new regulation has been inserted:
Issue of Convertible Notes by Start-up Companies:
* A person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an entity which is
registered / incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian start-up company for
an amount of twenty five lakh rupees or more in a single tranche.
Explanation: For the purpose of this Regulation, a ‘start-up company’ means a private company incorporated under the Companies
Act and recognised by the Deptt. of Industrial Policy and Promotion, Ministry of Commerce and Industry.
a) A start-up company engaged in a sector where foreign investment requires Government approval may issue convertible notes to
a non-resident only with approval of the Government.
b) A start-up company issuing convertible notes to a person resident outside India shall receive the amount of consideration by
inward remittance through banking channels or by debit to the NRE / FCNR (B) / Escrow account maintained by the person
concerned in accordance with the Foreign ExchangeManagement (Deposit) Regulations, 2016.
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c) Provided that an escrow account for the above purpose shall be closed immediately after the requirements are completed or
within a period of six months, whichever is earlier. However, in no case continuance of such escrow account shall be permitted
beyond a period of six months.
d) NRIs may acquire convertible notes on non-repatriation basis in accordance with the Principal Regulations.
A person resident outside India may acquire or transfer, by way of sale, convertible notes, from or to, a person resident in or outside
India, provided the transfer takes place in accordance with the pricing guidelines as prescribed by RBI
Prior approval from the Government shall be obtained for such transfers in case the startup company is engaged in a sector
which requires Government approval.
e) The start-up company issuing convertible notes shall be required to furnish reports as prescribed by Reserve Bank.
CONVERTIBLE NOTES: Convertible Note means an instrument issued by a Start-up Co evidencing receipt of money initially as debt
which is repayable at the option of the holder or which is convertible into such number of equity share of such Start-up Co’s within
a period not exceeding 5 years from the date of issue of the convertible note upon occurrence of specified events as per the other
terms and conditions agreed to and indicated in the instrument.
Evidence of Import under Import Data Processing and Monitoring System (IDPMS)
Extant guidelines of RBI outline the procedure, mode/manner of payment for imports and submission of related returns. According
to this procedure, Bill of Entry (BoE) data is received in IDPMS from Customs Department for EDI ports and from NSDL for SEZ on
daily basis. BoE data for non-EDI ports are entered by AD Category – I bank of the importer on receipt of BoE (importer’s copy) and
then the bank uploads the data in IDPMS through “Manual BOE reporting” process. In order to enhance ease of doing business and
reduce transaction costs, RBI decided (Jan 12) to discontinue submission of hardcopy of Evidence of Import documents i.e. BoE,
with effect from December 01, 2016, as it is available in IDPMS. The revised procedures are as set out below:
i. AD Category – I bank will enter BoE details (BoE number, port code and date) as received from the importer and download the
BoE message data from “BOE Master” in IDPMS. Thereafter, match and settle the BoE data with Outward Remittance Message
(ORM) associated with the payment for import as per the message format “BOE Settlement” in IDPMS. Multiple ORMs can be
settled against single BoE and also multiple BoE(s) can be settled against one ORM.
ii. In respect of imports on ‘Delivery against Acceptance’ basis, on request of importer, AD Category – I bank shall verify the
evidence of import from IDPMS at the time of effecting remittance of import bill.
iii. On settlement of ORM with evidence of import, AD Category – I bank shall in all cases issue an acknowledgement slip to the
importer containing the following particulars:
1. importer’s full name and address with code number ;
2. number and date of BoE and the amount of import; and
a recap advice on number and amount of BoE and ORM not settled for the importer.
iv. The importer needs to preserve the printed ‘Importer copy’ of BoE as evidence of import and acknowledgement slip for future
use.
The extant instructions and guidelines for Evidence of Import in Lieu of Bill of Entry will apply mutatis mutandis. The evidence of
import in lieu of BoE in permitted/ approved conditions will be created and uploaded by AD Category – I bank of the importer in the
form of BoE data as per message format “Manual BOE reporting” in IDPMS.
Follow-up for Evidence of Import : AD Category – I banks shall continue to follow up for outward remittance made for import (i.e.
unsettled ORM) in terms of extant guidelines and instructions on the subject. In cases where relevant evidence of import data is not
available in IDPMS on due dates against the ORM, AD Category – I bank shall follow up with the importer for submission of
documentary evidence of import. Similarly, if BoE data is not settled against ORM within the prescribed period AD Category – I banks
shall follow up with the importer in terms of extant instructions.
Verification and Preservation: Internal inspectors and IS auditors (including external auditors appointed by AD Category – I bank)
should carry out verification and IS audit and assurance of the “BOE Settlement” process in IDPMS. Data and process followed by AD
Category – I bank for “BOE Settlement” should be preserved in terms of the guidelines under Cyber Security Framework in the bank.
However, in respect of cases which are under investigation by investigating agencies, the data, process and/or documents may be
destroyed only after obtaining clearance from the investigating agency concerned.
Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of exporters, reporting of
advance remittance for exports and migration of old XOS data To simplify the procedure for filing returns on a single platform
and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16) with EDPMS, in operation
since March 1, 2014.Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of
exporters, reporting of advance remittance for exports and migration of old XOS data To simplify the procedure for filing
returns on a single platform and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16)
with EDPMS, in operation since March 1, 2014.
a) Caution / De-caution Listing of Exporters : AD banks can access the updated list of caution listed exporters through EDPMS
on daily basis. Criteria for cautioning / de-cautioning in EDPMS are as under:
i. The exporters would be caution listed if any shipping bill against them remains open for more than two years (from
date of shipment) in EDPMS. If bills are realised and closed or extension for realisation is granted, the exporter will
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c) Provided that an escrow account for the above purpose shall be closed immediately after the requirements are completed or
within a period of six months, whichever is earlier. However, in no case continuance of such escrow account shall be permitted
beyond a period of six months.
d) NRIs may acquire convertible notes on non-repatriation basis in accordance with the Principal Regulations.
A person resident outside India may acquire or transfer, by way of sale, convertible notes, from or to, a person resident in or outside
India, provided the transfer takes place in accordance with the pricing guidelines as prescribed by RBI
Prior approval from the Government shall be obtained for such transfers in case the startup company is engaged in a sector
which requires Government approval.
e) The start-up company issuing convertible notes shall be required to furnish reports as prescribed by Reserve Bank.
CONVERTIBLE NOTES: Convertible Note means an instrument issued by a Start-up Co evidencing receipt of money initially as debt
which is repayable at the option of the holder or which is convertible into such number of equity share of such Start-up Co’s within
a period not exceeding 5 years from the date of issue of the convertible note upon occurrence of specified events as per the other
terms and conditions agreed to and indicated in the instrument.
Evidence of Import under Import Data Processing and Monitoring System (IDPMS)
Extant guidelines of RBI outline the procedure, mode/manner of payment for imports and submission of related returns. According
to this procedure, Bill of Entry (BoE) data is received in IDPMS from Customs Department for EDI ports and from NSDL for SEZ on
daily basis. BoE data for non-EDI ports are entered by AD Category – I bank of the importer on receipt of BoE (importer’s copy) and
then the bank uploads the data in IDPMS through “Manual BOE reporting” process. In order to enhance ease of doing business and
reduce transaction costs, RBI decided (Jan 12) to discontinue submission of hardcopy of Evidence of Import documents i.e. BoE,
with effect from December 01, 2016, as it is available in IDPMS. The revised procedures are as set out below:
i. AD Category – I bank will enter BoE details (BoE number, port code and date) as received from the importer and download the
BoE message data from “BOE Master” in IDPMS. Thereafter, match and settle the BoE data with Outward Remittance Message
(ORM) associated with the payment for import as per the message format “BOE Settlement” in IDPMS. Multiple ORMs can be
settled against single BoE and also multiple BoE(s) can be settled against one ORM.
ii. In respect of imports on ‘Delivery against Acceptance’ basis, on request of importer, AD Category – I bank shall verify the
evidence of import from IDPMS at the time of effecting remittance of import bill.
iii. On settlement of ORM with evidence of import, AD Category – I bank shall in all cases issue an acknowledgement slip to the
importer containing the following particulars:
1. importer’s full name and address with code number ;
2. number and date of BoE and the amount of import; and
a recap advice on number and amount of BoE and ORM not settled for the importer.
iv. The importer needs to preserve the printed ‘Importer copy’ of BoE as evidence of import and acknowledgement slip for future
use.
The extant instructions and guidelines for Evidence of Import in Lieu of Bill of Entry will apply mutatis mutandis. The evidence of
import in lieu of BoE in permitted/ approved conditions will be created and uploaded by AD Category – I bank of the importer in the
form of BoE data as per message format “Manual BOE reporting” in IDPMS.
Follow-up for Evidence of Import : AD Category – I banks shall continue to follow up for outward remittance made for import (i.e.
unsettled ORM) in terms of extant guidelines and instructions on the subject. In cases where relevant evidence of import data is not
available in IDPMS on due dates against the ORM, AD Category – I bank shall follow up with the importer for submission of
documentary evidence of import. Similarly, if BoE data is not settled against ORM within the prescribed period AD Category – I banks
shall follow up with the importer in terms of extant instructions.
Verification and Preservation: Internal inspectors and IS auditors (including external auditors appointed by AD Category – I bank)
should carry out verification and IS audit and assurance of the “BOE Settlement” process in IDPMS. Data and process followed by AD
Category – I bank for “BOE Settlement” should be preserved in terms of the guidelines under Cyber Security Framework in the bank.
However, in respect of cases which are under investigation by investigating agencies, the data, process and/or documents may be
destroyed only after obtaining clearance from the investigating agency concerned.
Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of exporters, reporting of
advance remittance for exports and migration of old XOS data To simplify the procedure for filing returns on a single platform
and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16) with EDPMS, in operation
since March 1, 2014.Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of
exporters, reporting of advance remittance for exports and migration of old XOS data To simplify the procedure for filing
returns on a single platform and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16)
with EDPMS, in operation since March 1, 2014.
a) Caution / De-caution Listing of Exporters : AD banks can access the updated list of caution listed exporters through EDPMS
on daily basis. Criteria for cautioning / de-cautioning in EDPMS are as under:
i. The exporters would be caution listed if any shipping bill against them remains open for more than two years (from
date of shipment) in EDPMS. If bills are realised and closed or extension for realisation is granted, the exporter will
Compiled by Sanjay Kumar Trivedy, ChiefManager, Canara Bank, Shrigonda,Ahmed Nagar, Maharashtra 54 | P a g e
automatically be de-caution listed.
ii. The exporters can also be caution listed on the recommendation of AD banks. RBI will caution / de-caution the
exporters in such cases.
b) Reporting of Advance Remittance for Exports: RBI decided to capture the details of advance remittances received for
exports in EDPMS. Banks will have to report all the inward remittances including advance as well as old outstanding inward
remittances received for export of goods / software to EDPMS. The quarterly return presently being submitted by banks for
delay in utilization of advances received for export has been discontinued.
c) Export Outstanding Statement (XOS): With effect from March 01, 2014, details of all export outstanding bills can be obtained
from the EDPMS. AD banks were required to report the old outstanding bills prior to Mar 01, 2014 in XOS on half yearly basis as
at the end of June and December every year. To reduce the reporting burden of AD Banks, RBI decided to migrate the XOS data
reported by the AD banks for HY ended Dec 2015 onwards to EDPMS and discontinue separate reporting of XOS for the
subsequent periods. AD banks should mark off / close the XOS data pertaining to pre March 01, 2014 as and when amount has
been realised.
PURCHASE AND SALE OF SECURITIES :With a view to providing flexibility in regard to the manner in which non-convertible
debentures/bonds issued by Indian companies can be acquired by Foreign Portfolio Investors (FPIs), the RBI on Dec. 28, 2016 has
decided to allow them to transact in such instruments either directly or in any manner as per the prevalent / approved market
practice.
