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FAQ on Foreign Exchange Transactions
Q.1. Where are the guidelines pertaining to overseas investment available?
A. The guidelines have been notified by Reserve Bank of India vide Notification No. FEMA 19 dated May 3, 2000, as amended from time to time, which can be accessed at the Reserve Bank's website fema.rbi.org.in . A Master Circular entitled Indian Direct Investment in JV/WOS Abroad dated July 1, 2004, which is a compendium of all notifications/circulars incorporating the developments, till that date, is also available at the website rbi.org.in.

Q.2. Where can one get clarifications pertaining to the guidelines on overseas investment?
A. Please see answer to Q. 1 above. Any clarification in respect of cases not covered by the instructions, may be obtained, giving full details of the case from the Reserve Bank's Central Office at the following address:

Reserve Bank of India
Foreign Exchange Department
Overseas Investment Division
Central Office
Amar Building, 3rd Floor
Mumbai 400 001
Or e-mail: oid@rbi.org.in

Q.3. What is direct investment outside India?
A. Direct investment outside India means investment by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity, signifying a long term interest (setting up a Joint Venture (JV) or a Wholly Owned Subsidiary (WOS)) in the overseas entity and thus does not include portfolio investment.

Q.4. Does the definition as given in Q.3. mean that one cannot acquire an existing company either partially or wholly?
A. No. An eligible entity is free to acquire either a partial stake (JV) or the entire equity (WOS) in an already existing company, provided the valuation is as per the laid down norms. (Please refer answer to Q.16).

Q.5. Who is eligible to make overseas direct investment?
A. Resident corporate entities and partnership firms registered under the Indian Partnership Act, 1932 (Indian Party) are eligible to make direct investment abroad in JVs/ WOSs.

Q.6. Can overseas direct investment be made in any activity?
A. An Indian Party can make overseas direct investment in any bonafide activity (except those that are specifically prohibited). However, for undertaking activities in the financial sector, certain additional conditions specified in Regulation 7 should be adhered to. (Please refer answer to Q.26).

Q.7. What are the prohibited activities for overseas direct investment?
A. Real estate and Banking are the prohibited sectors for overseas direct investment. However, Indian banks operating in India can set up JVs/WOSs abroad provided they obtain clearance under the Banking Regulation Act 1949, from DBOD, RBI, CO.

Q.8. What exactly is covered under the term real estate business?
A. Real estate business means buying and selling of real estate or trading in transferable development rights (TDRs) but does not include development of township, construction of residential/commercial premises, roads and bridges.

Q.9. What are the schemes under which an eligible entity can set up a JV or WOS abroad?
A. Broadly there are two schemes under which an Indian Party can set up a JV/WOS abroad, namely the Automatic Route and the Normal Route.

Q.10. What is the Automatic Route?
A. Under the Automatic Route, an Indian Party does not require any prior approval from the Reserve Bank for setting up a JV/WOS abroad (in case of investment in the financial sector, however, prior approval is required from the concerned regulatory authority both in India and abroad).

Q.11. What are the criteria for direct investment to be made under the Automatic Route?
A. The criteria for direct investment under the Automatic Route are as under:
  • the total 'financial commitment' of the Indian Party in JVs/WOSs in any country other than Nepal, Bhutan and Pakistan is up to 100% of its net worth and the investment is in a lawful activity permitted by the host country;
  • the Indian Party is not on the Reserve Bank's exporters caution list / list of defaulters to the banking system published/ circulated by the Credit Information Bureau of India Ltd. (CIBIL)/RBI or under investigation by the Enforcement Directorate or any investigative agency or regulatory authority;
  • the Indian Party routes all the transactions relating to the investment in a JV/WOS through only one branch of an authorised dealer to be designated by it.


Q.12. What is 'financial commitment'? A. Financial commitment means the amount of direct investment outside India by way of contribution to equity and loans and 50% of the amount of guarantee issued by an Indian Party to or on behalf of its overseas JV/WOS.

Q.13. What is the limit for direct investment in Nepal or Bhutan under the Automatic Route?
A. In respect of direct investment in Nepal or Bhutan, the total financial commitment is upto the net worth of the Indian Party in INR.

Q. 14. Can direct investment upto the net worth be made on an annual basis?
A. No, the networth is the overall ceiling for overseas direct investment. Any fresh overseas investment can be made only on the basis of accretion to the networth.

Q.15. What is the procedure to be followed by an eligible entity to make direct investment in a JV/WOS under the Automatic Route?
A. The eligible Indian Party intending to make a direct investment under the automatic route is required to fill in the form ODA supported by documents listed therein, i.e., certified copy of the Board Resolution, Statutory Auditors certificate, Valuation report (in case of acquisition of an existing company) as per the valuation norms listed in answer to Q.16 and approach an Authorised Dealer (designated Authorised Dealer) for making the investment/remittance.

Q.16. What are these valuation norms referred to in Q. 4 and 15?
A. Where the investment is more than USD five million, the valuation has to be done by a Category I Merchant Banker registered with Securities and Exchange Board of India (SEBI) or an Investment Banker/Merchant Banker outside India registered with the appropriate regulatory authority in the host country and in all other cases by a Chartered Accountant/Certified Public Accountant.

However, in the case of investment by acquisition of shares where the consideration is to be paid fully or partly by issue of the Indian Party's shares (swap), in all cases, the valuation will have to be done by a Category I Merchant Banker registered with Securities and Exchange Board of India (SEBI) or an Investment Banker/Merchant Banker outside India registered with the appropriate regulatory authority in the host country.
Q.17. Where does one find Form ODA ?
A. Form ODA as also other relevant forms pertaining to overseas direct investment are available under Forms at the
website: fema.rbi.org.in.

Q.18. What is the concept of a 'designated Authorised Dealer'? Can there be more than one 'designated Authorised Dealer' for the same JV/WOS in case the JV/WOS has more than one Indian promoter?
A. The Indian party is to route all transactions in respect of one particular overseas JV/WOS through only one branch of an Authorized Dealer. This branch would be the 'designated Authorised Dealer' in respect of that JV/WOS and all transactions relating to the investment in that particular JV/WOS are to be reported only through this 'designated' branch of an Authorized Dealer. In case the JV/WOS is being set up abroad by two or more Indian promoters, then all Indian promoters would collectively be called the Indian party who would be required to report all transactions in respect of that JV/WOS only through one 'designated Authorised Dealer'.

