Fema
Foreign Exchange Management Act(FEMA)
1999 FORMS under FEMA
Requirement for Exporters:-

Every exporter of goods or software in physical form or through any other form, either directly or indirectly, to any place outside India, other than Nepal and Bhutan, shall furnish to the specified authority, a declaration in one of the forms* set out in the Schedule and supported by such evidence as may be specified, containing true and correct material particulars including the amount representing -

(i) the full export value of the goods or software; or
(ii) if the full export value is not ascertainable at the time of export, the value which the exporter, having regard to the prevailing market conditions expects to receive on the sale of the goods or the software in overseas market, and affirms in the said declaration that the full export value of goods (whether ascertainable at the time of export or not) or the software has been or will within the specified period be, paid in the specified manner.

In respect of export of services to which none of the Forms specified in these Regulations apply, the exporter may export such services without furnishing any declaration, but shall be liable to realise the amount of foreign exchange which becomes due or accrues on account of such export, and to repatriate the same to India in accordance with the provisions of the Act, and these Regulations, as also other rules and regulations made under the Act.

FORMS*:-
Declaration in Form GR( General Reciepts) - For export otherwise than by Post including export of software in physical form i.e. magnetic tapes/discs and paper media.
  • The declaration in form GR/SDF shall be submitted in duplicate to the Commissioner of Customs.
  • After duly verifying and authenticating the declaration form, the Commissioner of Customs shall forward the original declaration form/data to the nearest office of the Reserve Bank and handover the duplicate form to the exporter for being submitted to the authorised dealer.
SDF( Statutory Declaration Fund) - For exports which have introduced EDI
  • To be completed in duplicate and appended to the shipping bill, for exports declared to Customs Offices notified by the Central Government which have introduced Electronic Data Interchange (EDI) system for processing shipping bills notified by the Central Government.
Declaration in Form PP- For export by Post
  • The declaration in form PP shall be submitted in duplicate to the authorised dealer named in the form.
  • The authorised dealer shall, after countersigning the declaration form, hand over the original form to the exporter who shall submit it to the postal authorities through which the goods are being despatched. The postal authorities after despatch of the goods shall forward the declaration form to the nearest office of the Reserve Bank.
Declaration in Form SOFTEX- For export of software otherwise than in physical form, i.e. magnetic tapes/discs, and paper media.
  • The declaration in form SOFTEX in respect of export of computer software and audio/video/television software shall be submitted in triplicate to the designated official of Department of Electronics of Government of India at the Software Technology Parks of India (STPIs) or at the Free Trade Zones (FTZs) or Export Processing Zones (EPZs) in India.
  • After certifying all three copies of the SOFTEX form, the said designated official shall forward the original directly to the nearest office of the Reserve Bank and return the duplicate to the exporter. The triplicate shall be retained by the designated official for record.

Exporters are required to generate online SOFTEX Form No. (Single as well as Bulk) for use in Off-Site Software exports, in addition to EDF Form No. through its website www.rbi.org.in . In order to generate the above number, the applicant has to fill-in the online form (Path www.rbi.org.in Forms FEMA Forms Printing EDF/SOFTEX Form No.) , thereafter, the related EDF/SOFTEX Form No. would be generated for each transaction by the applicant exporter. The specimen of online form and the advice are given in Annex III.

The Foreign Exchange Management Act (FEMA) requires exporters to complete the EDF/SOFTEX Form using the number so allotted and submit them to the specified authority first for certification and then to AD for necessary action as hitherto.

Submission of export documents :-

The documents pertaining to export shall, within 21 days from the date of export as, as the case may be, from the date of certification of SOFTEX form, be submitted to the authorised dealer mentioned in the relevant declaration form (except for reasons beyond the control of the exporter).

Period within which export value of goods/software to be realized :-

The amount representing the full export value of goods or software exported shall be realised and repatriated to India within nine months from the date of export (Date of Invoice)

Exemptions for export declaration forms :-

Notwithstanding anything contained in Regulation 3, export of goods or services may be made without furnishing the declaration in the following cases, namely:

  • Trade samples of goods and publicity material supplied free of payment.
  • Personal effects of travellers, whether accompanied or unaccompanied.
  • Ship's stores, trans-shipment cargo and goods supplied under the orders of Central Government or of such officers as may be appointed by the Central Government in this behalf or of the military, naval or air force authorities in India for military, naval or air force requirements
  • goods or software accompanied by a declaration by the exporter that they are not more than twenty five thousand USD or its equivalent in value
  • By way of gift of goods accompanied by a declaration by the exporter that they are not more than five lakh rupees in value;
  • Aircrafts or aircraft engines and spare parts for overhauling and/or repairs abroad subject to their reimport into India after overhauling /repairs, within a period of six months from the date of their export
  • Goods imported free of cost on re-export basis
  • Goods not exceeding U.S.$ 1000 or its equivalent in value per transaction exported to Myanmar under the Barter Trade Agreement between the Central Government and the Government of Myanmar

The following goods which are permitted by the Development Commissioner of the Export Processing Zones or Free Trade Zones to be re-exported, namely
  1. Imported goods found defective, for the purpose of their replacement by the foreign suppliers/collaborators
  2. Goods imported from foreign suppliers/collaborators on loan basis
  3. Goods imported from foreign suppliers/collaborators free of cost, found surplus after production operations.
  4. Replacement goods exported free of charge in accordance with the provisions of Exim Policy in force, for the time being
Requirement for Authorised Money Changer:-
Application FORM for FFMC License (u/s 10 of FEMA,1999)
Who can apply for FFMC license?
  1. The applicant has to be a company registered under the Companies Act, 1956.
  2. The minimum Net Owned Funds (NOF) required for consideration as FFMC are as follows
Category Minimum Net Owned Funds
Single branch FFMC Rs. 25 lakh.
Multiple branch FFMC Rs. 50 lakh
Note :- The Net Owned Funds of applicants, other than banks, should be calculated as per the following:
  1. Owned Funds :- (Paid-up Equity Capital + Free reserves + Credit balance in Profit & Loss A/c) minus (Accumulated balance of loss, Deferred revenue expenditure and Other intangible assets)
  2. Net Owned Funds :- Owned funds minus the amount of investments in shares of its subsidiaries, companies in the same group, all (other) non-banking financial companies as also the book value of debentures, bonds, outstanding loans and advances made to and deposits with its subsidiaries and companies in the same group in excess of 10 per cent of the Owned funds.

Following documents required alongwith the application form for FFMC License

Application in the form should be submitted to the respective Regional Office of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the applicant falls, along with the following documents:

SDF( Statutory Declaration Fund) - For exports which have introduced EDI
  1. Copy each of the Certificate of Incorporation and Certificate of Commencement of Business of the company
  2. Memorandum and Articles of Association containing a provision for undertaking money changing business or an appropriate amendment to this effect filed with the Company Law Board.
  3. Copy of the latest audited accounts with a certificate from the Statutory Auditors certifying the Net Owned Funds as on the date of application. Copies of the audited Balance Sheet and Profit & Loss Account of the company for the last three years, wherever applicable.
  4. Confidential Report from the applicant's banker in a sealed cover.
  5. A declaration to the effect that no proceedings have been initiated by / pending with the Directorate of Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the applicant company or its directors and that no criminal cases are initiated / pending against the applicant company or its directors.
  6. A declaration to the effect that proper policy framework on KYC / AML / CFT, in accordance with the guidelines issued vide A.P.(DIR Series) Circular No. 17[ A.P.(FL/RL Series) Circular No. 04] dated November 27, 2009, as amended from time to time, will be put in place on obtaining the approval of the Reserve Bank and before commencement of operations.
  7. Details of sister / associated concerns operating in the financial ector, like NBFCs, etc.
  8. A certified copy of the board resolution for undertaking money changing business.
'Fit and proper' criteria for the applicant FFMCs

If any case by DoE / DRI or any other case by any other law enforcing authorities, is initiated / pending against any company / its directors, the company will not be considered as 'fit and proper' and its application will not be considered for licencing as FFMC.

