FED User


FED Mailbox

Authorised Dealer Category - I banks are advised to route, from February 01, 2015, all applications, received from their constituents for External Commercial Borrowings (ECBs)/Trade Credit, along with supporting documents only through the Application Tracking System (ATS) of the Reserve Bank of India. The ATS can be accessed from the home page of the Reserve Bank’s website (http://rbi.org.in)

Advance payment against Exports and Merchanting Trade
Clarification on investments by Foreign Venture Capital Investors (FVCI)
Investment by FIIs in IPO / pre-IPO issues of companies engaged in real estate development
RBI revises Internal Control Guidelines for Forex Business
Trade
Overseas Direct Investments
Email for submission of details related to trade credits
eBIZ – A G2B Platform for the Government of India – Establishment of Centralised Connectivity
Developments in Foreign Exchange Management 2014-15
Imports - Allowing import of precious/ semi- precious stones upto 180 days credit term
Export of Goods – Long Term Export Advances
Supreme Court’s interim Order dated September 14, 2015 on establishment of Liaison Offices in India by foreign law firms
A. Discontinuation of Form A4
B. Transfer between NRO accounts
Revised ECB framework
Clarification on LRS-remittance by sole proprietor under LRS
External Commercial Borrowings (ECB) by NBFCs under Track III of the revised ECB framework
NRO Account – Joint Holding with Residents
Special Non-Resident Rupee Account
Sending of currencies by NRIs/PIOs through post to their relatives in India on the advice from the foreign branches of Indian banks
Special Non-Resident Rupee (SNRR) accounts for Trade transactions
Clarification on acknowledgment of Form FC-TRS
Clarification on export through Post/Courier
Discontinuation of hard copies of R-Returns
Clarification on Discontinuation of hard copies of R-Returns
EDPMS – Responsibility of remittance receiving and converting bank
Outstanding entries in Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS)
EDPMS- Clarification on closure of export bills
EDPMS–Closure of entries
Monthly Statements indicating the details of remittances made by NRIs/PIOs Foreign nationals out of the NRO accounts
Routing of overseas investment cases through Nodal Office / IBD
Daily Reporting of transactions under LRS
Liberalised Remittance Scheme (LRS)-Daily Reporting of Transaction
Advance Remittances made by Tour Operators/Travel Agents

19-Apr-2007

Advance payment against Exports and Merchanting Trade

Banks may refer to our Circular DBOD No. Dir.BC.72/13.03.00/2006-07 dated April 3, 2007 on issuance of bank guarantees against export advances. It has now been brought to our notice that several such guarantees have been issued on behalf of exporters having poor track records towards huge amounts, not commensurate with the business of the company, received as advance for exports from India and/ or merchanting trade in low interest rate currencies.

From the information available it has been observed that the banks and exporters are following the modus operandi as set out below in one form or the other: a) Indian exporters receive export advance, denominated in JPY, against bank guarantees issued by a domestic bank (the guarantees are issued even before the receipt of the export advance, with a proviso that the guarantees would become operational only upon receipt of the full advance). The rupee proceeds of the advance are parked with the bank as a term deposit. The bank issues guarantees to the overseas importer with the deposit amount as margin for the guarantees. The guarantees have been issued at par values, against the discounted values of the export advances. The bank facilitated booking of forward contracts by the exporter to cover the USD - Yen risk fully while keeping the INR-USD leg partially open. However, there is no past performance or underlying export transactions for booking, rebooking and cancellation of forward contracts. Besides, the export transaction does not really take place.

b) Indian exporters receive export advance in JPY against bank guarantee for facilitating Merchanting Trade transactions. The advance thus received is kept in term deposit for a period of one year i.e. the period of the guarantee, implying that there is no intention to export. The exporter then books forward cover purportedly against the import leg of the merchanting trade; but the real intention is to hedge the currency risk of the export advance.

c) Overseas companies / Group of companies enter into a Master Agreements with their subsidiaries in India and send remittances in the form of export advances for merchanting trade transactions with their global subsidiaries. The advance thus received is parked as deposits with banks. Thereafter, the company appoints sub-agents, who are basically small time exporters with neither the track record nor the ability to execute such large merchanting trade transactions. Banks then extend non-fund based credit facilities to the sub-agents merely on the basis of the guarantees, backed by the deposits, of the Indian subsidiaries, which received the export advance. There seems to be no independent assessment of the credit risk and the bonafides of such transactions. Banks allow the Indian sub agents to book forward contracts to cover the advances without any crystallized exposures and / or past performances, in contravention of the FEMA regulations.

The companies tend to split the export advances across different banks and centres, with the intention to avoid being noticed by the regulatory and other authorities. It is also reported that the Bunge Group of companies, Cargill International, Rochester Trade Links DMCC, Dubai Exchange Centre LCC, etc. are parking such advances with their Indian subsidiaries and their sub-agents.

Normally, export advance is used to finance the manufacturing / sourcing of items to be exported. In case of merchanting trade transactions, the manufacturing / sourcing of items is taking place only overseas. Parking of export advances as deposits with the banks, as collateral against the guarantees, clearly indicates that there is no intention of exporting or executing the merchanting trade transactions.

It is thus clear that such remittances are in the nature of carry trades for placement of deposits in the garb of export advances with the prime intention of earning higher interest rate available on rupees funds with the overseas importer being fully protected against exchange risk. Banks are, therefore, advised to be careful while extending guarantees against export advances so as to ensure that no violation of FEMA regulations takes place and banks are not exposed to various risks. It will be important for the banks to carry out due diligence and verify the track record of such exporters to assess their ability to execute such export orders.

The Reserve Bank is reviewing such transactions, on a case to-case basis, and would be taking appropriate actions for contravention of FEMA and other regulations.

(The original clarification/instruction was placed in DBOD mailbox on April 19, 2007 and is now being placed in FED mailbox for wider dissemination.)