Q.19. What about if one Indian promoter has more than one JV in either the same country or in different countries?
A. The Indian promoters are free to designate different branches of the same Authorised Dealer or different branches of different Authorised Dealers for their separate JVs/WOSs. The only requirement is that regardless of the number of promoters, one JV/WOS will have only one 'designated Authorsied Dealer' to report all its transactions.

Q.20. Can one change the 'designated Authorized Dealer'?
A. Yes. An application by way of a letter may be made to the concerned Regional Office of the Reserve Bank.

Q.21. Whether any prior registration with the Reserve Bank is necessary for direct investments under the Automatic Route?
A. No prior registration with the Reserve Bank is necessary for direct investments under the automatic route. After the report of remittance/investment in form ODR is received by the Reserve Bank, from the designated Authorised Dealer, an identification number for that particular JV/WOS will be issued for the purpose of taking on record the overseas direct investment with the objective of maintaining a database for monitoring the outflows/inflows in respect of the overseas entities. Subsequent investments in the same project can be made only after allotment of the identification number.

Q.22. Does the allotment of an identification number by the Reserve Bank for direct investments under the automatic route constitute an approval from the Reserve Bank?
A. No. The allotment of the identification number does not constitute an approval from the Reserve Bank for the investment made/to be made in the JV/WOS. The issue of an identification number only signifies the taking on record of the investment for maintaining the database.

Q.23. Is there any prohibition for direct investment under the Automatic Route?
A. Yes. Indian Parties which are under investigation by the Enforcement Directorate/other investigative agencies/regulatory authorities, or are on the Reserve Bank's exporters caution list or are included in the list of defaulters to the banking system in India published/circulated by CIBIL/RBI are not eligible to make investment under the automatic route.

Q. 24. What is the Normal route? What is the procedure to be followed for investment propose to be made under Normal Route?
A. Proposals not covered by the conditions under the automatic route require the prior clearance of the Reserve Bank for which a specific application in form ODI with the documents prescribed therein is required to be made to :

Reserve Bank of India
Foreign Exchange Department
Overseas Investment Division
Central Office
Amar Building, 3rd Floor
Mumbai 400 001.

Q.25. What are the parameters for considering proposals under the normal route?
A. Requests under the normal route are considered by taking into account inter alias the prima facie viability of the proposal, business track record of the promoters, experience and expertise of the promoters, benefits to the country, etc.

Q.26. Can an Indian company make investment in a JV/WOS abroad in the financial services sector?
A. Only an Indian Company engaged in financial sector activities can make investment in the financial services sector provided it fulfills the following additional norms :
  • Has earned net profit during the preceding three financial years from the financial services activities;
  • Is registered with the appropriate regulatory authority in India for conducting financial services activities;
  • Has obtained approval for undertaking such activities from the concerned regulatory authorities both in India and abroad before venturing into such activity;
  • Has fulfilled the prudential norms relating to capital adequacy as prescribed by the concerned regulatory authority in India.


Q.27. What are the permissible sources for funding overseas direct investment?
A. Funding for overseas direct investment can be made by one or more of the following sources:
  • The balances held in Exchange Earners Foreign Currency account of the Indian Party maintained with an authorised dealer;
  • Proceeds of ADR/GDR issues;
  • Market purchases of foreign exchange;
  • Share swap (refers to the acquisition of the shares of an overseas entity by way of exchange of the shares of the Indian entity);
  • Capitalisation of exports, royalties, etc.;
  • Proceeds of ECBs/FCCBs raised abroad.
Q.28. Can an Indian Party capitalize the proceeds of the exports to its overseas JV/WOS?
A. Yes, capitalization of export proceeds by an Indian Party, to its overseas JV/WOS, is permitted under the automatic route provided the export proceeds have not remained unrealised beyond a period of six months from the date of export. Such proceeds shall not be capitalized without the prior permission of the Reserve Bank.

Q.29. Can an Indian Party extend loan or guarantee to an overseas entity without any equity participation in that entity?
A. No. Loan and guarantee can be extended to an overseas entity only if there is already an equity participation by way of direct investment. Q.30. Can an Indian Company make direct investment in an overseas concern by way of share swap?
A. Yes, requests for direct investment outside India in a JV/WOS by way of share swap arrangement can be made under the automatic route provided the valuation norms prescribed i.e. valuation of the shares is done by a category I Merchant Banker registered with the Securities and Exchange Board of India (SEBI) or an Investment Banker/Merchant Banker outside India registered with the appropriate Regulatory Authority in the host country, are satisfied. Investors may also please note that all share swap transactions require prior approval of the Foreign Investment Promotion Board for the inward leg of the investment.

Q. 31. What are the schemes for overseas direct investment by partnership firms?
A. Partnership firms registered under the Indian Partnership Act 1932 can make overseas direct investments subject to the same terms and conditions as applicable to corporate entities.

Q.32. Can the partners hold shares of the overseas concerns for and on behalf of the firm?
A. It will be in order for individual partners to hold shares for and on behalf of the firm in an overseas JV/WOS, only if the host country regulations or operational requirements warrant such holding. However, the funding for the overseas JV/WOS has to be made by the firm.

Q.33. Are there any restrictions for setting up of a second generation company? Can such step down subsidiaries be set up under the Automatic Route?
A. There are no restrictions on entities having JVs/WOSs abroad setting up second generation companies (step-down subsidiaries) within the overall limits applicable for investments under the Automatic Route. However, companies wishing to set up step-down subsidiaries to undertake financial sector activities will have to comply with the additional requirements for direct investment in the financial sector.

Q.34. Can an Indian Party have a JV/WOS through a Special Purpose Vehicle (SPV) under the Automatic Route?
A. Yes. Direct investment through the medium of a SPV is permitted under the Automatic Route.

Q.35. Can an Indian Party directly fund such step-subsidiaries?
A. Where the JV/WOS has been established through a SPV all funding to the operating subsidiary should be routed through the SPV only. However, in the case of guarantees to be given to the step down subsidiary these can be given directly by the Indian Party provided such exposures are within the permissible financial commitment of the Indian Party.

Q.36. Can the shares of a JV/WOS abroad be pledged for the purpose of financial assistance?
A. The shares of a JV/WOS can be pledged as a security for availing fund based or non-fund based facility for the concerned entity or for the JV/WOS from an authorised dealer/ public financial institution in India.