FRA AND IRS WITHDRAWAL OF FORTNIGHTLY RETURN :In a step towards rationalisation of returns, the Reserve Bank has advised
banks that the requirement to submit fortnightly return on the Forward Rate Agreement (FRA) and Interest Rate Swap (IRS) was
withdrawn with immediate effect.
Accordingly, banks need not send the hard copy of the return to the Reserve Bank. The existing procedure for reporting Overthe-
Counter (OTC), Foreign Exchange and Interest Rate Derivative transactions to the trade repository hosted by Clearing Corporation of
India Ltd (CCIL) shall continue.
MULTILATERAL AND REGIONAL FI INVESTORS
In order to provide more choices of investors to Indian entities issuing Rupee denominated bonds abroad, the Reserve Bank has
permitted multilateral and regional financial institutions (FIs) where India is a member country, to invest in Rupee denominated
bonds.
EXCHANGE TRADED CURRENCY DERIVATIVES (ETCD)
With a view to enabling additional hedging products for Non Resident Indians (NRIs) to hedge their investments in India so that
they can hedge the currency risk arising out of their investments in India, the Reserve Bank has permitted them to access the ETCD
market.
The following are the terms and conditions to be followed:
NRIs shall designate an authorised dealer (AD) category-I bank for the purpose of monitoring and reporting their combined
positions in the Over-the-counter (OTC) and ETCD segments;
NRIs may take positions in the currency futures / exchange traded options market to hedge the currency risk on the market value
of their permissible (under FEMA, 1999) Rupee investments in debt and equity and dividend due and balances held in NRE
accounts;
The exchange / clearing corporation will provide details of all transactions of the NRI to the designated bank;
The designated bank will consolidate the positions of the NRI on the exchanges as well as the OTC derivative contracts booked
with them and with other AD banks. The designated bank shall monitor the aggregate positions and ensure the existence of
underlying Rupee currency risk and bring transgressions, if any, to the notice of the Reserve Bank of India/Securities and Exchange
Board of India (SEBI);
The onus of ensuring the existence of the underlying exposure shall rest with the NRI concerned. If the magnitude of exposure
through the hedge transactions exceeds the magnitude of underlying exposure, the concerned NRI shall be liable to such penal
action as may be taken by Reserve Bank of India under the Foreign Exchange Management Act (FEMA), 1999.
Currently, NRIs are permitted to hedge their Rupee currency risk through OTC transactions with AD banks.
STATUS HOLDERS: Government of India vide amendment has notified that the Status Holders shall be entitled to export freely
exportable items on free of cost basis for export promotion subject to an annual limit of Rs. 10 lakh or 2% of average annual export
realization during preceding three licensing years whichever is lower.
ACQUISITION & TRANSFER OF IMMOVABLE PROPERTY:
A) PERSON RESIDENT IN INDIA: The RBI has advised AD banks that acquisition or transfer of any immovable property outside
India by a person resident in India would require prior approval of Reserve Bank with few exceptions like, Property held outside
India by a foreign citizen resident in India; Property acquired by a person on or before July 8, 1947 and held with the permission
of Reserve Bank; Property acquired by way of gift or inheritance from specified persons; Property purchased out of funds held
in Resident Foreign Currency (RFC) account held in accordance with the Foreign Exchange Management (Foreign Currency
Accounts by a person resident in India) Regulations, 2015; etc.
B) INDIAN COMPANY: An Indian company having overseas offices may acquire immovable property outside India for its business
and residential purposes provided total remittances do not exceed the following limits prescribed for initial and recurring
expenses, respectively: a)15 per cent of the average annual sales / income or turnover of the Indian entity during the last two
financial years or up to 25 per cent of the net worth, whichever is higher;
b) 10 per cent of the average annual sales/ income or turnover during the last two financial years.
POS S E S S ION & RE TENT ION OF FOR E IGNCURRENCY:
A) The RBI has advised AD Banks on the limits for possession or retention of foreign currency or foreign coins, as under:
a) Possession without limit of foreign currency and coins by an authorised person within the scope of his authority;
b) Possession without limit of foreign coins by any person;
c) 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 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
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
Represents unspent amount of foreign exchange acquired by him from an authorised person for travel abroad.
B) RBI also advised that a person resident in India but not permanently resident therein may possess without limit foreign currency in
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.
SETTLEMENT OF EXPORT / IMPORT TRANSACTIONS IN CURRENCIES NOT HAVING A DIRECT EXCHANGE RATE: To further
liberalize the procedure and facilitate settlement of export and import transactions where the invoicing is in a freely convertible
currency, RBI has decided that AD Category-I banks may permit settlement of such export and import transactions (excluding those
put through the ACU mechanism), subject to conditions as under:
a) Exporter / Importer shall be a customer of the AD Bank.
b) Signed contract / invoice is in a freely convertible currency.
c) The beneficiary is willing to receive the payment in the currency of beneficiary instead of the original (freely convertible)
currency of the invoice / contract / Letter of Credit as full and final settlement.
d) AD bank is satisfied with the bonafides of the transactions;
e) The counterparty to the exporter / importer of the AD bank is not from a country or jurisdiction in the updated FATF Public
Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures.
EXTERNAL COMMERCIAL BORROWINGS (ECB):
RBI has decided to make the following changes in the ECB framework:
a) Companies in Infrastructure sector, Non-Banking Financial Companies Infrastructure Finance Companies (NBFC-IFCs), NBFCs-
Asset Finance Companies (NBFC-AFCs), Holding Companies and Core Investment Companies (CICs) will also be eligible to raise ECB
under Track I of the framework with minimum average maturity period of 5 years, subject to 100 per cent hedging.
b) Companies in Infrastructure sector shall utilize the ECB proceeds raised under Track I for the end uses permitted for this Track.
NBFCs-IFCs and NBFCs-AFCs will, however, be allowed to raise ECB only for financing infrastructure.
i)Holding Companies and CICs shall use ECB proceeds only for on-lending to infrastructure Special Purpose Vehicles (SPVs).
ii)The individual limit of borrowing under the automatic route for aforesaid companies shall be as applicable to the companies in
the Infrastructure sector (currently USD 750 million).
iii)Companies in infrastructure sector, Holding Companies and CICs will continue to have the facility of raising ECB under Track II of
the ECB framework subject to the prescribed conditionalities.
On the ECB framework, RBI has further clarified that:
a) The designated AD Category-I banks may, under the powers delegated to them, allow refinancing of ECBs raised under the
previous ECB framework, provided the refinancing is at lower all-in-cost, the borrower is eligible to raise ECB under the extant
ECB framework and residual maturity is not reduced (i.e. it is either maintained or elongated).
b) ECB framework is not applicable in respect of the investment in Non-convertible Debentures (NCDs) in India made by Registered
Foreign Portfolio Investors (RFPIs).
c) Minimum average maturity of Foreign Currency Convertible Bonds (FCCBs)/ Foreign Currency Exchangeable Bonds (FCEBs) is 5
years irrespective of the amount of borrowing. Further, the call and put option, if any, for FCCBs shall not be exercisable prior to
5 years.
FOREIGN DIRECT INVESTMENT (FDI) IN INDIA
The extant FDI policy for Insurance sector has since been reviewed by the Govt. of India and enhanced the limit of foreign
e
investment in insurance sector from 26 to 49 percent under the automatic route covering Insurance Co, Insurance Brokers, Third
Party Administrators’ Surveyors and Loss Assessors.
ESTABLISHMENT IN INDIA OF A BRANCH OFFICE OR LIAISON OFFICE OR A PROJECT OFFICE
A) Prohibition against opening a branch office or a liaison office or a project office or any other place of business in India: No
person resident outside India shall without prior approval of the RBI open in India a branch office or a liaison office or a project office
or any other place of business by whatever name called except as laid down in these Regulations:
Provided that
a) A banking company resident outside India; b) An insurance company resident outside India; c) A company resident outside India
shall not require any approval under these Regulations to establish a branch office in the Special Economic Zones to undertake
manufacturing and service activities, subject to the conditions that such branch offices are functioning in those sectors where 100%
FDI is permitted.
B) Approval for opening a branch office or a liaison office or a project office or any other place of business in India:
a) A person resident outside India can establish a branch office or a liaison office in India provided it meets the following:
i) For Branch Office - a profit making track record during the immediately preceding five financial years in the home country and
net worth of not less than USD 100,000 or its equivalent.
ii) For Liaison Office - a profit making track record during the immediately preceding three financial years in the home country and
net worth of not less than USD 50,000 or its equivalent.
GRANT OF EDF WAIVER FOR EXPORT OF GOODS:
* Government of India vide amendment has notified that the Status Holders shall be entitled to export freely exportable items on
free of cost basis for export promotion subject to an annual limit of Rs.10 lakh or 2% of average annual export realization during
preceding three licensing years whichever is lower.
* The Reserve Bank on August 25, 2016 clarified that in cases where a derivative contract is restructured, the mark-to-market value
of the contract on the date of restructuring should be cash settled.
* The Reserve Bank has permitted banks to raise funds through issuance of rupee denominated bonds overseas for the various
specified purposes.
* The Reserve Bank on April 21, 2016 has decided, in consultation with the Government of India, to allow foreign investment in the
units of Investment Vehicles registered and regulated by SEBI or any other competent authority.
* The Reserve Bank on October 6, 2016 advised all category-I authorised dealer (AD) banks that Import Data Processing and
Monitoring System (IDPMS) would go live with effect from October 10, 2016, used for reporting and monitoring of the import
transactions.
ECBs BY STARTUPS:
* With a view to boosting innovation and promoting job creation, the Reserve Bank of India has permitted Startups to raise external
commercial borrowings (ECBs) of up to $3 million in a financial year under ECB framework
The minimum average maturity period will be 3 years. Lender / investor shall be a resident of a country who is either a member of
Financial Action Task Force (FATF) or a member of a FATF-Style Regional Bodies. The borrowing should be denominated in any freely
convertible currency or in Indian Rupees (INR) or a combination thereof. In case of borrowing in INR, the non-resident lender, should
mobilise INR through swaps/outright sale undertaken through an AD Category-I bank in India.
* Startups raising ECB in foreign currency, whether having natural hedge or not, are exposed to currency risk due to exchange rate
movements and hence are advised to ensure that they have an appropriate risk management policy to manage potential risk arising
out of ECBs.
FOREIGN INVESTMENT IN OTHER FINANCIAL SERVICES:
The Reserve Bank has advised to allow foreign investment up to 100 per cent under the automatic route in ‘Other Financial Services’.
Other Financial Services will include activities which are regulated by any financial sector regulator such as RBI, SEBI, IRDAI, PFRDA,
NHB or any other financial sector regulator as may be notified by the Govt. Such foreign investment shall be subject to
conditionalities, including minimum capitalisation norms, as specified by the concerned Regulator/ Government Agency.
FOREIGN VENTURE CAPITAL INVESTOR (FVCI):
In order to further liberalise and rationalise the investment regime for Foreign Venture Capital Investor (FVCI), any FVCI which has
obtained registration under the SEBI Regulations, 2000, will not require any approval from RBI and can invest in Equity or equity
linked instrument or debt instrument issued by an Indian ‘start-up’ irrespective of the sector in which the start-up is engaged. A
startup will mean an entity (private limited company or a registered partnership firm or a limited liability partnership) incorporated
or registered in India not prior to five years, with an annual turnover not exceeding INR 25 crores in any preceding financial year,
working towards innovation, development, deployment or commercialization of new products, processes or services driven by
technology or intellectual property & satisfying stipulated conditions.