Reserve Bank’s decision in the matter of granting approval or otherwise will be final and binding.

After obtaining approval from the Reserve Bank the FFMC should have to comply with the following requirements:
  • a copy of the registration under Shops & Establishment Act or any other documentary evidence such as rent receipt, copy of lease agreement, etc. should be submitted to the Regional Office concerned of the Reserve Bank before commencement of the business.
  • The FFMC should commence its operations within a period of six months from the date of issuance of licence and inform the Regional Office concerned of the Reserve Bank.
RMC-F (Restricted Money Changer)

Guidelines for appointment of Agents / Franchisees by Authorized Dealer Category – I Banks, Authorized Dealers Category - II and FFMCs :-

Under the Scheme, the Reserve Bank permits AD Category – I Banks, ADs Category - II and FFMCs to enter into [franchisee (also referred as agency)] agreements at their option for the purpose of carrying on Restricted Money Changing business i.e. conversion of foreign currency notes, coins or travellers' cheques into Indian Rupees.

A franchisee can be any entity which has a place of business and a minimum Net Owned Funds of Rs. 10 lakh. Franchisees can undertake only restricted money changing business.

An AD Category – I Banks / ADs Category - II/ FFMC should apply to the respective Regional Office of the Reserve Bank, in Form RMC-F for appointment of franchisees under this Scheme. The application should be accompanied by a declaration that while selecting the franchisees, adequate due diligence has been carried out and that such entities have undertaken to comply with all the provisions of the franchising agreement and prevailing Reserve Bank regulations regarding money changing.

Submission of Statements to the Reserve Bank

  1. AMCs should submit to the office of the Reserve Bank which has issued the license, a monthly consolidated statement for all its offices in respect of sale and purchase of foreign currency notes in form FLM 8 so as to reach not later than the 10th of the succeeding month.
  2. Similarly RMCs should submit to the office of Reserve Bank under whose jurisdiction they are functioning, a quarterly statement in form RLM 3. The statement duly certified by the AD Category–I Banks / ADs Category–II / FFMC should reach the Reserve Bank not later than the 10th day of the month following the quarter. In case the purchased foreign currencies are surrendered to different authorized dealers / FFMCs, separate quarterly statements should be prepared to facilitate independent certification by each such authorized dealer / FFMC.
  3. AMCs should submit to the Regional Office concerned of the Foreign Exchange Department, Reserve Bank, a monthly statement indicating details of receipt / purchase of US $ 10,000 (or its equivalent) and above per transactions in the enclosed format as at Annex-XIII, within 10 days of the close of the month. FFMCs / ADs Category - II should include transactions of their franchisees in their statement.
  4. AMCs should submit a quarterly statement regarding Foreign Currency Account/s maintained in India in their names with AD Category-I Banks to the Regional Office concerned of the Foreign Exchange Department, Reserve Bank as per the format in Annex-XIV.
  5. An Annual Statement should be submitted by all the AMCs to the respective Regional Offices of the Foreign Exchange Department, Reserve Bank which have issued the licenses within one month of the financial year-end, giving the details of the amount written off during the financial year, as per the format as at Annex-XV.
Concurrent Audit :-

All single branch AMCs having a turnover of more than US $ 100,000 or equivalent per month and all multiple branch AMCs should institute a system of monthly audit. Single branch AMCs having turnover of less than US $ 100,000 or its equivalent may institute a system of quarterly audit.

Currency Declaration Form:-
  1. This form need not be completed in cases where the aggregate value of the foreign exchange brought in by the passenger in the form of currency notes, bank notes, or travellers cheques does not exceed U.S.$ 10,000/- or its equivalent and/or the value of foreign currency notes does not exceed U.S.$ 5,000 or its equivalent.
  2. Passengers are advised to produce this form to a bank authorised to deal in foreign exchange or money changer at the time of conversion of foreign exchange into Indian rupees or reconversion of rupees into foreign.
  3. Visitors to India may please note that in case they do not wish to encash all the foreign exchange declared above they should retain this form with them for production to the Customs at the time of their departure from India to enable them to take with them the unutilised balance.
  4. Details of travellers’ cheques/currency notes need not be furnished.
  5. Foreign tourists need not indicate their address.
Application for drawal of foreign exchange:-

The form A2 relating to sale of foreign exchange should be retained for a period of one year by the Authorised Persons, together with the related documents, for the purpose of verification by their Internal Auditors. 5 However, in respect of remittance applications for miscellaneous non-trade current account transactions of amount not exceeding USD 25,000, Authorised Dealers may obtain simplified Application-cum-Declaration form (Form A2) as shown at Annex -2.

Import Evidence:- ( To be obtained by Authorised dealers ):-

Authorised dealers should forward to Reserve Bank a statement on half- yearly basis as at the end of June & December of every year, in form BEF* (format enclosed) furnishing details of import transactions, exceeding USD 25,000 in respect of which importers have defaulted in submission of appropriate document evidencing import within 6 months from the date of remittance. The said half-yearly statement should be submitted to the Regional Office of Reserve Bank under whose jurisdiction the authorised dealer is functioning, within 15 days from the close of the half-year to which the statement relates.

*Form BEF- Statement showing the details of remittances effected towards import in respect of which documentary evidence has not been received despite reminders.

Requirement for Importers:-
Form A 1:-

Applications by persons, firms and companies for making payments, exceeding USD 5000 (increased from 500$ to 5000$ via A.P. (DIR Series) Circular No. 82 dated February 21, 2012) or its equivalent, towards imports into India must be made on appropriate form A 1. *

Variants of this form have been devised in different colours to be used for -

  • Remittance in foreign currency
  • Transfer of rupees to non-resident bank accounts, and
  • remittance through Asian Clearing Union.
  • Vide A. P. (DIR Series) Circular No.76 dated February 12, 2015, it has been decided to dispense with the requirement of submitting request in Form A-1 to the AD Category –I Banks for making payments towards imports into India. AD Category –I may however, need to obtain all the requisite details from the importers and satisfy itself about the bonafides of the transactions before effecting the remittance.

Time Limit for Settlement of Import Payments:-
Form A 1:-

In terms of the extant regulations, remittances against imports should be completed not later than six months from the date of shipment except in cases where amounts are withheld towards guarantee of performance etc. Deferred payment arrangements including payments beyond a period of six months from date of shipment are treated as External Commercial Borrowings (ECBs). For deferred or delayed payment imports, authorised dealers may adhere to the instructions issued vide A.P.(DIR Series) Circular No.25 dated September 27, 2002 read with regulations 5(3) of Notification No. FEMA 3/2000-RB dated 3rd May 2000.

NOTE: Remittances against import of books may be allowed without restriction as to time limit, provided, interest payment, if any, is as per the instructions in para A.7.

  • Remittance in foreign currency
  • Transfer of rupees to non-resident bank accounts, and
  • remittance through Asian Clearing Union.
  • Vide A. P. (DIR Series) Circular No.76 dated February 12, 2015, it has been decided to dispense with the requirement of submitting request in Form A-1 to the AD Category –I Banks for making payments towards imports into India. AD Category –I may however, need to obtain all the requisite details from the importers and satisfy itself about the bonafides of the transactions before effecting the remittance.

Requirement for Evidence of Import (To be furnished by Importers):-

In case of all imports, where value of foreign exchange remitted/paid for import into India exceeds USD 25,000 or its equivalent, it is obligatory on the part of the authorized dealers through whom the relative remittance was made, to ensure that the importer submits

  • The Exchange Control copy of the Bill of Entry for home consumption
  • In case of 100% Export Oriented Units the Exchange Control copy of the Bill of Entry for warehousing, or
  • Customs Assessment Certificate or Postal Appraisal Form, as declared by the importer to the Customs Authorities, where import has been made by post, as an evidence that the goods for which the payment was made have actually been imported into India.
  • Where imports are made in non-physical form, i.e., software or data through internet/datacom channels and drawings and designs through e-mail/fax, a certificate from a Chartered Accountant that the software/data/ drawing/ design has been received by the importer, may be obtained.