Q.37. What are the obligations of the Indian party, which has made direct investment outside India?
A. An Indian Party will have to comply with the following: -
  • receive share certificates or any other documentary evidence of investment in the foreign entity to the satisfaction of the Reserve Bank within six months, failing which an application for extension of time citing reasons for non-receipt will have to be made to the Reserve Bank.
  • repatriate to India, all dues receivable from the foreign entity, like dividend, royalty, technical fees etc., within 60 days of its falling due, or such further period as the Reserve Bank may permit.
  • submit to the Reserve Bank every year, within 60 days from the date of expiry of the statutory period, as prescribed by the respective laws of the host country for finalisation of the audited accounts of the JV/WOS outside India, an Annual Performance Report in form APR in respect of each JV or WOS outside India set up or acquired by the Indian party. This APR should inevitably be accompanied by :
    • copies of FIRCs in support of inward remittances on account of dividend, royalty, etc.;
    • audited Financial Statements of the overseas venture;
    • certificate from a chartered accountant in support of realization of export proceeds;
    • a note on the working of the JV/WOS during the previous year highlighting the ups and downs, reasons for nonperformance, etc. in monetary terms.
In case the promoter company is unable to submit APRs within the stipulated time, an application on the due date should be made to the Reserve Bank of India seeking extension, giving reasons for the same.

Q.38. What are the penalties for non-submission of APRs?
A. Reserve Bank takes a serious view of delayed submission/non-submission of such reports and can take such measures, as prescribed under FEMA 1999, against the delinquent Indian Party as it deems fit.

Q.39. Is prior permission of the Reserve Bank required for disinvestment of existing holding in a JV/WOS?
A. No prior approval of the Reserve Bank is required for disinvestment, either by way of sale to another Indian Party (which is eligible to make such investments under the Automatic Route) or to a person resident outside India, provided ,
  • the disinvestment does not result in a write-off (however, listed Indian companies have been permitted a write-off of capital upto 10% of the previous years export realization);
  • the overseas concern has repatriated all its dues;
  • the overseas concern has been in operation for at least one year and has submitted upto date APR with the prescribed documents;
  • the Indian Party is not under investigation by any investigative/ regulatory authority;
  • the sale is to be effected through a stock exchange where the shares of the overseas JV or WOS are listed;
  • if the shares are not listed on the stock exchange, and the disinvestment is by private arrangement, the sale price of the share is not less than the value certified by a Chartered Accountant/Certified Public Accountant/Category I Merchant Banker registered with SEBI.

The above conditions are applicable even when an Indian Party wants to windup/close its existing JV/WOS.

Q.40. What is the procedure to be followed for such disinvestment and what are the documents to be submitted for disinvestment of existing holding in a JV/WOS?
A. The Indian Party may apply for disinvestment to the designated Authorized Dealer/Reserve Bank (in case the proposal is not eligible to be considered by the Authorized Dealer) with the following documents/information :
  • letter giving the reasons for the disinvestment;
  • latest Annual Performance Report on the working of the JV/WOS;
  • certified true copy of the Board Resolution approving the
  • disinvestment and indicating the amount of disinvestment approved;
  • letter of offer from the purchaser;
  • consent letter from the partners in case of disinvestment of share in a JV abroad;
  • valuation certificate on the value of shares of the JV/WOS;
  • certificate from a Chartered Accountant certifying that no dues are outstanding to the Indian party or indicating the details of dues, if any, from the JV/WOS to the Indian party.
Q.41. Can a resident individual in India acquire/sell foreign securities without prior approval of the Reserve Bank?
A. Resident individuals can acquire/sell foreign securities without prior approval in the following cases: -
  • as a gift from a person outside India;
  • by way of ESOPs issued by a company incorporated outside India under Cashless Employees Stock Option Scheme which does not involve any remittance from India;
  • by way of ESOPs issued to an employee or a director of Indian office or branch of a foreign company or of a subsidiary in India of a foreign company or of an Indian company in which foreign equity holding is not less than 51 percent;
  • by inheritance from a person whether resident in or outside India;
  • by purchase of foreign securities out of funds held in the Resident Foreign Currency Account maintained in accordance with the Foreign Exchange Management (Foreign Currency Account) Regulations, 2000;
  • by way of bonus/rights shares on the foreign securities already held by them;
  • by way of shares in listed overseas companies that have at least a 10% share in an Indian company listed on a recognized stock exchange in India as on 1st January of the year of investment;
  • by way of rated debt securities issued by companies as at vii.
Q. 42. Can Indian corporates invest overseas other than by way of direct investment?
A. Yes. Listed Indian Companies can invest upto 25 % of the net worth in overseas companies, listed on a recognized stock exchange, that have at least 10% share in an Indian company listed on a recognized stock exchange in India as on 1st January of the year of investment or by way of rated debt securities issued by the same companies. However, this 10 % holding should be a direct holding and not through a subsidiary or a SPV.

Q.43. Are there any other provisions by which an individual can acquire shares of a foreign company?
A Yes, resident individuals can make investments in foreign securities upto USD 25000/ per annum provided the investments are in accordance with AP (DIR Series) Circular No.64. dated February 4, 2004. The restriction at item vii of answer to Q. 41 will not apply.

Q.44. Can a resident individual acquire shares of a foreign company in his capacity as director?
A.Yes, Reserve Bank has given general permission to a resident individual to acquire foreign securities to the extent of the minimum number of qualification shares required to be held for holding the post of Director provided such shares do not exceed 1% of the paid-up capital of the company and the amount to be remitted for such shares does not exceed USD 20,000/ in a calendar year.

Q.45. Can a resident individual subscribe to the rights issue of shares held by him?
A. Yes, a resident individual may acquire foreign securities by way of rights shares issued by a company incorporated outside India provided the existing shares were held in accordance with the provisions of the law.

Q.46. Are there any relaxations for individual employees/directors of an Indian company engaged in the field of software for acquisition of shares in their JV/WOS abroad?
A Yes, Reserve Bank on an application, will permit the individual employees/directors of an Indian promoter company engaged in the field of software for acquisition of shares of a JV/WOS abroad provided :
  • the consideration for purchase does not exceed USD 10,000/ or its equivalent per employee in a block of five calendar years;
  • the shares acquired by all the employees/directors do not exceed 5% of the paid-up capital of the Joint Venture or Wholly Owned Subsidiary outside India, and
  • after allotment of such shares, the percentage of shares held by the Indian promoter company, together with shares allotted to its employees is not less than the percentage of shares held by the Indian promoter company prior to such allotment.
Further, Reserve Bank may also on an application, made to it, by an Indian company engaged in the field of software allow its resident employees (including working directors) to purchase foreign securities under the ADR/GDR linked stock option scheme provided the consideration for purchase does not exceed USD 50,000/ or its equivalent in a block of five calendar years.

