INDIA(Position as of May 31, 2013)

Status under IMF Articles of Agreement

Date of membership Yes. December 27, 1945.

Article VIII Yes. Date of acceptance: August 20, 1994.

Article XIV

Exchange Measures

Restrictions and/or multiplecurrency practices

Yes. The IMF staff report for the 2012 Article IV Consultation with Indiastates that, as of April 12, 2012, India maintained the followingrestrictions on the making of payments and transfers for currentinternational transactions, which are subject to IMF approval underArticle VIII, Section 2(a):

restrictions related to the nontransferability of balances under theIndia-Russia debt agreement; restrictions arising from unsettledbalances under inoperative bilateral payments arrangements withtwo eastern European countries; and a restriction on the transfer ofamortization payments on loans by nonresident relatives. (CountryReport No. 13/37)

Exchange measures imposed forsecurity reasons

Yes.

In accordance with IMF ExecutiveBoard Decision No. 144-(52/51)

Yes.

Other security restrictions Yes.

References to legal instruments andhyperlinks

n.a.

Exchange Arrangement

Currency Yes. The currency of India is the Indian rupee.

Other legal tender No.

Exchange rate structure

Unitary Yes.

Dual

Multiple

Classification

No separate legal tender

Currency board

Conventional peg

Stabilized arrangement

Crawling peg

Crawl-like arrangement

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Pegged exchange rate within horizontalbands

Other managed arrangement

Floating Yes. The de jure exchange rate arrangement is floating. The exchangerate of the rupee is determined in the interbank market, where theReserve Bank of India (RBI) intervenes at times. The RBI’s role isto modulate excessive volatility so as to maintain orderlyconditions. The RBI has no fixed or preannounced target or bandfor the exchange rate. In its interventions, the RBI purchases andsells U.S. dollars spot and forward in the interbank market at theongoing market rate. The RBI deals only with ADs and publishesmonthly data on its interventions (foreign exchange purchases andsales) in both the spot and the forward markets in the RBI MonthlyBulletin with a one-month lag.

Free floating

Official exchange rate Yes. The RBI compiles and publishes spot U.S. dollar–rupee and euro-rupee reference rates daily. The rates are derived by averaging themean of the bid and offer rates polled from selected banks aroundnoon every weekday (excluding Saturdays). The banks are selectedbased on their standing, market share in the domestic foreignexchange market, and representative character. The RBIperiodically reviews the procedure for selecting the banks and thepolling methodology in order to ensure that the reference rate is atrue reflection of market activity. In addition, based on the referencerate for the U.S. dollar and middle rates of the cross-currencyquotes, the RBI publishes exchange rates of pounds sterling andJapanese yen against the rupee on a daily basis.

Monetary policy framework

Exchange rate anchor

Monetary aggregate target

Inflation-targeting framework

Other monetary framework Yes. The RBI replaced the monetary targeting approach with a multipleindicators approach in 1998. The multiple indicators approach looksat a large number of indicators from which policy perspective isderived. Interest rates or rates of return in different segments of thefinancial markets, along with data on currency, credit, trade, capitalflows, fiscal position, inflation, exchange rate, and other suchindicators, are compared with output data to assess underlyingtrends in various sectors. The shift from a monetary targetingframework to a multiple indicators approach was gradual and alogical outcome of measures taken over the reform period since theearly 1990s. The RBI has been given the flexibility to respond tochanges in the domestic and international economic environmentand financial market conditions more effectively.

Exchange tax No.

Exchange subsidy No.

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Foreign exchange market Yes. ADs may freely determine their bid-ask spreads and foreignexchange commissions and margin with their clients.

Spot exchange market Yes. The RBI issues licenses to “authorized persons” (which includeCategory I, Category II, and Category III ADs) for foreign exchangetransactions, depending on the scope and type of activities allowedand to “full-fledged money changers” numbering about 1,000,which may buy and sell foreign exchange for private and businessvisits abroad.

Operated by the central bank n.a.

Foreign exchange standing facility No.

Allocation n.a.

Auction n.a.

Fixing n.a.

Interbank market Yes. There are no limits on the bid-ask spreads or commissions of marketparticipants. ADs are authorized by the RBI to deal in foreignexchange. There are now 97 licensed AD Category I banks.

Over the counter n.a.

Brokerage Yes. There is a brokering system in the interbank foreign exchangemarket. Brokers are accredited by the Foreign Exchange DealersAssociation of India (FEDAI), which is a self-regulatoryorganization, to operate in the market. Some of the banks functionas market makers.

Market making No. There are no market-making agreements or other similaragreements.

Forward exchange market Yes. ADs may deal forward in any permitted currency. The RBI mayenter into swap transactions with ADs, under which it buys and sellsU.S. dollars spot and forward at maturities available in the market.

Residents may enter into forward contracts with ADs to hedgeagainst exchange rate risk. Outstanding forward contracts ofimporters and exporters booked on the basis of past performancemust not exceed 100% of the eligible limit and must be ondeliverable basis percent. The eligible limit is defined as the pastthree years’ average of import or export turnover or the previousyear’s turnover, whichever is higher for exporters, and 25% of thelimit as computed alone for importers. A resident with an underlyingcontract may enter into a forward contract with an AD in India tohedge exposure to exchange rate risk for the full amount of thecontract. ADs may provide forward exchange cover to foreigninstitutional investors (FIIs) up to the full amount of theirinvestments in debt instruments and equities. FIIs may hedge theentire market value of their investments in equities and/or debt inIndia as of a particular date. The limit for calculating the eligibilityfor rebooking is based on the market value of the portfolio at thebeginning of the financial year. Outstanding contracts must besupported by underlying exposure at all times. ADs must ensurethat total forward contracts outstanding do not exceed the marketvalue of the portfolio. ADs may enter into forward contracts withresidents outside India to hedge their investments made in India

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after January 1, 1993, subject to verification of exposure in India.ADs may also provide forward cover not exceeding six months toforeign direct investors to hedge currency risk arising fromproposed direct investment in India, after ensuring compliance withformalities necessary approvals (where applicable). NonresidentIndians (NRIs) may enter into forward contracts with ADs to hedgedividends due to them on shares held in an Indian company orbalances held in foreign currency nonresident (FCNR) accounts ornonresident external (NRE) accounts. NRIs are also eligible forforward cover for their portfolio investments. ADs may offer plain-vanilla European forward options to customers who have genuineforeign currency exposures. All conditions applicable to booking,rolling over, and canceling forward contracts apply to optionscontracts. Only one hedge transaction may be booked against aparticular exposure or part thereof for a given time period. Optionscontracts may not be used to hedge contingent or derived exposures,unless the exposure results from submission of a tender bid inforeign exchange. In addition to forwards, options, and swaps, costreduction structures are also permitted, provided they do not resultin a net receipt of premium. Residents with overseas directinvestment (ODI) in equities and loans may hedge against exchangerate risk arising from such investments. ADs may provide forwardcover to hedge the economic exposure of importers in the customsduty payable on imports. Small and medium enterprises (SMEs)with direct or indirect foreign exchange risk and resident individualsmay book forward contracts without supplying underlyingdocuments, provided such contracts are booked through ADCategory I banks with which SMEs have credit facilities. Theguidelines for OTC foreign exchange derivatives were reviewed inthe wake of the global events of 2008. Revised guidelines on OTCForeign Exchange Derivatives and Overseas Hedging ofCommodity Price and Freight Risks were issued December 28,2010, and became effective February 1, 2011. Currency futures aretraded on the National Stock Exchange (NSE), the MultiCommodity Exchange (MCX-SX), and the United Stock Exchange(USE). Exchange-traded currency options are also traded on thesethree exchanges. There is no need for underlying exposures fortrading in the currency futures and exchange-traded currencyoptions market, which is available only to residents.

Official cover of forward operations Yes. The Export Credit Guarantee Corporation of India, Ltd. (ECGCI)insures against exchange fluctuation for deferred receivables fromthe date of a bid up to 15 years after the awarding of a contract.Exchange cover is offered in Australian dollars, euros, Japaneseyen, pounds sterling, Swiss francs, U.A.E. dirhams, and U.S.dollars. For payments specified in other convertible currencies,cover is provided at the discretion of the ECGCI.

References to legal instruments andhyperlinks

Yes. Circular No. 15 of October 29, 2007. A.P. (DIR) Series Circulars:

www.rbi.org.in/scripts/NotificationUser.aspx?Id=3900&Mode=0.

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Arrangements for Payments and Receipts

Prescription of currencyrequirements

Yes. For prescription of currency purposes, countries are divided intotwo groups: (1) ACU members (except Bhutan and Nepal) and (2)the external group (all other countries). For the first group, allpayments for eligible current international transactions must besettled through the ACU. In other cases, payments may be settledin any permitted currency. Export-import transactions financedwith loans from international financial institutions must be settledoutside the ACU. Payment for imports of oil and gas is permittedoutside the ACU mechanism, and all eligible current accounttransactions, including trade transactions with the Islamic Republicof Iran, must be settled in any permitted currency outside the ACUmechanism. Trade settlements are made through ACU dollar orACU euro accounts, which are replenished through the RBI.Payments to countries in the second group may be made in rupeesto the account of a resident of any of these countries or in anypermitted currency, and receipts from these countries may beobtained in rupees from banks in any of these countries or in anypermitted currency. However, special rules may apply to exportsunder lines of credit extended by the government of India to thegovernments of certain foreign countries. AMUs are denominatedas ACU dollars or ACU euros.

Controls on the use of domesticcurrency

Yes.

For current transactions andpayments

Yes.

For capital transactions Yes.

Transactions in capital and money marketinstruments

Yes.

Transactions in derivatives and otherinstruments

Yes.

Credit operations Yes.

Use of foreign exchange amongresidents

Yes.

Payments arrangements Yes.

Bilateral payments arrangements Yes.

Operative Yes. India and Russia have a rupee-ruble agreement, which is partiallydenominated in rupees. The rupee balances are generally used fortrade settlements and investments.

Inoperative No.

Regional arrangements Yes. India is a member of the ACU.

Clearing agreements Yes. Although Bhutan and Nepal are members of the ACU, trade withthese countries is settled outside the ACU. Nepalese residents mayimport from India against payment in freely convertible currenciesand under the existing system of payment in rupees, with permissionfrom the Nepal Rastra Bank and payment through the ACU.Transactions with all other ACU members must be settled through

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ACU dollar accounts. As of January 1, 2009, ACU participants maysettle either in ACU dollars or ACU euros. AMUs are denominatedas ACU dollars or ACU euros.

Barter agreements and open accounts Yes. India and Myanmar have a barter trade agreement.