Foreign Exchange Management (FC Accounts by persons Resident in India) Regulations 2015
Further to extant guidelines, RBI decided (23.06.16) that an Indian startup, having an overseas subsidiary, may open a FC
account with a bank outside India for crediting to the account, the foreign exchange earnings out of exports/sales made. The
balances held in such accounts, to the extent they represent exports from India, shall be repatriated to India within prescribed
period for realization of exports. In addition, payments received in foreign exchange by an Indian startup arising out of sales/
export made by the startup or its overseas subsidiaries will be a permissible credit to EEFC account maintained in India by the
startup.
Further, any insurance/ reinsurance company registered with the Insurance Regulatory and Development Authority of India
(IRDAI) may open a foreign currency account with a bank outside India to carry out insurance/ reinsurance business.
Memorandum of Procedure for channeling transactions through Asian Clearing Union (ACU)
In terms of Memorandum (17.02.10), the minimum amounts and the multiples in which RBI receives and pays U.S. Dollar/
Euro was fixed as $ 25000/ Euro 25000 and $ 1000/ Euro 1000, respectively. RBI decided (26.05.16) to revise the minimum
amount and the multiples in which RBI will receive and pay for the purpose of funding or for repatriating the excess liquidity in
the ACU Dollar and ACU Euro accounts to $ 500 / Euro 500.
Information on Investment in Commercial Papers and Unhedged Foreign Currency Exposures of the Borrowers to Credit
Information Companies On recommendations of Committee to Recommend Data Format for Furnishing of Credit Information
to Credit Information Companies (Chairman: Shri Aditya Puri) RBI decided (23.06.16) to capture the information on CPs and
UFCE: Commercial papers : The information on CPs issued by the companies shall be reported on a monthly basis to all the
four credit information companies (CICs) by the bank which has been designated as the Issuing and Payment Agent (IPA) for
the particular CP issue. If there are multiple IPAs for a single CP issue, they shall report to the CICs, the details pertaining to the
portion of the issue which is with them. The IPA shall also report any default in the redemption of the relevant CP issue. It is
clarified that the investing credit institutions need not report the information on CPs to the CICs.
Unhedged Foreign Currency Exposures : The information regarding UFCE of individual borrowers shall be reported on a
quarterly basis to all the four CICs by the lending bank (in the case of solo lenders) /consortium leader (in the case of
consortium arrangements)/largest lender (in the case of multiple lending arrangements). This information shall be reported in
the Credit Facility (CR) Segment of Commercial Data format. The reporting requirements is effective from July 1, 2016 i.e. from
the credit information reports showing the position for the month of June 2016.
Investment in CICs :RBI advised (19.05.2016) that investment directly or indirectly by any person, whether resident or
otherwise, in a CIC, shall not exceed 10% of the equity capital of the investee company. RBI may consider allowing higher FDI
limits to entities which have an established track record of running a Credit Information Bureau in a well regulated
environment:
1. up to 49%, if their ownership is not well diversified (i.e. one or more shareholders each hold more than 10% of voting
rights in the company)
2. up to 100%, if their ownership is well diversified or
If their ownership is not well diversified, at least 50% of the directors of the investee CIC in India, are Indian nationals/ Non-
Resident Indians/ Persons of Indian Origin subject to the condition that one third of the directors are Indian nationals resident
in India.
3. The investor company should preferably be a listed company on a recognised stock exchange. FII/FPI investment
would be permitted subject to the conditions that:
1. A single entity should directly or indirectly hold below 10% equity;
2. Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement;
3. FIIs/FPIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.
4. In case the investor in a Credit Information Company in India is a wholly owned subsidiary (directly or indirectly) of an
investment holding company, the conditions as at (2) and (3) above will be applied to the operating group company that is
engaged in credit information business and has undertaken to provide technical know-how to the Credit Information Company
in India.
Rupee Drawing Arrangement - Submission of statement/returns under XBRL : In terms of extant guidelines, AD Cat- I banks
were required to submit statement E on total remittances received every quarter. RBI advised (19.05.16) the AD Cat-1 banks to
report the above statement in eXtensible Business Reporting Language (XBRL) system from the quarter ending June 2016.
Opening and Maintenance of Rupee / Foreign Currency Vostro Accounts of Non-Resident Exchange Houses: Rupee Drawing
Arrangement : The extant RBI guidelines relating to above aspects regarding collateral cover under Speed Remittance
Procedure (SRP), stipulate that the Exchange Houses (EH) shall keep with the AD Category - I bank a cash deposit in any
convertible foreign currency equivalent to 3 days’ estimated drawings on which market related interest rate may be paid.
The EH can also keep the said collateral in the form of guarantees from a bank of international repute. The adequacy of
collateral should be reviewed by the AD Category - I bank at regular intervals. These requirements were relaxed and the
collateral requirement was brought down to one day’s estimated drawings.
To further streamline the remittance arrangement under SRP and make remittances cost-effective, RBI decided (28.04.16) to
do away with the mandated requirement of maintenance of collateral or cash deposits by the Exchange Houses with whom
the banks have entered into the Rupee Drawing Arrangement. The AD banks are free to determine the collateral requirement,
if any, based on factors, such as, whether the remittances are pre-funded, the track record of the Exchange House, whether
the remittances are effected on gross (real-time) or net (file transfer) basis, etc., and may frame their own policy in this
regard.
Investment Advisory Services by Banks Investment Advisory Services (IAS) is defined and regulated by SEBI under the SEBI
(Investment Advisors) Regulations, 2013, and entities offering these activities need to be registered with SEBI. In view of the
same RBI advised (21.04.16) that henceforth, banks cannot undertake IAS departmentally. Accordingly, banks desirous of
offering these services may do so either through a separate subsidiary set up for the purpose or one of the existing
subsidiaries after ensuring that there is an arm’s length relationship between bank and the subsidiary. The sponsor bank
should obtain specific prior approval of Department of Banking Regulation before offering IAS through an existing subsidiary
or for setting up a subsidiary for this purpose. (Setting up of any subsidiary will, as hitherto, be subject to the extant guidelines
on para-banking activities of banks).
All bank sponsored subsidiaries offering IAS will be registered with SEBI and regulated as per the SEBI (Investment Advisors)
Regulations, 2013, and shall adhere to all relevant SEBI rules and regulations in this regard.IAS provided by the bank
sponsored subsidiaries should only be for the products and services in which banks are permitted to deal in as per Banking
Regulation Act, 1949.
Foreign Investment in units issued by Real Estate Investment Trusts, Infrastructure Investment Trusts and Alternative
Investment Funds RBI decided (21.04.16) to allow foreign investment in the units of Investment Vehicles registered and
regulated by SEBI or any other competent authority which include:
Real Estate Investment Trusts registered /regulated under SEBI Regulations 2014;
Infrastructure Investment Trusts registered / regulated under SEBI Regulations;
Alternative Investment Funds registered / regulated under SEBI Regulations 2012. The salient features of the new
investment regime are:
1. A person resident outside India including a Registered Foreign Portfolio Investor (RFPI) and a Non-Resident Indian
(NRI) may invest in units of Investment Vehicles.
2. The payment shall be made by an inward remittance through the normal banking channel including by debit to an
NRE or an FCNR account.
3. Purchased units may be sold/transferred/redeemed as per RBI/SEBI regulations.
4. Downstream investment by an Investment Vehicle shall be regarded as foreign investment if Sponsor or Manager or
Investment Manager is not Indian ‘owned.
5. If sponsors or managers or investment managers are in a form other than companies or LLPs, SEBI shall determine
whether it is foreign owned and controlled.
6. Downstream investment by an Investment Vehicle that is reckoned as foreign investment shall have to conform to
the sectoral caps and conditions / restrictions.
7. Downstream investment in an LLP by an Investment Vehicle that is reckoned as foreign investment has to conform to
the provisions of Schedule 9 of the Principal Regulations as well as the extant FDI policy for foreign investment in
LLPs.
8. An Alternative Investment Fund Category III with foreign investment shall make portfolio investment in only those
securities in which a RFPI is allowed to invest.
9. The Investment Vehicle receiving foreign investment shall be required to make such report and in such format to RBI
or SEBI as prescribed by them from time to time. RBI has clarified that foreign investment in units of REITs registered
and regulated under the SEBI (REITs) Regulations, 2014 will not be included in “real estate business” for the purpose
of these regulations.
Acceptance of deposits by Indian companies from a person resident outside India for nomination as Director
In terms RBI notification dated 01.04.16, no person resident in India shall accept any deposit from, or make any deposit with, a
person resident outside India. U/s 160 of Companies Act, 2013, a person who intends to nominate himself or any other person
as a director in an Indian company is to place a deposit with that company. RBI clarified (13.04.16) that keeping deposits with
an Indian company by persons resident outside India, as per Section 160 of the Companies Act, 2013, is a current account
(payment) transaction and does not require any approval from RBI. All refunds of such deposits, arising in the event of
selection of the person as director or getting more than 25% votes, shall be treated similarly.
Grant of EDFWaiver for Export of Goods Free of Cost :
In terms of circular dated 26.04.2003, GR waive to exporters for export of goods free of cost was enabled. The facility was
extended to the Status through Foreign Trade Policy 2004-2009, in terms of which Status Holders were entitled to export
freely exportable items on free of cost basis for export promotion subject to an annual limit of Rs 10 lakh or 2% of average
annual export realization during preceding three licensing years, whichever is higher.
Government of India on June 4, 2015, notified that the Status Holders shall be entitled to export freely exportable items on
free of cost basis for export promotion subject to an annual limit of Rs 10 lakh or 2% of average annual export realization
during preceding three licensing years whichever is lower. AD Category – I banks can consider requests from Status Holder
exporters for grant of Export Declaration Form (EDF) waiver, for export of goods free of cost based on the revised norm.
Issuance of Rupee denominated bonds overseas – Multilateral and Regional Financial Institutions as Investors
Further to extent guidelines on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by
Authorised Dealers and Persons other than ADs, about the criteria of recognized investors in the Rupee denominated bonds
issued overseas, in order to provide more choices of investors to Indian entities issuing Rupee denominated bonds abroad, RBI
decided on Feb 16, 2017, to also permit Multilateral and Regional Financial Institutions where India is a member country, to
invest in these Rupee denominated bonds.
Forward Rate Agreement (FRA) and Interest Rate Swap (IRS)
As per extent notification, banks are to submit a fortnightly return on FRA/IRS to Monetary Policy Department with a copy to
various RBI departments. In a further step towards rationalization of returns, RBI decided (Feb 16) to withdraw the said return
with immediate effect. The banks have been advised to stop sending the hardcopy of the said return to RBI. The existing
procedure for reporting OTC Foreign exchange and Interest Rate Derivative transactions to the trade repository hosted by CCIL
shall continue.
Prohibition on Indian Party from making direct investment in countries identified by the Financial Action Task Force (FATF)
as “Non Co- operative countries and territories” :At present, there is no restriction on an Indian Party with regard to the
countries, where it can undertake Overseas Direct Investment. In order to align, the instructions with the objectives of FATF.
On a review RBI decided (Jan 25) to prohibit an Indian Party from making direct investment in an overseas entity (set up or
acquired abroad directly as JV/ WOS or indirectly as step down subsidiary) located in the countries identified by the FATF as
“non co-operative countries and territories” as per list available on FATF website www.fatf-gafi.org or as notified by RBI.
Prohibition on Indian Party from making direct investment in countries identified by the Financial Action Task Force (FATF)
as “Non Co-operative countries and territories” At present, there is no restriction on an Indian Party with regard to the
countries, where it can undertake Overseas Direct Investment. In order to align, the instructions with the objectives of FATF, on
a review, RBI decided (Jan 25) to prohibit an Indian Party from making direct investment in an overseas entity (set up or
acquired abroad directly as JV/ WOS or indirectly as step down subsidiary) located in the countries identified by the FATF as
“non co-operative countries and territories” as per list available on FATF or as notified by the RBI from time to time.