I Acquisition and Transfer of Immovable Property in India by a person resident outside India

Q.1. Where can one find regulations/directions issued by Reserve Bank for acquisition and transfer of immovable property in India by a person resident outside India?
A.1. Regulations regarding acquisition and transfer of immovable property in India by a person resident outside India have been notified vide RBI Notification No. FEMA 21/2000-RB dated May 3, 2000 as amended vide Notification No. FEMA 64/2002-RB dated June 29, 2002 and Notification No. FEMA 65/2002-RB dated June 29, 2002 and relevant directions issued in the form of A.P. (DIR Series) Circulars. These are available on RBI website: www.fema.rbi.org.in

II Acquisition of immovable property in India by way of purchase by a person resident outside India

Q.2. Under the extant foreign exchange regulations to whom is general permission available for purchase immovable property in India?
A.2. General Permission is available to purchase only a residential/commercial property in India to a person resident outside India who is a citizen of India (NRI) and who is a Person of Indian Origin (PIO).

Q.3. Who is a Person of Indian Origin (PIO)?
A.3. For the purpose of acquisition and transfer of immovable property in India, a PIO means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who (i) at any time, held Indian passport; or (ii) who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

Q.4. Is NRI/PIO who has purchased residential/commercial property under general permission required to file any documents with Reserve Bank of India?
A.4. NRI/PIO who has purchased residential/commercial property under general permission is not required to file any documents with the Reserve Bank.

Q.5. Is there any restriction on number of residential/commercial property that NRI/PIO can purchase under the general permission available?
A.5. There is no restriction on number of residential/commercial property that NRI/PIO can purchase under the general permission available

Q.6. Can a name of a foreign national of non-Indian origin be added as a second holder to a residential/commercial property purchased by NRI/PIO?
A.6. No.

Q.7. Can a foreign national of non-Indian origin resident outside India acquire any immovable property in India by way of purchase?
A.7. No. Under section 2 (ze) of the Foreign Exchange Management Act, 1999 'transfer' includes among others, 'purchase'. Therefore, a foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of purchase.

Q.8. Can a foreign national of non-Indian origin acquire residential property on a lease in India?
A.8. Yes. A Foreign National of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan may acquire only residential accommodation on lease, not exceeding five years for which he/she does not require prior permission of Reserve Bank of India.

Q.9. Can a person resident outside India (i.e. a NRI or a PIO or a foreign national of non-Indian origin) acquire agricultural land/plantation property/farm house in India by way of purchase?
A.9. No. A person resident outside India cannot acquire by way of purchase agricultural land/plantation property/farm house in India.

III Acquisition of immovable property in India by way of gift by a person resident outside India

Q. 10. Can NRI/PIO acquire residential/commercial property by way of gift under the general permission available?
A. 10.Yes. Under general permission available NRI/PIO may acquire residential/commercial property by way of gift from a person resident in India or a NRI or a PIO.

Q. 11. Can a foreign national of non-Indian origin resident outside India acquire residential/commercial in India by way of gift?
A. 11. No. Under section 2 (ze) of the Foreign Exchange Management Act, 1999 'transfer' includes among others, 'gift'. Therefore, a foreign national of non-Indian origin resident outside India cannot acquire residential/commercial property in India by way of gift.

Q. 12. Can a person resident outside India (i.e. a NRI or a PIO or a foreign national of non-Indian origin) acquire agricultural land/plantation property/farm house in India by way of gift?
A. 12. No. A person resident outside India cannot acquire agricultural land/plantation property/farm house in India by way of gift.

IV Acquisition of immovable property in India by way of inheritance by a person resident outside India

Q.13. Can a person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) hold any immovable property in India acquired by way of inheritance from a person resident in India?
A.13. Yes. A person resident outside India can hold immovable property acquired by way of inheritance from a person resident in India as per the provisions of Section 6(5) of the Foreign Exchange Management Act, 1999.

Q.14. Can a person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) hold any immovable property in India acquired by way of inheritance from a person resident outside India?
A. 14. With the specific approval of Reserve Bank a person resident outside India may hold any immovable property in India acquired by way of inheritance from a person resident outside India, provided the bequeath or had acquired such property in accordance with the provisions of foreign exchange law in force at the time of acquisition or under FEMA regulations.

V Transfer of immovable property in India by way of sale by a person resident outside India

Q.15. Under general permission available to whom can NRI transfer by way of sale his residential/commercial property?
A.15. NRI can transfer by way of sale residential/commercial property in India to a person resident in India or to a NRI or a PIO.

Q.16. Under general permission available to whom can a PIO transfer his residential/commercial property by way of sale?
A.16. PIO can transfer by way of sale residential/commercial property in India only to a person resident in India.

Q. 17. Can a PIO transfer by way of sale his residential/commercial property to a NRI or a PIO?
A.17. No. He would need to seek Reserve Bank prior approval for transfer by way of sale residential/commercial property in India to a NRI or a PIO.

Q. 18. Can a foreign national of non-Indian origin whether resident in India or outside India transfer by way of sale residential/property in India acquired with the specific permission of Reserve Bank to a person resident in India or outside India?
A. 18. No. A foreign national of non-Indian origin whether resident in India or outside India would need to seek prior approval of Reserve Bank for transfer by way of sale residential/property in India acquired with the specific permission of Reserve Bank to a person resident in India or outside India.

Q.19. Under general permission available to whom can NRI/PIO transfer by way of sale his agricultural land/plantation property/farm house in India?
A.19. Under the general permission available NRI/PIO may transfer by way of sale his agricultural land/plantation property/farm house in India to a person resident in India who is a citizen of India.

Q.20. Can a foreign national of non-Indian origin resident outside India transfer by way of sale agricultural land/plantation property/farm house acquired by him in India?
A. 20. A foreign national of non-Indian origin resident outside India would need to seek prior approval of Reserve Bank for transfer, by way of sale, agricultural land/plantation property/farm house acquired in India.

VI Transfer of immovable property in India by way of gift by a person resident outside India

Q.21. Under general permission available can NRI/PIO transfer his residential/commercial property by way of gift?
A. 21. Yes. NRI/PIO may transfer by way of gift residential/commercial property in India to a person resident in India or to a NRI or a PIO.

Q. 22. Under general permission available to whom can NRI/PIO transfer by way of gift agricultural land/plantation property/farm house in India?
A.22. Under the general permission available NRI/PIO may transfer by way of gift agricultural land/plantation property/farm house in India to a person resident in India who is a citizen of India.