Administration of control Yes. Exchange management is administered by the RBI in accordancewith the Foreign Exchange Management Act (FEMA) of 1999 andthe general policy established by the government, in consultationwith the RBI. Much of the routine work of exchange control isdelegated to authorized persons. Import and export licenses, wherenecessary, are issued by the director general of foreign trade.

Payments arrears No.

Official No.

Private No.

Controls on trade in gold (coinsand/or bullion)

Yes.

On domestic ownership and/or trade Yes. Eight agencies are authorized by the government and 36 banks bythe RBI to import gold for sale in the domestic market. In addition,the premier trading house, star trading houses in the gem andjewelry sector, export-oriented units (EOUs), and special economiczones (SEZs) in the gem and jewelry sector may import golddirectly for their own consumption (Paragraph 4.A.4, Foreign TradePolicy 2009-14).

On external trade Yes. There are no restrictions on exports of gold. A few designatedagencies and a few banks approved by the RBI, 100% EOUs, andgem and jewelry business units in SEZs may import gold directly.NRIs may bring in gold bars and coins under applicable rules. Otherrestrictions regarding exports and imports of gold are in the ForeignTrade Policy.

Controls on exports and imports ofbanknotes

Yes.

On exports Yes.

Domestic currency Yes. In general, exports of rupee notes and coins, except to Bhutan andNepal, are prohibited. Exports of rupee notes to Bhutan or Nepal indenominations higher than Rs 100 are also prohibited. However,residents going abroad on a temporary visit may take with themIndian currency notes not exceeding Rs 7,500 a person to countriesother than Bhutan and Nepal.

Foreign currency Yes. An AD may transfer abroad foreign currency acquired in the normalcourse of business. Any person may take out foreign exchangeobtained from an AD and any unspent foreign currency owned orbrought in during a previous visit for permissible transactions.Nonresidents may take out unspent foreign exchange up to theamount declared on arrival.

On imports Yes.

Domestic currency Yes. The importation of rupee notes and coins is prohibited. However,individuals may bring in rupee notes (other than notes larger thanRs 100) from Bhutan and Nepal. Individuals returning from

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countries other than Bhutan or Nepal may bring in up to Rs 7,500a person if they took this amount out of India.

Foreign currency No. Foreign exchange may be brought in without limit, provided thetotal amount is declared to the customs authorities on arrival, if thevalue of foreign notes, coins, and traveler’s checks exceedsUS$10,000 or its equivalent and/or if the aggregate value of foreigncurrency notes brought in at any one time exceeds US$5,000 or itsequivalent.

References to legal instruments andhyperlinks

Yes. Foreign Exchange Management Act of 1999; A.P. (DIR) SeriesCirculars: www.rbi.org.in/scripts/NotificationUser.aspx?Id=3831&Mode=0.

Resident Accounts

Foreign exchange accountspermitted

Yes.

Held domestically Yes. Foreign exchange earners along with resident close relative(s) mayopen exchange earners’ foreign currency (EEFC) accounts andcredit these accounts with up to 100% of their foreign exchangeearnings. EEFC accounts do not earn interest.

Effective July 31, 2012, exporters may credit 100% of their foreignexchange earnings to an EEFC account; total accruals in the accountduring a calendar month must be converted to rupees on or beforethe last day of the subsequent calendar month after adjusting forapproved purposes and forward commitments.

Credit may not be made available against the balances in theseaccounts. Balances may be used for trade-related loans to foreignimporters.

Residents and their close relatives may hold RFC domestic accountswith an AD. These do not earn interest and may be credited withforeign exchange from the following sources: (1) exports of goodsor services, (2) gifts or honoraria while abroad, (3) legal transactionswith nonresidents in India, (4) remaining balances from travelabroad, and (5) proceeds of life insurance claims settled in foreigncurrency. As long as the foreign exchange is acquired by one ofthese means, there is no limit on the account balance. Returningresidents may open resident foreign currency (RFC) accounts withforeign exchange from pensions and other payments from overseasemployers or with other receipts, such as gifts or inheritances,permitted under the regulations. The balance may be used for anypermissible purpose and freely abroad..

Approval required Yes. RBI approval is required for foreign exchange accounts, held eitherdomestically or abroad, except for those covered by generalpermission granted by the RBI.

Held abroad Yes. Resident individuals may open and maintain foreign exchangeaccounts abroad, which may be used to remit up to the equivalentof US$200,000 a financial year for all permissible current andcapital account transactions or a combination of both under theLiberalized Remittance Scheme (LRS) of 2004. Specific approval

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is required for remittances in excess of this limit and for othertransactions. In addition to accounts with ADs and the Export-Import Bank (EXIM Bank), the RBI working group may permitexporters to open, maintain, and operate one or more foreignexchange accounts in the currency of their choice with interprojecttransferability of funds in any currency or country. The transfer offunds between projects is monitored by those issuing the permit.Exporters may use cash surpluses generated outside India for thefollowing: (1) short-term investments abroad, including in treasurybills and other monetary instruments with a maturity or remainingmaturity of one year or less and with a rating at least A-1/AAA byStandard & Poor’s, P-1/Aaa by Moody’s Investors Service, or Fl/AAA by Fitch IBCA or an acceptable rating from another majorrating agency; and (2) deposits with branches/subsidiaries outsideIndia of an AD Category I bank in India.

Effective April 2, 2012, an Indian party (as defined for ODI) mayhave a foreign currency account abroad for the purpose of ODI,subject to certain conditions—for example, if the host country lawstipulates that investment must be routed through a designatedaccount.

Approval required Yes.

Accounts in domestic currency heldabroad

No.

Accounts in domestic currencyconvertible into foreign currency

No.

References to legal instruments andhyperlinks

Yes. A.P. (DIR) Series Circulars: www.rbi.org.in/scripts/NotificationUser.aspx?Id=3831&Mode=0.

Nonresident Accounts

Foreign exchange accountspermitted

Yes. FCNR accounts (banks—Scheme B) in freely convertible foreigncurrency are permitted for NRIs and people of Indian origin (PIOs).These must be in the form of term deposits of one- to five-yearmaturity in any permitted currency—i.e., foreign currency that isfreely convertible.

Diplomatic missions and their staff and nondiplomatic staff withofficial passports may open foreign exchange accounts with ADswithout RBI approval, subject to certain conditions. Accountsrelated to all countries other than Bhutan and Nepal are treated asnonresident accounts. NRIs in Nepal and Bhutan may open foreignexchange accounts, provided they are funded with permitted foreignexchange.

FDI proceeds may be credited to an FCNR (B), provided the originalacquisition was from inward remittance or funds in an NRE/FCNR(B) account. Balances may be repatriated at any time without RBIapproval. NRIs may use new remittances or funds in FCNRaccounts for (1) portfolio investment with repatriation benefits ofup to 5% of the paid-up capital, provided total holdings of sharesand convertible debentures under the Portfolio Investment Scheme(PIS) do not exceed 10% (24% with a special board resolution

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passed at a general meeting of the company) of the paid-up capitalof the company or of the total paid-in value of each series of itsconvertible debentures; (2) existing joint-venture companies toraise the ratio of foreign equity shares to prescribed percentages oftheir capital through expansion of their capital base or throughpreferential allocation of shares to foreign investors; and (3)investment (only NRIs) on a nonrepatriation basis in money marketmutual funds (MFs).

The interest rate ceiling on FCNR (B) deposits on maturitiesbetween one and three years is set to LIBOR/swap rates plus 200bps and for maturities between three and five years at LIBOR/swaprate plus 300 bps. Banks may grant loans, in rupees and foreignexchange, against FCNR (B) fixed deposits either to the depositorsor to third parties without limit, subject to margin requirements.

Residents may be joint holders in FCNR accounts. NRIs and PIOsmay open FCNR (B) accounts with their resident close relative(s)as joint holder(s) on a former or survivor basis.

Borrowing not exceeding US$250,000 or its equivalent by residentsfrom NRIs who are close relatives of the borrower is permitted bythe RBI, provided the loan is interest free and the minimum maturityperiod is one year, subject to certain conditions. Effective March21, 2012, AD Category I banks may allow repayment of such loansto the NRE/FCNR(B) account of the lender concerned subject toconditions.

Approval required No.

Domestic currency accounts Yes.

Convertible into foreign currency Yes. Diplomatic missions and their personnel and family members mayopen rupee accounts with ADs. Foreign companies may not opennew NRE accounts. NRIs and PIOs may maintain NRE rupeeaccounts with their resident close relative(s) as joint holder(s) on aformer or survivor basis.

FDI proceeds may be credited to the NRE account provided theoriginal acquisition was from inward remittance or funds held in anNRE/FCNR (B) account. Balances may be repatriated at any timewithout RBI approval. NRIs may use funds derived from newremittances or held in their NRE accounts to (1) make portfolioinvestments with repatriation benefits of up to 5% of the paid-upcapital, provided their total holdings of shares and convertibledebentures held under the PIS do not exceed 10% (24% with aspecial board resolution passed at a general meeting of thecompany) of the paid-up capital of the company or of the total paid-in value of each series of its convertible debentures; (2) for existingjoint-venture companies to raise the ratio of foreign equity sharesto prescribed percentages of their capital through expansion of theircapital base or through preferential allocation of shares to foreigninvestors; and (3) invest on a nonrepatriation basis in money marketMFs (only NRIs).

Balances in such accounts are freely convertible. Banks may freelyset their interest rates on savings deposits and term deposits with

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maturities of one year or more. However, interest rates may not behigher than those offered on comparable domestic rupee deposits.

Gifts to NRIs may be credited to nonresident ordinary (NRO)accounts in rupees. Residents may make rupee gifts up toUS$200,000 a financial year, as permitted under the LRS to an NRIor PIO who is a close relative through a cross-checked/electronictransfer to an NRO account. Effective July 5, 2012, NRIs maytransfer funds from NRO accounts within the overall ceiling ofUS$1 million a financial year subject to payment of applicable taxes(i.e., when the funds are remitted abroad).

Approval required No. These accounts require RBI approval if they are in the name ofPakistan or Bangladesh nationals—even those of Indian origin.

Blocked accounts No.

References to legal instruments andhyperlinks

Yes. www.rbi.org.in/scripts/NotificationUser.aspx?Id=6838&Mode=0;www.rbi.org.in/scripts/notificationuser.aspx.

Imports and Import Payments

Foreign exchange budget No.

Financing requirements for imports Yes. The RBI allows requests from exporters through their AD CategoryI banks to set off export receivables against import payables of thesame foreign buyer and supplier, subject to certain terms andconditions.

Minimum financing requirements No. There are no minimum financing requirements for imports.However, importers making payments exceeding US$5,000 mustprovide information in a mandatory format.