Post Office (Postal Orders/Money Orders), 2015 :Further to notification dated December 29, 2015 RBI, on 04.02.16, granted
general permission to any person to buy foreign exchange from any post office in India in the form of postal order or money
order.
PARTICIPATION IN CURRENCY FUTURESMARKET :RBI has decided to permit stand-alone Primary Dealers (PDs) to deal in currency
futures contracts traded on recognized exchanges subject to the following conditions:
Eligibility:
a) Exposure to currency futures will be treated as a non- core activity for PDs and only PDs having a minimum Net Owned Fund of
Rs.250 crore or any amount as prescribed for undertaking diversified activity will be allowed to participate in currency futures.
b)As prescribed in the existing guidelines on capital adequacy standards, the capital charge for market risk for the non-core activities
(including currency futures) which are expected to consume capital should not be more than 20 per cent of the NOF as per last
audited balance sheet.
Position Limits: PDs are permitted to take long and short positions in the currency futures market with or without having an
underlying exposure subject to the position limits specified by the exchanges. However, the aggregate gross open positions across
all contracts in all the stock exchanges in the respective currency pairs shall not exceed the limits prescribed by RBI
Purchase and sale of securities other than shares or convertible debentures of an Indian company by a person resident outside
India In terms of notification dated 03.05.2000, eligible investors, viz., SEBI registered Foreign Institutional Investors (FIIs), Qualified
Foreign Investors (QFIs), registered Foreign Portfolio Investors (FPIs) and long term investors registered with SEBI, may purchase
securities indicated in Schedule 5 on repatriation basis and subject to such terms and conditions as may be specified by the SEBI and
RBI from time to time. With a view to providing flexibility in regard to the manner in which non-convertible debentures/bonds issued
by Indian companies can be acquired by FPIs, RBI decided (Dec 27, 2016) to allow them to transact in such instruments either directly
or in any manner as per the prevalent/approved market practice.
Exchange facility to foreign citizens RBI decided (25.11.16) that foreign citizens (i.e. foreign passport holders) can exchange forex for
Indian currency notes up to a limit of Rs. 5000 per week till Dec 15, 2016 subject to the tenderer submitting a self-declaration that
this facility has not been availed of during the week. The Authorized Person (APs) shall keep the passport details and the above
declaration on record. APs may also ensure that the total value of such exchange to Indian currency notes does not exceed Rs.5000/-
during the week.
Investment by FPI in corporate debt securities : As per extant guidelines, Foreign Portfolio Investors (FPI) can invest only in listed or
to-be-listed debt securities. Investment in unlisted debt securities is permitted only in case of infrastructure sector companies. RBI
decided (17.11.16) to expand the investment basket of eligible instruments for investment by FPIs under the corporate bond route
to include the following:
i. Unlisted corporate debt securities in the form of non-convertible debentures/bonds issued by public or private companies
subject to minimum residual maturity of 3 years and end use-restriction on investment in real estate business, capital
market and purchase of land.
ii. Securitised debt instruments as under:
1. any instrument issued by a special purpose vehicle set up for securitisation where banks, FIs or NBFCs are originators;
and/or
2. any certificate or instrument issued/listed as per SEBI Regulations on Public Offer and Listing of Securitised Debt
Instruments, 2008.
Investment by FPIs in the unlisted corporate debt securities and securitised debt instruments shall not exceed Rs. 35,000 crore
within the extant investment limits prescribed for corporate bond from time to time which currently is Rs. 2,44,323 crore. Further,
investment by FPIs in securitised debt instruments shall not be subject to the minimum 3-year residual maturity requirement. The
revised norms will be reviewed after one year.
Investment by Foreign Portfolio Investors (FPI) in Government Securities : The limits for investment by foreign portfolio investors
(FPI) in Government securities were last increased in terms of the Medium Term Framework MTF) announced on 29.03.16.
Accordingly, the limits for the next half year are proposed to be increased in two tranches, each of Rs. 100 billion from October 3,
2016 and January 2, 2017 respectively. The limits for State Development Loans (SDLs) are proposed to be increased in two tranches,
each of Rs.35 billion, from October 3, 2016 and January 2, 2017 respectively. 4. The revised limits over the next two quarters would
be as under (INR billion):
Central Govt. All FPIs Addl for Total State Total
Securities Long term Loans
Existing Limit 1440 560 2000 140 2140
w.e.f. 03.10.16 1480 620 2100 175 2275
w.e.f. 02.01.17 1520 680 2200 210 2410
The operational guidelines relating to allocation and monitoring of limits will be issued
by the Securities and Exchange Board of India (SEBI).
Foreign investment in Other Financial Services
At present foreign investment up to 100%, under automatic route, in Non-Banking Finance Companies (NBFCs) engaged in the 18
activities listed therein is allowed. RBI decided (20.10.16) to allow foreign investment up to 100% under the automatic route in
‘Other Financial Services’ which activities regulated by any financial sector regulator viz. RBI, SEBI, IRDAI, PFRDA, NHB or any other
financial sector regulator. Such investment shall be subject to conditionalities, specified by the concerned Regulator/ Government
Agency. Other salient features of the revised regulatory framework are as under:
1. In activities which are not regulated or partly regulated by any financial sector regulator or where there is lack of clarity
regarding regulatory oversight, foreign investment will be allowed up to 100% under the Govt. approval route.
Foreign investment in an activity specifically regulated by an Act, will be restricted to foreign investment levels/limits, if any,
specified in that Act.
Quarterly reporting system- Foreign branches/ subsidiaries/ joint ventures/ associates of Indian banks
As per RBI Circular dated March 24, 2008 foreign branches/ subsidiaries/ joint ventures/ associates of Indian banks were
required to submit quarterly return for reporting of profit and asset size of overseas operations of the bank. On a review RBI
decided (30.06.16) to discontinue the submission of the said return w.e.f. June 30, 2016.
Settlement System under Asian Clearing Union (ACU)
As per extant RBI directions dated 26.12.2008, the participants in ACU mechanism have the option to settle their transactions
either in ‘ACU Dollar’ or in ‘ACU Euro’. The ‘ACU Dollar’ and ‘ACU Euro’ is equivalent in value to one US Dollar and one Euro,
respectively. RBI advised banks (30.06.16) that the payment channel for processing ‘ACU Euro’ transactions is under review.
Hence, it has become necessary to temporarily suspend operations in ‘ACU Euro’ w.e.f July 01, 2016. Accordingly, all eligible
current account transactions including trade transactions in ‘Euro’ are permitted to be settled outside the ACU mechanism until
further notice.
EDPMS - Issue of eBRC
As per circular dated 01.01.2016, related to As per RBI circular dated 01.01.2016, related to implementation and operationalisation
of Export Data Processing and Monitoring System (EDPMS) of RBI as also circular dated 28.07.14, reporting of data related to
realisation of export proceeds i.e. ENC and Schedule 3 to 6 files was discontinued with effect from the first fortnight of September
2014 after implementation of EDPMS. In terms of circrulated dated May 26, 2016, banks were advised to carry out appropriate
changes in their IT system / operating procedure immediately, report subsequent export transactions in EDPMS and also capture
the details of advance remittances (including old outstanding inward remittances) received for exports in EDPMS.
AD Category-I banks have been directed by RBI on Sept 15, 2017, to update the EDPMS with data of export proceeds on “as and
when realised basis” and, with effect from October 16, 2017 generate Electronic Bank Realisation Certificate (eBRC) only from the
data available in EDPMS, to ensure consistency of data in EDPMS and consolidated eBRC.
Investment by Foreign Portfolio Investors (FPI) in Govt. Securities: Medium Term Framework Revision of Limits for the quarter
Oct-Dec 2017 On Sept 28, 2017, RBI increased the limits for investment by FPIs for the quarter October-December 2017 by INR 80
billion in Central Government Securities and INR 62 billion in State Development Loans. The revised limits are allocated as per the
framework modified by RBI on 03.07.17 is given as under.
Limits for FPI investment in Government Securities Existing limit : (Rs. in billion)
General Long Term Total Grand Total
Central Govt. 1877 543 2420
State Govts 285 46 331 2751
Limite for Quarter Dec 2017
Central Govt. 1897 603 2500
State Govts 300 93 393 2893
The revised limits will be effective from October 3, 2017.
Issuance of Rupee Denominated Bonds (RDBs) Overseas On Sept 22, 2017, RBI brought modification relating to issuance of Rupee
denominated bonds overseas under External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency. In
terms of the revision in consultation with the Government of India, the amount of issuances of RDBs from the limit for investments
by FPIs in corporate bonds with effect from October 3, 2017 is to be excluded. Consequently, reporting requirement in the form of
additional email for RDB transactions for onward reporting to
Investment by Foreign Portfolio Investors in Corporate Debt Securities – Review Currently, the limit for investment by Foreign
Portfolio Investors (FPIs) in corporate bonds is Rs. 244,323 crore. This includes issuance of Rupee denominated bonds overseas
(Masala Bonds) by resident entities of Rs. 44,001 crore (including pipeline). The Masala Bonds are presently reckoned both under
Combined Corporate Debt Limit (CCDL) for FPI and External Commercial Borrowings (ECBs).
On a review and to further harmonise norms for Masala Bonds issuance with the ECB guidelines, RBI made the following changes on
Sept 22, 2017:
1. With effect from October 3, 2017, Masala bonds will no longer form a part of the limit for FPI investments in corporate
bonds. They will form a part of the ECBs and will be monitored accordingly. Eligible Indian entities proposing to issue
Masala Bonds may approach Foreign Exchange Department, Reserve Bank of India, Central Office, Mumbai.
2. The amount of Rs.44,001 crore arising from shifting of Masala bonds will be released for FPI investment in corporate
bonds over the next two quarters as specified hereunder:
Limit for FPI Investments in Corporate Bonds Amount( Rs.crore)
1. Current FPI limits for corporate bonds (including masala bonds) : 2,44,323
(a) of which Masala bonds (including pipeline): 44,001
2. FPI limit after shifting Masala bonds to ECB (1-(a)) : 2,00,322
3. Additional limit for Q3 FY18 : 27,000
4. FPI limit for corporate bonds from 03 Oct 2017 (2+3) : 2,27,322
(of which reserved for investment by long term FPIs in infrastructure : 9,500)
5. Additional limit for Q4 FY18 : 17,001
FPI limit for corporate bonds from January 01, 2018 (4+5) : 2,44,323 (of which reserved for investment by long term
ForeignDirect Investment (FDI-LLP) inLimitedLiabilityPartnerships (LLP)
RBI notified the Foreign ExchangeManagement (Transfer or Issue of Security by a Person Resident
outsideIndia) (2ndAmendment)Regulations,2017on03.03.2017, relating toForeignDirect Investment (FDILIP) inLimitedLiabilityPartnerships (LIP).
Thesummary isprovided.
1. Eligible Investors: A person resident outside India or an entity incorporated outside India (other than in
PakistanorBangladesh), not being a Foreign Portfolio
Investor or Foreign Institutional Investor or Foreign Venture Capital Investor registered as per SEBI
guidelines,may contributeforeigncapitalbywayof capital contributionoracquisition/ transferofprofit sharesinthecapital structureof anLLP.
2.Eligibleinvestment:Contributiontothecapitalwouldbeaneligibleinvestment.Theinvestmentbywayof`profitshare'willfallunderthecategoryof
reinvestmentofearnings
3. Eligibility of a LLP : FDI is permitted, subject to following conditions;
a) FDI ispermittedunder theautomatic routeinLLPsoperating insectorswhere100%FDI is allowedthroughtheautomatic route.
b) An Indian company or an LLP, having foreign investment,will be permitted tomake downstream
investment inanother company or LP engagedin sectors inwhich 100%FDI is allowed under theautomatic route.Onus shall be on theIndian
company / LLPacceptingdownstreaminestment to ensure compliancewiththeabove conditions.
c) AcompanyhavingforeignnvestmentcanbeconvertedintoanLIPundertheautomaticrouteonlyifitisengagedinasectorwhereforeign
investmentupto100%ispermittedunderautomaticroute.