Q.23. Can a foreign national of non-Indian origin resident outside India transfer by way of gift agricultural land/plantation property/farm house acquired by him in India?
A.23. No. A foreign national of non-Indian origin resident outside India would need to seek prior approval of Reserve Bank for transfer by way of gift agricultural land/plantation property/farm house acquired by him in India.

VII Transfer of residential/commercial property in India by way of mortgage by a person resident outside India

Q.24. Can NRI/PIO transfer by way of mortgage his residential/commercial property to an authorized dealer/housing finance institution in India?
A. 24. Yes.

Q.25. Can NRI/PIO transfer by way of mortgage his
residential/commercial property in India to a party abroad? A.25. No. He should seek prior approval of RBI.

Q.26. Can a foreign national of non-Indian origin resident in India or outside India transfer by way of mortgage his residential/commercial property in India acquired with the specific approval of Reserve Bank to a party in India or abroad?
A. 26. No. He should seek prior approval of RBI. However, immovable property purchased by a person resident outside India who has established a Branch Office or other place of business for carrying on in India any activity in accordance with FERA/FEMA regulations, may under general permission available, mortgage such a property with an authorized dealer as a security for any borrowing.

VIII Mode of payment for purchase of residential/commercial property in India by NRI/PIO

Q.27. Under the general permission available what is mode of payment for purchase of residential/commercial property in India by NRI/PIO?
A.27. Under the general permission available NRI/PIO may purchase residential/commercial property in India out of funds remitted to India through normal banking channel or funds held in his NRE/FCNR (B)/NRO account. No consideration shall be paid outside India.

Q.28. Can refund of application/earnest money/purchase consideration made by the house building agencies/seller on account of non-allotment of flat/plot/cancellation of bookings/deals for purchase of residential/commercial property together with interest, if any (net of income tax payable thereon) be credited to NRE account?
A. 28. Yes, provided original payment was made by way of inward remittance or by debit to NRE/FCNR (B) account. For this purpose no permission of Reserve Bank is required and they may approach the Authorised Dealer directly in the matter. (Please refer to A. P. (DIR Series Circular No. 46 dated November 12, 2002).

Q. 29. Can NRI/PIO for the purpose of acquisition of flat/house in India for his own residential use avail of loan from authorized dealer against the security of funds held in his NRE Fixed Deposit account/FCNR (B) account?
A. 29. Yes, subject to certain terms and conditions (Please refer to Schedules 1 and Schedules 2 to Notification No. FEMA 5/2000-RB dated 3rd May 2000).

Q.30. Can NRI/PIO, avail of housing loan in rupees from an authorized dealer or housing finance institution in India approved by the National Housing Finance Bank for purchase of residential accommodation or for the purpose of repairs/renovation/improvement of residential accommodation?
A. 30. Yes, subject to certain terms and conditions. Such loans can be repaid by the borrower by way of inward remittance through normal banking channel or by debit to his NRE/FCNR (B)/NRO account or out of rental income derived from renting out such property. Such loan can also be repaid by the borrower's close relatives through their account in India by crediting the borrower's loan account. (Please refer to Regulation 8 to Notification No. FEMA 4/2000-RB dated 3rd May 2000 and A.P. (DIR Series) Circular No.95 dated April 20, 2003 and A.P. (DIR Series) Circular No.94 dated May 25, 2003).

Q. 31. Can NRI avail of housing loan in rupees from his employer in India?
A. 31. Yes, subject to certain terms and conditions (Please refer to Regulation 8A to Notification No. FEMA 4/2000-RB dated 3rd May 2000 and A.P. (DIR Series Circular No.27 dated October 10, 2003).

IX Repatriation of sale proceeds of residential/commercial property purchased by NRI/PIO

Q.32. Can NRI/PIO repatriate the sale proceeds of residential/commercial property in India acquired by way of inward remittance through normal banking channel or by debit to NRE/FCNR (B)/NRO account? If so, what is the quantum?
A.32. NRI/PIO may repatriate the sale proceeds of residential/commercial property in India acquired by way of inward remittance through normal banking channel or by debit to NRE/FCNR (B) account. The amount to be repatriated should not exceed the amount paid for acquisition of residential/commercial property (a) in foreign exchange received through normal banking channel or by debit to FCNR (B) account or (b) the foreign currency equivalent, as on the date of payment, of the amount paid by debit to NRE account. The sale proceeds of residential/commercial property in India acquired by way of debit to NRO account cannot be repatriated and should be credited to NRO account only.

Q.33. The rupee loan availed by NRI for purchase of residential accommodation was repaid either by inward remittance or by debit to NRE/FCNR (B) account. Can the sale proceeds of such property be repatriated?
A.33. Yes. Repayment of loan in foreign exchange is treated as equivalent to the foreign exchange received for purchase of residential accommodation.

Q.34. Is there any lock in period for sale of residential/commercial property purchased out of inward remittance/debit to NRE/FCNR(B) account?
A.34. No lock in period is applicable for sale of such property.

Q.35. Is there any restriction on repatriation of sale proceeds of residential property purchased by NRI/PIO out of funds remitted to India through normal banking channel or funds held in his NRE/FCNR (B) account?
A.35. Yes. Repatriation of sale proceeds is restricted to not more than two residential properties.

X Remittance of sale proceeds of residential/commercial property received by way of gift by NRI/PIO

Q.36 Into which account the sale proceeds of residential/commercial property received by way of gift by NRI/PIO can be credited?
A.36. The sale proceeds of residential/commercial property received by way of gift by NRI/PIO should be credited to NRO account only.

XI Remittance of sale proceeds of immovable property inherited by a person resident outside India.

Q.37. Can sale proceeds of any immovable property inherited by NRI/PIO from a person resident in India be remitted abroad?
A. 37. Yes. Amount not exceeding USD one million, per calendar year subject to production of documentary evidence in support of inheritance and Tax clearance certificate/no objection certificate from Income Tax authority to authorized dealer for remittances. However, if a PIO is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran he should seek prior approval of Reserve Bank with documentary evidence in support of inheritance and tax clearance/no objection certificate from Income Tax authority. This remittance facility is not available to a citizen of Nepal or Bhutan. (Please refer to Regulation 4 (3) to Notification No. FEMA 13/RB-2000 dated 3rd May 2000)

Q.38. Can sale proceeds of any immovable property in India inherited, by a foreign national of non-Indian origin resident outside India, from a person resident in India be repatriated by him?
A.38. Yes. Amount not exceeding USD one million, per calendar year subject to production of documentary evidence in support of inheritance and Tax clearance certificate/no objection certificate from Income Tax authority to authorized dealer for remittances. However, a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran shall seek prior approval of Reserve Bank with documentary evidence in support of inheritance and tax clearance/no objection certificate from Income Tax authority. This remittance facility is not available to a citizen of Nepal or Bhutan. (Please refer to Regulation 4 (2) (ii) to Notification No. FEMA 13/RB-2000 dated 3rd May 2000)

Q.39. Can sale proceeds of any immovable property in India inherited, by a person resident outside India (i.e. NRI or PIO or foreign national of non- Indian origin resident outside India), from a person resident outside India be repatriated by him or his successor?
A.39. No. He needs to seek prior approval of Reserve Bank with documentary evidence in support of inheritance and tax clearance/no objection certificate from Income Tax authority.