Advance payment requirements Yes. ADs may allow unlimited advance remittances against imports ofgoods, but importers must provide a standby LC or bank guaranteefor amounts over US$200,000. ADs, at their discretion, may allowadvance remittance up to US$5 million without a bank guaranteeor standby LC if the importer is legitimate and has a satisfactorytrack record. ADs may make advance remittances without a bankguarantee or standby LC for the importation of rough diamondsfrom certain mining companies and aircraft, helicopter, or otheraviation-related purchases up to US$50 million.

ADs may allow unlimited advance remittances against imports ofservices, though importers must provide a bank guarantee if theamount exceeds US$500,000.

Government and public sector companies require a specific waiverof the bank guarantee from the MOF for advance payments aboveUS$100,000 for imports of both goods and services.

Advance import deposits n.a.

Documentation requirements forrelease of foreign exchange forimports

Yes.

Domiciliation requirements No. These may be required by the terms of an LC.

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Preshipment inspection No. This may be required by the terms of an LC.

Letters of credit Yes. These may be required where applicable.

Import licenses used as exchangelicenses

Yes. These may be required where applicable.

Other Yes. Documentary evidence is required for foreign exchange paymentsfor imports exceeding the equivalent of US$100,000. ADs mustnotify the RBI when documentation does not accompany importsvalued at US$100,000 or more. If the amount of the transaction isless than US$1 million, ADs may accept either (1) the exchangecontrol copy of the bill of entry for home consumption or (2) acertificate from the chief executive officer or an auditor of theimporting company stating that the goods for which payment wasmade were imported into India, if the importing company is listedon a stock exchange in India and had a net worth of at least Rs 1billion on the date of the most recent audited balance sheet or is anentity of the government of India or a public sector company orentity whose accounts are audited by the comptroller and auditorgeneral of India. A credit report on the overseas supplier (whenimport documents are received directly) is not necessary if theinvoice value does not exceed US$300,000, provided the ADs aresatisfied as to the bona fide nature of the transaction and track recordof the importer.

Import licenses and other nontariffmeasures

Yes. Imports of capital goods have been liberalized. Under the Servedfrom India Scheme, service providers and hotels may import dutyfree 10% and 5%, respectively, of foreign exchange earned. Underthe Export Promotion Capital Goods Scheme, (1) imports ofsecondhand capital goods are permitted without restriction on age,(2) imports of capital goods for agricultural products are permittedat zero duty rates, (3) transfers of capital goods to groups ofcompanies and managed hotels are permitted, and (4) installationcertificates are no longer required for movable capital goods in theservice sector.

Positive list Yes. Importation of the following is restricted: (1) certain specifiedprecious, semiprecious, and other stones; (2) safety, security, andrelated items; (3) seeds, plants, and animals; (4) insecticides andpesticides; (5) drugs and pharmaceuticals; (6) chemicals and relateditems; (7) some consumer goods and miscellaneous items; (8) itemsrelating to the small-scale sector; (9) communication equipment andscientific instruments; (10) metallic waste and scrap; and (11)ammunition.

Negative list Yes. Importation of the following is prohibited: tallow, fat, and/or oilsrendered or unrendered of any animal origin; animal rennet; wildanimals (including their parts and products); ivory; and arms andrelated materials from Iraq.

Open general licenses No.

Licenses with quotas No.

Other nontariff measures Yes.

Import taxes and/or tariffs Yes. The peak import tariff rate for nonagricultural products is 10%.Other import duties include (1) 10% on seconds and defectives of

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steel, rough synthetic stones, unworked coral, basic inorganicchemicals, such as halogen, sulfur, carbon, hydrogen man-madefibers, filament yarns, purified terephthalic acid, monoethyleneglycol, dimethyltryptamine (DMT), caprolactam, vinyl acetatemonomer, butyl rubber, 2-vinylpyridine, metallurgical-gradesilicon, borax and boric acid, and potassium chloride; (2) 7.5% onmost chemicals and plastics, polyester fibers and yarns, certain rawmaterials, medical equipment, refractories and specified rawmaterial for refractions, and primary and semifinished (a) ferroalloys and other alloy steel, (b) aluminum, (c) copper, (d) zinc, (e)tin, (f) base metals, (g) calcined alumina, and (h) ashes and residuesof copper and zinc; (3) 5% on (a) drip irrigation systems,agricultural sprinklers, and food processing machinery; (b) 15specified machines for the pharmaceutical and biotechnologysectors; (c) naphtha and petroleum coke, (d) specified organicchemicals, (e) polymers of ethylene, propylene, styrene, and vinylchloride, (f) project imports, (g) phosphoric acid, regardless of use,(h) unworked coral, (i) specified convergence products, (j) specifieddrugs or kits and bulk drugs for their manufacture, (k) specified rawmaterials for manufacturing ELISA kits, (l) specified raw materialsfor the tire industry, (m) and specified machinery for manufacturingsporting goods; (4) 3% on cut and polished diamonds; (5) 2.5% oncubic zirconia (polished); (6) 2% on ores and concentrates, styrene,ethylene dichloride, vinyl chloride monomer, paraxylene, and crudeand unrefined sulfur; and (7) zero on rough cubic zirconia,bactofuges, tuna bait, specified raw materials for manufacturingsporting goods, specified parts of set-top boxes, iron or steel meltingscrap, aluminum scrap, and helicopter simulators. Duty on cigars,cheroots, and cigarillos is 60%. Crude and refined edible oil areexempt from an additional countervailing duty of 4%.

Taxes collected through the exchangesystem

No.

State import monopoly Yes. The importation of certain items, including wheat and meslin,soybeans, nitrogenous fertilizers, industrial monocarboxylic fattyacids, acid oils from refining, and industrial fatty alcohols, isconducted through agencies such as the Minerals and MetalsTrading Corporation of India Ltd., State Trading Corporation ofIndia Ltd., Food Corporation of India, and Hindustan Vegetable OilCorporation Ltd.

References to legal instruments andhyperlinks

Yes. www.rbi.org.in/scripts/notificationuser,aspx?Id=360784mode20.

Exports and Export Proceeds

Repatriation requirements Yes. Effective May 20, 2013, proceeds must be repatriated within 9months of shipment unless otherwise specified by the RBI.Previously, effective November 30, 2012, the repatriation periodwas maintained at 12 month (relaxed from the legal requirement ofsix months under a periodic review process by the RBI since June2008 through March 31, 2013. Exporters must obtain permissionfrom an AD if the export proceeds are not collected within theprescribed period. Indian-owned warehouses abroad may collect

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export proceeds for a period of up to 15 months. The RBI alsoadministers a program under which engineering goods (capitalgoods and consumer durables) may be exported under deferredcredit arrangements, so that the full export value is paid ininstallments over a prescribed period. Status-holder exporters,100% EOUs, and units in electronic hardware technology parks,software technology parks, and biotechnology parks may collectexport proceeds within 12 months of shipment. Exporters executingturnkey and construction contracts are not required to recover themarket value of equipment and machinery from the transfereeproject. Exporters may use the machinery/equipment for any othercontract in any country, with approval of the relevant authority.Software companies do not have to repatriate 30% of the contractvalue of on-site contracts; however, the profits must be repatriatedafter the completion of the contract. For units in SEZs there is notime limit for repatriation of export proceeds, although theobligation to repatriate remains.

Surrender requirements Yes.

Surrender to the central bank No.

Surrender to authorized dealers Yes. Effective July 31, 2012, exporters may credit 100% of their foreignexchange earnings to an EEFC account; total accruals in the accountduring a calendar month must be converted to rupees on or beforethe last day of the subsequent calendar month after adjusting forapproved purposes and forward commitments.

ADs may extend the period of collection of export proceeds beyond12 months (previously, six months) from the date of export, up tosix months at a time, regardless of the invoice value, subject toconditions. Status-holder exporters may write off outstandingexport proceeds up to 10% (5% for other than status-holderexporters) of their export proceeds during the previous calendaryear. ADs may allow reduction in the export invoice value, providedthe reduction does not exceed 25% of the invoice value, subject toregulatory conditions.

Financing requirements n.a.

Documentation requirements Yes.

Letters of credit Yes. These may be required where applicable.

Guarantees Yes. These may be required where applicable.

Domiciliation No. This may be required by the terms of LC.

Preshipment inspection No. This may be required by the terms of LC.

Other Yes. Exports of goods and software in amounts exceeding the equivalentof US$25,000 must be declared.

Export licenses Yes. Export licenses are required for restricted items, which include

(1) dress-making materials and ready-made garments and fabricsand textile items with imprints of excerpts or verses from the Koran;

(2) live animals and animal parts;

(3) seeds and silkworms, silkworm seeds, and silkworm cocoons;

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(4) residue and waste from the food industry and prepared animalfodder;

(5) sand and soil;

(6) certain ores and fertilizers;

(7) certain pharmaceutical products derived from human blood;

(8) waste paper;

(9) vintage motor cars and motorcycles and their parts andcomponents; and

(10) special chemicals, organisms, materials, equipment, andtechnologies.

Without quotas n.a.

With quotas n.a.

Export taxes Yes.

Collected through the exchange system No.

Other export taxes Yes. Export duties apply as follows: (1) snakeskin, raw fur, andlambskin, 10%; (2) tanned, cycle saddle, hydraulic/packing,belting/washer, picking band, and strap/combing leather, 15%; (3)leather for luggage, cases, and handbags, 25%; and (4) other hides,skins, and leathers, tanned and untanned, excluding manufactures,60%. There is a 20% ad valorem tax on exports of iron ores andconcentrates as well as on exports of chrome and concentrates.

References to legal instruments andhyperlinks

n.a.

Payments for Invisible Transactions and Current Transfers

Controls on these transfers Yes. Residents may obtain foreign exchange for bona fide permissiblecurrent account transactions.

Trade-related payments No.

Prior approval No.

Quantitative limits No. ADs may effect remittances of up to US$1 million a project towardconsulting services procured abroad, subject to documentaryrequirements.

ADs may also effect remittances on behalf of Indian companiesexecuting infrastructure projects for procurement of consultingservices for such projects, up to US$10 million a project.

Indicative limits/bona fide test No.

Investment-related payments Yes.

Prior approval No.

Quantitative limits No.

Indicative limits/bona fide test Yes. Remittances are allowed, subject to certain conditions, provided allcurrent taxes and other liabilities have been cleared. Branches of

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foreign companies operating in India may remit profits to their headoffices without RBI approval, subject to payment of applicabletaxes and other liabilities.

Payments for travel Yes.

Prior approval No.