30-Dec-2010
Clarification on investments by Foreign Venture Capital Investors (FVCI)

Q 1. Can a Foreign Venture Capital Investor (FVCI) purchase equity shares of an unlisted company from an existing shareholder?

Ans. (a) FEMA Regulations – In terms of Schedule 6 to Notification No. FEMA 20/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended from time to time (hereinafter referred to as Notification No. FEMA 20/2000-RB), a SEBI registered FVCI is permitted to purchase equity / equity linked instruments/ debt/ debt instruments, debentures of an Indian Venture Capital Undertaking (IVCU) or of a Venture Capital Fund (VCF) through Initial Public Offer or Private Placement or in Units of schemes/ funds set up by a VCF.

(b) As per the extant FEMA Regulations, an IVCU means a company incorporated in India whose shares are not listed on a recognized stock exchange in India and which is not engaged in an activity under the negative list specified by SEBI. Therefore, FVCI can purchase equity shares of an unlisted company by way of fresh issue only. As per the extant FEMA Regulations, in terms of Schedule 6 to Notification No. FEMA 20/2000-RB, FVCIs cannot acquire shares of IVCUs through private arrangements with the existing shareholders of the Indian company as such transactions would tantamount to transfer of shares from a resident to a non-resident and the same would be deemed as Foreign Direct Investment (FDI) transaction under the existing FDI scheme and therefore, would have to comply with the pricing and the other guidelines as stipulated in Notification No. FEMA 20/2000-RB and to be reported in form FC-TRS to the Reserve Bank. Therefore, a FVCI can acquire shares of an unlisted Indian company by way of private arrangement only under the FDI scheme (Schedule 1 to Notification No. FEMA 20/2000-RB) and not under the FVCI route (Schedule 6 of Notification No. FEMA 20/2000-RB).

Q 2. Would transfer of shares of a listed company / unlisted company from a non-resident to an FVCI be allowed? If so, can the FVCI make payment to the non-resident outside India that is, without any inward remittance from abroad through the normal banking channel or out of funds held in foreign currency account or Special Non-resident Rupee account maintained by the FVCI?

Ans. As explained in the answer to Question 1 above, such transaction would not fall within the scope of Schedule 6 to Notification No.FEMA 20/2000-RB. However, FVCI, also being a non-resident entity may acquire shares of listed / unlisted Indian company by transfer of shares by way of sale from other non-resident entity under the FDI scheme for foreign investment which should be in compliance with Regulations 9 and 10 of Notification No. FEMA 20/2000-RB. Further, as this investment by the FVCI would be different from investment under Schedule 6 to Notification No. FEMA 20/2000-RB, routing money through the foreign currency account or Special Non-Resident Rupee account of the FVCI may not be required as the transfer of shares between the FVCI and the non-resident entity would take place outside the country.

Q 3. Is FVCI permitted to purchase shares from the secondary market?

Ans. No, FVCI is not permitted to purchase shares from the secondary market except as provided under Chapter III, Section II (ii) of SEBI (FVCI) Regulations, 2000, whereby a SEBI registered FVCI may invest not more than 33 per cent of its investible funds by way of :-

(a) subscription to initial public offer of a IVCU whose shares are proposed to be listed;
(b) Debt or debt instrument of an IVCU in which the FVCI has already made an investment by way of equity;
(c) Preferential allotment of equity shares of a listed company subject to lock-in period of one year; and
(d) The equity shares or equity linked instruments of a financially weak company or a sick industrial company whose shares are listed.

Q.4. Schedule 6 to Notification No. FEMA 20/2000-RB provides that the FVCI may acquire by purchase or otherwise or sell shares / convertible debentures / units or any other investment held by it in the IVCUs or VCFs or schemes / funds set up by the VCFs at a price that is acceptable to the buyer and the seller / issuer. In view of the same, would the pricing guidelines under aforementioned Notification be applicable to FVCI?

Ans. The pricing guidelines for transfer / issue of shares and convertible debentures to non-residents are stipulated primarily in terms of Regulation 10 (A) and (B) of Notification No. FEMA 20/2000-RB dated May 3, 2000 and paragraph 5 of Schedule 1 to the Notification, as amended from time to time, which are primarily meant for FDI transactions under the Notification. However, in terms of Schedule 6 of the Notification, the FVCI may acquire by purchase or otherwise or sell shares / convertible debentures / units or any other investment held by it in the IVCUs or VCFs or schemes / funds set up by the VCFs at a price that is acceptable to the buyer and the seller / issuer. The pricing guidelines applicable for FDI transactions under the Notification are, therefore, not applicable to FVCI investment made in terms of Schedule 6 of the Notification.

30-Dec-2010

Investment by FIIs in IPO / pre-IPO issues of companies engaged
in real estate development

The Foreign Exchange Department, Reserve Bank of India has been receiving references from Authorised Dealer banks/ companies engaged in real estate development seeking clarification regarding proposed investments in the Initial Public Offering (IPO) / pre-IPO issues by Foreign Institutional Investors (FIIs).

2. In this regard it is clarified as under:

(i) Foreign Institutional Investors (FIIs) are permitted to purchase shares or convertible debentures of an Indian company under the Portfolio Investment Scheme, subject to the terms and conditions of Schedule 2 to the Notification No. FEMA 20/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended from time to time.

(ii) In terms of FEMA Notification No. 1/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Permissible Capital Account Transactions) Regulation, 2000, foreign investment in India, in any form, is prohibited in "real estate business". For the purpose of this regulation, ‘real estate business’ shall not include development of townships, construction of residential /commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships.

(iii) However, it is clarified that investment by FIIs in pre-IPO offering would be treated on par with Foreign direct Investment (FDI) in terms of lock-in period as applicable to FDI in construction development projects including housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships. This would be without prejudice to any other law.

The corresponding provisions of (ii) and (iii) above, find place in para 5.23 – Development of Townships, Housing, Built-up infrastructure and Construction development activities, of Chapter 5 of the Consolidated FDI Policy Circular No. 1 dated March 31, 2010 notified by the Department of Industrial Policy and Promotion, Government of India.