XII Acquisition of immovable property for carrying on a permitted activity in India.

Q.40. Can a person resident outside India who has established a Liaison Office in India in accordance with FERA/FEMA regulations purchase immovable property?
A.40. No.

Q. 41. Can a person resident outside India who has established a Branch Office or other place of business for carrying on in India any activity in accordance with FERA/FEMA regulations purchase commercial/residential property?
A.41. Yes, provided it is necessary for or incidental to carrying on such activity and all applicable laws, rules, regulations or directions are duly complied with. The purchase price should be paid by way of inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquisition of commercial/residential property.

Q. 42. Can such a property referred to in Q. No.41 be mortgaged with an authorized dealer as a security for any borrowing?
A.42. Yes, RBI has granted general permission for such a mortgage.

Q.43. On winding up of the business can the sale proceeds of such property be repatriated?
A.43. Yes, with prior approval of Reserve Bank.

XIII Acquisition/Transfer of immovable property in India by Foreign Embassies/Diplomats/Counsel Generals

Q.44. Can Foreign Embassies/Diplomats/Counsel General purchase/sell immovable property in India?
A.44.Yes. Under general permission available Foreign Embassies/Diplomats/Counsel General may acquire any immovable property other than agricultural land/plantation property/farm house in India. Such property may be purchased/sold provided prior clearance from the Government of India, Ministry of External Affairs has been obtained for such purchase/sale. The consideration for purchase of such property should be paid by way of inward remittance through normal banking channel.

XIV Other issues

Q. 45. Can NRI/PIO rent out the residential/commercial property purchased out of foreign exchange/rupee funds, if not required for immediate use?
A. 45. Yes. Rent received, being current income may be credited to NRO/NRE account or remitted abroad.

Q.46. Can NRI who had acquired immovable property viz., residential/commercial property/agricultural land/plantation property/farm house in India while he was a person resident in India continue to hold or transfer such immovable property? In which account the sale proceeds may be credited?
A.46. Yes, under the provisions of Section 6 (5) of the Foreign Exchange Management Act, 1999 NRI who had acquired immovable property in India while he was a person resident in India may continue to hold such property. Under the general permission available he may transfer by way of sale or gift agricultural land/plantation property/farm house in India to a person resident in India who is a citizen of India and may transfer by way of sale or gift residential/commercial property in India to a person resident in India or to a NRI/PIO. The sale proceeds may be credited to NRO account.

Q.47. Can a PIO who had acquired immovable property viz., residential/commercial property/agricultural land/plantation property/farm house in India while he was a person resident in India continue to hold or transfer such immovable property? In which account the sale proceeds may be credited?
A.47. Yes, under the provisions of Section 6 (5) of the Foreign Exchange Management Act, 1999, PIO who had acquired immovable property in India while he was a person resident in India may continue to hold such property. Under the general permission available he may transfer agricultural land/plantation property/farm house in India by way of sale or gift to a person resident in India who is a citizen of India and residential/commercial property in India by way of sale to a person resident in India and way of gift residential/commercial property in India to a person resident in India or to a NRI/PIO. However, if a PIO is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan he should seek prior approval of Reserve Bank for transfer of such immovable property in India. The sale proceeds may be credited to NRO account.

Q.48. Can the sale proceeds of the immovable property referred to in Q. Nos. 46 and 47 credited to NRO account of NRI/PIO, be remitted abroad?
A.48. Yes, provided the immovable property was held for a period not less than ten years.

Q. 49. What if such an immovable property was held for less than ten years?
A. 49. If such a property acquired out of rupee funds is sold after being held for less than ten years, remittance can be made, if the sale proceeds were held for the balance period in NRO account (Savings/Term Deposit) or in any other eligible investment, provided such investment is traced to the sale proceeds of the immovable property.

Q.50. Under erstwhile FERA, foreign nationals of non-Indian origin resident in India or outside India had with the specific approval of Reserve Bank acquired residential property in India. While they can continue to hold the same under the provisions of Section 6 (5) of the FEMA, 1999 can they transfer such property?
A.50. Yes; only with the prior approval of Reserve Bank.

Q.51. Is a person resident in India governed by the provisions of Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2000?
A.51. A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2000.

Q.52. Where are the terms a 'person resident in India' and a 'person resident outside India' defined?
A.52. Section 2 (v) and section 2 (w) of the Foreign Exchange Management Act, 1999 defines a 'person resident in India' and a 'person resident outside India' respectively.

Q.53. What is meant by a person resident in India?
A.53. From FEMA angle, a person resident in India means a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year (April-March) and who has come to or stays in India either for taking up employment, carrying on business or vocation in India or for any other purpose, that would indicate his intention to stay in India for an uncertain period. In other words, to be treated as 'a person resident in India', under FEMA a person has not only to satisfy the condition of the period of stay (being more than 182 days during the course of the preceding financial year) but has also to comply with the condition of the purpose/intention of stay.

Q.54. Does Reserve Bank determine the residential status of a person for the purpose of acquisition of immovable property in India?
A.54. No. Under FEMA residential status is determined by operation of law. The onus is on an individual to prove his/her residential status if questioned by any other authority.