Note:- In case an importer does not furnish any documentary evidence of import, as required above, within 3 months from the date of remittance involving foreign exchange exceeding USD 25,000, the authorised dealer should rigorously follow-up for the next 3 months, including issue of registered letters to the importer.

Liberalised Remittance Scheme:-

AD banks may now allow remittances by a resident individual up to USD 250,000 per financial year for any permitted current or capital account transaction or a combination of both. If an individual has already remitted any amount under the LRS, then the applicable limit for such an individual would be reduced from the present limit of USD 250,000 for the financial year by the amount already remitted. The resident individual seeking to make the remittances should furnish an application cum declaration in the format indicated in Annex 2 to the AD/ full fledged money changer (FFMC) concerned regarding the purpose of the remittances and declaration to the effect that the funds belong to the remitter and will not be used for the prohibited purposes referred to in Para 4 above. Resident individuals can also purchase foreign exchange from a full fledged money changer (FFMC) for private/business visits. Foreign exchange thus purchased from an FFMC should also be reckoned within the overall LRS limit USD 250,000 and declared accordingly in the application-cum-declaration form submitted to the AD bank. The permissible capital account transactions by an individual under LRS are

  • opening of foreign currency account abroad with a bank
  • purchase of property abroad
  • making investments abroad
  • setting up Wholly owned subsidiaries and Joint Ventures abroad
  • extending loans including loans in Indian Rupees to Non-resident Indians (NRIs) who are relatives as defined in Companies Act, 2013.

( For More Details, Read Circular on LRS -A.P. (DIR Series) Circular No. 106 dated June 1, 2015)

Reporting of Loan Agreement details under FEMA Act’1999:-

The borrower is required to submit completed Form 83, in duplicate, certified by the Company Secretary (CS) or Chartered Accountant (CA) to the designated Authorised Dealer (AD). After examining conformity with the extant ECB guidelines, the AD may provide requisite details in Part F of the Form. One copy is to be forwarded by the designated AD to the Director, Balance of Payments Statistics Division, Department of Statistical Analysis and Computer Services (DESACS), Reserve Bank of India, Bandra-Kurla Complex, Mumbai – 400 051 within 7 days from the date of signing loan agreement between borrower and lender for allotment of loan registration number.

Annual Return on Foreign Liabilities and Assets(FLA):-

All Indian companies which have received FDI (foreign direct investment) and/or made FDI abroad (i.e. overseas investment) in the previous year(s) including the current year, should file the annual return on Foreign Liabilities and Assets (FLA) in the soft form to the Reserve Bank by July 15 every year.

If the company’s accounts are not audited before the due date of submission, i.e. July 15, then the FLA Return should be submitted based on unaudited (provisional) account. Once the accounts gets audited and there are revisions from the provisional information submitted by the company, they are supposed to submit the revised FLA return based on audited accounts by end - September.

If the company has not ‘received any fresh FDI and/or ODI (overseas direct investment)’ in the latest year but the company has outstanding FDI and/or ODI, then that company is also required to submit the FLA Return every year by July 15.

If the Partnership firms, Branches or Trustees have any outward FDI outstanding as on end-March of the reporting year, then they are required to send a request mail to get a dummy CIN number which will enable them to file the Excel based FLA Return. If any entity has already got the dummy CIN number from the previous survey, they should use the same CIN number in the current survey also.

Note:- It is also informed that these dummy CIN numbers are provided by RBI for filling the excel based FLA return only and not for any other purpose.

Reports by Authorised Dealers to Reserve Bank:-
FTD (Fixed Term Deposit)Statement & GPB Statement:-

The Head/Principal Office of each authorised dealer should submit to the Chief General Manager, Foreign Exchange Department (Forex Markets Division), Reserve Bank of India, Central Office, Mumbai 400 001 daily statements of foreign exchange turnover in Form FTD and Gaps position and cash balances in Form GPB as per Annex III. These statements should be transmitted online through wide area network (WAN). The data for a particular date has to reach the RBI by the close of business of the following working day.

Following are to be reported in FTD Statement:-:-
  • SPOT- Cash and tom transactions are to be included under ‘Spot’ transactions.
  • SWAP- Only foreign exchange swaps between authorised dealers should be reported under swap transactions. Long term swaps (both cross currency and foreign currency-rupee swaps) should not be included in this report. Swap transactions should be reported only once and should not be included under either the ‘spot’ or ‘forward’ transactions. Buy/Sell swaps should be included in the ‘Purchase’ side under ‘Swaps’ while Sell/buy swaps should figure on the ‘Sale’ side.
  • Cancellation of forwards- The amount required to be reported under cancellation of forward contracts against purchases from merchants should be the aggregate of cancelled forward merchant sale contracts by authorised dealers (adding to the supply in the market). On the sale side of cancelled forward contracts, aggregate of the cancelled forward purchase contracts should be indicated (adding to the demand in the market).
  • ‘FCY/FCY’ transactions- Both the legs of the transactions should be reported in the respective columns. For example in a EUR/USD purchase contract, the EUR amount should be included in the purchase side while the USD amount should be included in the sale side.
  • Transactions with RBI should be included in inter-bank transactions. Transactions with financial institutions other than banks authorised to deal in foreign exchange should be included under merchant transactions.

Following are to be reported in GPB Statement:-

  • Foreign Currency Balances -: Cash balances and investments in all foreign currencies should be converted into US dollars and reported under this head.
  • Net open exchange position- This should indicate the overall overnight net open exchange position of the authorised dealer in Rs Crore. The net overnight open position should be calculated on the basis of the instructions given in the Master Circular.
  • Of the above FCY/INR- The amount to be reported is the position against the rupee- i.e. the net overnight open exchange position less cross currency position, if any.
MTSS:-

Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. Only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permissible. No outward remittance from India is permissible under MTSS.

A quarterly statement of the volume of remittances received, as per the enclosed format ( Remittances received under MTSS Statement Qtly)should be furnished to the Regional Office concerned of the Reserve Bank within 15 days from the close of the quarter to which it relates.

Reporting by ADs-Category II:-

The ADs-Category II are required to submit the following monthly statements of transactions:-

  • Category-wise statement of transactions where the amount exceeds USD 5,000 per transaction initially, so that a review could be made of the threshold in six months and a firmer threshold may be arrived at.
  • Category-wise, transaction-wise statement where the amount exceeds US $ 25,000 per transaction.

The reports should be sent to the Chief General Manager, Foreign Exchange Department, Forex Markets Division, Central Office, Amar Bhawan, Mumbai-400 001 by the15th of the following month.

St. of Cross currency Der ( To be provided by all Authorised Dealers ):-
  • All authorised dealers are required to forward reports containing full details of transactions undertaken by residents in respect of cross-currency (i.e. not involving Indian Rupee) derivative products to the respective Regional Offices of Reserve Bank within a week of their conclusion.
  • In modification of the direction, ADs are advised that in place of sending a separate report for each transaction for cross-currency derivatives, they may consolidate the data and a half-yearly report in the format given, may be forwarded to the Chief General Manager, Exchange Control Department, Forex Markets Division, Central Office, Mumbai.
Statement of Import/ Export Turnover:-

Details of the import/export turnover of the past three years, delayed realisations/payments during these years and existing limits, duly authenticated by the authorised dealer, may also be furnished in the enclosed format.