(iv) Therefore, SEBI registered FIIs can invest in IPO / pre-IPO issues of companies in construction and development projects other than real estate (as defined in FEMA Notification No. 1/2000-RB dated May 3, 2000) subject to the terms and conditions stipulated in Schedule 2 to FEMA Notification No. 20/2000-RB dated May 3, 2000, as amended from time to time, provided that the FII investment in pre-IPO offerings are treated at par with the FDI in terms of the lock-in period as applicable to FDI in construction development projects including housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships.

03-Feb-2011

RBI revises Internal Control Guidelines for Forex Business

The Reserve Bank of India has today issued the revised Guidelines for “Internal Control over Foreign Exchange Business”.

First framed in 1981, the Internal Control Guidelines (ICG) were revised in December, 1996. The need to revise them once again was felt in the context of rapid pace of evolution of the forex markets in India and abroad as also, developments in information technology and its progressive usage in banks. A Group comprising officials from the Reserve Bank of India, Foreign Exchange Dealers’ Association of India, Fixed Income Money Market and Derivatives Association of India, State Bank of India, ICICI Bank and Standard Chartered Bank looked into the updation of the Internal Control Guidelines to make them contemporary and benchmark document.

The document is designed to provide a scale of standards for the banks in the conduct of their foreign exchange business and is available on our website (www.rbi.org.in).

R. R. Sinha
Deputy General Manager

Press Release : 2010-2011/1116

17-Nov-2011

Trade

Sl. No. Query Our comments
1 Whether balances lying in the EEFC account of a parent company resident in India can be transferred to the EEFC account of their subsidiary company also resident in India for meeting import payment obligations? No
2 Whether EEFC balances can be used for payment to a supplier of goods in India? Yes. EEFC balances can be used for payment to suppliers of goods in India subject to permissible debits in terms of Schedule to A.P. (DIR Series) Circular No. 15 dated November 30, 2006.
3 Whether AD can approve trade credit for import of non-capital goods beyond the stipulated period of one year if the reasons submitted by the importer are convincing? No. AD has to refer the case to local office of RBI for permission.
4 An importer wants to purchase goods from an overseas supplier. However, the overseas supplier arranges for supply of goods from an Indian manufacturer company. In this case, there is no Bill of Entry. Whether, AD can allow outward remittance to the overseas supplier as per the agreement? Such cases are decided by RBI on a case-to-case basis.
5 When export bills are very old and overseas buyer is not traceable, how to write off these export bills? The write-off of export bills can be permitted by the Authorised Dealer / Regional Office of the Reserve Bank depending on the case.
6 Whether export bills for less than USD 25,000 are to be reported in XOS? Outstanding export bills up to USD 25,000 or its equivalent are not required to be reported in the XOS.
7 After partial realization of a bill above USD 25000, when the outstanding is reduced to below USD 25000, should it be reported in the XOS ? Yes. Even if the original invoice value is above USD 25000/- and if after partial realization, the outstanding is reduced to below USD 25000/-the same still needs to be reported as outstanding in the XOS.
8 What is the procedure and formalities of Import /Export? The customer may first go through Foreign Trade Policy issued by the Government of India and procedure for obtaining IE Code from DGFT. He / she may also refer to RBI's current circulars on Export of Goods and Services and Import of Goods and Services. Thereafter, he may approach any Authorised Dealer bank for his requirement.
9 What is the Exemption limit from declaration of Export Software Service/Softex Form? The upper exemption limit from declaration of export of software is USD 25000/-. Export of services is allowed without furnishing any declaration. However, exporters shall be liable to realise and repatriate the export proceeds to India.
10 How to get GR form/Sl. No ? An exporter may download it from the web-site www.fema.rbi.org.in. An A.P. (DIR Series) circular No.60 dated March 26, 2009 has also been issued in this regard
11 Whether GR/SDF/PP/SOFTEX in respect of export of goods and software of less than USD 25,000 or its equivalent value is required to submit? It has been decided to waive the submission of Declaration in Form GR/SDF/PP/SOFTEX in respect of export of goods and software of value not exceeding USD 25,000 or its equivalent {c.f. A.P.(DIR Series) Circular No.61 dated January 31, 2004}.
12 Whether exports to Nepal/ Bhutan are to be reported in R-Return? All the exports to Nepal / Bhutan, either in INR or foreign currency, are required to be reported in R-Return.
13 Exporters are facing problems in payments to /receipts from Iranunder ACU mechanism. As per instructions contained in A.P. (DIR Series) Circular No. 31 dated December 27, 2010, it has been decided, in view of the difficulties being experienced by importers / exporters in payments to /receipts from Iran, that all eligible current account transactions including trade transactions with Iran should be settled in any permitted currency outside the ACU mechanism, until further notice.
 
18-Mar-2013

Overseas Direct Investments

Ques 1: How can the old transactions of ODI where APRs have not been submitted for previous years be entered in the ODI Package?

Response : If old transaction is related to APR, APR may be submitted online by ensuring that the figures are in sync with the previous and ensuing year APRs. If the old transactions are related to ODI (Part II) it may be reported online irrespective of whether APRs are submitted or not.

Query 2: Can an AD submit an APR without receipt of share certificate and/or audited financials of the overseas entity? If the corporate were not willing to share the audited financial statements of their overseas entities how to ensure that the APRs are submitted based on audited financial statements?

Response: Submission of APR and receipt of share certificate are two different aspects. IP submitting APRs prior to March 28, 2012 were supposed to be on the basis of audited accounts only. IP desiring to submit the APRs on the basis of unaudited accounts may be guided by the instructions contained in A.P. (DIR Series) Circular No. 96 dated March 28, 2012.

Query 3: How can an AD be responsible for submission of APRs in respect of all overseas entities when an Indian Party has the option to use different ADs for different Overseas ventures?