4.Pricing: FDIbywayof capital contributionorbywayof acquisition/ transferofprofit shares,wouldhaveto
bemorethan or equal to the fair priceasworked out
withinternationallyaccepted/adoptednorms aspermarketpracticeanda valuationcertificatetothateffect
shallbeissuedbytheCharteredAccountantorCostAccountantorbyanapprovedvaluerfromthepanelmaintainedbytheCentralGovernment.
Incaseof transferof capital contribution/profit share fromaresident toanon-resident, thetransfer shallbefor a consideration equal to or more
than the fair price of capital contribution / profit share of an LLP. Further, in case of transfer of capital contribution / profit share from
a non-resident to resident, the transfer shall be for a consideration which is less than or equal to the fair price of the capital
contribution / profit share of an LLP.
5. Mode of payment : Payment shall be made:
(i) by way of inward remittance through banking channels; or
(ii) by debit to NRE / FCNR(B) account of the person concerned, with an AD - I bank in accordance with Foreign Exchange
Management (Deposit) Regulations, 2016, as amended from time to time.
6. Reporting : (i) Reporting of investment in LLPs and disinvestment/transfer of capital contribution or profit shares between a
resident and a non-resident may be made in a manner as prescribed by RBI.
(ii) All LLPs having received FDI in previous year(s) including the current year, shall submit to RBI, by 15th day of July of each
year, a report titled 'Annual Return on Foreign Liabilities and Assets' as specified by RBI.
Funding Limits of FLCs
As per circular dated March 02, 2017, RBI had advised banks that FLCs and rural branches can avail funding support from the
Financial Inclusion Fund (FIF) for the financial literacy camps to the extent of 60% of the expenditure of the camp subject to a
maximum of Rs.15,000/- per camp.
On a review, the FIF Advisory Board has revised (on 13.07.17) the funding support available to banks to the extent of 60% of the
expenditure of the camp subject to a maximum of Rs.5,000/- per camp
Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 :RBI on 04.02.16, issued following
clarifications: A. Export and import of Indian currency and currency notes
a) Any person resident in India,
i. may take outside India (other than to Nepal and Bhutan) currency notes of Govt.
of India and RBI notes up to an amount not exceeding Rs.25,000.
ii. may take or send outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.
iii. 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 Govt. of India and RBI notes up to an amount of Rs.25,000.
b) Any person resident outside India, not being a citizen of Pakistan or Bangladesh, and visiting India,
i. may take outside India currency notes of Govt. of India and RBI notes up to an
amount not exceeding Rs.25,000 per person
ii. may bring into India currency notes of Govt. of India and RBI 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,
i. may send into India without limit foreign exchange in any form other than currency
notes, bank notes and travelers cheques;
ii. may bring into India from any place outside India without limit foreign exchange
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 and Import of currency to or from Nepal and Bhutan A person may
i. take or send out of India to Nepal or Bhutan, currency notes of Govt. of India and
RBI 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 RBI notes of denomination Rs.500/- and/or Rs.1000/- up to a limit of Rs.25,000/- ;
ii. bring into India from Nepal or Bhutan, currency notes of Govt. of India and RBI notes (other than notes of denominations
of above Rs.100 in either case) ;
iii. 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.
D. 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.
INDIAN PAR TY FROM MAKING DI R EC T INVESTMENT PROHIBITED *EXTANT GUIDELINES: At present, there is no
restriction on an Indian party with regard to the countries, where it can make Overseas Direct Investment.
*REVISED GUYIDELINES: In order to align the instructions with the objectives of Financial Action Task Force (FATF), the Reserve
Bank on January 25, 2017, on a review, has decided to prohibit an Indian party from making direct investment in an overseas entity
(set up or acquired abroad directly as Joint Venture/Wholly Owned Subsidiary (JV/ WOS) or indirectly as step down subsidiary
located in the countries identified by the FATF as “non co-operative countries and territories”.
TRANSFER OR ISSUE OF ANY FOREIGN SECURITY AMENDED :The Reserve Bank on Jan. 17, 2016 has decided to make the following
amendments in the Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004: ‘Indian Party shall
make no direct investment in an overseas entity [set up or acquired abroad directly as JV/WOS or indirectly as Step Down
Subsidiary] located in the countries identified by the Financial Action Task Force (FATF) as “non co-operative countries and
territories” as per list available on FATF website or as notified by the RBI of India from time to time.’
TRANSFER OR ISSUE OF SECURITY BY A PERSON RESIDENT OUTSIDE INDIA AMENDED :The Reserve Bank on January 10, 2017 has
made the following amendments in the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside
India) Regulations, 2000. In the amended version, the following new regulation has been inserted:
Issue of Convertible Notes by Start-up Companies:
* A person resident outside India (other than an individual who is citizen of Pakistan or Bangladesh or an entity which is
registered / incorporated in Pakistan or Bangladesh), may purchase convertible notes issued by an Indian start-up company for
an amount of twenty five lakh rupees or more in a single tranche.
Explanation: For the purpose of this Regulation, a ‘start-up company’ means a private company incorporated under the Companies
Act and recognised by the Deptt. of Industrial Policy and Promotion, Ministry of Commerce and Industry.
a) A start-up company engaged in a sector where foreign investment requires Government approval may issue convertible notes to
a non-resident only with approval of the Government.
b) A start-up company issuing convertible notes to a person resident outside India shall receive the amount of consideration by
inward remittance through banking channels or by debit to the NRE / FCNR (B) / Escrow account maintained by the person
concerned in accordance with the Foreign ExchangeManagement (Deposit) Regulations, 2016.
e
c) Provided that an escrow account for the above purpose shall be closed immediately after the requirements are completed or
within a period of six months, whichever is earlier. However, in no case continuance of such escrow account shall be permitted
beyond a period of six months.
d) NRIs may acquire convertible notes on non-repatriation basis in accordance with the Principal Regulations.
A person resident outside India may acquire or transfer, by way of sale, convertible notes, from or to, a person resident in or outside
India, provided the transfer takes place in accordance with the pricing guidelines as prescribed by RBI
Prior approval from the Government shall be obtained for such transfers in case the startup company is engaged in a sector
which requires Government approval.
e) The start-up company issuing convertible notes shall be required to furnish reports as prescribed by Reserve Bank.
CONVERTIBLE NOTES: Convertible Note means an instrument issued by a Start-up Co evidencing receipt of money initially as debt
which is repayable at the option of the holder or which is convertible into such number of equity share of such Start-up Co’s within
a period not exceeding 5 years from the date of issue of the convertible note upon occurrence of specified events as per the other
terms and conditions agreed to and indicated in the instrument.
Evidence of Import under Import Data Processing and Monitoring System (IDPMS)
Extant guidelines of RBI outline the procedure, mode/manner of payment for imports and submission of related returns. According
to this procedure, Bill of Entry (BoE) data is received in IDPMS from Customs Department for EDI ports and from NSDL for SEZ on
daily basis. BoE data for non-EDI ports are entered by AD Category – I bank of the importer on receipt of BoE (importer’s copy) and
then the bank uploads the data in IDPMS through “Manual BOE reporting” process. In order to enhance ease of doing business and
reduce transaction costs, RBI decided (Jan 12) to discontinue submission of hardcopy of Evidence of Import documents i.e. BoE,
with effect from December 01, 2016, as it is available in IDPMS. The revised procedures are as set out below:
i. AD Category – I bank will enter BoE details (BoE number, port code and date) as received from the importer and download the
BoE message data from “BOE Master” in IDPMS. Thereafter, match and settle the BoE data with Outward Remittance Message
(ORM) associated with the payment for import as per the message format “BOE Settlement” in IDPMS. Multiple ORMs can be
settled against single BoE and also multiple BoE(s) can be settled against one ORM.
ii. In respect of imports on ‘Delivery against Acceptance’ basis, on request of importer, AD Category – I bank shall verify the
evidence of import from IDPMS at the time of effecting remittance of import bill.
iii. On settlement of ORM with evidence of import, AD Category – I bank shall in all cases issue an acknowledgement slip to the
importer containing the following particulars:
1. importer’s full name and address with code number ;
2. number and date of BoE and the amount of import; and
a recap advice on number and amount of BoE and ORM not settled for the importer.
iv. The importer needs to preserve the printed ‘Importer copy’ of BoE as evidence of import and acknowledgement slip for future
use.
The extant instructions and guidelines for Evidence of Import in Lieu of Bill of Entry will apply mutatis mutandis. The evidence of
import in lieu of BoE in permitted/ approved conditions will be created and uploaded by AD Category – I bank of the importer in the
form of BoE data as per message format “Manual BOE reporting” in IDPMS.
Follow-up for Evidence of Import : AD Category – I banks shall continue to follow up for outward remittance made for import (i.e.
unsettled ORM) in terms of extant guidelines and instructions on the subject. In cases where relevant evidence of import data is not
available in IDPMS on due dates against the ORM, AD Category – I bank shall follow up with the importer for submission of
documentary evidence of import. Similarly, if BoE data is not settled against ORM within the prescribed period AD Category – I banks
shall follow up with the importer in terms of extant instructions.
Verification and Preservation: Internal inspectors and IS auditors (including external auditors appointed by AD Category – I bank)
should carry out verification and IS audit and assurance of the “BOE Settlement” process in IDPMS. Data and process followed by AD
Category – I bank for “BOE Settlement” should be preserved in terms of the guidelines under Cyber Security Framework in the bank.
However, in respect of cases which are under investigation by investigating agencies, the data, process and/or documents may be
destroyed only after obtaining clearance from the investigating agency concerned.
Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of exporters, reporting of
advance remittance for exports and migration of old XOS data To simplify the procedure for filing returns on a single platform
and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16) with EDPMS, in operation
since March 1, 2014.Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of
exporters, reporting of advance remittance for exports and migration of old XOS data To simplify the procedure for filing
returns on a single platform and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16)
with EDPMS, in operation since March 1, 2014.
a) Caution / De-caution Listing of Exporters : AD banks can access the updated list of caution listed exporters through EDPMS
on daily basis. Criteria for cautioning / de-cautioning in EDPMS are as under:
i. The exporters would be caution listed if any shipping bill against them remains open for more than two years (from
date of shipment) in EDPMS. If bills are realised and closed or extension for realisation is granted, the exporter will
e
c) Provided that an escrow account for the above purpose shall be closed immediately after the requirements are completed or
within a period of six months, whichever is earlier. However, in no case continuance of such escrow account shall be permitted
beyond a period of six months.
d) NRIs may acquire convertible notes on non-repatriation basis in accordance with the Principal Regulations.
A person resident outside India may acquire or transfer, by way of sale, convertible notes, from or to, a person resident in or outside
India, provided the transfer takes place in accordance with the pricing guidelines as prescribed by RBI
Prior approval from the Government shall be obtained for such transfers in case the startup company is engaged in a sector
which requires Government approval.
e) The start-up company issuing convertible notes shall be required to furnish reports as prescribed by Reserve Bank.
CONVERTIBLE NOTES: Convertible Note means an instrument issued by a Start-up Co evidencing receipt of money initially as debt
which is repayable at the option of the holder or which is convertible into such number of equity share of such Start-up Co’s within
a period not exceeding 5 years from the date of issue of the convertible note upon occurrence of specified events as per the other
terms and conditions agreed to and indicated in the instrument.