Statement of Nostro, Vostro Bal.:-

The Head/Principal Office of each authorised dealer should forward a statement of Nostro/Vostro Account balances on a monthly basis in the format given to the Director, Division of International Finance, Department of Economic Analysis and Policy, Reserve Bank of India, Central Office Building, 8th Floor, Fort, Mumbai-400 001.The data may also be transmitted by fax or e-mail at the numbers/addresses given in the format.

Statement of Overseas Fcy Borrowings:-

Authorised dealers have to report their total outstanding foreign currency borrowings under all categories as on the last Friday of every month to The Chief General Manager, Foreign Exchange Department (Forex Markets Division), Amar Building, Central Office, Reserve Bank of India, Mumbai-400 001.as per the format. The report should be receivedby the 10th of the following month.

Application for obtaining permission to enter into Rupee/Foreign Currency Drawing Arrangements with Exchange Houses.:-

Under the Rupee Drawing Arrangements (RDAs), cross-border inward remittances are received in India through Exchange Houses situated in Gulf countries, Hong Kong, Singapore, Malaysia (for Malaysia only under Speed Remittance Procedure) and all other countries which are FATF compliant (for all other countries which are FATF compliant only under Speed Remittance Procedure). AD Category–I banks should apply to the Reserve Bank in the form provided with necessary documents for the first time they enter into RDAs(Rupee Drawing Arrangements ) with non – resident Exchange Houses from Gulf countries, Hong Kong, Singapore, Malaysia and all other countries which are FATF compliant, for opening and maintaining in India the Rupee vostro accounts of those non – resident Exchange Houses.

Reports / Statements:-

Under the Rupee Drawing Arrangements (RDAs), cross-border inward remittances are received in India through Exchange Houses situated in Gulf countries, Hong Kong, Singapore, Malaysia (for Malaysia only under Speed Remittance Procedure) and all other countries which are FATF compliant (for all other countries which are FATF compliant only under Speed Remittance Procedure). AD Category–I banks should apply to the Reserve Bank in the form provided with necessary documents for the first time they enter into RDAs(Rupee Drawing Arrangements ) with non – resident Exchange Houses from Gulf countries, Hong Kong, Singapore, Malaysia and all other countries which are FATF compliant, for opening and maintaining in India the Rupee vostro accounts of those non – resident Exchange Houses.

  • Statement A : This statement (as at Annex-II) is designed to elicit details of operations in Rupee/ foreign currency vostro accounts of Exchange Houses and has to be prepared every month Exchange House-wise. This statement should be critically examined to ascertain whether funds held in the account are adequate to cover estimated pipeline debits. The Top Managements of the ADs Category-I may work out the pipeline data and set their own limits. The adherence to the limits set should be informed to the Top Management on a quarterly basis.
  • Statement B : This is a consolidated half-yearly statement (as at Annex-III) showing position of Rupee/ foreign currency vostro accounts of Exchange Houses which are to be closed/ are in the process of closure.
  • Statement C : This is a monthly statement (as at Annex- IV) giving information regarding Exchange House’s account held at overseas branches of Indian banks under DDA/ Non-DDA procedures for holding collection proceeds and additional collaterals.
  • Statement D : This monthly statement (as at Annex- V) provides information about operations in the foreign currency vostro account of the Exchange House.

    Note - While statements A to D are not required to be submitted to the Reserve Bank, ADs Category-I should prepare these statements and cause inspections at the prescribed periodicities. The relative statements/ reports should invariably be submitted to their respective Top Managements with suitable explanatory notes indicating corrective measures taken/ being initiated wherever necessary.

  • Statement E : This statement (as at Annex- VI) is designed to collect statistical information on total remittances received every quarter and the growth of business. This quarterly statement is required to be submitted to the Principal Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Central Office, Forex Markets Division, Mumbai- 400001 before 15th of the succeeding month to which the quarter relates.
Reporting of ADR/GDR Issues:-

The Indian company issuing ADRs / GDRs has to furnish to the Reserve Bank, full details of such issue in the Form named Return to be filed by an Indian Company who has arranged issue of ADR/GDR, within 30 days from the date of closing of the issue. The company should also furnish a quarterly return in the Form namely Return to be filed by Issuer/Transferor who has arranged issue/transfer of Depository Reciepts, to the Reserve Bank of the close of the calendar quarter. The quarterly return has to be submitted till the entire amount raised through ADR/GDR mechanism is either repatriated to India or utilized abroad as per the extant Reserve Bank guidelines.

FC-GPR & FC-TRS:-
  • An Indian company receiving investment from outside India for issuing shares / convertible debentures / preference shares/ warrants under the FDI Scheme, should report the details of the amount of consideration (including each upfront/call payment) to the Regional Office concerned of the Reserve Bank through it’s AD Category I bank, not later than 30 days from the date of receipt in the Advance Reporting Form. Non-compliance with the above provision would be reckoned as a contravention under FEMA, 1999 and could attract penal provisions.
  • Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures/ warrants , through an AD Category - I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report. on the non-resident investor from the overseas bank remitting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported.
  • The equity instruments should be issued within 180 days from the date of receipt of the inward remittance or by debit to the NRE/FCNR (B) /Escrow account of the non-resident investor. In case, the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B)/Escrow account, as the case may be. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions. In exceptional cases, refund / allotment of shares for the amount of consideration outstanding beyond a period of 180 days from the date of receipt may be considered by the Reserve Bank, on the merits of the case.
  • After issue of shares (including bonus and shares issued on rights basis and shares issued on conversion of stock option under ESOP scheme)/ partly paid shares to the extent equity shares are called up/ convertible debentures / convertible preference shares/warrants to the extent equity shares are called up , the Indian company has to file Form FC-GPR through it’s AD Category I bank, not later than 30 days from the date of issue of shares. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions.
  • Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorised Dealer of the company, who will forward it to the concerned Regional Office of the Reserve Bank.

The following documents have to be submitted along with Form FC-GPR:

  1. A certificate from the Company Secretary of the company certifying that :
    a. all the requirements of the Companies Act, 1956 have been complied with; b. terms and conditions of the Government’s approval, if any, have been complied with; c. the company is eligible to issue shares under these Regulations; and d. the company has all original certificates issued by AD banks in India evidencing receipt of amount of consideration.
  2. A certificate from SEBI registered Merchant Banker or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
  3. The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated.
  4. Issue of bonus/rights shares or shares on conversion of stock options issued under ESOP to persons resident outside India directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs has to be reported in Form FC-GPR.
FC-TRS:-
  • The actual inflows and outflows on account of such transfer of shares shall be reported by the AD branch in the R-returns in the normal course.
  • Reporting of transfer of shares/ convertible debentures and partly paid shares and warrants to the extent the equity shares are called up between residents and non-residents and vice- versa is to be made in Form FC-TRS. The Form FC-TRS should be submitted to the AD Category – I bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India. However, the onus of reporting the purchase of shares by non-residents/NRIs on the recognised stock exchanges in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations shall be on the investee company. AD Category-I bank shall approach Regional Office concerned of Reserve Bank of India, Foreign Exchange Department to regularize the delay in submission of form FC-TRS, beyond the prescribed period of 60 days and in all other cases, form FC-TRS shall continue to be scrutinised at AD bank level as per extant practice.
  • The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a KYC check by the remittance receiving AD Category – I bank at the time of receipt of funds. In case, the remittance receiving AD Category – I bank is different from the AD Category - I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category – I bank carrying out the transaction along with the Form FC-TRS.
  • The AD bank should scrutinise the transactions and on being satisfied about the transactions should certify the form FC-TRS as being in order.
  • The AD bank branch should submit two copies of the Form FC-TRS received from their constituents/customers together with the statement of inflows/outflows on account of remittances received/made in connection with transfer of shares, by way of sale, to IBD/FED/or the nodal office designated for the purpose by the bank in the enclosed proforma (which is to be prepared in MS-Excel format). The IBD/FED or the nodal office of the bank will consolidate reporting in respect of all the transactions reported by their branches into two statements inflow and outflow statement. These statements (inflow and outflow) should be forwarded on a monthly basis to Foreign Exchange Department, Reserve Bank, Foreign Investment Division, Central Office, Mumbai in soft copy (in MS- Excel) by e-mail. The bank should maintain the FC-TRS forms with it and should not forward the same to the Reserve Bank of India.
  • The transferee/his duly appointed agent should approach the investee company to record the transfer in their books along with the certificate in the Form FC-TRS from the AD branch that the remittances have been received by the transferor/payment has been made by the transferee. On receipt of the certificate from the AD, the company may record the transfer in its books.
  • On receipt of statements from the AD bank , the Reserve Bank may call for such additional details or give such directions as required from the transferor/transferee or their agents, if need be.
Form FDI (Foreign Direct Investment) in an LLP (Limited Liability Partnership)

