Forex Digest May 11

8/10/2019 Forex Digest May 11

1/4

Academy of Excellence Inventing Methods for Igniting MindsAn initiative of Staff College under the aegis of

Wholesale Banking Department (Domestic Foreign Business), BCC, Mumbai

FOREXDIGESTMonthly IssueNo XIMay2

BANK OF BARODA FORMIDABLEJOURNEY FROM 1908 2011

SMALL STEPS BIG LEAP

RBI increases the Repo Rate by 50 bps to7.25 percent and Reverse Repo Rateby 50 bps to 6.25 percent with effectfrom 03 May. 2011

SLR 24.00 percent w.e.f 18th Dec. 10and CRR 6.00 percent w.e.f 24th Apr. 10

Bank Rate kept unchanged at 6 percent

Banks BPLR 14.25 percentw.e.f 04 Feb.2011

Banks Base Rate revised to 10.00

percentw.e.f 06 May. 2011

Long outstanding Overdue Export Bills -ActionPoints/guidelines for follow up/write-off by

Authorized Branches

Analyze the portfolio of overdue export b

and find out which are the commoditiecountries and exporters whose bills a

overdue.

Follow-up with all major exporters whobills are overdue since long and advise the

to pursue with their counter part otherwisthey may be caution listed by RBI.

Do not allow sending the export bills direct

to consignee of those exporters whose biare already overdue without prior consent Zonal Heads, even if sanctioning authoritie

have allowed so. Analyze whether the name of exporte

whose bills are overdue, also appearing overdue usance import bills. In such cases n

further bills under FIBC should be accepte

without bringing it to the notice of ZonHead and getting necessary guidelines.

Reminder should be sent to all the exporte

whose bills are overdue and regular follow-u

be done.

The duplicate copies of GR/SDF/PP/SOFTE

forms should however continue to be held tfull proceeds are realized except in case

undrawn balances.

Authorized Branches should closely monit

realisation of export bills and in cases where biremain outstanding, beyond the due date fpayment or six months from the date of export, th

matter should be promptly taken up with th

concerned exporter. It should ensured thoutstanding overdue export bills are reduce

significantly and XOS statement is submitted to R

in time.

Branches should also to be guided by the R

Master circular on Goods and Services No. 06/20111 dated 1st July, 2010, point No. C.14, 21 & 2under which they have given cle

guidelines/procedure about follow-up/write-off

long outstanding overdue export bills.

(BCC:WB:DFB:103/40 dt. 31.5.201

IMPORTANT FINANCIALINDICATORS

As on 31.05.2011


2/4




Comprehensive Guidelines on OTCForex Derivatives - Clarification

During a recent meeting of the ManagingCommittee meeting of FEDAI, some membersexpressed that some of their clients haveexpressed difficulty in furnishing quarterlystatutory auditors certificate for the quarterended 31st March 2011, within a month, i.e.within 30th April 2011.

The clarification furnished by RBI is as under:

For submission of quarterly certificates, 3months grace period may be provided, ifthe quarter coincides with the fiscal yearend.

(BCC:WB:DFB:103/29 dt. 02.05.2011)

Foreign investments in India by SEBIregistered FIIs in other securities

The present limits for such investments is USD

15 billion for FII investment in corporate debtwith an additional limit of USD 5 billion for FIIinvestment in bonds with a residual maturity ofover five years, issued by Indian companieswhich are in the infrastructure sector, where

infrastructure is defined in terms of the extant

guidelines on External Commercial Borrowings.

It has now been decided, to enhance the FIIinvestment limit in listed non-convertibledebentures / bonds, with a residual maturity offive years and above, and issued by Indian

companies in the infrastructure sector, whereinfrastructure is defined in terms of the extant

ECB guidelines, by an additional limit of USD 20billion taking this limit from USD 5 billion to USD25 billion (with this the total limit available toFIIs for investment in listed non convertibledebentures / bonds would be USD 40 billion with

NEWS YOU CAN USEa sub limit of USD 25 billion for investment listed non-convertible debentures / bondissued by corporates in the infrastructusector).

Further, such investment by FIIs in listed noconvertible debentures / bonds would have minimum lock-in period of three years.

However, FIIs are allowed to trade amongthemselves during the lock-in period. It haalso been decided by RBI to allow SEBregistered FIIs to invest in unlisted noconvertible debentures / bonds issued bcorporates in the infrastructure sector, provide

that such investment is as per thaforementioned terms and conditions.

(BCC:WB:DFB:103/32 dt. 06.05.201

Issue of Irrevocable Payment Commitme(IPCs) to Stock Exchanges on behalf oMutual Funds (MFs) and Foreign InstitutionInvestors (FIIs)

It has been decided to allow custodian banks issue Irrevocable Payment Commitments (IPCin favour of the Stock Exchanges / ClearinCorporations of the Stock Exchanges, on behaof their FII clients for purchase of shares undthe PIS.

Issue of IPCs should be in accordance with thReserve Bank regulations on banks exposu

to the capital market issued by the ReservBank from time to time.

Further, branches may also comply with thinstructions issued by Department of BankinOperations and Development (DBOD) vidcircular no. DBOD Dir. BC.46/13.03.00/20111 dated September 30, 2010.

(BCC:WB:DFB:103/31 dt. 06.05.201


3/4




Interest Subvention on Rupee Export Credit

Our Corporate Office has been receiving manyqueries from branches as to whether the

interest subvention has been extended for thisyear also or not.