Quantitative limits Yes. The limits are the equivalent of US$10,000 a financial year andUS$25,000 a trip for personal and business travel, respectively,regardless of the length of stay. No such limits apply to paymentsmade with an international credit card (ICC). Foreign exchange isnot made available for travel to Bhutan or Nepal or for transactionswith residents of these countries.

Indicative limits/bona fide test Yes. ADs may release foreign exchange beyond indicative limits, whereapplicable, with RBI approval, on verification of purpose.

Personal payments Yes.

Prior approval No.

Quantitative limits Yes. Thirteen types of personal expenses are subject to limits, andamounts exceeding these limits require RBI approval. ADs mayrelease foreign exchange for medical costs on the basis ofdeclaration, without supporting documents, up to US$100,000.

ADs may remit abroad up to the equivalent of US$100,000 a yearfor various purposes, including employment, emigration,maintenance of close relatives, and education. For purposes otherthan education and medical treatment, higher amounts may bepermitted with a documented estimate and RBI approval. Students,like other NRIs, may transfer up to US$1 million from personalaccounts with an AD. Effective July 5, 2012, ADs may allownonresidents to remit up to the equivalent of US$1 million afinancial year for any bona fide purpose, including to nonresidentexternal accounts with payment of appropriate taxes. Effective May7, 2012, the limit for foreign exchange remittance for miscellaneouspurposes without documentation was raised from US$5,000 toUS$25,000.

Indicative limits/bona fide test No. For education and medical purposes, ADs may allow remittancesexceeding US$100,000 with documentary evidence.

Foreign workers’ wages Yes.

Prior approval No.

Quantitative limits Yes. Foreigners residing in India and employed by a foreign companyand Indian citizens employed by a foreign company outside India—and in either case on deputation to the office, branch, subsidiary,or joint venture in India of such foreign company—may maintaina foreign exchange account with a bank outside India and have theirentire salary credited to that account, provided income taxchargeable under the Income Tax Act of 1961 is paid on the entiresalary accrued in India. Foreigners residing in India and employedby a company incorporated in India may maintain a foreignexchange account with a bank outside India and remit their wholesalary in rupees to such account, provided income tax chargeable

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under the Income Tax Act of 1961 is paid on the entire salaryaccrued in India.

Indicative limits/bona fide test Yes.

Credit card use abroad Yes. Travelers may use ICCs for all purposes, including for the purchaseof articles for personal use, subject to the limits established by thecard provider. The basic travel quota may also be obtained throughthe use of credit cards. The use of ICCs is allowed for imports ofbooks, computer software, and other items through the Internet,with the exception of prohibited items, such as lottery tickets,sweepstakes participation, banned or proscribed subscriptions, andpayments for callback services. Debit and automated teller machinecards may be used for any purpose for which foreign exchange maybe purchased from an AD.

Prior approval No.

Quantitative limits No.

Indicative limits/bona fide test Yes.

Other payments Yes.

Prior approval No. Residents may remit without RBI approval health insurancepremiums if the health insurance policy was obtained when theperson was not a resident, commissions on sales of property,proceeds of short-term credit to overseas offices of Indian banks,foreign television advertising fees, royalties, and franchise fees.

Quantitative limits Yes.

Indicative limits/bona fide test Yes.

References to legal instruments andhyperlinks

Yes. Schedule III to Foreign Exchange Management (Current Account)Rule No. 2000 of May 3, 2000; Gazette of India Part II Section IIISubsection (i) of November 23, 2009 vide G.S.R. No. 838 (E)—Notification No. FEMA 199/2009-RB of September 30, 2009; RBI/2009-10/288 A.P. (DIR Series) Circular No. 26 of January 14, 2010;

www.rbidocs.rbi.org.in/rdocs/content/PDFs/MEGANDS010710.pdf.

Proceeds from Invisible Transactions and Current Transfers

Repatriation requirements Yes. Proceeds must be repatriated.

Surrender requirements Yes.

Surrender to the central bank No.

Surrender to authorized dealers Yes. Effective July 31, 2012, exporters may credit 100% of their foreignexchange earnings to an EEFC account; total accruals in the accountduring a calendar month must be converted to rupees on or beforethe last day of the subsequent calendar month after adjusting forapproved purposes and forward commitments.

Restrictions on use of funds Yes. EEFC accounts do not earn interest.

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References to legal instruments andhyperlinks

Yes. Schedule III to Foreign Exchange Management (Current Account)Rules No. 2000 of May 3, 2000; Gazette of India Part II Section IIISubsection (i) of November 23, 2009, vide G.S.R. No. 838 (E)—Notification No. FEMA 199/2009-RB of September 30, 2009; RBI/2009-10/288 A.P. (DIR Series) Circular No. 26 of January 14, 2010.

Capital Transactions

Controls on capital transactions Yes. Residents may remit up to the equivalent of US$200,000 a financialyear for all permissible current and capital transactions or acombination of both.

Repatriation requirements Yes. The proceeds of external commercial borrowing (ECB) raisedabroad for rupee expenditures in India, such as local sourcing ofcapital goods, onlending to self-help groups or for microcredit,payment for spectrum allocation, etc., must be credited immediatelyto a rupee account with an AD Category I bank in India. Proceedsmeant only for foreign currency expenditures may be retainedabroad until used.

Surrender requirements Yes.

Surrender to the central bank

Surrender to authorized dealers Yes.

Controls on capital and moneymarket instruments

Yes. FIIs such as pension funds, MFs, investment trusts, universityfunds, endowments, charitable trusts, and charitable societies mayinvest in shares and fully mandatorily convertible debentures of anIndian company, rights shares, renunciation of rights shares, datedgovernment securities, treasury bills, MF units in the primary andsecondary markets, commercial paper, listed nonconvertibledebentures, corporate debt instruments, etc.

On capital market securities Yes.

Shares or other securities of aparticipating nature

Yes.

Purchase locally by nonresidents Yes. FIIs must register with the Securities and Exchange Board of India(SEBI) before they invest in the Indian capital market. Theregulations also permit foreign corporations and high-net-worthindividuals to invest as subaccounts of SEBI-registered FIIs. FIIssuch as pension funds, MFs, investment trusts, university funds,endowments, charitable trusts, and charitable societies may investin shares and fully mandatorily convertible debentures of an Indiancompany, rights shares, renunciation of rights shares, datedgovernment securities, treasury bills, MF units in the primary andsecondary markets, commercial paper, listed nonconvertibledebentures, corporate debt instruments, etc.

There is no cap on FIIs’ investment in shares and fully andmandatorily convertible debentures of an Indian company, but thereare caps on the FII percent of paid-up capital in individual Indiancompanies. The holdings of a single FII of each SEBI-approvedsubaccount in an Indian company may not exceed 10% of total paid-up capital. The aggregate limit for investment by all FIIs may notexceed 24% of the total paid-up capital of the Indian company. The

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overall ceiling of 24% may be raised to the sectoral cap by acompany through a special resolution passed by the board ofdirectors at a general meeting. Foreign individuals and corporationsthat invest through the FII portfolio route are limited to 5%.

NRIs may invest in all shares and convertible debentures under thePIS. Individual NRIs may purchase shares and convertibledebentures of Indian companies listed on the stock exchange, up to5% of the paid-up capital of the Indian company. The aggregatelimit for investment by all NRIs taken together may not exceed 10%of the paid-up capital of the Indian company. This limit may beraised to 24% through a special resolution passed by the board ofdirectors at a general meeting.

Sale or issue locally by nonresidents Yes. Securities of Indian companies held by nonresidents may be soldon the stock exchange. Transfers to residents under privatearrangements do not require RBI permission and may be handledby authorized banks in accordance with the requirements in theregulations, including pricing and reporting requirements.Transfers of sale proceeds are permitted, subject to payment ofapplicable tax, provided no controls were imposed on therepatriation of sale proceeds at the time of the original investment.Transfers between two nonresidents do not require RBI permission,unless the recipient has a financial or technical collaboration in thesame field as the company whose shares are being transferred.Transfers from NRIs and PIOs to nonresidents other than NRIs andPIOs are not allowed under the general permission. Transfers ofshares from residents to nonresidents when the investor companyis in the financial sector fall under SEBI Regulation No. 1997(Substantial Acquisition of Shares and Takeover) or whose pricingand other guidelines are not met require RBI approval.

Purchase abroad by residents Yes. General permission has been granted by the RBI to residents to hold,own, transfer, or invest in foreign currency or foreign securitiesoutside India, if the currency or security was acquired or held bythe person while residing outside India or received throughinheritance or as a gift from a person residing outside India.Registered venture capital funds (VCFs) with approval may investin equity and equity-linked instruments of foreign venture capitalenterprises, subject to an overall limit of US$500 million and SEBIregulations. Individual VCF limits are set by the SEBI, subject tosuch terms and conditions as SEBI may deem necessary. Residentsmay invest in companies listed abroad on recognized stockexchanges up to an overall limit of US$200,000 a financial yearunder the LRS. A listed Indian company may invest in (a) shares ofan overseas company listed on a recognized stock exchange and (b)rated bonds/fixed-income securities issued by companies at (a)above up to 50% of its net worth on the date of its latest auditedbalance sheet.

ADs may allow remittances by resident employees of foreigncompanies and their joint ventures or wholly owned subsidiaries inwhich the foreign company holds equity, either directly orindirectly, for acquisition of shares of the foreign company underan employee stock option plan, subject to certain conditions.Effective March 28, 2012, the previous condition that the foreign

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company have a direct/indirect holding of at least 51% in an Indiancompany was eliminated. Effective March 28, 2012, ADs may alsoallow remittance from resident individuals for acquisition ofqualifying shares for the position of director in the overseascompany according to the laws of the host country. The limit ofthese remittances is within the overall ceiling prescribed for theresident individuals under the LRS in effect at the time ofacquisition. Resident individuals may acquire shares of a foreignentity in part/full consideration of professional services rendered tothe foreign company or in lieu of director’s remuneration within theoverall ceiling under the LRS in effect at the time of acquisition.

Sale or issue abroad by residents Yes. The regulations governing purchases abroad by residents apply.

Bonds or other debt securities Yes.

Purchase locally by nonresidents Yes. FIIs registered with the SEBI and NRIs are permitted to invest inperpetual debt instruments (eligible for inclusion as tier I capital)and debt capital instruments (eligible for inclusion as upper tier IIcapital), issued by banks in India and denominated in rupees, subjectto the following conditions: (1) Investment by all FIIs in rupee-denominated perpetual debt instruments (tier I) must not exceed anaggregate ceiling of 49% of each issue, and investment byindividual FIIs must not exceed 10% of each issue. (2) Investmentby all NRIs in rupee-denominated perpetual debt instruments (tierI) must not exceed an aggregate ceiling of 24% of each issue, andinvestment by a single NRI must not exceed 5% of each issue. (3)Investment by FIIs in rupee-denominated debt capital instruments(tier II) must be within the limits stipulated by the SEBI for FIIinvestment in corporate debt instruments. (4) Investment by NRIsin rupee-denominated debt capital instruments (tier II) must be inaccordance with the current policy for investment by NRIs in otherdebt instruments.

