SUMMARY OF RECENT RBI - A. P. (DIR Series) Circulars & Notifications

1) Circular No.27 dated March 2, 2002

Re: Indian Direct Investment outside India

Regulation 6 of the Notification No 19 dated May 3, 2000 permits an Indian party to make direct investment in a joint venture or wholly owned subsidiary outside India to the extent of US $ 50 million or its equivalent in any one financial year, except for investments in Nepal, Bhutan and Pakistan. Investments under this regulation can be funded by drawal of foreign exchange from an AD in India to the extent of 25% of the networth of the Indian party as on the date of last audited balance sheet.

This Circular has now increased the limit of direct investment by the Indian party from US $ 50 million to US $ 100 million. Permission also has been granted for drawal of foreign exchange from an AD in India to the extent of 50% of the networth of the Indian party as on the date of last audited balance sheet.

2) Circular No.28 dated March 4, 2002

Re: Full convertibility of Deposit Schemes - Non-Resident Indians.

RBI, with a view to provide full convertibility of deposit schemes for non-resident Indians and to rationalise the existing non-resident deposit schemes, has notified that no deposit or renewal of existing deposit shall be accepted under the NRNR Account or the NRSR Account. The existing deposits under the NRNR Account and the existing account in the form of term deposits of NRSR account may be continued until the date of maturity.

On maturity of the deposits under the NRNR account, the maturity proceeds shall be credited to the account holder's NRE account. While in case of deposits under NRSR account, the maturity proceeds will be credited to the account holder's NRO account.

The existing NRSR account will be continued only upto 30 September 2002 and the balance therein, then will be credited to the account holder's NRO account or will have to be closed at the option of the account holder.

The circular further states that no NRNR or NRSR account shall be opened on or after 1st April 2002, whether by renewal of existing deposit or otherwise.

3) Circular No.29 dated March 11, 2002

Re: Issue of Foreign Currency Convertible Bonds (FCCBs)

Sub-regulation (2) of Regulation 18 of the RBI Notification No 19 dated May 3, 2000, allows an Indian Company or a Body Corporate, created by an Act of Parliament, to issue FCCBs to a person resident outside India, on obtaining an approval from the Government.

The circular gives subsistance to Notification No 55 dated March 7, 2002, wherein with a view to liberalise the capital account transactions, the RBI has now permitted an Indian Company or a Body Corporate, created by an Act of Parliament, to issue FCCBs not exceeding US $ 50 million in any one financial year to a person resident outside India under the automatic route, without the approval from the Government or the RBI.

4) Circular No.30 dated March 26, 2002

Re: Export of Goods for Exhibition / Trade Fairs outside India

With a view of liberalise the facilities available to exporters and to simplify the export procedures, RBI has now permitted residents to take export goods for exhibition and sale outside India without the prior approval of the RBI. Further, unsold exhibit items may be sold, even at discounted value, outside the exhibition / trade fairs in the same country or in another third country. It is permissible to "gift" unsold goods upto the value of US $ 500 per exporter, per exhibition / trade fair.

The circular further states the conditions for the A.D to approve GR form for export items for display or display-cum-sale in trade fairs/ exhibitions outside India.

5) Circular No.31 dated March 27, 2002

Re: Exim Bank's line of Credit of USD 10 Million to Banco Centroamericano de Integracion Economica (BCIE)

EXIM Bank has concluded an agreement with Banco Centroamericano de Integracion Economica (BCIE) on November 29, 2001 making available to the latter, a line of credit upto an aggregate sum of USD 10 million. The credit has become effective from January 21, 2002 and is available for financing Indian export of eligible goods and related services to buyers in the BCIE member countries, viz. Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua. The eligible goods will also include initial spares, drawings and designs, together with services related thereto. The export of goods from India and their import into the borrowers' countries shall be subject to the laws and regulations in force in the concerned countries.

The Circular also specifies the broad terms and conditions of the credit. Annexure to the Circular lists out the goods eligible for finance out of the credit.

6) Circular No.32 dated March 28, 2002

Re: Exim Bank's line of Credit of USD 10 Million to Vnesheconombank, Russia (VEB, The Bank for Foreign Economic Affairs of the USSR)

EXIM Bank has concluded an agreement with Vnesheconombank, Russia (VEB, The Bank for Foreign Economic Affairs of the USSR) on November 5, 2001 making available to the latter, a line of credit upto an aggregate sum of USD 10 million. The credit has become effective from January 30, 2002 and is available for financing Indian export of eligible goods and related services to buyers in the borrower's country i.e. the Russian Federation. The eligible goods will also include initial spares, drawings and designs together with services related thereto. The export of goods from India and their import into the borrowers' countries shall be subject to the laws and regulations in force in the concerned countries.

The Circular also specifies the broad terms and conditions of the credit. Annexure to the Circular lists out the goods eligible for finance out of the credit.