Evidence of Import under Import Data Processing and Monitoring System (IDPMS)
Extant guidelines of RBI outline the procedure, mode/manner of payment for imports and submission of related returns. According
to this procedure, Bill of Entry (BoE) data is received in IDPMS from Customs Department for EDI ports and from NSDL for SEZ on
daily basis. BoE data for non-EDI ports are entered by AD Category – I bank of the importer on receipt of BoE (importer’s copy) and
then the bank uploads the data in IDPMS through “Manual BOE reporting” process. In order to enhance ease of doing business and
reduce transaction costs, RBI decided (Jan 12) to discontinue submission of hardcopy of Evidence of Import documents i.e. BoE,
with effect from December 01, 2016, as it is available in IDPMS. The revised procedures are as set out below:
i. AD Category – I bank will enter BoE details (BoE number, port code and date) as received from the importer and download the
BoE message data from “BOE Master” in IDPMS. Thereafter, match and settle the BoE data with Outward Remittance Message
(ORM) associated with the payment for import as per the message format “BOE Settlement” in IDPMS. Multiple ORMs can be
settled against single BoE and also multiple BoE(s) can be settled against one ORM.
ii. In respect of imports on ‘Delivery against Acceptance’ basis, on request of importer, AD Category – I bank shall verify the
evidence of import from IDPMS at the time of effecting remittance of import bill.
iii. On settlement of ORM with evidence of import, AD Category – I bank shall in all cases issue an acknowledgement slip to the
importer containing the following particulars:
1. importer’s full name and address with code number ;
2. number and date of BoE and the amount of import; and
a recap advice on number and amount of BoE and ORM not settled for the importer.
iv. The importer needs to preserve the printed ‘Importer copy’ of BoE as evidence of import and acknowledgement slip for future
use.
The extant instructions and guidelines for Evidence of Import in Lieu of Bill of Entry will apply mutatis mutandis. The evidence of
import in lieu of BoE in permitted/ approved conditions will be created and uploaded by AD Category – I bank of the importer in the
form of BoE data as per message format “Manual BOE reporting” in IDPMS.
Follow-up for Evidence of Import : AD Category – I banks shall continue to follow up for outward remittance made for import (i.e.
unsettled ORM) in terms of extant guidelines and instructions on the subject. In cases where relevant evidence of import data is not
available in IDPMS on due dates against the ORM, AD Category – I bank shall follow up with the importer for submission of
documentary evidence of import. Similarly, if BoE data is not settled against ORM within the prescribed period AD Category – I banks
shall follow up with the importer in terms of extant instructions.
Verification and Preservation: Internal inspectors and IS auditors (including external auditors appointed by AD Category – I bank)
should carry out verification and IS audit and assurance of the “BOE Settlement” process in IDPMS. Data and process followed by AD
Category – I bank for “BOE Settlement” should be preserved in terms of the guidelines under Cyber Security Framework in the bank.
However, in respect of cases which are under investigation by investigating agencies, the data, process and/or documents may be
destroyed only after obtaining clearance from the investigating agency concerned.
Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of exporters, reporting of
advance remittance for exports and migration of old XOS data To simplify the procedure for filing returns on a single platform
and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16) with EDPMS, in operation
since March 1, 2014.Export Data Processing and Monitoring System (EDPMS) – Additional modules for caution listing of
exporters, reporting of advance remittance for exports and migration of old XOS data To simplify the procedure for filing
returns on a single platform and for better monitoring, RBI decided (26.05.16) to integrate the following returns (wef 15.06.16)
with EDPMS, in operation since March 1, 2014.
a) Caution / De-caution Listing of Exporters : AD banks can access the updated list of caution listed exporters through EDPMS
on daily basis. Criteria for cautioning / de-cautioning in EDPMS are as under:
i. The exporters would be caution listed if any shipping bill against them remains open for more than two years (from
date of shipment) in EDPMS. If bills are realised and closed or extension for realisation is granted, the exporter will
Compiled by Sanjay Kumar Trivedy, ChiefManager, Canara Bank, Shrigonda,Ahmed Nagar, Maharashtra 54 | P a g e
automatically be de-caution listed.
ii. The exporters can also be caution listed on the recommendation of AD banks. RBI will caution / de-caution the
exporters in such cases.
b) Reporting of Advance Remittance for Exports: RBI decided to capture the details of advance remittances received for
exports in EDPMS. Banks will have to report all the inward remittances including advance as well as old outstanding inward
remittances received for export of goods / software to EDPMS. The quarterly return presently being submitted by banks for
delay in utilization of advances received for export has been discontinued.
c) Export Outstanding Statement (XOS): With effect from March 01, 2014, details of all export outstanding bills can be obtained
from the EDPMS. AD banks were required to report the old outstanding bills prior to Mar 01, 2014 in XOS on half yearly basis as
at the end of June and December every year. To reduce the reporting burden of AD Banks, RBI decided to migrate the XOS data
reported by the AD banks for HY ended Dec 2015 onwards to EDPMS and discontinue separate reporting of XOS for the
subsequent periods. AD banks should mark off / close the XOS data pertaining to pre March 01, 2014 as and when amount has
been realised.
PURCHASE AND SALE OF SECURITIES :With a view to providing flexibility in regard to the manner in which non-convertible
debentures/bonds issued by Indian companies can be acquired by Foreign Portfolio Investors (FPIs), the RBI on Dec. 28, 2016 has
decided to allow them to transact in such instruments either directly or in any manner as per the prevalent / approved market
practice.
FRA AND IRS WITHDRAWAL OF FORTNIGHTLY RETURN :In a step towards rationalisation of returns, the Reserve Bank has advised
banks that the requirement to submit fortnightly return on the Forward Rate Agreement (FRA) and Interest Rate Swap (IRS) was
withdrawn with immediate effect.
Accordingly, banks need not send the hard copy of the return to the Reserve Bank. The existing procedure for reporting Overthe-
Counter (OTC), Foreign Exchange and Interest Rate Derivative transactions to the trade repository hosted by Clearing Corporation of
India Ltd (CCIL) shall continue.
MULTILATERAL AND REGIONAL FI INVESTORS
In order to provide more choices of investors to Indian entities issuing Rupee denominated bonds abroad, the Reserve Bank has
permitted multilateral and regional financial institutions (FIs) where India is a member country, to invest in Rupee denominated
bonds.
EXCHANGE TRADED CURRENCY DERIVATIVES (ETCD)
With a view to enabling additional hedging products for Non Resident Indians (NRIs) to hedge their investments in India so that
they can hedge the currency risk arising out of their investments in India, the Reserve Bank has permitted them to access the ETCD
market.
The following are the terms and conditions to be followed:
NRIs shall designate an authorised dealer (AD) category-I bank for the purpose of monitoring and reporting their combined
positions in the Over-the-counter (OTC) and ETCD segments;
NRIs may take positions in the currency futures / exchange traded options market to hedge the currency risk on the market value
of their permissible (under FEMA, 1999) Rupee investments in debt and equity and dividend due and balances held in NRE
accounts;
The exchange / clearing corporation will provide details of all transactions of the NRI to the designated bank;
The designated bank will consolidate the positions of the NRI on the exchanges as well as the OTC derivative contracts booked
with them and with other AD banks. The designated bank shall monitor the aggregate positions and ensure the existence of
underlying Rupee currency risk and bring transgressions, if any, to the notice of the Reserve Bank of India/Securities and Exchange
Board of India (SEBI);
The onus of ensuring the existence of the underlying exposure shall rest with the NRI concerned. If the magnitude of exposure
through the hedge transactions exceeds the magnitude of underlying exposure, the concerned NRI shall be liable to such penal
action as may be taken by Reserve Bank of India under the Foreign Exchange Management Act (FEMA), 1999.
Currently, NRIs are permitted to hedge their Rupee currency risk through OTC transactions with AD banks.
STATUS HOLDERS: Government of India vide amendment has notified that the Status Holders shall be entitled to export freely
exportable items on free of cost basis for export promotion subject to an annual limit of Rs. 10 lakh or 2% of average annual export
realization during preceding three licensing years whichever is lower.
ACQUISITION & TRANSFER OF IMMOVABLE PROPERTY:
A) PERSON RESIDENT IN INDIA: The RBI has advised AD banks that acquisition or transfer of any immovable property outside
India by a person resident in India would require prior approval of Reserve Bank with few exceptions like, Property held outside
India by a foreign citizen resident in India; Property acquired by a person on or before July 8, 1947 and held with the permission
of Reserve Bank; Property acquired by way of gift or inheritance from specified persons; Property purchased out of funds held
in Resident Foreign Currency (RFC) account held in accordance with the Foreign Exchange Management (Foreign Currency
Accounts by a person resident in India) Regulations, 2015; etc.
B) INDIAN COMPANY: An Indian company having overseas offices may acquire immovable property outside India for its business
and residential purposes provided total remittances do not exceed the following limits prescribed for initial and recurring
expenses, respectively: a)15 per cent of the average annual sales / income or turnover of the Indian entity during the last two
financial years or up to 25 per cent of the net worth, whichever is higher;
b) 10 per cent of the average annual sales/ income or turnover during the last two financial years.
POS S E S S ION & RE TENT ION OF FOR E IGNCURRENCY:
A) The RBI has advised AD Banks on the limits for possession or retention of foreign currency or foreign coins, as under:
a) Possession without limit of foreign currency and coins by an authorised person within the scope of his authority;
b) Possession without limit of foreign coins by any person;
c) 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 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
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
Represents unspent amount of foreign exchange acquired by him from an authorised person for travel abroad.
B) RBI also advised that a person resident in India but not permanently resident therein may possess without limit foreign currency in
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.
SETTLEMENT OF EXPORT / IMPORT TRANSACTIONS IN CURRENCIES NOT HAVING A DIRECT EXCHANGE RATE: To further
liberalize the procedure and facilitate settlement of export and import transactions where the invoicing is in a freely convertible
currency, RBI has decided that AD Category-I banks may permit settlement of such export and import transactions (excluding those
put through the ACU mechanism), subject to conditions as under:
a) Exporter / Importer shall be a customer of the AD Bank.
b) Signed contract / invoice is in a freely convertible currency.
c) The beneficiary is willing to receive the payment in the currency of beneficiary instead of the original (freely convertible)
currency of the invoice / contract / Letter of Credit as full and final settlement.
d) AD bank is satisfied with the bonafides of the transactions;
e) The counterparty to the exporter / importer of the AD bank is not from a country or jurisdiction in the updated FATF Public
Statement on High Risk & Non Co-operative Jurisdictions on which FATF has called for counter measures.
EXTERNAL COMMERCIAL BORROWINGS (ECB):
RBI has decided to make the following changes in the ECB framework:
a) Companies in Infrastructure sector, Non-Banking Financial Companies Infrastructure Finance Companies (NBFC-IFCs), NBFCs-
Asset Finance Companies (NBFC-AFCs), Holding Companies and Core Investment Companies (CICs) will also be eligible to raise ECB
under Track I of the framework with minimum average maturity period of 5 years, subject to 100 per cent hedging.
b) Companies in Infrastructure sector shall utilize the ECB proceeds raised under Track I for the end uses permitted for this Track.
NBFCs-IFCs and NBFCs-AFCs will, however, be allowed to raise ECB only for financing infrastructure.
i)Holding Companies and CICs shall use ECB proceeds only for on-lending to infrastructure Special Purpose Vehicles (SPVs).
ii)The individual limit of borrowing under the automatic route for aforesaid companies shall be as applicable to the companies in
the Infrastructure sector (currently USD 750 million).
iii)Companies in infrastructure sector, Holding Companies and CICs will continue to have the facility of raising ECB under Track II of
the ECB framework subject to the prescribed conditionalities.