Effective January 24, 2013, FIIs may invest in governmentsecurities, up to US$25 billion (previously, US$20 billion) andcorporate debt instruments up to US$50 billion (previously,US$45 billion). The limit for infrastructure bonds isUS$25 billion. The requirement that the government securities havea residual maturity of three years at the time of the purchase waseliminated, but FIIs and long term investors may not purchasetreasury bills within the US$15 billion sublimit. In order to simplifythe investment limits for FIIs and long-term investors ingovernment securities and corporate debt, the debt limits have beenmerged into two broad categories: (1) The government debt limitmerged the two sublimits under government securities to (a)US$10 billion for investment by FIIs in government securities,including treasury bills and (b) US$15 billion for investment indated government securities by FIIs and long-term investors. (2)The corporate debt limit merged the existing sublimits undercorporate debt to (a) US$1 billion for qualified foreign investors(QFIs), (b) US$25 billon for investment by FIIs and long-terminvestors in sectors other than infrastructure, and (c)US$25 billion for investment by FIIs/QFIs/long-term investors inthe infrastructure sector.

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Effective July 16, 2012, QFIs may invest through SEBI-registeredqualified depository participants in eligible corporate debtinstruments.

Sale or issue locally by nonresidents

Purchase abroad by residents Yes. Resident individuals may remit up to the equivalent ofUS$200,000 a financial year for any permissible current and/orcapital transaction or a combination of both.

Sale or issue abroad by residents Yes. Convertible bonds in foreign currency may be issued up to theequivalent of US$500 million a financial year through the automaticroute without RBI approval.

On money market instruments Yes.

Purchase locally by nonresidents Yes. NRIs may invest in money market mutual funds floated bycommercial banks and public or private sector financial institutionswith authorization from the SEBI on a repatriation basis.

Sale or issue locally by nonresidents Yes. These transactions require RBI approval.

Purchase abroad by residents Yes. Residents may purchase these instruments abroad without RBIapproval according to the prescribed norms.

Sale or issue abroad by residents Yes. These transactions are not permitted.

On collective investment securities Yes. Resident companies require general or specific permission from theRBI to issue securities to NRIs.

Purchase locally by nonresidents No. These transactions by FIIs do not require RBI approval.

Sale or issue locally by nonresidents Yes. The issuance of collective investment securities by nonresidents onlocal markets in India is permitted subject to certain conditions.

Purchase abroad by residents Yes. MFs registered with the SEBI are permitted to invest (within anoverall ceiling of US$7 billion) in

(1) American Depository Receipts (ADRs) and Global DepositoryReceipts (GDRs) issued by Indian or foreign companies;

(2) equity of overseas companies listed on recognized stockexchanges overseas;

(3) initial and subsequent public offerings for listing on recognizedstock exchanges overseas;

(4) foreign debt securities in countries with fully convertiblecurrencies and short- and long-term debt instruments with ratingnot below investment grade by accredited/registered credit ratingagencies;

(5) money market instruments rated not below investment grade;

(6) repos in the form of investment, where the counterparty is ratednot below investment grade. The repos may not, however, involveborrowing of funds by MFs;

(7) government securities of countries rated not below investmentgrade;

(8) derivatives traded on recognized stock exchanges overseas onlyfor hedging and portfolio balancing with underlying securities;

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(9) short-term deposits with banks overseas where the issuer is ratednot below investment grade;

(10) units/securities issued by overseas MFs or unit trusts registeredwith overseas regulators and investing in (a) the above-namedsecurities, (b) real estate investment trusts (REITs) listed onrecognized stock exchanges overseas, or (c) unlisted overseassecurities (not exceeding 10% of their net assets). Residentindividuals may invest up to US$200,000 a financial year under theLRS.

Sale or issue abroad by residents Yes. Resident companies require general or specific permission from theRBI to issue securities to NRIs.

Controls on derivatives and otherinstruments

Yes. The guidelines on OTC derivatives were reviewed in the wake ofthe international events of 2008. Revised guidelines on OTCForeign Exchange Derivatives and Overseas Hedging ofCommodity Price and Freight Risks were issued December 28,2010, and went into effect February 1, 2011. ADs may offerspecified OTC derivatives for contracted exposure and probableexposure. The requirement of an underlying exposure for OTCforeign exchange derivatives has been relaxed for residents andSMEs. Exchange-traded currency futures were introduced inAugust 2008. Currency futures are traded on the MCX-SX and theUSE. Exchange-traded currency options are also traded on the NSEand the USE. Underlying exposure is not required for trading in thecurrency futures and exchange-traded currency options market.Only residents may trade in exchange-traded currency futures andthe options market.

Purchase locally by nonresidents Yes. ADs may offer forward or options contracts to nonresidents of Indiato hedge direct investment made in India after January 1, 1993,subject to verification of exposure in India. FIIs may hedge themarket value of their entire investment in equity or debt. NRIs mayhedge the dividends due to them, balances held in FCNR and NREaccounts, and portfolio investments. FIIs and NRIs may trade in allexchange-traded derivative contracts (not currency derivatives) thathave been approved by the SEBI, subject to prescribed limits. FIIsand NRIs may also invest in these contracts using rupee funds heldin India on a repatriation basis, subject to the limits prescribed bythe SEBI. FIIs may offer domestic government securities andforeign sovereign securities with an AAA rating as collateral to therecognized stock exchanges in India, in addition to cash (previously,they were not permitted to offer domestic government securities ascollateral), for their transactions in the cash segment of the market.However, cross-margining of government securities (placed asmargins by the FIIs for their transactions in the cash segment of themarket) is not allowed between the cash and the derivative segmentsof the market. The operational guidelines in this regard will beissued separately by the SEBI.

Sale or issue locally by nonresidents Yes. These transactions are not allowed.

Purchase abroad by residents Yes. ADs and their branches abroad may sell hedge instruments forcorporate clients that have borrowed foreign exchange inaccordance with FEMA provisions and purchase them for their ownasset and liability management. Exporters and importers may hedge

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commodity price exposures for any commodity (except gold,platinum, and silver) in the international exchange markets, subjectto conditions. Listed companies may also hedge overseascommodity price risk arising from domestic transactions withrespect to aluminum, copper, lead, nickel, zinc, and aviation turbinefuel, based on underlying economic exposures, subject toconditions.

Sale or issue abroad by residents No. Restrictions on offshore derivative instruments and participatorynotes with underlying derivatives, which previously had to beissued or renewed by regulated entities, were removed in 2008.

Controls on credit operations Yes. All corporations registered under the Companies Act, 1956, whichare in the industrial sector; infrastructure sector; and specifiedservice sectors such as hotels, hospitals, software, units in SEZs,nongovernment organizations engaged in microfinance activities,microfinance institutions (MFIs), infrastructure finance companies(IFCs), small industries development Bank of India (SIDBI—except other financial intermediaries such as banks, nonbankfinancial companies (NBFCs), housing finance companies (HFCs),and other financial institutions) may raise funds through externalcommercial borrowing from internationally recognized overseaslenders under the automatic route, subject to RBI guidelines. Casesoutside the purview of automatic route and average maturity periodlimits are considered under the approval route.

Commercial credits Yes.

By residents to nonresidents Yes. A commercial credit of up to six months is allowed for exports ondocuments-against-acceptance terms. Contracts for exportsinvolving payments to be realized beyond the usual period of sixmonths or one year as the case may be are treated as deferredpayment exports. Such exports are permitted, depending on thecredit terms offered, the commodity to be exported, and otherrelated considerations. This applies to turnkey, construction, andservice contracts undertaken by Indian exporters on credit terms.Under the Buyer Credit Scheme, the EXIM Bank offers credit toforeign buyers in connection with the exportation of capital goodsand turnkey projects in India in participation with commercial banksin India. An Indian exporter may lend without restriction from thefunds held in an EEFC account for trade-related purposes to anoverseas importing customer against a bank guarantee. Othertransactions require RBI permission.

To residents from nonresidents Yes. Trade credits of up to one year for noncapital goods and less thanthree years for capital goods may be permitted by ADs, up toUS$20 million for import transactions; ADs may guarantee suchtrade credits. Larger trade credits (buyer credit and supplier credit)for financing imports of noncapital goods require RBI permission,subject to certain conditions. The all-in-cost ceiling for trade creditsis LIBOR plus 350 bps for all maturities. All-in-cost means six-month LIBOR (for the respective currency or applicablebenchmark) plus margin plus all other costs. Effective September11, 2012, conditions were relaxed for trade credits in theinfrastructure sector. The maximum maturity of credits for importsof capital goods as classified by the DGFT was extended from threeyears to five years subject to conditions, including that the trade

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credit must be ab initio contracted for not less than 15 months.Effective December 14, 2012, this requirement was further relaxedto 6 months for existing trade credit to companies for up to fiveyears. The conditions regarding ab initio buyer credit for 15 monthsare unchanged for future trade credit.

Financial credits Yes.

By residents to nonresidents Yes. An Indian entity may lend in foreign exchange to its wholly ownedsubsidiary or joint venture abroad as part of the financialcommitment up to an overall limit of 400% of the net worth of theIndian entity. Indian companies may extend foreign currency loansfor personal purposes to employees of their branches outside India.Effective October 12, 2012, banks may grant unlimited foreigncurrency loans in India/outside India and rupee loans in India todepositors/third parties against NRE/FCNR (B) fixed depositsunder their usual margin requirements subject to conditions.

To residents from nonresidents Yes. The maximum ECB credit a company in India may obtain under theautomatic route is US$750 million a financial year. For companiesin specified service sectors, the limit is US$200 million and fornongovernmental organizations and MFIs the limit isUS$10 million.

Eligible borrowers may raise ECB from internationally recognizedsources, such as (1) international banks; (2) international capitalmarkets; (3) multilateral financial institutions (such as theInternational Finance Corporation, Asian Development Bank, CDCGroup, etc.), regional financial institutions, and government-owneddevelopment financial institutions; (4) export credit agencies; (5)suppliers of equipment; (6) foreign collaborators; (7) foreign equityholders; (8) overseas organizations; and (9) individuals.

Eligible borrowers may borrow up to the equivalent ofUS$20 million with a minimum three-year average maturity andfrom US$20 million to US$750 million with a minimum five-yearaverage maturity under the automatic route without RBI approval.