Response: AD is not responsible for submission of APRs for the UINs for which they are not the designated AD. However the AD has to put in place a mechanism to monitor the submission of APR for the UINs for which they are the designated AD. To protect the interest of the ADs a revised Sec E & F has been introduced wherein the IP declares that all the APRs in respect of all other UINs are submitted to RBI.

Query 4: Can ODI form to have a declaration regarding submission of share certificate?

Response: ODI form is submitted at the time of transaction whereas time period available for submission of share certificate is 180 days hence it would not be proper to take the declaration in the ODI form.

Ans: Yes, a loan can be converted into equity and reported to RBI by a letter.

Query 5: Whether the amount of credit facility availed by the JV / WOS / SDS shall be reckoned for computation of financial commitment when the JV / WOS creates a charge on assets / pledges the shares of the SDS?

Response: A JV/ WOS/ SDS availing credit facility for itself by pledging the shares held by them in favor of overseas lender may not be reckoned for financial commitment.

 
19-Mar-2014

Email for submission of details related to trade credits

For submission of details has been changed from "deapdif@rbi.org.in" to deprditf@rbi.org.in.
(para 8 of A.P.(DIR Series) Circular No. 87 dated April 17, 2004/ paragraph (d) Part II of Master Circular No. 12/2013-14 dated July 01, 2013 on External Commercial Borrowings and Trade Credit )

02-Dec-2014

eBIZ – A G2B Platform for the Government of India – Establishment of Centralised Connectivity

FE.CO.FID.9148 / 10.02.036/2014-15

CMDs of all Authorised Dealer banks

Respected Madam / Dear Sir,

eBIZ – A G2B Platform for the Government of India – Establishment of Centralised Connectivity

Please refer to our letter FE.CO.FID. 4267/10.02.036/2014-15 dated September 9, 2014 addressed to your International Banking Departments / Foreign Exchange Departments wherein we had advised regarding the eBiz Project initiated by the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India and the routing of the forms ARF, FCTRS and FCGPR pertaining to the Reserve Bank through the eBIZ application (copy enclosed for ready reference). It was also conveyed that only one or two Nodal branch/branches of each bank will establish connectivity with the NIC Data Centre for the three RBI related services, viz., ARF, FC-GPR and FC-TRS. This Nodal branch would in turn connect to all the other branches for pushing / pulling the applications to/from their respective braches using its internal mechanisms.

2. We wish to bring to your notice that the Advance Remittance Form (ARF) module which intends to automate the reporting filed by a company receiving funds from an overseas investor to the Reserve Bank will be launched shortly. As already advised vide the afore-mentioned letter, you would be required to connect to the eBIZ website hosted at NIC Data centre. Therefore, you will be required to make arrangements to connect to the eBiz server thru Virtual Private Network (VPN) over the Internet. You may therefore, nominate nodal Officers who will be coordinating the business requirement and network connectivity with us. The names and contact details of these nodal Officers, including landline, mobile no. and email addresses may please be forwarded to us at the email address sabashaikh@rbi.org.in and vartulagrawal@rbi.org.in, positively by December 8, 2014.

Yours faithfully,

(C.D. Srinivasan)
Chief General Manager

Encl.: As above

12-Jan-2015

Annual Conference of Authorised Dealers 2014-15


Developments in Foreign Exchange Management 2014-15 Part I
Developments in Foreign Exchange Management 2014-15 Part II
25-May-2015

Imports - Allowing import of precious/ semi- precious stones upto 180 days credit term

Q : Whether the facility of Clean Credit [i.e. credit given by a foreign supplier to its Indian customer/ buyer, without any Letter of Credit (Suppliers’ Credit) / Letter of Undertaking (Buyers’ Credit) / Fixed Deposits from any Indian financial institution] for import of Rough, Cut and Polished Diamonds, permitted for a period not exceeding180 days from the date of shipment applicable in case of precious and semi-precious stones as well? (A. P. DIR Series Circular No.02 dated July 7, 2014).

A. Yes, Clean Credit [i.e. credit given by a foreign supplier to its Indian customer/ buyer, without any Letter of Credit (Suppliers’ Credit) / Letter of Undertaking (Buyers’ Credit) / Fixed Deposits from any Indian financial institution] for import of Rough, Cut and Polished Diamonds and precious/ semi-precious stones is permitted for a period not exceeding 180 days from the date of shipment.

05-Aug-2015

Export of Goods – Long Term Export Advances

Q : Whether entities which have come under adverse notice of Enforcement Directorate or any other regulatory agency are eligible to receive long term export advance pending the outcome of such investigations / adjudications/appeal (Para 2(c) of AP DIR Series Circular No. 132 dated May 21, 2014).

A. Yes, mere receipt of show cause notice by Enforcement Directorate or any of the law enforcing agencies does not disqualify any entity from availing long term export advance, if it is otherwise eligible for the same. AD banks can consider such proposals without prejudice to any action that may be taken by any such law enforcing agency in the matter. However, while approving the proposal, the AD banks should endorse a copy of the approval letter to the concerned agencies, without fail.

 
08-Oct-2015

Supreme Court’s interim Order dated September 14, 2015 on establishment of Liaison Offices in India by foreign law firms:

As per the interim Supreme Court order dated September 14, 2015, no permission shall be granted to any foreign law firm on or after the date of the said interim order, for establishing a Liaison Office in India. Foreign Law Firms which have been granted permission prior to the date of interim order for opening Liaison Offices in India may be allowed to continue provided such permission is still in force. No renewal of permission shall be granted by AD banks. Existing foreign law firms, which have been granted permission prior to the date of interim order, may not be advised by RBI/AD banks to close down their Liaison Office in India.

18-Nov-2015

A. Discontinuation of Form A4

We have received a query from Standard Chartered Bank asking whether there is a requirement of form A4 preparation for operations in the Non- resident accounts viz NRO, NRE and FCNR (B).

Reply: We have advised Standard Chartered that the requirement of preparation of form A4 may be discontinued.