On the ECB framework, RBI has further clarified that:
a) The designated AD Category-I banks may, under the powers delegated to them, allow refinancing of ECBs raised under the
previous ECB framework, provided the refinancing is at lower all-in-cost, the borrower is eligible to raise ECB under the extant
ECB framework and residual maturity is not reduced (i.e. it is either maintained or elongated).
b) ECB framework is not applicable in respect of the investment in Non-convertible Debentures (NCDs) in India made by Registered
Foreign Portfolio Investors (RFPIs).
c) Minimum average maturity of Foreign Currency Convertible Bonds (FCCBs)/ Foreign Currency Exchangeable Bonds (FCEBs) is 5
years irrespective of the amount of borrowing. Further, the call and put option, if any, for FCCBs shall not be exercisable prior to
5 years.
FOREIGN DIRECT INVESTMENT (FDI) IN INDIA
The extant FDI policy for Insurance sector has since been reviewed by the Govt. of India and enhanced the limit of foreign
e
investment in insurance sector from 26 to 49 percent under the automatic route covering Insurance Co, Insurance Brokers, Third
Party Administrators’ Surveyors and Loss Assessors.
ESTABLISHMENT IN INDIA OF A BRANCH OFFICE OR LIAISON OFFICE OR A PROJECT OFFICE
A) Prohibition against opening a branch office or a liaison office or a project office or any other place of business in India: No
person resident outside India shall without prior approval of the RBI open in India a branch office or a liaison office or a project office
or any other place of business by whatever name called except as laid down in these Regulations:
Provided that
a) A banking company resident outside India; b) An insurance company resident outside India; c) A company resident outside India
shall not require any approval under these Regulations to establish a branch office in the Special Economic Zones to undertake
manufacturing and service activities, subject to the conditions that such branch offices are functioning in those sectors where 100%
FDI is permitted.
B) Approval for opening a branch office or a liaison office or a project office or any other place of business in India:
a) A person resident outside India can establish a branch office or a liaison office in India provided it meets the following:
i) For Branch Office - a profit making track record during the immediately preceding five financial years in the home country and
net worth of not less than USD 100,000 or its equivalent.
ii) For Liaison Office - a profit making track record during the immediately preceding three financial years in the home country and
net worth of not less than USD 50,000 or its equivalent.
GRANT OF EDF WAIVER FOR EXPORT OF GOODS:
* Government of India vide amendment has notified that the Status Holders shall be entitled to export freely exportable items on
free of cost basis for export promotion subject to an annual limit of Rs.10 lakh or 2% of average annual export realization during
preceding three licensing years whichever is lower.
* The Reserve Bank on August 25, 2016 clarified that in cases where a derivative contract is restructured, the mark-to-market value
of the contract on the date of restructuring should be cash settled.
* The Reserve Bank has permitted banks to raise funds through issuance of rupee denominated bonds overseas for the various
specified purposes.
* The Reserve Bank on April 21, 2016 has decided, in consultation with the Government of India, to allow foreign investment in the
units of Investment Vehicles registered and regulated by SEBI or any other competent authority.
* The Reserve Bank on October 6, 2016 advised all category-I authorised dealer (AD) banks that Import Data Processing and
Monitoring System (IDPMS) would go live with effect from October 10, 2016, used for reporting and monitoring of the import
transactions.
ECBs BY STARTUPS:
* With a view to boosting innovation and promoting job creation, the Reserve Bank of India has permitted Startups to raise external
commercial borrowings (ECBs) of up to $3 million in a financial year under ECB framework
The minimum average maturity period will be 3 years. Lender / investor shall be a resident of a country who is either a member of
Financial Action Task Force (FATF) or a member of a FATF-Style Regional Bodies. The borrowing should be denominated in any freely
convertible currency or in Indian Rupees (INR) or a combination thereof. In case of borrowing in INR, the non-resident lender, should
mobilise INR through swaps/outright sale undertaken through an AD Category-I bank in India.
* Startups raising ECB in foreign currency, whether having natural hedge or not, are exposed to currency risk due to exchange rate
movements and hence are advised to ensure that they have an appropriate risk management policy to manage potential risk arising
out of ECBs.
FOREIGN INVESTMENT IN OTHER FINANCIAL SERVICES:
The Reserve Bank has advised to allow foreign investment up to 100 per cent under the automatic route in ‘Other Financial Services’.
Other Financial Services will include activities which are regulated by any financial sector regulator such as RBI, SEBI, IRDAI, PFRDA,
NHB or any other financial sector regulator as may be notified by the Govt. Such foreign investment shall be subject to
conditionalities, including minimum capitalisation norms, as specified by the concerned Regulator/ Government Agency.
FOREIGN VENTURE CAPITAL INVESTOR (FVCI):
In order to further liberalise and rationalise the investment regime for Foreign Venture Capital Investor (FVCI), any FVCI which has
obtained registration under the SEBI Regulations, 2000, will not require any approval from RBI and can invest in Equity or equity
linked instrument or debt instrument issued by an Indian ‘start-up’ irrespective of the sector in which the start-up is engaged. A
startup will mean an entity (private limited company or a registered partnership firm or a limited liability partnership) incorporated
or registered in India not prior to five years, with an annual turnover not exceeding INR 25 crores in any preceding financial year,
working towards innovation, development, deployment or commercialization of new products, processes or services driven by
technology or intellectual property & satisfying stipulated conditions.
Foreign Exchange Management (FC Accounts by persons Resident in India) Regulations 2015
Further to extant guidelines, RBI decided (23.06.16) that an Indian startup, having an overseas subsidiary, may open a FC
account with a bank outside India for crediting to the account, the foreign exchange earnings out of exports/sales made. The
balances held in such accounts, to the extent they represent exports from India, shall be repatriated to India within prescribed
period for realization of exports. In addition, payments received in foreign exchange by an Indian startup arising out of sales/
export made by the startup or its overseas subsidiaries will be a permissible credit to EEFC account maintained in India by the
startup.
Further, any insurance/ reinsurance company registered with the Insurance Regulatory and Development Authority of India
(IRDAI) may open a foreign currency account with a bank outside India to carry out insurance/ reinsurance business.
Memorandum of Procedure for channeling transactions through Asian Clearing Union (ACU)
In terms of Memorandum (17.02.10), the minimum amounts and the multiples in which RBI receives and pays U.S. Dollar/
Euro was fixed as $ 25000/ Euro 25000 and $ 1000/ Euro 1000, respectively. RBI decided (26.05.16) to revise the minimum
amount and the multiples in which RBI will receive and pay for the purpose of funding or for repatriating the excess liquidity in
the ACU Dollar and ACU Euro accounts to $ 500 / Euro 500.
Information on Investment in Commercial Papers and Unhedged Foreign Currency Exposures of the Borrowers to Credit
Information Companies On recommendations of Committee to Recommend Data Format for Furnishing of Credit Information
to Credit Information Companies (Chairman: Shri Aditya Puri) RBI decided (23.06.16) to capture the information on CPs and
UFCE: Commercial papers : The information on CPs issued by the companies shall be reported on a monthly basis to all the
four credit information companies (CICs) by the bank which has been designated as the Issuing and Payment Agent (IPA) for
the particular CP issue. If there are multiple IPAs for a single CP issue, they shall report to the CICs, the details pertaining to the
portion of the issue which is with them. The IPA shall also report any default in the redemption of the relevant CP issue. It is
clarified that the investing credit institutions need not report the information on CPs to the CICs.
Unhedged Foreign Currency Exposures : The information regarding UFCE of individual borrowers shall be reported on a
quarterly basis to all the four CICs by the lending bank (in the case of solo lenders) /consortium leader (in the case of
consortium arrangements)/largest lender (in the case of multiple lending arrangements). This information shall be reported in
the Credit Facility (CR) Segment of Commercial Data format. The reporting requirements is effective from July 1, 2016 i.e. from
the credit information reports showing the position for the month of June 2016.
Investment in CICs :RBI advised (19.05.2016) that investment directly or indirectly by any person, whether resident or
otherwise, in a CIC, shall not exceed 10% of the equity capital of the investee company. RBI may consider allowing higher FDI
limits to entities which have an established track record of running a Credit Information Bureau in a well regulated
environment:
1. up to 49%, if their ownership is not well diversified (i.e. one or more shareholders each hold more than 10% of voting
rights in the company)
2. up to 100%, if their ownership is well diversified or
If their ownership is not well diversified, at least 50% of the directors of the investee CIC in India, are Indian nationals/ Non-
Resident Indians/ Persons of Indian Origin subject to the condition that one third of the directors are Indian nationals resident
in India.
3. The investor company should preferably be a listed company on a recognised stock exchange. FII/FPI investment
would be permitted subject to the conditions that:
1. A single entity should directly or indirectly hold below 10% equity;
2. Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement;
3. FIIs/FPIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.
4. In case the investor in a Credit Information Company in India is a wholly owned subsidiary (directly or indirectly) of an
investment holding company, the conditions as at (2) and (3) above will be applied to the operating group company that is
engaged in credit information business and has undertaken to provide technical know-how to the Credit Information Company
in India.
Rupee Drawing Arrangement - Submission of statement/returns under XBRL : In terms of extant guidelines, AD Cat- I banks
were required to submit statement E on total remittances received every quarter. RBI advised (19.05.16) the AD Cat-1 banks to
report the above statement in eXtensible Business Reporting Language (XBRL) system from the quarter ending June 2016.
Opening and Maintenance of Rupee / Foreign Currency Vostro Accounts of Non-Resident Exchange Houses: Rupee Drawing
Arrangement : The extant RBI guidelines relating to above aspects regarding collateral cover under Speed Remittance
Procedure (SRP), stipulate that the Exchange Houses (EH) shall keep with the AD Category - I bank a cash deposit in any
convertible foreign currency equivalent to 3 days’ estimated drawings on which market related interest rate may be paid.
The EH can also keep the said collateral in the form of guarantees from a bank of international repute. The adequacy of
collateral should be reviewed by the AD Category - I bank at regular intervals. These requirements were relaxed and the
collateral requirement was brought down to one day’s estimated drawings.
To further streamline the remittance arrangement under SRP and make remittances cost-effective, RBI decided (28.04.16) to
do away with the mandated requirement of maintenance of collateral or cash deposits by the Exchange Houses with whom
the banks have entered into the Rupee Drawing Arrangement. The AD banks are free to determine the collateral requirement,
if any, based on factors, such as, whether the remittances are pre-funded, the track record of the Exchange House, whether
the remittances are effected on gross (real-time) or net (file transfer) basis, etc., and may frame their own policy in this
regard.
Investment Advisory Services by Banks Investment Advisory Services (IAS) is defined and regulated by SEBI under the SEBI
(Investment Advisors) Regulations, 2013, and entities offering these activities need to be registered with SEBI. In view of the
same RBI advised (21.04.16) that henceforth, banks cannot undertake IAS departmentally. Accordingly, banks desirous of
offering these services may do so either through a separate subsidiary set up for the purpose or one of the existing
subsidiaries after ensuring that there is an arm’s length relationship between bank and the subsidiary. The sponsor bank
should obtain specific prior approval of Department of Banking Regulation before offering IAS through an existing subsidiary
or for setting up a subsidiary for this purpose. (Setting up of any subsidiary will, as hitherto, be subject to the extant guidelines
on para-banking activities of banks).
All bank sponsored subsidiaries offering IAS will be registered with SEBI and regulated as per the SEBI (Investment Advisors)
Regulations, 2013, and shall adhere to all relevant SEBI rules and regulations in this regard.IAS provided by the bank
sponsored subsidiaries should only be for the products and services in which banks are permitted to deal in as per Banking
Regulation Act, 1949.