Under the automatic route, ECB funds may be used for investmentsuch as imports of capital goods, new projects, modernization/expansion of existing production units in the real and industrialsector, including SMEs, the infrastructure sector, and specifiedservice sectors—namely, hotels, hospitals, and software in Indiaand ODI in joint ventures (JVs), wholly owned subsidiaries (WOS),and for other permitted end uses.

Infrastructure under ECB guidelines is defined to include (1) power;(2) telecommunications; (3) railways; (4) roads, including bridges;(5) seaports and airports; (6) industrial parks; (7) urbaninfrastructure (water supply, sanitation, sewage projects); (8)mining, refining, and exploration; and (9) cold storage or cold roomfacilities, including for farm-level precooling for preservation orstorage of agricultural and allied products, marine products, andmeat.

Borrowers are permitted to keep ECB proceeds abroad for foreigncurrency expenditures. For rupee expenditures, borrowers must

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repatriate these funds to India for credit to borrowers’ rupeeaccounts with AD Category I banks, pending permissible end use.

The current all-in-cost ceiling is LIBOR plus 350 bps for loansbetween three and five years and LIBOR plus 500 bps for loansabove five years.

Under the approval route, corporations may obtain ECB loans overand above the existing limit under the automatic route during afinancial year.

Effective February 29, 2012, developers of the proposed NationalManufacturing Investment Zone (NMIZ) may obtain ECB underthe approval route for developing infrastructure.

Borrowing not exceeding US$250,000 or its equivalent by residentsfrom NRIs who are close relatives of the borrower is permitted bythe RBI, provided the loan is interest free and the minimum maturityperiod is one year, subject to certain conditions. Effective March21, 2012, AD Category I banks may allow repayment of such loansto the NRE/FCNR(B) account of the lender concerned subject toconditions.

Effective April 20, 2012, Indian companies in the power sector mayuse 40% of new ECB raised toward refinancing of a rupee loan(s)from the domestic banking system, under the approval route, as longas at least 60% of the proposed new ECB is used for new capitalexpenditures of infrastructure project(s).

Effective April 20, 2012, ECB is allowed for capital expendituresunder the automatic route for maintenance and operation of tollsystems for roads and highways provided they are part of theoriginal project.

Effective April 20, 2012, refinancing existing ECB is allowedthrough new ECB at a higher all-in-cost/rescheduling of an existingECB at a higher all-in-cost under the approval route as long as theenhanced all-in-cost does not exceed the all-in-cost ceiling underthe current guidelines.

Effective April 24, 2012, ECB is allowed for working capital as apermissible end use for the civil aviation sector, under the approvalroute, up to US$1 billion (US$300 million for an individual airlinecompany). Effective June 25, 2012, Indian companies may use ECBfor repayment of rupee loan(s) from the domestic banking systemand/or for new rupee capital expenditures up to 50% of the averageannual export earnings realized during the past three financial years,under the approval route, with the following conditions: (1) Onlycompanies in the manufacturing and infrastructure sector areeligible for such ECB provided they have been consistent foreignexchange earners during the past three financial years and are notin the default list/caution list of the RBI. (2) The ECB may be usedonly for repayment of the rupee loans for capital expenditure or fornew rupee capital expenditure. The overall ceiling for such ECB isUS$10 billion. The maximum allowable ECB for an individualcompany or group under this program is US$3 billion. EffectiveSeptember 11, 2012, the maximum ECB for an individual companyunder the US$10 billion program was raised to 75% of the average

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foreign exchange earnings during the preceding three financialyears or 50% of the highest foreign exchange earnings in any of thepreceding three financial years, whichever is higher. Specialpurpose vehicles incorporated for at least one year that do not havea three-year financial year track record are permitted ECB up to50% of their annual export earnings during the previous financialyear. Effective July 5, 2012, proposals from Indian companies forbuyback of foreign currency convertible bonds with ECB areconsidered under the approval route subject to certain conditions.Effective September 11, 2012, refinancing bridge financing (in thenature of buyer/supplier credit) with long-term ECB is allowedunder the automatic route. Effective November 6, 2012, the SmallIndustries Development Bank of India was named an eligible ECBborrower for onlending to the micro, small, and medium enterprisesector, with certain conditions.

Effective November 26, 2012, the conditions of ECB were relaxedfor refinancing rupee and short-term foreign exchange bridge loansfrom foreign equity holders of successful bidders under the 2Gspectrum auction.

Effective December 17, 2012, ECB may be used for affordablehousing projects under the approval route. ECB may be used bydevelopers/builders for affordable housing projects. HFCs and theNational Housing Bank may also use ECB for financing forprospective owners of affordable housing.

Effective January 7, 2013, the limit on ECB by NBFC-IFCs underthe automatic route was increased from 50% of their own funds to75%, including outstanding ECBs approved by the RBI.

Guarantees, sureties, and financialbackup facilities

Yes.

By residents to nonresidents Yes. Banks may not issue a guarantee, standby LC, or letter of comfort(LoC) or undertaking (LoU) on behalf of their constituents in favorof an overseas lender to access ECB or financial credit. However,banks may issue the same instruments in favor of an overseas lenderon behalf of their importer constituents for trade credits (i.e., buyeror supplier credits) for imports of noncapital goods for up to oneyear and capital goods for a period of less than three years and upto the equivalent of US$20 million an import transaction, withoutRBI approval.

To residents from nonresidents Yes. The RBI allows ADs to grant rupee loans to residents againstguarantees from nonresidents under the general permission.

Borrowing and lending between two residents is not affected by anyprovisions of the 1999 FEMA. If a rupee loan is granted against aguarantee by a nonresident, there is no transaction involving foreignexchange until the guarantee is invoked and the nonresidentguarantor is required to meet the liability under the guarantee.

Facility of nonresident guarantee under the general permission isallowed for non-fund-based facilities (such as LCs, guarantees,LoUs, LoCs) between two residents.

Credit enhancement by eligible nonresident entities has beenextended to domestic debt raised through issues of capital market

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instruments, such as debentures and bonds, by Indian companiesengaged exclusively in the development of infrastructure and byIFCs under the automatic route, subject to certain conditions.

Controls on direct investment Yes.

Outward direct investment Yes. Indian companies and registered partnership firms (Indian parties)making ODI in JVs or WOS may invest up to 400% of their networth through the automatic route. Unregistered partnership andproprietorship firms subject to fulfilling certain conditions mayinvest abroad up to 200% of their net worth with RBI approval. Forthe purpose of investing abroad, net worth is calculated as of thedate of the company’s latest audited balance sheet. Indian partiesmay fund ODI in JVs or WOS with remittances by way of marketpurchases, capitalization of exports, balances held in EEFCaccounts of the Indian party, ECB, and ADR/GDR proceeds.

Financial entities investing abroad in any activity must also obtainapproval from the regulatory authorities concerned in India andabroad. However, approval from overseas regulators is requiredonly if the overseas subsidiary is engaged in financial servicesactivity. Companies may also invest by way of share-swaptransactions under the automatic route, subject to approval by theForeign Investment Promotion Board (FIPB) for the inward leg ofthe transaction. Effective September 7, 2012, Indian parties maymake ODI in Pakistan. Previously such investments wereprohibited. ODI in Nepal is allowed only in rupees, but ODI inBhutan is allowed in rupees and freely convertible currencies. ODIin other countries is permitted in freely convertible currencies. ODIis prohibited for real estate and banking business. The Indian partymay issue a corporate guarantee on behalf of the first-leveloperating subsidiary under the automatic route. Resident employeesof a foreign company’s office, branch, or subsidiary in India inwhich the foreign company holds not less than 51% equity, eitherdirectly or indirectly, may invest under an employee stock optionplan without limit, subject to certain conditions. Effective March28, 2012, the previous condition that the foreign company have adirect/indirect holding of at least 51% in an Indian company waseliminated. Effective March 28, 2012, ADs may also allowremittances from resident individuals for acquisition of qualifyingshares for the position of director in the overseas companyaccording to the laws of the host country. The limit of theseremittances is within the overall ceiling prescribed for residentindividuals under the LRS in effect at the time of acquisition.Resident individuals may acquire shares of a foreign entity in partor full consideration of professional services rendered to the foreigncompany or in lieu of director’s remuneration within the overallceiling under the LRS in effect at the time of acquisition.

Effective March 29, 2012, a bank guarantee issued by a residentbank on behalf of an overseas JV or WOS of the Indian party thatis backed by a counterguarantee/collateral by the Indian party isconsidered in calculation of the financial commitment of the IndianParty. A personal guarantee issued on behalf of the JV/WOS byindirect promoters of the Indian Party may be allowed with samestipulations as for a personal guarantee by the direct promoters. For

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the purpose of ODI, compulsorily convertible preference shares(CCPS) are treated as equal to equity shares, and the Indian partymay enter into a financial commitment based on the exposure to aJV by way of CCPS.

Inward direct investment Yes. FDI in India is subject to policy guidelines framed by thegovernment of India from time to time. Persons resident outsideIndia and incorporated entities outside India are permitted to investin terms of the FDI Scheme. However, FIPB approval is requiredfor investment by citizens of/entities incorporated in Bangladeshand Pakistan. Further, an Indian company receiving FDI fromPakistan may not engage in sectors or activities pertaining todefense, space, and atomic energy or sectors or activities prohibitedfor foreign investment. FDI is permitted under two routes: thegovernment route and the automatic route, subject to sector-specificcaps and guidelines, except for a small negative list. Under thegovernment route, SIA/FIPB approval is required. There are eightsectors in which foreign investment is prohibited: (1) lotterybusiness; (2) gambling and betting; (3) chit funds; (4) nidhicompanies; (5) trading in transferable development rights; (6) realestate business or construction of farmhouses; (7) manufacturing ofcigars, cheroots, cigarillos, and cigarettes of tobacco or tobaccosubstitutes; (8) activity or sectors not open to private sectorinvestment—e.g., atomic energy and railway transportation. FDI ispermitted in several sector-based groups where foreign investmentrequires approval of the government: (1) defense, capped at 26%;(2) existing airports 74%–100%; (3) asset reconstructioncompanies, capped at 49%; (4) credit information companies,capped at 49%; (5) commodity exchange, capped at 49%; (6)infrastructure companies in the securities market, capped at 49%;(7) satellite companies, capped at 74%; (8) broadcasting, includinguplinking nonnews and current affairs television channels, between20% and 100%; (9) print media, capped at 26%; (10) petroleumrefining by public sector companies, capped at 49%; (11)multibrand retail trading, capped at 51%; (12) telecommunications,capped at between 49% and 74%; (13) satellites, single-brandproduct retail trading, tea plantation, mining and mineral separationof titanium-bearing minerals and ores, and existing airports, cappedat between 74% and 100%; (14) courier services, infrastructure, andservices investment companies; (15) publishing scientific andspecialty journals; and (16) test marketing, etc. Further, under theautomatic route, there are only four sectors where investments aresubject to sector-specific caps: (1) private sector banks, capped at74%; (2) insurance companies, capped at 26%; (3) air transportservices, capped at 49% for schedule-based service and at 74% fornon-schedule-based service, and ground handling services, cappedat 74%; and (4) telecommunication services, capped at 49%. FDIis allowed up to 100% through the automatic route in the followingsectors: (1) agricultural activities such as floriculture andhorticulture; (2) pisciculture; (3) mining of diamonds, gold, silver,coal, and lignite; (4) alcohol, hazardous chemicals, industrialexplosives, drugs, and pharmaceuticals (greenfield); (5) power,greenfield airport, and helicopter services; (6) industrial parks; (7)construction development projects; (8) petroleum refining byprivate companies; (9) telecom instruments; (10) NBFCs; and (11)