The same may be noted by all Authorised Dealers.

B. Transfer between NRO accounts

Banks may refer to the response to question number 105 to the questionnaire on the AD Conference held on January 10, 2015 stating that transfers are not permitted between NRO accounts.

2. We have been receiving queries from AD Banks stating that the prohibition on transfers between two NRO accounts is giving rise to genuine difficulties as it may prohibit transfer which are otherwise permissible under Schedule 3 to Notification No. FEMA 5/2000-RB dated May 3, 2000, as amended from time to time.

3. In view of this, it is clarified that such restriction on transfers between NRO accounts will not apply to transfers which are otherwise as per the debits and credits to NRO account as laid down in Para 3 of Schedule 3 to FEMA 5.

4. We have also received queries about transfers between two NRO accounts maintained by the same person. It may be appreciated that the credits to an NRO account are limited to inward remittances and legitimate dues (as per Para 3 of Schedule 3 to FEMA 5). Therefore such transfers cannot be construed as an inward remittance and hence their credit to an NRO account would not be in compliance with the extant instructions as laid down in the Schedule ibid.

5. With regard to online transfers between NRO accounts, the AD Banks may put in place necessary safeguards to ensure that transactions in an NRO account are in compliance with the extant instructions.

10-Feb-2016

Revised ECB framework

a) Revised ECB framework – ECB loans contracted in the old ECB regime

All ECB loan agreements entered into prior to the date of the revised ECB framework coming into effect from December 02, 2015 may continue with the disbursement schedules post March 31, 2016, as already provided in the loan agreements without (requiring) further consent from the Reserve Bank or any AD bank.

b) Revised ECB framework – ECB by NBFCs

Extant ECB framework permits all NBFCs to raise only INR denominated ECB under track III for the following end uses: (i) On-lending to the infrastructure sector; (ii) providing hypothecated loans to domestic entities for acquisition of capital goods/equipment; and (iii) providing capital goods/equipment to domestic entities by way of lease and hire-purchases. The said end uses also include lending for the business purposes of purchasing tractors, commercial vehicles / construction equipment, auto / utility Vehicles.

13-April-2016

Clarification on LRS-remittance by sole proprietor under LRS

In terms of Schedule III of Foreign Exchange Management (Current Account Transaction) Rules, 2000, dated May 3, 2000, as amended from time to time, a resident individual can remit up to USD 250,000 per financial year for the purposes mentioned therein. In a sole proprietorship business, there is no legal distinction between the individual / owner and as such the owner of the business can remit USD up to the permissible limit under LRS. If a sole proprietorship firm intends to remit the money under LRS by debiting its current account then the eligibility of the proprietor in his individual capacity has to be reckoned. Hence, if an individual in his own capacity remits USD 250,000 in a financial year under LRS, he cannot remit another USD 250,000 in the capacity of owner of the sole proprietorship business as there is no legal distinction.

 


01-Aug-2016

External Commercial Borrowings (ECB) by NBFCs under Track III of the revised ECB framework

Reserve Bank has received references regarding permissible end use of ECB proceeds raised under Track III (Rupee denominated) of the revised ECB framework. It is clarified that NBFCs raising ECB under Track III can use ECB proceeds for on-lending for any activities including infrastructure as permitted by the regulatory department concerned of RBI, subject to the condition that such activities are not in the negative end-use list for Track III (i.e., real estate activities, investing in capital market, using the proceeds for equity investment domestically, on-lending to other entities with any of the said objectives and purchase of land).

04-Aug-2016

NRO Account – Joint Holding with Residents

The Chief Executive
Foreign Exchange Dealers Association of India
17th floor, Maker Tower F
Cuffe Parade
Mumbai 400 005

Dear Sir

NRO Account – Joint Holding with Residents

With reference to the above subject, we advise that joint holder facility with residents in NRO accounts shall be provided on ‘former or survivor’ basis as stipulated at paragraph 7 of Schedule 3 of Notification No. FEMA 5(R) dated April 1, 2016. All fresh NRO accounts should be opened with this mandate only. As regard existing accounts where ‘either or survivor’ facility was provided, no fresh operations shall be allowed in the account before changing the mandate to ‘former or survivor’ basis.

2. You may advise your constituents accordingly and ensure compliance.

19-Sep-2016

Special Non-Resident Rupee Account

Q. Can the Special Non-Resident Rupee Account (SNRR account) be used as an eligible mode of payment for FDI transactions, under FEMA 20 [Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 as amended from time to time]?

Ans. No, an SNRR account is not an eligible mode of payment for FDI transactions, under FEMA 20. However, a rupee mechanism in the form of an escrow account is (already) available for FDI transactions.

26-Dec-2016

Sending of currencies by NRIs/PIOs through post to their relatives in India on the advice from the foreign branches of Indian banks

Reserve Bank has been receiving applications that NRIs/PIOs are sending currencies through post to their relatives in India on the advice from the foreign branches of Indian banks. In this regard, it is clarified that as per Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 dated December 29, 2015, a person resident outside India is not permitted to send currency through postal channels. Therefore, banks may issue suitable instructions to their branches outside India not to advise people to send currencies through postal channels.

20-Jan-2017

Special Non-Resident Rupee (SNRR) accounts for Trade transactions

Attention is invited to Question no. 196 of the Question and Answers of Annual Conference of the Authorized Dealers held in February 2016 regarding usage of NRO accounts for putting through trade transactions.

2. It is clarified that a person resident outside India may open an SNRR account only in cases where the underlying transaction is permitted and the FEMA provisions do not prescribe any specific manner of routing the payment and receipt for such transaction. Since manner of receipt and payment for import and export transactions has been specifically stipulated, an SNRR account will not be permissible for routing export/import transactions under FEMA, 1999.

 
31-Mar-2017

Clarification on acknowledgment of Form FC-TRS

Attention of all Authorised Dealer banks is invited to the provisions of para 10 of Schedule 1 to Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 dated May 3, 2000 and as amended from time to time.