FDI in an LLP either by way of capital contribution or by way of acquisition / transfer of ‘profit shares’, would have to be more than or equal to the fair price as worked out with any valuation norm which is internationally accepted/ adopted as per market practice (hereinafter referred to as “fair price of capital contribution/profit share of an LLP”) and a valuation certificate to that effect shall be issued by a Chartered Accountant or by a practicing Cost Accountant or by an approved valuer from the panel maintained by the Central Government.

In case of transfer of capital contribution/profit share from a resident to a non-resident, the transfer shall be for a consideration equal to or more than the fair price of capital contribution/profit share of an LLP. Further, in case of transfer of capital contribution/profit share from a non-resident to a resident, the transfer shall be for a consideration which is less than or equal to the fair price of the capital contribution/profit share of an LLP.

Mode of payment for an eligible investor:

Payment by an eligible investor towards capital contribution/profit share of LLPs will be allowed only by way of cash consideration to be received -

  • by way of inward remittance through normal banking channels; or
  • by debit to NRE/FCNR(B) account of the person concerned, maintained with an AD Category - I bank.

LLPs shall report to the Regional Office concerned of the Reserve Bank, the details of the receipt of the amount of consideration for capital contribution and profit shares in Form FOREIGN DIRECT INVESTMENT-LLP(I) , together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report on the non-resident investor, through an AD Category – I bank, and valuation certificate as regards pricing at the earliest but not later than 30 days from the date of receipt of the amount of consideration. The report would be acknowledged by the Regional Office concerned, which would allot a Unique Identification Number (UIN) for the amount reported.

  • The AD Category – I bank in India, receiving the remittance should obtain a KYC report in respect of the foreign investor from the overseas bank remitting the amount.
  • Disinvestment / transfer of capital contribution or profit share between a resident and a non-resident (or vice versa) shall require to be reported within 60 days from the date of receipt of funds in Form FOREIGN DIRECT INVESTMENT-LLP(II).
Stat of Exposure of Corporates in foreign currency & Report on exposures of corporates in foreign currency

A person resident in India may enter into a forward contract with an Authorised Dealer Category-I bank (AD Category I bank) in India to hedge an exposure to exchange risk in respect of a transaction for which sale and/or purchase of foreign exchange is permitted under the Foreign Exchange Management Act, 1999 or rules or regulations or directions or orders made or issued .

All forward contracts with Rupee as one of the currencies, booked to cover foreign exchange exposures, falling due within one year, can be freely cancelled and rebooked. All forward contracts, involving the Rupee as one of the currencies, booked by residents to hedge current account transactions, regardless of tenor, may be allowed to be cancelled and rebooked freely. This relaxation will not be applicable to forward contracts booked on past performance basis without documents as also forward contracts booked to hedge transactions denominated in foreign currency but settled in INR, where the current restrictions will continue.

The format in which corporate exposures are required to be reported is given in Stat of Exposure of Corporates in foreign currency. The details of exposures of all corporate clients have to be included in the report. Further, the facility of cancellation and rebooking should not be permitted unless the corporate has submitted the required exposure information. All non- INR forward contracts can be freely re-booked on cancellation.

Authorised Dealers Category-I should forward details of exposures in foreign exchange as on 1st April every year as per the format in Report on exposures of corporates in foreign currency to the Chief General Manger, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Mumbai, 400 001. Please note that details of exposures of all corporate clients have to be included in the report

Statement of Forward Contract based on past performance

AD Category-I banks are required to submit a monthly report (as on the last Friday of every month) on the limits granted and utilized by their constituents under the facility of booking forward contracts on past performance basis, as per the format. The report may be forwarded to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, , Amar Building, 5th Floor, Mumbai-400 001 and by e-mail so as to reach the Department by the 10th of the following month.

Statement – Details of Forward cover undertaken by FII clients

A monthly statement should be furnished to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Forex Markets Division, Central Office, Amar Building, 5th Floor Mumbai-400 001, before the 10th of the succeeding month, in respect of cover taken by FIIs, indicating the name of the FII / fund, the eligible amount of cover, the actual cover taken, etc. as per the format.

Establishment of Branch/Liaison/Project Offices in India by Foreign Entities

A body corporate incorporated outside India (including a firm or other association of individuals), desirous of opening a Liaison Office (LO) / Branch Office (BO) in India have to obtain permission from the Reserve Bank under provisions of FEMA 1999. The applications from such entities in Form FNC will be considered by Reserve Bank under two routes:

Reserve Bank Route — Where principal business of the foreign entity falls under sectors where 100 per cent Foreign Direct Investment (FDI) is permissible under the automatic route.

Government Route — Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non - Government Organisations / Non - Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.

The following additional criteria are also considered by the Reserve Bank while sanctioning Liaison/Branch Offices of foreign entities:

Track Record

For Branch Office — a profit making track record during the immediately preceding five financial years in the home country.

For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country.

Government Route — Where principal business of the foreign entity falls under the sectors where 100 per cent FDI is not permissible under the automatic route. Applications from entities falling under this category and those from Non - Government Organisations / Non - Profit Organisations / Government Bodies / Departments are considered by the Reserve Bank in consultation with the Ministry of Finance, Government of India.

  • Net Worth [total of paid-up capital and free reserves, less intangible assets as per the latest Audited Balance Sheet or Account Statement certified by a Certified Public Accountant or any Registered Accounts Practitioner by whatever name]. (a) For Branch Office — not less than USD 100,000 or its equivalent. (b) For Liaison Office — not less than USD 50,000 or its equivalent. The application for establishing BO / LO in India should be forwarded by the foreign entity through a designated AD Category - I bank to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, New Delhi Regional Office, 6, Parliament Street, New Delhi-110 001, India, along with the prescribed documents including
  • English version of the Certificate of Incorporation / Registration or Memorandum & Articles of Association attested by Indian Embassy / Notary Public in the Country of Registration.
  • Latest Audited Balance Sheet of the applicant entity.

Applicants who do not satisfy the eligibility criteria and are subsidiaries of other companies can submit a Letter of Comfort from their parent company as per the FORMAT for LETTER OF COMFORT for LO/BO, subject to the condition that the parent company satisfies the eligibility criteria as prescribed above. The designated AD Category - I bank should exercise due diligence in respect of the applicant’s background, antecedents of the promoter, nature and location of activity, sources of funds, etc. and also ensure compliance with the KYC norms before forwarding the application together with their comments/ recommendations to the Reserve Bank.

The Branch / Liaison offices established with the Reserve Bank's approval will be allotted a Unique Identification Number (UIN). The BOs / LOs shall also obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up the offices in India.

Permission to set up such offices is initially granted for a period of 3 years and this may be extended from time to time by an AD Category I bank.

The designated AD Category - I bank may extend the validity period of LO/s for a period of 3 years from the date of expiry of the original approval / extension granted by the Reserve Bank, if the applicant has complied with the conditions stipulated in Circular: RBI/2015-16/54 Master Circular No.7/2015-16 dated July 01, 2015(updated as on October 30, 2015) and the application is otherwise in order.