It is being informed that there is nonotification from RBI regarding extension

of Interest subvention to exporters, tilldate. Hence, it is requested not to extendinterest subvention after 31stMarch 2011.

(BCC:WB:DFB:103/36 dt. 18.05.2011)

FEMA, 1999 Import of rough, cut andpolished diamonds

RBI vide their A.P.(Dir Series) Circular No.59dated 06.05.2011 has decided that Suppliersand Buyers credit (trade credit) including theusance period of Letters of Credit opened forimport of rough, cut and polished diamondsshould not exceed 90 days from the date ofshipment. The revised directions will come intoforce with immediate effect. Branches shouldensure that due diligence is undertaken andKnow-Your-Customer (KYC) norms and Anti-Money Laundering (AML) standards, issued bythe Reserve Bank are adhered to whileundertaking the import transactions. Further,any large or abnormal increase in the volume ofbusiness should be closely examined to ensurethat the transactions are bonafide and are notintended for interest/currency arbitrage. Allother instructions relating to imports of rough,cut and polished diamonds shall continue.

The earlier instructions issued by RBI for directimport of gold, import of platinum / palladium /rhodium / silver and advance remittance forimport of rough diamonds, vide various A.P.(DIRSeries) Circulars shall remain unchanged.

(BCC:WB:DFB:103/34 dt. 10.05.2011)

Forward cover for ForeigInstitutional Investors Rebookingof cancelled contracts

Foreign Institutional Investors (FIIs) apermitted to cancel and rebook up to twpercent of the market value of the portfolio aat the beginning of the financial year.

On a review, it has been decided by ReservBank of India vide their A.P.(Dir Series) CirculNo.67 dated 20.05.2011 to enhance thexisting limit of two per cent as above to teper cent with immediate effect. Othoperational guidelines as also terms anconditions of the circular shall rema

unchanged.

(BCC:WB:DFB:103/38 dt. 26.05.201

Hedging IPO flows by Foreign InstitutionalInvestors (FIIs) under the ASBA mechanism

FIIs are allowed to hedge the currency risk othe market value of entire investment in equitand/or debt in India as on a particular datusing forward foreign exchange contracts wirupee as one of the currencies and foreig

currency-INR options. On review it has beedecided by RBI that for Initial Public Offe(IPO) related transient capital flows under th

Application Supported by Blocked Amou(ASBA) mechanism, foreign currency-rupeswaps may be permitted to the FIIs subject the following terms and conditions:

i. FIIs can undertake foreign currency- rupeswaps only for hedging the flows relating to thIPO under the ASBA mechanism.ii. The amount of the swap should not excee

the amount proposed to be invested in the IPOiii. The tenor of the swap should not exceed 3days.iv. The contracts, once cancelled, cannot brebooked. Rollovers under this scheme will alsnot be permitted.

(BCC:WB:DFB:103/39 dt. 26.05.201


4/4




[

FAQs: Liberalised Remittance Scheme

Q.1. What is the Liberalised RemittanceScheme of USD 200,000?

Ans. Under the Liberalised Remittance Scheme,all resident individuals, including minors, areallowed to freely remit up to USD 200,000 perfinancial year (April March) for any

permissible current or capital accounttransaction or a combination of both.

Q.2. List down a few Capital Accounttransactions permitted under the scheme.

Ans. Under the Scheme, resident individualscan acquire and hold immovable property orshares or debt instruments or any other assetsoutside India, without prior approval of theReserve Bank. Individuals can also open,maintain and hold foreign currency accountswith banks outside India for carrying outtransactions permitted under the Scheme.

Q.3. Whether LRS facility is in addition toexisting facilities detailed in Schedule IIIunder remittances?

Ans. The facility under the Scheme is inaddition to those already available for privatetravel, business travel, studies, medicaltreatment, etc., as described in Schedule III ofForeign Exchange Management (CurrentAccount Transactions) Rules, 2000. The Schemecan also be used for these purposes.

However, remittances for gift and donation can

not be made separately and have to be madeunder the Scheme only. Accordingly, residentindividuals can remit towards gifts and

donations up to USD 200,000 per financial yearunder the Scheme.

Q. 4. What are the prohibited items undethe Scheme?

Ans. The prohibited items are:

i) Remittance for any purpose specificalprohibited under Schedule-I (like purchase lottery tickets/sweep stakes, proscribemagazines, etc.) or any item restricted undSchedule II of FEMA;

ii) Remittance from India for margins or margcalls to overseas exchanges / overseacounterparty;

iii) Remittances for purchase of FCCBs issueby Indian companies in the overseas seconda

market;

iv) Remittance for trading in foreign exchangabroad;

v) Remittance by a resident individual fosetting up a company abroad;

vi) Remittances directly or indirectly to BhutaNepal, Mauritius and Pakistan;

vii) Remittances directly or indirectly countries identified by the Financial Action TasForce (FATF) as non co-operative countrieand territories, from time to time; and

viii) Remittances directly or indirectly to thosindividuals and entities identified as posinsignificant risk of committing acts of terrorisas advised separately by the Reserve Bank tthe banks.

Q.5. Are remittances under the Scheme ogross basis or net basis (net o

repatriation from abroad)?

Ans. Remittance is on a gross basis.

We solicit comments, suggestions andcontribution from readers for improving the

digest

Documents

Forex Digest May 11