The acknowledgement of form FC-TRS for the transfer of shares of an Indian company from resident to non-resident or vice- versa is within the delegated powers of Authorised Dealer banks. In cases, where there is transfer of shares from non-resident to resident, RBI acknowledgement letter for the original non-resident investment reported in Form FC-GPR by the investee company, is a necessary document for filing of FC-TRS.

In cases, where the AD banks do not receive the acknowledgement letter with form FC-TRS and are unable to ascertain the original non-resident investment, they may take the confirmation of the acknowledgement of Form FC-GPR from the respective Regional Offices of RBI.

12-July-2017

Clarification on export through Post/Courier

For export through post/ courier, the exporter has to submit form EDF with the AD Bank concerned and AD bank has to follow the process given at para B.3 of Master Direction on Export of Goods and Services. Banks may arrange to disseminate this information to all its branches/ officials of relevant work area. This information is specially circulated as it has come to the notice of RBI that ground level staff of certain banks are not aware of the process.

18-July-2017

Discontinuation of hard copies of R-Returns

The present system of dual reporting of cross-border forex transactions by the banks for compilation of BoP statistics has been reviewed. Present system involves- (i) Fortnightly R-Return in hard copy form through Regional Offices of FED (ROs) and (ii) Transaction wise reporting in Soft copy form through Foreign Exchange Transactions Electronic Reporting System (FETERS) on a fortnightly basis.

2. The New FETERS gives options to the AD banks to view the data-files submitted by them during the previous two fortnights, facilitates data error checking via validator template and also provides an option to correct the erroneous purpose codes which may have been reported earlier.

3. In light of the new system, it has been decided to discontinue the practice of receiving hard copies of R-Returns from AD banks from the 1st fortnight of August 2017 (i.e. transactions which take place from August 01, 2017). Thus, transactions taking place from this date onwards have to be reported by the AD banks only through FETERS.

4. AD banks are requested to take necessary action accordingly.

19-July-2017

Clarification on Discontinuation of hard copies of R-Returns

Please refer to the mail box message dated July 18, 2017 regarding discontinuance of the practice of receiving hard copies of R-Returns from Authorised Dealer banks from the 1st fortnight of August 2017 (i.e. transactions which take place from August 01, 2017). With this change in the reporting, the last sentence appearing under the heading "Reporting to RBI", i.e. "The electronic reporting system is in addition to the submission of R-Return cover page" under the Guidelines for Submission of Data: Foreign Exchange Transactions Electronic Reporting System (FETERS) issued vide A.P. (DIR Series) Circular No. 84 dated February 29, 2012, may be treated as deleted.

17-Oct-2017

EDPMS – Responsibility of remittance receiving and converting bank

"As you are aware that in cases of export realisation (including cases of export through market place like Amazon and/or cases where payment is received through Paypal, PayU or similar mechanism), it is the responsibility of remittance receiving and converting bank to, inter alia, provide, while transferring funds to exporters account, full details of overseas remitter (name, address, country), purpose of remittance, currency and amount of remittance, name and account of the beneficiary to the beneficiary’s bank, so as to help the latter in closing entries in EDPMS.

2. It has been brought to the notice of RBI, by banks as well as exporter’s associations that remittance receiving and converting banks, while transferring funds to beneficiary’s account are not providing aforesaid information to the beneficiary bank because of which export entries are lying outstanding in EDPMS. This has also led to caution listing of exporters. RBI has learnt that many a time beneficiary and/or its bank is advised by the remittance receiving and converting bank to get in touch with Amazon/Paypal, etc to get requisite information.

3. Against this background a reference is invited to Question No.4 of FAQs issued vide Circular No16/2016 dated October 17, 2016 by FEDAI on reporting under EDPMs and is clarified in no uncertain terms that remittance receiving and converting bank has to provide aforesaid information to beneficiary’s bank in all cases of export realisation (including past transactions)

4. Authorised Dealers Category I (AD Cat. I) banks may please note that their inability to provide information and/or resultant difficulty if any to the exporters would be viewed very seriously by RBI. AD Cat. I banks may please find the letter dated October 13, 2017 issued in this regard here.”

14-Nov-2017

Outstanding entries in Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS)

FE.CO.Trade (EXP) No.4206/05.31.042/2017-18

November 10, 2017

All Authorised Dealer Category I Banks

Madam / Dear Sir

Outstanding entries in Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS)

As you are aware RBI has been advising all Authorised Dealer Category I banks (AD banks) to focus on clearing the pendency in EDPMS and IDPMS. Apart from communicating with AD banks through written communication, communication through emails, communication via EDPMS / IDPMS application site, RBI is having one to one meetings at periodic intervals with AD banks against whom outstanding entries are found to be higher. To help banks in clearing the data in EDPMS, RBI has also made available e-BRC data to AD banks for the years 2014, 2015 and 2016 as available with DGFT.

2. You are also aware that the direct fallout of outstanding entries in EDPMS is automatic caution listing of exporters, if any shipping bill remains outstanding beyond two years. Not only this, because of outstanding entries in EDPMS and IDPMS, the correct position of export / import is not getting available. Pendency in EDPMS has forced RBI to grant extension from the restrictions due to caution listing. As per latest communication, RBI has given time upto December 31, 2017 to AD banks to clear the outstanding in EDPMS and has advised that during interim period, exporters concerned would not be treated as caution listed.

3. With all efforts made and time given, RBI was expecting that pendency in EDPMS and IDPMS would come down substantially. This has not happened and outstanding position in the applications is found to be alarming. As on November 08, 2017, around 13 percent of the total shipping bills are outstanding in EDPMS. Number wise it comes to around 1.6 mn. Not only this, the number of shipping bills which are more than 9 months old (normal period for export realization) comes to around 4.6 mn which is 23 percent of the total shipping bills. For imports, the number in IDPMS is equalling disturbing as more than 61 percent of this entries have been found to be outstanding (in number terms it is around 4 mn).