For Liaison Office — a profit making track record during the immediately preceding three financial years in the home country.

All new entities setting up LO/BO shall submit a report containing information, as per format provided in Format of Report to DG of Police for LO/BO within five working days of the LO/BO becoming functional to the Director General of Police (DGP) of the state concerned in which LO/BO has established its office; if there is more than one office of such a foreign entity, in such cases to each of the DGP concerned of the state where it has established office in India.

Branch Offices / Liaison Offices have to file Annual Activity Certificates for LO/BO(AAC) from Chartered Accountants, at the end of March 31, along with the audited Balance Sheet on or before September 30 of that year. In case the annual accounts of the LO/ BO are finalized with reference to a date other than March 31, the AAC along with the audited Balance Sheet may be submitted within six months from the due date of the Balance Sheet to the designated AD Category I bank, and a copy to the Directorate General of Income Tax (International Taxation), New Delhi along with the audited financial statements including receipt and payment account.

The certificates are to be filed by the following offices as applicable:

  • In case of a sole BO/LO, by the BO/LO concerned
  • In case of multiple BO/LO, a combined Annual Activity Certificate in respect of all Offices in India by the Nodal Office of the BO/LOs.

The designated AD Category - I bank shall scrutinize the Annual Activity Certificate and ensure that the activities undertaken by the BO/LO are being carried out in accordance with the terms and conditions of the approval given by the Reserve Bank. In the event of any adverse findings being reported by the Auditor or noticed by the designated AD Category -I bank, the same should be reported immediately by the designated AD Category–I bank to the respective Regional Office of the Reserve Bank in respect of LOs and to the Central Office of the Reserve Bank in the case of BOs, along with the copy of the Annual Activity Certificate and their comments thereon.

A copy of the report in Format of Report to DG of Police for LO/BO shall be filed with the DGP concerned on annual basis along with a copy of the Annual Activity Certificate, and also with the AD concerned.

Quartely Statement –Details of Guarantees availed of from non-residents for fund and non-fund based facilities and details of guarantees invoked.

Borrowing and lending of Indian Rupees between two persons resident in India does not attract the provisions of the Foreign Exchange Management Act, 1999. In case where a Rupee loan is granted against the guarantee provided by a person resident outside India, there is no transaction involving foreign exchange until the guarantee is invoked and the non-resident guarantor is required to meet the liability under the guarantee. The Reserve Bank vide Notification No. FEMA 29/2000-RB dated September 26, 2000 has granted general permission to a person resident in India, being a principal debtor, to make payment to a person resident outside India, who has met the liability under a guarantee.

On a review, it has been decided to extend the facility of non-resident guarantee under the general permission for non-fund based facilities (such as Letters of Credit/guarantees/Letter of Undertaking (LoU) /Letter of Comfort (LoC) ) entered into between two persons resident in India. The method of discharge of liability by the nonresident guarantor under the guarantee and the subsequent repayment of the liability by the principal debtor would continue, as hitherto, as detailed in A.P. (DIR Series) Circular No. 28 dated March 30, 2001.

It has also been decided to introduce a reporting format to capture such guarantees issued and invoked. Authorized Dealer Category-I banks are required to furnish such details by all its branches, in a consolidated statement, during the quarter, as per the format to the Chief General Manager, Foreign Exchange Department, ECB Division, Reserve Bank of India, Central Office Building, 11th floor, Fort, Mumbai – 400 001 (and in MS-Excel file through email) so as to reach the Department not later than 10th day of the following month.

External Commercial Borrowings and Trade Credit

ECBs refer to commercial loans in the form of bank loans, securitized instruments (e.g. floating rate notes and fixed rate bonds, nonconvertible, optionally convertible or partially convertible preference shares), buyers’ credit, suppliers’ credit availed of from non-resident lenders with a minimum average maturity of 3 years.

ECB can be accessed under two routes, viz., (i) Automatic Route and (ii) Approval Route

Under Approval Route, Applicants (eligible borrowers) are required to submit an application in form ECB Application for raising External Commercial Borrowings (ECB) under Approval Route through designated AD bank to the Principal Chief General Manager, Foreign Exchange Department, Reserve Bank of India, Central Office, External Commercial Borrowings Division, Mumbai – 400 001, along with necessary documents.

Conversion of ECB may be reported to the Reserve Bank as follows:

  • Borrowers are required to report full conversion of outstanding ECB into equity in the form FC-GPR to the Regional Office concerned of the Reserve Bank as well as in form Reporting of Actual Transcations of ECB submitted to the Department of Statistics and Information Management (DSIM), RBI within seven working days from the close of month to which it relates. The words "ECB wholly converted to equity" should be clearly indicated on top of the form. Once reported, filing of above said in the subsequent months is not necessary.
  • In case of partial conversion of outstanding ECB into equity, borrowers are required to report the converted portion in form FC-GPR to the Regional Office concerned as well as in form Reporting of Actual Transcations of ECB clearly differentiating the converted portion from the unconverted portion. The words "ECB partially converted to equity" should be indicated on top of the form. In subsequent months, the outstanding portion of ECB should be reported in form to DSIM.
TRADE CREDITS FOR IMPORTS INTO INDIA

Trade Credits (TC) refer to credits extended for imports, permissible under the extant Foreign Trade Policy, directly by the overseas supplier, bank and financial institution for maturity up to five years. Depending on the source of finance, such trade credits include suppliers’ credit or buyers’ credit. Suppliers’ credit relates to credit for imports into India extended by the overseas supplier, while buyers’ credit refers to loans for payment of imports into India arranged by the importer from a bank or financial institution outside India.

AD banks are required to furnish details of approvals, drawal, utilisation, and repayment of trade credit granted by all its branches, in a consolidated statement, during the month, in form TC- Approval of Trade Credit from April 2004 onwards to the Director, Division of International Trade and Finance, Department of Economic Policy and Research, Reserve 44 Bank of India, Central Office Building, 8th floor, Fort, Mumbai – 400 001 (and in MS-Excel file through email) so as to reach not later than 10th of the following month. Each trade credit may be given a unique identification number by the AD bank.

AD banks are required to furnish data on issuance of LCs / Guarantees / LoU / LoC by all its branches, in a consolidated statement, at quarterly intervals namely Statement of Guarantees/ LoU / LoC issued by Authorised Dealer banks for trade Credit to the Principal Chief General Manager, Foreign Exchange Department, ECB Division, Reserve Bank of India, Central Office Building, 11th floor, Fort, Mumbai – 400 001 (and in MS-Excel file through email) from December 2004 onwards so as to reach the Department not later than 10th of the following month.

Contact information form for creation of user id-EDPMS

As of now, AD banks are submitting the various returns like XOS (export outstanding statements), ENC (Export Bills Negotiated / sent for collection) for acknowledgement of receipt of Export documents, Sch.3 to 6 (realization of export proceeds), EBW (write-off of export bills), ETX (extension of realization of export bills) relating to Export transaction under FEMA to RBI. These various returns are being managed on a different solo application or manually.With a view to simplify the procedure for filling various returns and for better monitoring, a comprehensive IT- based system called EDPMS has been developed which will facilitate the banks to report all the above mentioned returns through a single platform. In the new system, the primary data on exports transactions including offsite software exports from all the sources viz. Customs/SEZ/STPI will flow to RBI secured server and then the same will be shared with the respective banks for follow up with the exporters. Subsequently, the document submission and realization data will be reported back by the AD banks to RBI through the same secured RBI server so as to update the RBI database on real time basis to facilitate quicker follow up/ data generation. The AD banks are required to download and upload the data on daily basis. The system will also facilitate the Authorised Dealer to raise the Authorised Dealer (AD) transfer request in case of Export document submitted to the Authorised Dealers other than declared in the export document which will discontinue the paper based NOC issued by the AD banks. AD banks have to approve/disapprove the AD transfer request within 7 days from date of request.