Foreign Investment in units issued by Real Estate Investment Trusts, Infrastructure Investment Trusts and Alternative
Investment Funds RBI decided (21.04.16) to allow foreign investment in the units of Investment Vehicles registered and
regulated by SEBI or any other competent authority which include:
Real Estate Investment Trusts registered /regulated under SEBI Regulations 2014;
Infrastructure Investment Trusts registered / regulated under SEBI Regulations;
Alternative Investment Funds registered / regulated under SEBI Regulations 2012. The salient features of the new
investment regime are:
1. A person resident outside India including a Registered Foreign Portfolio Investor (RFPI) and a Non-Resident Indian
(NRI) may invest in units of Investment Vehicles.
2. The payment shall be made by an inward remittance through the normal banking channel including by debit to an
NRE or an FCNR account.
3. Purchased units may be sold/transferred/redeemed as per RBI/SEBI regulations.
4. Downstream investment by an Investment Vehicle shall be regarded as foreign investment if Sponsor or Manager or
Investment Manager is not Indian ‘owned.
5. If sponsors or managers or investment managers are in a form other than companies or LLPs, SEBI shall determine
whether it is foreign owned and controlled.
6. Downstream investment by an Investment Vehicle that is reckoned as foreign investment shall have to conform to
the sectoral caps and conditions / restrictions.
7. Downstream investment in an LLP by an Investment Vehicle that is reckoned as foreign investment has to conform to
the provisions of Schedule 9 of the Principal Regulations as well as the extant FDI policy for foreign investment in
LLPs.
8. An Alternative Investment Fund Category III with foreign investment shall make portfolio investment in only those
securities in which a RFPI is allowed to invest.
9. The Investment Vehicle receiving foreign investment shall be required to make such report and in such format to RBI
or SEBI as prescribed by them from time to time. RBI has clarified that foreign investment in units of REITs registered
and regulated under the SEBI (REITs) Regulations, 2014 will not be included in “real estate business” for the purpose
of these regulations.
Acceptance of deposits by Indian companies from a person resident outside India for nomination as Director
In terms RBI notification dated 01.04.16, no person resident in India shall accept any deposit from, or make any deposit with, a
person resident outside India. U/s 160 of Companies Act, 2013, a person who intends to nominate himself or any other person
as a director in an Indian company is to place a deposit with that company. RBI clarified (13.04.16) that keeping deposits with
an Indian company by persons resident outside India, as per Section 160 of the Companies Act, 2013, is a current account
(payment) transaction and does not require any approval from RBI. All refunds of such deposits, arising in the event of
selection of the person as director or getting more than 25% votes, shall be treated similarly.
Grant of EDFWaiver for Export of Goods Free of Cost :
In terms of circular dated 26.04.2003, GR waive to exporters for export of goods free of cost was enabled. The facility was
extended to the Status through Foreign Trade Policy 2004-2009, in terms of which Status Holders were entitled to export
freely exportable items on free of cost basis for export promotion subject to an annual limit of Rs 10 lakh or 2% of average
annual export realization during preceding three licensing years, whichever is higher.
Government of India on June 4, 2015, notified that the Status Holders shall be entitled to export freely exportable items on
free of cost basis for export promotion subject to an annual limit of Rs 10 lakh or 2% of average annual export realization
during preceding three licensing years whichever is lower. AD Category – I banks can consider requests from Status Holder
exporters for grant of Export Declaration Form (EDF) waiver, for export of goods free of cost based on the revised norm.
Issuance of Rupee denominated bonds overseas – Multilateral and Regional Financial Institutions as Investors
Further to extent guidelines on External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by
Authorised Dealers and Persons other than ADs, about the criteria of recognized investors in the Rupee denominated bonds
issued overseas, in order to provide more choices of investors to Indian entities issuing Rupee denominated bonds abroad, RBI
decided on Feb 16, 2017, to also permit Multilateral and Regional Financial Institutions where India is a member country, to
invest in these Rupee denominated bonds.
Forward Rate Agreement (FRA) and Interest Rate Swap (IRS)
As per extent notification, banks are to submit a fortnightly return on FRA/IRS to Monetary Policy Department with a copy to
various RBI departments. In a further step towards rationalization of returns, RBI decided (Feb 16) to withdraw the said return
with immediate effect. The banks have been advised to stop sending the hardcopy of the said return to RBI. The existing
procedure for reporting OTC Foreign exchange and Interest Rate Derivative transactions to the trade repository hosted by CCIL
shall continue.
Prohibition on Indian Party from making direct investment in countries identified by the Financial Action Task Force (FATF)
as “Non Co- operative countries and territories” :At present, there is no restriction on an Indian Party with regard to the
countries, where it can undertake Overseas Direct Investment. In order to align, the instructions with the objectives of FATF.
On a review RBI decided (Jan 25) to prohibit an Indian Party from making direct investment in an overseas entity (set up or
acquired abroad directly as JV/ WOS or indirectly as step down subsidiary) located in the countries identified by the FATF as
“non co-operative countries and territories” as per list available on FATF website www.fatf-gafi.org or as notified by RBI.
Prohibition on Indian Party from making direct investment in countries identified by the Financial Action Task Force (FATF)
as “Non Co-operative countries and territories” At present, there is no restriction on an Indian Party with regard to the
countries, where it can undertake Overseas Direct Investment. In order to align, the instructions with the objectives of FATF, on
a review, RBI decided (Jan 25) to prohibit an Indian Party from making direct investment in an overseas entity (set up or
acquired abroad directly as JV/ WOS or indirectly as step down subsidiary) located in the countries identified by the FATF as
“non co-operative countries and territories” as per list available on FATF or as notified by the RBI from time to time.
Post Office (Postal Orders/Money Orders), 2015 :Further to notification dated December 29, 2015 RBI, on 04.02.16, granted
general permission to any person to buy foreign exchange from any post office in India in the form of postal order or money
order.
PARTICIPATION IN CURRENCY FUTURESMARKET :RBI has decided to permit stand-alone Primary Dealers (PDs) to deal in currency
futures contracts traded on recognized exchanges subject to the following conditions:
Eligibility:
a) Exposure to currency futures will be treated as a non- core activity for PDs and only PDs having a minimum Net Owned Fund of
Rs.250 crore or any amount as prescribed for undertaking diversified activity will be allowed to participate in currency futures.
b)As prescribed in the existing guidelines on capital adequacy standards, the capital charge for market risk for the non-core activities
(including currency futures) which are expected to consume capital should not be more than 20 per cent of the NOF as per last
audited balance sheet.
Position Limits: PDs are permitted to take long and short positions in the currency futures market with or without having an
underlying exposure subject to the position limits specified by the exchanges. However, the aggregate gross open positions across
all contracts in all the stock exchanges in the respective currency pairs shall not exceed the limits prescribed by RBI
Purchase and sale of securities other than shares or convertible debentures of an Indian company by a person resident outside
India In terms of notification dated 03.05.2000, eligible investors, viz., SEBI registered Foreign Institutional Investors (FIIs), Qualified
Foreign Investors (QFIs), registered Foreign Portfolio Investors (FPIs) and long term investors registered with SEBI, may purchase
securities indicated in Schedule 5 on repatriation basis and subject to such terms and conditions as may be specified by the SEBI and
RBI from time to time. With a view to providing flexibility in regard to the manner in which non-convertible debentures/bonds issued
by Indian companies can be acquired by FPIs, RBI decided (Dec 27, 2016) to allow them to transact in such instruments either directly
or in any manner as per the prevalent/approved market practice.
Exchange facility to foreign citizens RBI decided (25.11.16) that foreign citizens (i.e. foreign passport holders) can exchange forex for
Indian currency notes up to a limit of Rs. 5000 per week till Dec 15, 2016 subject to the tenderer submitting a self-declaration that
this facility has not been availed of during the week. The Authorized Person (APs) shall keep the passport details and the above
declaration on record. APs may also ensure that the total value of such exchange to Indian currency notes does not exceed Rs.5000/-
during the week.
Investment by FPI in corporate debt securities : As per extant guidelines, Foreign Portfolio Investors (FPI) can invest only in listed or
to-be-listed debt securities. Investment in unlisted debt securities is permitted only in case of infrastructure sector companies. RBI
decided (17.11.16) to expand the investment basket of eligible instruments for investment by FPIs under the corporate bond route
to include the following:
i. Unlisted corporate debt securities in the form of non-convertible debentures/bonds issued by public or private companies
subject to minimum residual maturity of 3 years and end use-restriction on investment in real estate business, capital
market and purchase of land.
ii. Securitised debt instruments as under:
1. any instrument issued by a special purpose vehicle set up for securitisation where banks, FIs or NBFCs are originators;
and/or
2. any certificate or instrument issued/listed as per SEBI Regulations on Public Offer and Listing of Securitised Debt
Instruments, 2008.
Investment by FPIs in the unlisted corporate debt securities and securitised debt instruments shall not exceed Rs. 35,000 crore
within the extant investment limits prescribed for corporate bond from time to time which currently is Rs. 2,44,323 crore. Further,
investment by FPIs in securitised debt instruments shall not be subject to the minimum 3-year residual maturity requirement. The
revised norms will be reviewed after one year.
Investment by Foreign Portfolio Investors (FPI) in Government Securities : The limits for investment by foreign portfolio investors
(FPI) in Government securities were last increased in terms of the Medium Term Framework MTF) announced on 29.03.16.
Accordingly, the limits for the next half year are proposed to be increased in two tranches, each of Rs. 100 billion from October 3,
2016 and January 2, 2017 respectively. The limits for State Development Loans (SDLs) are proposed to be increased in two tranches,
each of Rs.35 billion, from October 3, 2016 and January 2, 2017 respectively. 4. The revised limits over the next two quarters would
be as under (INR billion):
Central Govt. All FPIs Addl for Total State Total
Securities Long term Loans
Existing Limit 1440 560 2000 140 2140
w.e.f. 03.10.16 1480 620 2100 175 2275
w.e.f. 02.01.17 1520 680 2200 210 2410
The operational guidelines relating to allocation and monitoring of limits will be issued
by the Securities and Exchange Board of India (SEBI).
Foreign investment in Other Financial Services
At present foreign investment up to 100%, under automatic route, in Non-Banking Finance Companies (NBFCs) engaged in the 18
activities listed therein is allowed. RBI decided (20.10.16) to allow foreign investment up to 100% under the automatic route in
‘Other Financial Services’ which activities regulated by any financial sector regulator viz. RBI, SEBI, IRDAI, PFRDA, NHB or any other
financial sector regulator. Such investment shall be subject to conditionalities, specified by the concerned Regulator/ Government
Agency. Other salient features of the revised regulatory framework are as under:
1. In activities which are not regulated or partly regulated by any financial sector regulator or where there is lack of clarity
regarding regulatory oversight, foreign investment will be allowed up to 100% under the Govt. approval route.
Foreign investment in an activity specifically regulated by an Act, will be restricted to foreign investment levels/limits, if any,
specified in that Act.
Quarterly reporting system- Foreign branches/ subsidiaries/ joint ventures/ associates of Indian banks
As per RBI Circular dated March 24, 2008 foreign branches/ subsidiaries/ joint ventures/ associates of Indian banks were
required to submit quarterly return for reporting of profit and asset size of overseas operations of the bank. On a review RBI
decided (30.06.16) to discontinue the submission of the said return w.e.f. June 30, 2016.
Settlement System under Asian Clearing Union (ACU)
As per extant RBI directions dated 26.12.2008, the participants in ACU mechanism have the option to settle their transactions
either in ‘ACU Dollar’ or in ‘ACU Euro’. The ‘ACU Dollar’ and ‘ACU Euro’ is equivalent in value to one US Dollar and one Euro,
respectively. RBI advised banks (30.06.16) that the payment channel for processing ‘ACU Euro’ transactions is under review.
Hence, it has become necessary to temporarily suspend operations in ‘ACU Euro’ w.e.f July 01, 2016. Accordingly, all eligible
current account transactions including trade transactions in ‘Euro’ are permitted to be settled outside the ACU mechanism until
further notice.
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