4. In view of the above, AD banks are again requested to put in sufficient efforts to close the entries in EDPMS and IDPMS without any further delay. AD banks may note that any case of inaction on their part would be viewed seriously and RBI would be constrained to take action against the erring banks including imposition of penalty under the provisions of FEMA 1999.

Yours faithfully

Rajeev Dwivedi
General Manager

16-Nov-2017

EDPMS- Clarification on closure of export bills

FE.CO.Trade (EXP) No.4334/05.31.042/2017-18

November 16, 2017

All Authorised Dealer Category I Banks

Madam / Dear Sir

EDPMS- Clarification on closure of export bills

While monitoring the progress made by AD banks in clearing pendency in EDPMS, it is observed by RBI that as on November 15, 2017, a total of 1.43 million entries are outstanding in EDPMS with shipping bill date beyond 2 years. This comes to 12.76 per cent of the total shipping bills. Number of shipping bills outstanding beyond 9 months comes to 4.6 million as on date, which is 22.68 per cent of the total number of shipping bills in EDPMS.

2. As the aforesaid position cannot be treated as satisfactory, we advise you to give due attention for clearance of pendency in EDPMS. Further, for the purpose of helping AD banks to clearing outstanding entries in EDPMS, following clarification are issued:-

a) Export payment through credit card: In cases where payment for export has been made through a credit card, certain information like remitter’s name, address, country, etc may not be available thus leading non-closure of Shipping Bills/Inward Remittance Message (IRM). In such cases of payment of export transactions through credit cards, AD bank may close the relevant entries by using the following information:

Fields In IRM Information to be used for settlement / closure of entries in EDPMS
Remitter Name As per Shipping bill/invoice
Remitter Address As per Shipping bill/invoice
Remitter Country As per Shipping bill/invoice
Remitter Bank Name NA
Remitter Bank Country XX
Swift Code SWIFT
Bank Remark CREDIT CARD PAYMENT

b) Involvement of two different currencies: As extant regulations permit raising of export invoices either in freely convertible currency or Indian rupees with condition that export proceeds have to be realized in freely convertible currency. It is clarified that export proceeds may be realized in any freely convertible currency which may be different from the currency mentioned in the shipping bill. In the EDPMS, the AD banks may use two fields for reporting the amount – one in realised currency and other in equivalent amount of declared currency in shipping bill (invoiced currency). For example, if the amount is declared in the shipping bill in USD but export realisation is in Euro, then the AD bank should lodge the bill in USD in their internal system based on export documents submitted by exporters and, at the time of realisation, the currency and amount should be reported in EURO while the invoiced amount should be reported in USD. At the same time, if the freight and insurance amount is paid in INR by the exporter itself, the same may be reported in EDPMS under the same logic. The extract of currency and amount of settlement (prn.xml) file as given below may be referred for closing the entries in EDPMS.

Field Name XML Field Name Description
Realized Currency Code realizedCurrencyCode Currency Code in which invoice amount has been realized by AD.
Realized FOB Amount in Realized Currency FOBAmt Actual FOB Amount in Realized Currency Code
Realized FOB Amount in Invoice Currency FOBAmtIC Equivalent FOB Amount in Invoice Currency Code
Realized Freight Amount in Realized Currency freightAmt Actual Freight Amount in Realized Currency Code
Realized Freight Amount in Invoice Currency freightAmtIC Equivalent Freight Amount in Invoice Currency Code
Realized Insurance Amount in Realized Currency insuranceAmt Actual Insurance Amount in Realized Currency Code
Realized Insurance Amount in Invoice Currency insuranceAmtIC Equivalent Insurance Amount in Invoice Currency Code

c) Tracking of cases referred to Directorate of Enforcement (DoE): AD banks are required to follow up with the exporters for submission of export documents for closing the entries in EDPMS. In case of non-submission of documents /non-cooperation by the errant exporters even after several follow up including sending of letters through registered post by AD, they may refer such cases to DoE. To track the cases reported to DoE, a suitable flag in EDPMS will be added shortly so that AD bank can mark the same in EDPMS.

Yours faithfully

Vivek Kumar
Assistant General Manager

18-Dec-2017

EDPMS–Closure of entries

As you are aware that RBI is continuously following up with AD banks for clearance of pendency in Export Data Processing and Monitoring System (EDPMS). During the course of discussion on various issues related to outstanding entries in EDPMS with select bankers and more recently with select exporters, RBI has come across following areas on which instructions / clarifications are required to be issued so as to help AD banks in closure of entries:

  1. Export realisation through entities like Paypal and Amazon;

  2. Export through FTWZ units;

  3. Export through courier ports.

2. Accordingly, the following instructions/clarifications are issued:

i. Export Payment through Paypal and Amazon: In cases of export realisation through market place like Amazon and/or cases where payment is received through Paypal, PayU or similar mechanism, if certain information regarding actual buyer’s name, address, country, etc. is not available, the AD banks who are maintaining the account of the exporters may use the following information in respect of relevant fields for generation of Inward Remittance Message (IRM )and close the entries in EDPMS provided they are otherwise satisfied with the bonafides of transactions and also they are sure that there is no KYC / AML concern:

Fields In IRM Information to be used for settlement / closure of entries in EDPMS
Remitter Name Name of remitter (Paypal / Amazon, etc as the case may be)
Remitter Address NA
Remitter Country NA
Remitter Bank Name NA
Remitter Bank Country XX
Swift Code SWIFT
Bank Remark Export payment realised through Paypal / Amazon, etc (as the case may be)

ii. Exports through FTWZ units: In case of export of goods held on behalf of the DTA unit by a Free Trade Warehouse Zone (FTWZ) unit, if the IE code (IEC) of latter was captured in the SEZ system, (and, accordingly, instead of actual exporter’s, the IEC of FTWZ unit is getting reflected in EDPMS) and where the export proceeds is realised by the actual exporter, AD banks may close the outstanding entries in EDPMS based on the name of actual exporter declared as a second party in the Shipping bill against the proceeds realised by the latter.

iii. Export through Courier Ports: In cases of export through Courier Port, where courier agency is filing shipping bills in bulk with the Express Cargo Clearance System (ECCS) of Customs through a simplified form called Courier Shipping Bill (CSB) (as the exports are neither captured in the Customs‘ centralised system (ICEGATE) nor manual bill of entry/EDF forms are generated at Customs level, no corresponding shipping bill entry gets added in the EDPMS but Inward Remittance Message gets added in EDPMS) the AD banks may close open IRM using the IRM adjustment/closure message by selecting indicator as export done through couriers based on submission of CSB by the exporter to AD banks.