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wholesale, cash and carry-trading in SEZs. NRIs may use fundsderived from new remittances or held in their NRE or FCNRaccounts (1) to make portfolio investments with repatriationbenefits of up to 5% of the paid-up capital, provided their totalholdings of shares and convertible debentures held under the PISdo not exceed 10% (extendable to 24% if the general meeting of theinvesting company passes a special board resolution) of the paid-up capital of the company or of the total paid-in value of each seriesof convertible debentures issued by the company; (2) for existingJV companies to raise the ratio of foreign equity shares to prescribedpercentages of their capital through expansion of their capital baseor through preferential allocation of shares to foreign investors; and(3) to invest on a nonrepatriation basis in money market mutualfunds (only NRIs). Outstanding ECB and lump-sum technicalknow-how fees, royalties, and imports of capital goods by units inSEZs may be converted to equity without RBI approval subject tocertain conditions. Further, an Indian company is allowed to issueequity shares/preference shares under the government route of theFDI Scheme against imports of capital goods, machinery,equipment (excluding secondhand machinery), preoperative/pre-incorporation expenses (including payments of rent, etc.), subjectto certain conditions.

Controls on liquidation of directinvestment

Yes. Shares may be sold freely on the stock exchange and the saleproceeds repatriated. Other sales of shares, securities, andimmovable property may be allowed by authorized banks aftercomplying with conditions prescribed by the RBI. RBI approval isrequired only for sales of shares when preconditions and norms havenot been fulfilled. Repatriation of after-tax sales proceeds isgenerally permitted, provided no condition of nonrepatriation wasimposed when the original investment was approved.

Controls on real estate transactions Yes. These transactions require RBI permission.

Purchase abroad by residents Yes. Residents may hold, own, or transfer immovable property outsideIndia, provided such property was acquired while the person residedoutside India or was obtained through inheritance or as a gift. Thatperson is also free to dispose of such property or acquire newproperty from the sale proceeds of such property. Residents maybuy immovable property abroad using RFC accounts. Residentsmay acquire property abroad using a personal remittance up to theequivalent of US$200,000 a financial year. General permission hasbeen granted to Indian companies that have established officesabroad to acquire immovable property abroad for their business useand for staff residences.

Purchase locally by nonresidents Yes. NRIs may invest in companies engaged in real estate development(e.g., construction of houses). ADs and housing companies mayextend loans to NRIs and PIOs for acquiring residences in India.

Sale locally by nonresidents Yes. Repatriation of after-tax sales proceeds is permitted up to theamount of foreign exchange brought in to purchase the property,subject to certain conditions. ADs may allow remittances of up tothe equivalent of US$1 million a year—subject to payment ofapplicable taxes—for sales of immovable property, the proceeds ofwhich are credited to a nonresident ordinary rupee account (NRO

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account). Proceeds from the sale of immovable property may beremitted without limitation on how long the property was owned.

Controls on personal capitaltransactions

Yes.

Loans Yes.

By residents to nonresidents Yes. ADs may lend to NRIs in rupees to purchase immovable propertyand for personal business.

To residents from nonresidents Yes. Borrowing not exceeding US$250,000 or its equivalent by residentsfrom NRIs who are close relatives of the borrower is permitted bythe RBI, provided the loan is interest free and the minimum maturityperiod is one year, subject to certain conditions. Effective March21, 2012, AD Category I banks may allow repayment of such loansto the NRE/FCNR(B) account of the lender concerned subject toconditions.

Gifts, endowments, inheritances, andlegacies

Yes.

By residents to nonresidents Yes. ADs may remit gifts and donations by residents with a limitsubsumed under the limit of US$200,000 a financial year under theLRS. The limit of US$5,000 a donor continues to apply tocorporations. The RBI considers requests for higher amounts.

To residents from nonresidents n.a.

Settlement of debts abroad byimmigrants

n.a.

Transfer of assets Yes.

Transfer abroad by emigrants Yes. ADs may allow remittances of up to US$100,000 or its equivalentat the time of emigration, and thereafter US$1 million a financialyear from balances held in NRO accounts, subject to certainconditions.

Transfer into the country byimmigrants

Yes.

Transfer of gambling and prizeearnings

Yes. Remittances of earnings from sweepstakes, gambling, and lotteriesare not permitted.

References to legal instruments andhyperlinks

Yes. dipp.nic.in/English/Policies/FDI_Circular_01_2013.pdf;

www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7355;

www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7353;

www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7352;

www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7350;

www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7313;

www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7311;

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www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=7309;

A.P. (DIR Series) Circular No. 47 of April 12, 2010;

Circular DNBS.PD.CC No. 168/03.02.089/2009-10 of February 12,2010;

A.P. (DIR Series) Circular Nos. 38, 39, and 40 of March 2, 2010.

Provisions Specific to the Financial Sector

Provisions specific to commercialbanks and other credit institutions

Yes.

Borrowing abroad Yes. ECB is subject to the policy framed by the RBI in consultation withthe MOF. Certain financial institutions are allowed to use ECB,subject to certain conditions.

Maintenance of accounts abroad No. There are no restrictions on ADs maintaining accounts abroad.

Lending to nonresidents (financial orcommercial credits)

Yes. ADs are free to manage surplus balances in their exchange accountsthrough overnight placement and investment with their branches orcorrespondent banks, subject to limits imposed by their respectiveboards.

Lending locally in foreign exchange Yes. Banks may lend to residents to meet foreign exchange requirementstoward pre-shipment credit in foreign currency for financingdomestic inputs. Banks may also use their foreign currency depositresources to grant loans to residents.

Purchase of locally issued securitiesdenominated in foreign exchange

n.a.

Differential treatment of depositaccounts in foreign exchange

Yes.

Reserve requirements No. The cash reserve ratio (CRR) was reduced from 5.5% in stages to4.25% of net demand and time liabilities (NDTL) of scheduledbanks from the fortnight beginning November 3, 2012, and wasreduced to 4.00% effective from the fortnight beginning February9, 2013. Credit balances in ACU dollar accounts, net interbankliabilities between 15 days and one year, and demand and timeliabilities of banks’ offshore banking units are exempt from reserverequirement percentages. (Section 2(e) of the RBI Act 1934 defines“scheduled bank” as a bank included in the Second Schedule of RBIAct 1934. Every scheduled bank is required to maintain a CRR withthe RBI under the terms of Section 42 of the RBI Act, 1934. Otherbanks must also maintain a prescribed CRR under the BankingRegulation Act, 1949.)

Liquid asset requirements No. There is no differential treatment of deposits in foreign exchange.Banks are subject to a statutory liquidity ratio (SLR), which isrequired for both domestic and foreign currency, of 23% of NDTL,(previously 24%) effective from the fortnight beginning August 11,2012.

Interest rate controls Yes. Interest rate ceilings on FCNR (B) deposits of all maturities betweenone and three years are set at LIBOR/swap rates plus 200 bps and

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for maturities three to five years at LIBOR/swap rates plus 300 bps.The LIBOR/swap rates as of the last business day of the precedingmonth are used as the basis for ceiling rates offered the followingmonth. The LIBOR/swap rates on the last business day of eachmonth announced by the FEDAI must be taken as the base rates forthe interest rate ceiling.

Credit controls n.a.

Differential treatment of depositaccounts held by nonresidents

Yes.

Reserve requirements No.

Liquid asset requirements No. There is no differential treatment of deposit accounts held bynonresidents.

Interest rate controls Yes. Interest rates on deposits of residents, including savings deposits,are not regulated. Banks may set their savings deposits interest rateon domestic deposits subject to the following two conditions: First,each bank must offer a uniform interest rate on savings balances upto Rs 100,000, irrespective of the amount in the account within thislimit. Second, for savings balances over Rs 100,000 a bank mayprovide differential rates on interest, subject to the condition thatbanks do not discriminate in the matter of interest paid on suchdeposits, between one deposit and another of similar amountaccepted on the same date.

The interest rates on savings deposits and term deposits of maturityof one year and above under NRE deposits accounts and under NROrupee savings deposit accounts are not regulated. However, interestrates offered by banks on NRE and NRO deposits may not exceedthose offered on comparable domestic rupee deposits. The interestrate ceiling on FCNR(B) deposits and NRE deposits remains linkedto international rates.

Credit controls No.

Investment regulations No.

Abroad by banks No. Banks may invest in money market instruments and/or debtinstruments held abroad up to the limits approved by their respectiveboards of directors.

In banks by nonresidents No.

Open foreign exchange position limits Yes. Banks must apply a capital charge of 9% on the open foreignexchange position limit or the actual position, whichever is higher.

On resident assets and liabilities Yes.

On nonresident assets and liabilities Yes.

Provisions specific to institutionalinvestors

Yes.

Insurance companies Yes.

Limits (max.) on securities issued bynonresidents

Yes. Insurance companies (both life and general) may not invest insecurities issued by nonresidents.

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Limits (max.) on investment portfolioheld abroad

Yes. Insurance companies (both life and general) may not hold portfoliosabroad.

Limits (min.) on investment portfolioheld locally

Yes. Life insurance companies must invest (other than funds relating topension and general annuity business and unit-linked business) notless than 50% in government and other government-approvedsecurities. The balance must be invested in approved bonds,debentures, securities, and money market instruments.

General insurance companies must invest not less than 30% ingovernment and other government-approved securities. Thebalance must be invested in approved bonds, debentures, securities,and money market instruments.

Currency-matching regulations onassets/liabilities composition

Yes. All investments are in domestic currency.

Pension funds n.a.

Limits (max.) on securities issued bynonresidents

n.a.

Limits (max.) on investment portfolioheld abroad

n.a.

Limits (min.) on investment portfolioheld locally

n.a.

Currency-matching regulations onassets/liabilities composition

n.a.