The date of inception of the system along with user credentials and web link for accessing the system would be communicated to the AD banks shortly through e-mail. For user name and password, AD banks are advised to submit a fill-in form named Contact information form for creation of user id-EDPMS through E-mail .

Compounding Application Form and related document requirements

The provisions of Section 15 of FEMA, 1999 permit compounding of contraventions and empower the Compounding Authority to compound any contravention as defined under Section 13 of the Act on an application made by the person committing such contravention.

An application for compounding of a contravention under FEMA, 1999 may be submitted to the Compounding Authority (CA) on being advised of a contravention under FEMA, 1999, either through a memorandum or suo moto on being made or on becoming aware of the contravention. The format of the application is appended to the Foreign Exchange (Compounding Proceedings) Rules, 2000.

Along with the application in the prescribed format, the applicant may also furnish the details as per the enclosed Annexes in the relevant form relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as applicable, a copy of the Memorandum of Association and latest audited balance sheet along with an undertaking that they are not under investigation of any agency such as DOE, CBI, etc. in order to complete the compounding process within the time frame.

Contraventions relating to any transaction where proper approvals or permission from the Government or statutory authority concerned, as the case may be, have not been obtained, such contraventions would not be compounded unless the required approvals are obtained from the authorities concerned.

In case the application has to be returned for this reason or any other reason, the application fees of Rs.5000/- received along with the application fees is also returned. To expedite the refund of compounding fees in such cases, it has been decided to credit the same to the applicant’s account through NEFT. The applicants are advised to furnish their mandate and details of their bank account as per Annex along with the 11 application in the prescribed format and other documents required to be submitted.

Reporting of Outward Remittances under ESOP

Authorised Dealer banks have been delegated authority to allow remittances, without any monetary limit, for ESOPs provided that the foreign company offering ESOPs holds not less than 51% stake in the Indian Company either directly or indirectly (i.e. through a SPV or step down subsidiary). Such remittances are, however, allowed directly to the Company offering shares under ESOP scheme. However, the foreign company requires prior permission of the Reserve Bank to repurchase the shares from the employees, issued under ESOP scheme.

Authorised Dealer banks may allow remittance for acquiring shares under ESOP Schemes, irrespective of the method of the operationalisation of the scheme. It would, therefore, be in order for Authorised Dealer banks to allow remittance for acquiring shares under ESOP scheme, where the shares under the scheme are offered directly by the issuing company or indirectly through a trust / a Special Purpose Vehicle (SPV) / step down subsidiary, provided (i) the company issuing the shares effectively, directly or indirectly, holds in the Indian company, whose employees / directors are being offered shares, not less than 51% of its equity, (ii) the shares under the ESOP Scheme are offered by the issuing company globally on uniform basis, and (iii) An Annual Return is submitted by the Indian company to the Reserve Bank through the Authorised Dealer banks giving details of remittances / beneficiaries / etc., as per form prescribed. It has further been decided to grant General Permission to foreign companies to repurchase the shares issued to residents in India under any ESOP scheme provided (i) the shares were issued in accordance with the Rules / Regulations framed under Foreign Exchange Management Act, 1999, (ii) the shares are being repurchased in terms of the initial offer document and, (iii) An Annual Return is submitted through the Authorised Dealer banks giving details of remittances / beneficiaries / etc., as per form prescribed.

Direct Investment in Joint Venture/Wholly Owned Subsidiary Overseas(WOS) Approval/Reporting of Outward Remiitances

In terms of Regulation 6 of the Notification, an Indian party has been permitted to make investment / undertake financial commitment in overseas Joint Ventures (JV) / Wholly Owned Subsidiaries (WOS), as per the ceiling prescribed by the Reserve Bank from time to time. An Indian party means a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act, 1932 or a Limited Liability Partnership (LLP) incorporated under the Limited Liability Partnership Act, 2008 making investment in a Joint Venture or Wholly Owned Subsidiary abroad.

With effect from July 03, 2014, the limit of Overseas Direct Investments (ODI)/ Financial Commitment (FC) to be undertaken by an Indian Party under the automatic route has been restored to the limit prevailing, as per the extant FEMA provisions, prior to August 14, 2013. It has, however, been decided that any financial commitment exceeding USD 1 (one) billion (or its equivalent) in a financial year would require prior approval of the Reserve Bank even when the total FC of the Indian Party is within the eligible limit under the automatic route (i.e., within 400% of the net worth as per the last audited balance sheet)

The Indian party should approach an Authorised Dealer Category - I bank with an application in Form ODI and prescribed enclosures / documents for effecting remittances towards such investments / financial commitments.

Acquisition of immovable property by person resident outside India for carrying on a permitted activity

A person resident outside India who has established a Branch, Office or other place of business, excluding a Liaison Office, for carrying on in India any activity in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000 may –

  • acquire any immovable property in India, which is necessary for or incidental to carrying on such activity, provided that all applicable laws, rules, regulations or directions for the time being in force are duly complied with; and the person files with the Reserve Bank a declaration in the form IPI, not later than ninety days from the date of such acquisition; and
  • transfer by way of mortgage to an Authorised Dealer as a security for any borrowing, the immovable property acquired in pursuance of clause (a) above
Statement of Forward Contracts SMEs & Ind

AD Category – I banks are required to submit a quarterly report on the forward contracts booked & cancelled by SMEs and Resident Individuals, to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Central Office, Forex Markets Division, Amar Building, 5th Floor, Mumbai - 400 001 within the first week of the following month, as per format given.

Stat of FcyINR option reports, Stat of Long term FcyINR Swap

In terms of paragraph (1) (iv) of section B contained in the Annex to the circular A.P. (DIR Series) circular no. 32 dated December 28, 2010, eligible residents can enter into FCY‐INR swaps to hedge exchange rate and/or interest rate risk exposure arising out of long‐term foreign currency borrowing or to transform long‐term INR borrowing into foreign currency liability, subject to operational guidelines, terms and conditions listed thereunder. As per condition listed at (e), swap transactions, once cancelled, shall not be rebooked or reentered, by whichever mechanism or by whatever name called.

To permit greater flexibility to the residents borrowing in foreign currency, it has been decided that in cases where the underlying is still surviving, the client, on cancellation of the swap contract, may be permitted to re‐enter into a fresh FCY‐INR swap to hedge the underlying but only after the expiry of the tenor of the original swap contract that had been cancelled.

Authorised Dealers Category I should forward details of option transactions (fcyINR) undertaken on a weekly basis as per the format indicated in Stat of FcyINR option reports.

Authorised Dealers Category I should forward details of all swap transactions on a weekly basis in the format given Stat of Long term FcyINR Swap.

Statement on Commodity Hedging Domestic Transactions

Residents in India are permitted, with prior approval of the Reserve Bank, to enter into contracts in commodity exchanges or markets outside India to hedge the price risk in a commodity, subject to certain terms and conditions. Further,companies listed on a recognised stock exchange can be permitted by selected AD Category – I banks to hedge the price risk in respect of any commodity (except gold, silver, petroleum and petroleum products) in international commodity exchanges / markets. However, hedging the price risk on domestic sale / purchase transactions in the international exchanges / markets is not permitted, even if the domestic price is linked to the international price of the commodity.

AD Category – I banks, which have specifically been authorised by Reserve Bank in this regard,may, henceforth, permit domestic producers / users to hedge their price risk on aluminium, copper, lead, nickel and zinc in international commodity exchanges, based on their underlying economic exposures. Hedging may be permitted up to the average of previous three financial years' (April to March) actual purchases / sales or the previous year's actual purchases / sales turnover, whichever is higher, of the above commodities. Further, only standard exchange traded futures and options (purchases only) may be permitted

AD Category – I banks, which have specifically been authorised by Reserve Bank in this regard, may also permit actual users of aviation turbine fuel (ATF) to hedge their economic exposures in the international commodity exchanges based on their domestic purchases. Reserve Bank has received representations from domestic users of ATF for permission to hedge their economic exposure through OTC products as well since ATF or its close substitutes are not traded on the exchanges.According to the domestic users, the hedging of their exposures to price risk on ATF indirectly through the exchange traded products, such as crude oil, heating oil, etc., may not achieve perfect hedges. Accordingly, if the risk profile warrants, the actual users of ATF may also use OTC contracts. AD Category – I banks should ensure that permission for hedging ATF is granted only against firm orders and the necessary documentary evidence should be retained by them.