Q.55. If a foreign national (except a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan) is a person resident in India as per the provisions of Section 2 (v) (i) B of the Foreign Exchange Management Act, 1999 does he require approval of RBI to purchase any immovable property in India?
A.55. No, he does not require approval from Reserve Bank from FEMA angle. However, approvals if any, required in terms of regulations prescribed by other authorities such as the concerned State Government etc., will have to be obtained by him/her.
Exchange Earners Foreign currency account (EEFC)
What is EEFC Account?
  • Optimize costs (Cut costs in a way that doesn't harm the business) and optimize resources. Key amongst them are:
    • improve labor productivity
    • manage inventory efficiently,
    • renegotiate the rentals
  • Adopt a revenue share model against fixed share model
Who can open an account?
  • Implement technology - specially in areas of manpower training, real estate management, supply chain and logistics management and day-to-day store operations
What is the limit prescribed? Status Holder" Exporter

Individual professionals @

100% Export Oriented Units/ Units in Export Processing Zones/Software Technology Parks/Electronic Hardware Technology Parks

Others

@ Individuals professionals means (i) Director on Board of overseas company, (ii) Scientist/Professor in Indian University/ Institution, (iii) Economist, (iv) Lawyer, (v) Doctor, (vi) Architect, (vii) Engineer, (viii) Artist, (ix) Cost/Chartered Accountant, (x) Any other person rendering professional services in his individual capacity, a may be specified by the Reserve Bank from time to time.
100% of earnings

100% of earnings

100% of earnings



50% of earnings
Types of Accounts Non-interest bearing current account.
Permissible Credits Earning in foreign exchange as per prescribed limits. Recredit of unutilised foreign exchange earlier withdrawn from such accounts.
Permissible Debits Payment towards all current account transactions such as travel, medical, studies abroad, permissible imports, commission, customs duty, etc. However, remittances towards gifts and donations exceeding USD 5000 per remitter/donor per annum is not permissible.

Payments towards permissible capital account transactions.

Payment in India to 100% Export Oriented Units/Units in Export Processing Zones/ Software Technology Parks/Electronic Hardware Technology Parks towards cost of goods and services provided by them.

Payment towards trade related loans and advances.

Payment in foreign exchange to a person resident in India for supply of goods and services including payment for air fare and hotel expenditure.
Cheque Facility Available.
Nomination Facility Permitted like in case of any other resident accounts.

Date: Jun 16, 2003
Supply of goods by Special Economic Zones (SEZs) to Units in
DomesticTariff Area (DTA) against payment in foreign exchange
A.P.(DIR Series) Circular No.105 (June 16, 2003)

Reserve Bank of India
Exchange Control Department
Central Office Mumbai - 400 001

A.P.(DIR Series) Circular No.105
June 16, 2003
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
Supply of goods by Special Economic Zones (SEZs) to
Units in DomesticTariff Area (DTA) against payment in foreign exchange
Attention of authorised dealers is invited to paragraph 8 of Annexure to A.P.(DIR Series) Circular No.54 dated November 25, 2002, in terms of which Units in Domestic Tariff Areas (DTAs) have been permitted to purchase foreign exchange from authorised dealers to pay for the goods supplied to them by 100% EOUs, EPZs, EHTPs and STPs. It has now been decided to extend this facility to units in DTAs for making payment towards goods supplied to them by Units in Special Economic Zones (SEZs).

2. Authorised dealers may bring the contents of this circular to the notice of their constituents.

3. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of Foreign Exchange Management Act, 1999(42 of 1999).
Yours faithfully,
Grace Koshie
Chief General Manager


Date: Apr 01, 2003
Export of Goods and Services - Facilities to Units in Special Economic
Zones (SEZs)
A.P.(DIR Series) Circular No.91 (April 1, 2003)
Reserve Bank of India
Exchange Control Department
Central Office
Mumbai - 400 001
A.P.(DIR Series) Circular No.91
June 16, 2003
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
Export of Goods and Services -
Facilities to Units in Special Economic Zones (SEZs)
Attention of authorised dealers is invited to A.P. (DIR Series) Circular No.28 dated March 30, 2001 and subsequent circulars issued extending various facilities to units in Special Economic Zones. It has been decided to extend the following facilities to the units located in the Special Economic Zones (SEZs) : -

A. Realisation of export proceeds In terms of para 11(c) of AP (DIR Series) Circular No.28 dated March 30, 2001, units situated in Special Economic Zones have been permitted to realise and repatriate to India the full value of goods or software within a period of twelve months from the date of export. It has now been decided to remove the stipulation of twelve months or extended period thereof for realisation of export proceeds. Accordingly, there shall be no prescription of any time limit for realisation of exports made by units in SEZs. However, the units in SEZs will continue to follow the GR/PP/SOFTEX export procedure outlined in Part B of Annexure to A.P.(DIR Series) Circular No.12 dated September 9, 2000 as amended from time to time.

B. Job work abroad
To promote international operations, units in SEZs are permitted to undertake job work abroad and export goods from that country itself subject to fulfillment of the following conditions :
  • Processing / manufacturing charges are suitably loaded in the export price and are borne by the ultimate buyer.
  • The exporter has made satisfactory arrangements for realisation of full export proceeds subject to the usual GR procedure.

C. Receipts of payment in precious metals for EOUs and units in SEZs
Attention of authorised dealers is invited to para. A.4 of Annexure to AP (DIR Series) Circular No.12 dated September 9, 2000 in terms of which the amount representing the full export value of goods exported shall be received through an authorised dealer in the manner specified in Notification No.FEMA. 14/2000-RB dated May 3, 2000 (Manner of Receipt & Payment) Regulations, 2000. It has been decided that payment of export may also be received by the Gem & Jewellery units in SEZs and EOUs in form of precious metals i.e. Gold / Silver / Platinum equivalent to value of jewellery exported on the condition that the sale contract provides for the same and the approximate value of the precious metal is indicated in the relevant GR/SDF/PP forms.

D. 'Netting off' of export receivables against import payments
It has been decided that authorised dealers may allow requests received from exporters for ' netting off ' of export receivables against import payments for units located in Special Economic Zones subject to the following :

  • The ' netting off ' of export receivables against import payments is in respect of the same Indian entity and the overseas buyer / supplier ( bilateral netting ). The netting may be done as on date of balance sheet of the unit in SEZ.
  • The details of export of goods is documented in GR(O) forms/DTR as the case may be while details of import of goods / services is recorded through A1/A2 form as the case may be. The relative GR / SDF forms will be treated as complete by the designated authorised dealer only after the entire proceeds are adjusted / received.
  • Both the transactions of sale and purchase in 'R' Returns under FET-ERS are reported separately.
  • The export / import transactions with ACU countries are kept outside the arrangement.
  • All the relevant documents are submitted to the concerned authorised dealer who should comply with all the regulatory requirements relating to the transactions.
E. Capitalisation of import payables
  • Units in SEZs are permitted to issue equity shares to non-residents against import of capital goods subject to the following :-
    • The valuation should be verified by a Committee consisting of Development Commissioner and the appropriate Customs officials.
    • The SEZ units issuing equity in the above manner should report the particulars of the shares issued in the form 'FC-GPR' prescribed under para 9 of Schedule I [Regulation 5(1)] to Notification No.FEMA.20/2000- RB dated May 3, 2000 to the concerned Regional Office under whose jurisdiction the SEZ falls, together with the copy of the valuation certificate. A copy of the report may be forwarded to Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, Government of India, Udyog Bhavan, New Delhi-110 001.
  • Necessary amendments to the Foreign Exchange Management Regulations are being notified separately.
  • These facilities will be available in respect of the shipments made on or after April 1, 2003.
  • Authorised Dealers may bring the contents of the circular to the notice of their constituents concerned.
  • The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).
Yours faithfully,
G. Padmanabhan
Chief General Manager