7) Circular No.33 dated March 28, 2002

Re: Exim Bank's line of Credit of USD 10 Million to Banco Nacional de Comercio Exterior, S.N.C. Mexico

EXIM Bank has concluded an agreement with Banco Nacional de Comercio Exterior, S.N.C. Mexico on November 28, 2001 making available to the latter, a line of credit upto an aggregate sum of USD 10 million. The credit has become effective from January 9, 2002 and is available for financing Indian export of eligible goods and related services to buyers in the borrower's country i.e. Mexico or any other country, as may be requested by the buyer and approved by the borrower, except to a country with which India may not have bilateral relations or on which any sanctions or embargo may have been imposed. The eligible goods will also include initial spares, drawings and designs together with services related thereto. The export of goods from India and their import into the borrowers' countries shall be subject to the laws and regulations in force in the concerned countries.

The Circular also specifies the broad terms and conditions of the credit. Annexure to the Circular lists out the goods eligible for finance out of the credit.

8) Circular No.34 dated April 01, 2002

Re: Facilities to Status Holder Exporters - Credit to the EEFC Account

This circular is in reference to FEMA Notification No.10 dated May 3, 2000 permitting the residents to maintain Exchange Earners Foreign Currency (EEFC) account with Authorised Dealers in India.

RBI has now permitted exporters with proven track record who have been certified as "Status Holder Exporters" in terms of the EXIM Policy, may be permitted to credit an amount upto 100% of their eligible receipts of Foreign Exchange to their Exchange Earners Foreign Currency (EEFC) account. This facility will be available in respect of the foreign exchange received by the exporters on or after April 1, 2002.

9) Circular No.35 dated April 01, 2002

Re: Export of Goods and services - Facilities to Status Holder Exporters

This circular modifies Circular No 12 dated September 9, 2000 which contains directions regarding export of goods and services.

In view of simplifying the export procedures, RBI has decided to permit exporters with proven track record who have been certified as "Status Holder Exporters" in terms of the EXIM Policy, to despatch the export documents directly to the consignees outside India, subject to the conditions that :

(a) The export proceeds are repatriated through the A. D. named in the GR Form and
(b) The duplicate copy of the GR Form is submitted to the A. D. for monitoring purposes, by the exporters within 21 days from the date of shipment of export.

RBI has also permitted the "Status Holder Exporters" to realise and repatriate the full value of export proceeds within a period of twelve months from the date of shipment, compared with the previously permitted period of six months. This facility will be available in respect of the shipments made on or after April 1, 2002.

1) Fema Notification No.55 Dated March 7, 2002

Re: Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations 2002

Sub-regulation (2) of Regulation 18 of the RBI Notification No 19 dated May 3, 2000, allows an Indian company or a Body Corporate, created by an Act of Parliament to issue (Foreign Currency Convertible Bonds) FCCBs to a person resident outside India, on obtaining an approval from the Government.

This notification now allows a person resident in India, being a Indian company or a Body Corporate created by an Act of Parliament to issue FCCBs not exceeding US $ 50 million to a person resident outside India under the automatic route subject to certain conditions stipulated in Schedule II.

The notification further states that where the issue exceeds US $ 50 million, but does not exceeds US $ 100 million, permission from RBI is required and where the issue exceeds Us $ 100 million, approval of Ministry of Finance, Government of India, is required.

The notification further lays down the various conditions for issue of Foreign Currency Convertible Bonds (FCCBs) through the automatic route.

2) Fema Notification No.57 Dated April 1, 2002

Re: Foreign Exchange Management (Export of Goods and Services)( Amendment) Regulations 2002

In terms of Clause (a) in sub-regulation (2) of Regulation 9 in The Foreign Exchange Management (Export of Goods and Services) Regulations, 2002 the words "or by a Status Holder Exporter, as defined in the EXIM policy in force" are added after the words " by a unit situated in Special Economic Zone".

3) Fema Notification No. 58 dated April 1, 2002

Re: Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations 2002

Paragraph 1 in the schedule to (Foreign Currency Accounts by a Person Resident in India) Regulations 2002, describes the Exchange Earner's Foreign Currency (EEFC) Account Scheme.

This notification now has specified the limit for various entities or persons to credit the foreign exchange earnings to their EEFC Accounts. The notification has notified the limit of allowing 100% foreign exchange earnings to its EEFC Account for a Status Holder Exporter (as defined in EXIM Policy in force). Similarly the limit for 100% EOUs, units in Export Processing Zones / Software Technology Parks, Electronic Hardware Technology Parks, is notified as 70% and the limit for any other person resident in India is kept at 50%.

The Notification also provides that the RBI, on an application made to it and on being satisfied that it is necessary, may grant permission to hold higher percentage of inward remittance/ payments in foreign exchange in the EEFC Account.

Attention 20th Annual General Meeting of our Association will be held on Saturday, 3rd August, 2002 at Nappoo Hall, Matunga (C.R.), Mumbai - 400 019. For Election of Managing Committee, Nomination Forms will be available at Association's Office from 9th July, 2002 onwards. Nomination Form to be filed between 22nd July to 25th July, 2002 upto 5.00 p.m. at Association's Office. Withdrawal of Nomination to be done on 26th July-27th July, 2002 upto 5.00 p.m. at Association's Office. Members are requested to note the above referred dates. Detailed programme will be informed separately.