AD Category – I banks which have been granted permission to approve commodity hedging are required to submit a monthly report to the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Central Office, Forex Markets Division, Amar Building, 5th Floor, Mumbai-400001, within first week of following month, as per format given in the Statement on Commodity Hedging Domestic Transactions .

COMPOUNDING AND PENALITIES UNDER FEMA :-

In terms of Section 13(1) , Chapter IV of FEMA 1999, if any person contravenes any provision of FEMA, 1999, or any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where the amount is quantifiable or up to Rupees Two lakh, where the amount is not quantifiable and where the contravention is a continuing one, further penalty which may extend to Rupees Five thousand for every day after the first day during which the contravention continues.

If penalty is not within 90 days, a person can be liable to civil imprisonment.

The provisions of Section 15 of FEMA, 1999 permit compounding of contraventions and empower the Compounding Authority to compound any contravention as defined under Section 13 of the Act on an application made by the person committing such contravention. In terms of rule 4 of the Foreign Exchange (Compounding Proceedings) Rules, 2000, the powers to compound the contraventions have been prescribed for compounding authorities with regard to the sum involved in such contravention and no contravention shall be compounded unless the amount involved in the contravention is quantifiable.

Accordingly, Foreign Exchange (Compounding Proceedings) Rules, 2000 have been framed by the Government of India empowering the Reserve Bank to compound contraventions under FEMA, 1999 with a view to provide comfort to individuals and corporate community by minimizing transaction costs, while taking severe view of willful, malafide and fraudulent transactions.

Compounding Powers

The compounding powers of the Reserve Bank and the Directorate of Enforcement (DoE), respectively, are as under:

(a) Reserve Bank has been empowered to compound the contraventions of all the Sections of FEMA, 1999, except clause (a) of Section 3 of the Act, ibid.

(b) Directorate of Enforcement would exercise powers of compounding under clause (a) of Section 3 of FEMA, 1999 (dealing essentially with Hawala transactions).

Delegation of Powers

As a measure of customer service and in order to facilitate the operational convenience, compounding powers were delegated to the Regional Offices of the Reserve Bank of India mentioned below to compound the contraventions of FEMA involving (i) delay in reporting of inward remittance, (ii) delay in filing of form FC-GPR after allotment of shares and (iii) delay in issue of shares beyond 180 days (viz. paragraphs 9(1)(A), 9(1)(B) and 8, respectively, of the Schedule I to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, notified vide Notification No. FEMA 20/2000-RB dated 3rd May 2000 and as amended from time to time:sss

a) Paragraphs 9 (1) (A) and 9 (1) (B) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 - Bhopal, Bhubaneshwar, Chandigarh, Guwahati, Jaipur, Jammu, Kanpur, Kochi, Patna and Panaji for amount of contravention below Rupees One hundred lakh only (Rs. 1,00,00,000 /-).

b) Paragraphs 9 (1) (A), 9 (1) (B) and 8 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 - Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi for amount of contravention without any limit.

Process of Compounding
  1. An application for compounding of a contravention under FEMA, 1999 may be submitted to the Compounding Authority (CA) on being advised of a contravention under FEMA, 1999, either through a memorandum or suo moto on being made or on becoming aware of the contravention. The format of the application is appended to the Foreign Exchange (Compounding Proceedings) Rules, 2000 (Annex-I).
  2. Along with the application in the prescribed format, the applicant may also furnish the details as per the enclosed Annexes (Annex-II) relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as applicable, a copy of the Memorandum of Association and latest audited balance sheet along with an undertaking that they are not under investigation of any agency such as DOE, CBI, etc. in order to complete the compounding process within the time frame.
  3. All applications for compounding whether on the advice of the Regional Office concerned or suo-moto, relating to the contraventions mentioned at paragraph 3.1 (a) and (b) above and up to the amount of contravention stated therein, may be submitted by the companies/individuals falling under the jurisdiction of the aforesaid Regional Offices directly to the Regional Office concerned, together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at the concerned Regional Office. Applications for compounding of all other contraventions together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at Mumbai may be submitted to: The Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)], Foreign Exchange Department, 5th floor, Amar Building, Sir P.M. Road, Fort, Mumbai- 400001.
  4. On receipt of the application for compounding, the proceedings would be concluded and an order issued by the CA within 180 days from the date of the receipt of the application for compounding. The time limit for this purpose would be reckoned from the date of receipt of the completed application for compounding by the Reserve Bank.
  5. Where there is sufficient cause for further investigation, the Reserve Bank may refer the matter to the Directorate of Enforcement for further investigation and necessary action under FEMA, 1999, or to the Anti- Money Laundering Authority instituted under the Prevention of Money Laundering Act (PMLA), 2002 or to any other agencies, as deemed fit. Such applications will be disposed of by returning the application to the applicant.
  6. Where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16 of FEMA, 1999 as the case may be, one copy of the compounding order made under sub rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 will be provided to the applicant (the contravener) and also to the Adjudicating Authority.
Post-compounding procedure
  1. The sum for which the contravention is compounded as specified in the order of compounding under sub-rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 is payable by way of a demand draft in favour of the “Reserve Bank of India” within fifteen days from the date of the order of compounding of such contravention. The demand draft has to be deposited in the manner as directed in the compounding order.
  2. On realization of the demand draft for the sum for which contravention is compounded, a certificate in this regard shall be issued by the Reserve Bank subject to the specified conditions, if any, in the order.
Pre-requisites for compounding process
  1. In respect of a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under the Compounding Rules, such contraventions would not be compounded. Such contravention would be dealt with under relevant provisions of the FEMA, 1999 for contravention. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention.
  2. Contraventions relating to any transaction where proper approvals or permission from the Government or statutory authority concerned, as the case may be, have not been obtained, such contraventions would not be compounded unless the required approvals are obtained from the authorities concerned.
Pre-requisites for compounding process
  • If any Person contravenes provisions of Section 3(a) of Foreign Exchange Management Act.]
  • in case where the sum involved in such contravention is more than rupees five lakhs but less than rupees ten lakhs, by the Additional Director of the Directorate of Enforcement;
  • in case where the sum involved in the contravention is rupees ten lakhs or more but less than fifty lakhs rupees by the Special Director of the Directorate of Enforcement;
  • in case where the sum involved in the contravention is rupees fifty lakhs or more but less than one crore rupees by Special Director with Deputy Legal Adviser of the Directorate of Enforcement;
  • in case the sum involved in such contravention is one crore rupees or more, by the Director of Enforcement with Special Director of the Enforcement Directorate. Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable.
  • Nothing contained in sub-section (1) shall apply to a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under these rules.

Explanation: For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention.

ORDER OF COMPOUNDING

The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerned as expeditiously as possible as and not later than 180 days from the date of application.

Payment of amount compounded
  • The sum for which the contravention is compounded as specified in the order of compounding under sub-rule (2) of rule 8, shall be paid by demand draft in favour of the Compounding Authority within fifteen days from the date of the order of compounding of such contravention.
  • In case a person fails to pay the sum compounded in accordance with the rule 9 within the time specified in that rule, he shall be deemed to have never made an application for compounding of any contravention under these rules and the provisions of the Act for contravention shall apply to him.
  • No contravention shall be compounded if an appeal has been filed under section 17 or section 19 of the Act.