Investment firms and collectiveinvestment funds

n.a.

Limits (max.) on securities issued bynonresidents

n.a.

Limits (max.) on investment portfolioheld abroad

n.a.

Limits (min.) on investment portfolioheld locally

n.a.

Currency-matching regulations onassets/liabilities composition

n.a.

References to legal instruments andhyperlinks

Yes.

Changes during 2012

Resident accounts April 2 An Indian party (as defined for overseas direct investment) mayhave a foreign currency account abroad for overseas directinvestment subject to certain conditions—namely host-countrylaws that stipulate that investment must be routed through adesignated account, etc.

July 31 Exporters may credit 100% of their foreign exchange earnings toexchange earners’ foreign currency accounts. Total accruals in theaccount during a calendar month must be converted to rupees on orbefore the last day of the subsequent calendar month after adjustingfor approved purposes and forward commitments.

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Nonresident accounts March 21 AD Category I banks may allow repayment of loans not exceedingUS$250,000 to a resident individual by close relatives outside Indiato the nonresident external/foreign currency (Scheme B) account ofthe lender concerned, subject to conditions.

July 5 Nonresident Indians may transfer funds from nonresident ordinaryaccounts to nonresident external accounts within an overall ceilingof US$1 million a financial year subject to payment of applicabletaxes (i.e., if the funds were remitted abroad).

Exports and export proceeds July 31 Exporters may credit 100% of their foreign exchange earnings toexchange earners’ foreign currency accounts. Total accruals in theaccount during a calendar month must be converted to rupees on orbefore the last day of the subsequent calendar month after adjustingfor approved purposes and forward commitments.

November30

The period of 12 months for the repatriation of export proceeds wasextended through March 31, 2012.

Payments for invisible transactionsand current transfers

May 7 The limit for foreign exchange remittance for miscellaneouspurposes without documentation was raised from US$5,000 toUS$25,000.

July 5 Nonresident Indians may transfer funds from nonresident ordinaryaccounts to nonresident external accounts within an overall ceilingof US$1 million a financial year subject to payment of applicabletaxes (i.e., if the funds were remitted abroad).

Proceeds from invisibletransactions and current transfers

July 31 Exporters may credit 100% of their foreign exchange earnings toexchange earners’ foreign currency accounts. Total accruals in theaccount during a calendar month must be converted to rupees on orbefore the last day of the subsequent calendar month after adjustingfor approved purposes and forward commitments.

Capital transactions

Controls on capital and moneymarket instruments

March 28 Remittances by resident employees of foreign companies and theirjoint ventures or wholly owned subsidiaries in which the foreigncompany holds equity, either directly or indirectly, to acquire sharesof the foreign company under an employee stock option plan nolonger require that the foreign company have a direct or indirectholding of at least 51% in an Indian company.

March 28 ADs may allow remittances from resident individuals foracquisition of qualifying shares for the position of director in aforeign company as prescribed by the host country’s laws. Residentsmay acquire shares of a foreign entity in part or full considerationof professional services rendered or in lieu of director’sremuneration within the overall ceiling for resident individualsunder the Liberalized Remittance Scheme. These remittances mustbe within the overall ceiling for resident individuals under theLiberalized Remittance Scheme in effect at the time of acquisition.

July 16 Qualified foreign investors may invest through Securities andExchange Board of India–registered qualified depositoryparticipants in eligible corporate debt instruments.

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Controls on credit operations February29

Developers of the proposed National Manufacturing InvestmentZone may use external commercial borrowing under the approvalroute to develop infrastructure within that zone.

March 21 AD Category I banks may allow repayment of loans not exceedingUS$250,000 to a resident individual by close relatives outside Indiato the nonresident external/foreign currency nonresident (SchemeB) account of the lender concerned, subject to conditions.

April 20 Indian companies in the power sector may use 40% of new externalcommercial borrowing raised to refinance their rupee loan(s) fromthe domestic banking system, under the approval route. At least60% of the new external commercial borrowing must be used fornew capital expenditures for infrastructure project(s).

April 20 External commercial borrowing is allowed for capital expendituresunder the automatic route for maintenance and operations of tollsystems for roads and highways provided they form part of theoriginal project.

April 20 Refinancing existing external commercial borrowing is allowed byraising new external commercial borrowing at a higher all-in-cost/reschedule of existing external commercial borrowing at a higherall-in-cost under the approval route. The enhanced all-in-cost maynot exceed the all-in-cost ceiling prescribed in the guidelines.

April 24 External commercial borrowing is allowed for working capital as apermissible end use for the civil aviation sector, under the approvalroute, subject to an overall limit of US$1 billion.

June 25 Indian companies may use external commercial borrowing forrepayment of rupee loan(s) from the domestic banking system and/or for new rupee capital expenditures, up to 50% of the averageannual export earnings realized during the past three financial yearsunder the approval route, subject to conditions. The overall ceilingfor such external commercial borrowing is US$10 billion.Maximum external commercial borrowing by an individualcompany or group, as a whole, under this program isUS$3 billion.

July 5 Proposals from Indian companies for buyback of foreign currencyconvertible bonds are considered under the approval route subjectto certain conditions.

September11

Maximum external commercial borrowing by an individualcompany under the US$10 billion plan was raised to 75% of theaverage foreign exchange earnings during the preceding threefinancial years or 50% of the highest foreign exchange earnings inany of the preceding three financial years, whichever is higher.

September11

Refinancing bridge finance (if in the nature of buyer/supplier credit)with long-term external commercial borrowing is allowed under theautomatic route.

September11

Conditions were relaxed for trade credits in the infrastructure sector.The maximum maturity of credits for imports of capital goods asclassified by The Directorate General of Foreign Trade wasextended from three years to five years subject to conditions,

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including that the trade credit must be ab initio contracted for notless than 15 months.

September11

Special purpose vehicles incorporated at least one year that do nothave a sufficient track record for three financial years may useexternal commercial borrowing up to 50% of their export earningsduring the preceding financial year.

October 12 Banks may grant loans against nonresident (external) rupeeaccounts and foreign currency nonresident (bank) accounts eitherto the depositors or third parties, subject to conditions.

November 6 The Small Industries Development Bank of India became eligiblefor external commercial borrowing for onlending to the micro,small, and medium enterprises sector, subject to certain terms andconditions.

November26

Conditions were relaxed for bridge financing, replacement of bridgefinancing with long-term external commercial borrowing,refinancing of rupee loans under long-term external commercialborrowing, and external commercial borrowing from foreign equityholders under the 2G spectrum reauction.

December14

Conditions were relaxed for ab initio buyer credit from 15 monthsto 6 months for existing trade credits for companies in theinfrastructure sector for trade credit up to five years. The conditionsfor ab initio buyer credit for 15 months are unchanged for futuretrade credit.

December17

External commercial borrowing is allowed for affordable housingprojects as an end use, under the approval route. Externalcommercial borrowing is permitted for developers/builders ofaffordable housing projects. Housing finance companies and theNational Housing Bank are also permitted to use externalcommercial borrowing to finance prospective owners’ affordablehousing units.

Controls on direct investment March 28 Remittances by resident employees of foreign companies and theirjoint ventures or wholly owned subsidiaries in which the foreigncompany holds equity, either directly or indirectly, to acquire sharesof the foreign company under an employee stock option plan nolonger require that the foreign company have a direct or indirectholding of at least 51% in an Indian company.

March 28 ADs may allow remittances from resident individuals for theacquisition of qualifying shares for the position of director in aforeign company as prescribed by the host country’s laws. Residentsmay acquire shares of a foreign entity in part or full considerationof professional services rendered or in lieu of director’sremuneration within the overall ceiling under the LiberalizedRemittance Scheme. These remittances must be within the overallceiling for resident individuals under the Liberalized RemittanceScheme in effect at the time of acquisition.

March 29 A bank guarantee issued by a resident bank on behalf of an overseasjoint venture/wholly owned subsidiary of an Indian party that isbacked by a counterguarantee/collateral by the Indian party must betaken into account in calculation of the financial commitment of the

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Indian party. Issuance of a personal guarantee on behalf of the jointventure/wholly owned subsidiary by indirect promoters of theIndian party may be allowed with same stipulations as in the caseof a personal guarantee by the direct promoters. For the purpose ofoverseas direct investment, compulsorily convertible preferenceshares are treated as equal to equity shares, and the Indian party mayundertake make a commitment based on the exposure to the jointventure by way of those shares.

September 7 Indian parties may make overseas direct investment in Pakistan(previously prohibited).

Controls on personal capitaltransactions

March 21 AD Category I banks may allow repayment of loans not exceedingUS$250,000 to a resident individual by close relatives outside Indiato the nonresident external/foreign currency nonresident (SchemeB) account of the lender concerned, subject to conditions.

Provisions specific to the financialsector

Provisions specific to commercialbanks and other credit institutions

August 11 The statutory liquidity ratio required for both domestic and foreigncurrency was reduced from 24% to 23% of net demand and timeliabilities.

November 3 The cash reserve ratio was reduced in stages from 5.5% to 4.25%of net demand and time liabilities of scheduled banks.

Changes during 2013

Exports and export proceeds May 20 The repatriation period of export proceeds was reduced from 12months to 9 months of shipment unless otherwise specified by theRBI.

Capital transactions

Controls on capital and moneymarket instruments

January 24 The limit on FII investments from US$20 billion to US$25 billionin government securities, and from US$45 billion toUS$50 billion in corporate debt instruments. The requirement thatthe government securities have a residual maturity of three years atthe time of the purchase was eliminated, but FIIs and long terminvestors may not purchase treasury bills within the US$15 billionsublimit.

January 24 In order to simplify the investment limits for FIIs and long-terminvestors in government securities and corporate debt, the debtlimits were merged into two broad categories: (1) The governmentdebt limit merged the two sublimits under government securities to(a) US$10 billion for investment by FIIs in government securities,including treasury bills and (b) US$15 billion for investment indated government securities by FIIs and long-term investors. (2)The corporate debt limit merged the existing sublimits undercorporate debt to (a) US$1 billion for qualified foreign investors(QFIs), (b) US$25 billon for investment by FIIs and long-terminvestors in sectors other than infrastructure, and (c)US$25 billion for investment by FIIs/QFIs/long-term investors inthe infrastructure sector.

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Controls on credit operations January 7 The limit on external commercial borrowing by nonbank financialcompanies–infrastructure finance companies under the automaticroute was increased from 50% of their own funds to 75%, includingoutstanding external commercial borrowing approved by theReserve Bank of India.

Provisions specific to the financialsector

Provisions specific to commercialbanks and other credit institutions

February 9 The cash reserve ratio was reduced to 4.00% from 4.25%.

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