Date: Oct 03, 2002
Opening, holding and maintaining Foreign Currency Account in India by
Unit in Special Economic Zones (SEZs)
A.P. (DIR Series) Circular No.28 (October 3, 2002)
Reserve Bank of India
Exchange Control Department
Central Office
Mumbai - 400 001
A.P. (DIR Series) Circular No.28
October 3, 2002
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
Opening, holding and maintaining Foreign Currency Account
in India by Unit in Special Economic Zones (SEZs)
Attention of authorised dealers is invited to Notification No.FEMA.37/2001-RB dated February 27, 2001 relating to Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations, 2000 which has been amended by Notification No.FEMA.63/2002-RB dated June 21, 2002 (copy enclosed).

2. In terms of paragraph 6A of the aforesaid notification, a unit located in a Special Economic Zone may be allowed to open, hold and maintain a Foreign Currency Account with an authorised dealer in India subject to the conditions stipulated in the Notification.

3. Paragraph 5 in the Schedule of the aforesaid regulation relating to special provision for EEFC Account of a unit in a Special Economic Zone stands deleted.

4. Authorised Dealers may please bring the contents of this circular to the notice of their constituents concerned.

5. The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).

Yours faithfully,
Grace Koshie
Chief General Manager


Date: Oct 03, 2002
Reserve Bank of India
Exchange Control Department
Central Office
Mumbai - 400 001

Notification No.FEMA. 63 /2002-RB
dated June 21, 2002
Foreign Exchange Management (Foreign Currency Accounts by
a person Resident in India) ( Third Amendment) Regulations, 2002
In exercise of the powers conferred by clause (b) of Section 9 and clause (e) of sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in super session of the Notification No.FEMA.37/2001-RB dated February 27, 2001, Reserve Bank of India makes the following amendments to Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000, namely :

Short title and commencement :-
  • These Regulations may be called the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) (Third Amendment) Regulations, 2002.
  • They shall come into force on their publication in the Official Gazette.
Amendment of the Regulations
In the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000 (hereinafter referred to as "the said Regulations"), after paragraph 6 of the Regulation, the following paragraph shall be inserted, namely :

6A. Foreign Currency Account of a unit in a Special Economic Zone
A unit located in a Special Economic Zone may open hold and maintain a Foreign Currency Account with an authorized dealer in India provided that,
  • all foreign exchange funds received by the unit in the Special Economic Zone (SEZ) are credited to such account,
  • no foreign exchange purchased in India against rupees shall be credited to the account without prior permission from the Reserve Bank,
  • the funds held in the account shall be used for bonafide trade transactions of the unit in the SEZ with the person resident in India or otherwise,
  • the balances in the accounts shall be exempt from the restrictions imposed under Rule 5, except item 3 and 4 of the Schedule III, of the Government of India Notification No.GSR.381(E) dated May 3, 2000.

Provided further that the funds held in these accounts shall not be lent or made available in any manner to any person or entity resident in India not being a unit in Special Economic Zones.

The existing paragraph 5 in the Schedule of the Regulation shall be deleted.
Yours faithfully,
(K.J.Udeshi)
Executive Director


 
Date: Aug 14, 2002
Export of Goods and Services -
Facilities to units in Special Economic Zones (SEZs)
A.P. (DIR Series) Circular No.10 (August 14, 2002)

Reserve Bank of India
Exchange Control Department
Central Office
Mumbai - 400 001

A.P. (DIR Series) Circular No.10
August 14, 2002
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
Export of Goods and Services -
Facilities to units in Special Economic Zones (SEZs)
Attention of authorised dealers is invited to paragraph C.7 of A.P. (DIR Series) Circular No.12 dated September 9,2000 in terms of which authorised dealers have been advised to accede, in certain cases, to the requests of exporters for despatch of documents direct to the consignee. It has now been decided that authorised dealers may permit units in Special Economic Zones (SEZs) to despatch export documents direct to the consignees outside India subject to the conditions that (a) the export proceeds are repatriated through the authorised dealer named in the GR/SDF/PP/SOFTEX form and (b) the duplicate copy of the respective declaration form is submitted to the authorised dealer for monitoring purposes by the exporters within 21 days from the date of shipment.

Authorised Dealers may please bring the contents of this circular to the notice of their constituents concerned.

The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999).
Yours faithfully,
Grace Koshie
Chief General Manager


Date: Oct 18, 2003
External Commercial Borrowings (ECBs) by Units in Special Economic Zones
(SEZs)
A.P.(DIR Series) Circular No.29 (October 18, 2003)

Reserve Bank of India
Exchange Control Department
Central Office
Mumbai - 400 001

A.P.(DIR Series) Circular No.29
October 18, 2003
To
All Authorised Dealers in Foreign Exchange
Madam/Sirs,
External Commercial Borrowings (ECBs)
by Units in Special Economic Zones (SEZs);
Attention of Authorised Dealers is invited to the Guidelines on ECBs Policies & Procedures (1999-2000) and Press Release F.No.4(2)/2002-ECB dated September 15, 2002 issued by Government of India, Ministry of Finance (MOF) wherein units in Special Economic Zones (SEZs) are permitted to raise External Commercial Borrowings (ECBs).

It has been decided that the units in SEZs shall raise the ECBs, in compliance with the Government of India guidelines and the Press Release, referred to above and subject to the following conditions :
  • Units in SEZ shall raise ECBs for its own requirement, and
  • It shall not transfer or on-lend any borrowed funds to its sister concern or any other unit in Domestic Tariff Area (DTA).
This is consistent with ECB guidelines at para VI(b) of Government of India Press Release referred to above.

Authorised Dealers may bring the contents of this circular to the notice of their constituents concerned.

The directions contained in this circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999).
Yours faithfully,
Grace Koshie
Chief General Manager


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