AD banks may please find the letter dated December 14, 2017 issued in this regard ‘here’.

10-Jan-2018

Monthly Statements indicating the details of remittances made by NRIs/PIOs Foreign nationals out of the NRO accounts

In terms of Part VI of the Master Direction on Reporting dated January 01, 2016 as amended from time to time, with a view to having access to more real time data the AD - Category I banks are required to furnish the monthly statement on remittances made from NRO Accounts in the requisite format to General Manager-in-Charge, Foreign Exchange Department, Foreign Investments Division (NRFAD), Reserve Bank of India, Central Office Cell, Parliament Street, New Delhi 110 001 within 7 days of the end of the reporting month.

It has been observed that some of the AD Category I banks are forwarding the said statement to Foreign Investments Division (NRFAD), Reserve Bank of India, Central Office, Mumbai. It is therefore, reiterated that the statement may be sent to Foreign Exchange Department, Foreign Investments Division (NRFAD), Reserve Bank of India, Central Office Cell, Parliament Street, New Delhi (and not to Foreign Investments Division (NRFAD), Reserve Bank of India, Central Office, Mumbai).

22-Feb-2018

Routing of overseas investment cases through Nodal Office / IBD

As you are aware, reporting of transactions on the online ODI portal is being done through Nodal Office/IBD of the AD Bank concerned. In terms of Para 3 (2) of ‘Operational Instructions to Authorised Dealer Banks’ of Master Direction on Direct Investment by Residents in Joint Venture (JV) / Wholly Owned Subsidiary (WOS) Abroad, online reporting would be required to be made by the Centralized Unit/Nodal Office of AD Category - I banks.

2. However, it has come to our notice that fresh cases for investment in JV/WOS are being received directly at RBI Central Office from different branches all across India which can either be handled at bank’s level itself under the automatic route or involve routine queries seeking clarification on different policy issues. As the Nodal Office/International Banking Division (IBD) of the banks concerned are considered to be a repository of information about interpretation of RBI instructions issued from time to time, it has therefore been decided that all the fresh approval cases shall also be routed through the Nodal Office/IBD of the Bank along with specific recommendation/observations, reason for submission to RBI and relevant documents. The system of online reporting through the Centralized Unit/Nodal Office shall continue, as hitherto.

3. The instructions shall be applicable with effect March 1, 2018. AD Category - I banks may bring the contents of this clarification to the notice of their constituents and customers concerned.”

07-May-2018

Daily Reporting of transactions under LRS

AD Category I banks have been instructed vide A.P(DIR)Cir. No. 23 dated April 12, 2018 to upload daily transaction-wise information undertaken by them under LRS at the close of business of the next working day by accessing XBRL site. It is clarified that the AD Category I banks shall also include the details of transactions carried out by the AD Category II banks and other entities in AD Category II as well as FFMCs attached to them/maintaining an account with them while reporting the said transactions. All the LRS remittances allowed by these entities since April 2, 2018 should be uploaded to have a holistic position available for all individual remitters.

In addition to the daily reporting, AD Category I banks shall continue  to report the LRS data on a monthly basis in ORFS as prescribed in Part II - Para 1 of Master Direction on Reporting under Foreign Exchange Management Act, 1999 dated January 1, 2016 (updated as on April 26, 2018).

26-July-2018

Liberalised Remittance Scheme(LRS)-Daily Reporting of Transaction

In terms of A.P. (DIR Series) Circular No.23 dated April 12, 2018, AD Category – I banks are required to upload the data of the transactions undertaken by them under LRS, latest by close of business of the next working day on the XBRL platform.

2. It is observed that though the amount remitted has to be indicated in USD, as specified in the format prescribed, some AD banks continue to report the amount in the actual currency of remittance, which is not in order; e.g. if the currency of remittance is JPY, data under amount remitted should be the USD equivalent of JPY. AD banks are advised to ensure this while uploading the data.

3. We have come across certain cases where the amount remitted is shown to be marginally higher than the prescribed ceiling, which is attributed by the ADs, to the difference between the rate offered and the rate used for MIS. All ADs are advised to report the transactions at the rate offered, to avoid such instances.

4. It is reiterated that in order to ensure compliance with the prescribed LRS limit, AD banks must check the utilization of the limit by the remitter from the system, before allowing further remittances under the Scheme to ensure that the objective of introducing ‘daily reporting of transactions’ is not defeated.

10-August-2018

Advance Remittances made by Tour Operators/Travel Agents

In terms of Para 4.11 of FED Master Direction No.8/2015-16 dated January 01, 2016 (updated as on February 11, 2016) on Other Remittance Facilities, ADs are allowed to effect remittances on behalf of agents in India who have tie-up arrangements with hotels / agents, etc., abroad for providing hotel accommodation or making other tour arrangements for travel from India. It is understood that many times these agents are required to make remittances towards booking of hotels/other travel arrangements much in advance, even before the list of travellers is finalized.

2. It is clarified that, such advance remittances made by tour operators/agents, are regular business transactions which should be reported by the ADs in FETERS as per extant reporting guidelines under FEMA. However, once the ADs obtain the traveller-wise details (including PAN) from the tour operators, these remittances should be reported by them in the daily reporting system under LRS to ensure that the limit utilized by the individual remitter is captured and is available for monitoring.

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