HEDGE-SQUARE FEMA Snaps – From 11 t h September , 2012 to 30 t h September , 2012

05.10.2012

Vide this Circular RBI has

increased borrowing limits

for an individual Company in

case of ECB from 50% of the

average annual export

earnings realised during the

past three financial years to

75 per cent of the average

foreign exchange earnings

realized during the

immediate past three

financial years or 50 per cent

of the highest foreign

exchange earnings realized

in any of the immediate past

three financial years,

whichever is higher subject

to maximum ECB amounting

to USD 3 Billion.

1. Circular No. 26 - External Commercial Borrowings (ECB)

Policy – Repayment of Rupee Loans and/or Fresh Rupee

Capital Expenditure:

Reforms on the

Path.

Inside this issue:

Special points

of interest:

• Amendment to

the Foreign

Director Investment

Scheme (FDI Scheme)

2. Circular No. 27 - External Commercial Borrowings (ECB)

Policy – Bridge Finance for Infrastructure Sector

Vide this Circular RBI has allowed refinancing of the bridge finances (taken vide approval route and

if in the nature of buyer’s/ supplier’s credit) through availing ECB under an automatic route subject

to satisfaction of certain conditions viz.

i. Refinancing shall be done prior to the end of the permissible period of credit.

ii. the AD by verifying the Bill of Entry evidences the import of capital goods;

iii. Other policies of DGFT and trade credit should be complied with

iv. the proposed ECB is obedient with all the other existing guidelines for availing ECB.

1

ECB 1

ECB – Bridge

Finance

1

Overseas Direct

Investment

1

FDI 2

Branch Office 2

FDI 2

3. Circular No. 29 - Overseas Direct Investments by Indian

Party – Rationalisation

Vide this circular RBI stated that any Indian party, which has set up / acquired a Joint Venture (JV) or

Wholly Owned Subsidiary (WOS) overseas in terms of the Regulations, shall submit Annual

Performance Report (APR) for each such JV/ WOS, based on the audited financials of the such JV /

WOS (subject to exemptions granted in certain cases as specified), to the Authorised Dealer, every year

together with other reports or documents as may be specified on or before the 30th June.

Single Brand Retail: 100% permitted under government route, subject to investment from single non-resident entity and

subject to terms and conditions specified by Department of industrial Policy & Promotion, Ministry of commerce & Industry,

Government of India.

Multi Brand Retail: 51 % FDI is permitted under approval route, subject to the terms and conditions issued by Department of

Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India.

Civil Aviation Sector: Foreign airlines are allowed to invest 49% in the capital of Indian companies, operating scheduled and

non-scheduled air transport services, subject to terms and conditions specified. Previously foreign airlines were permitted to

invest in the equity of companies operating Cargo airlines, helicopter and seaplane services.

Power Exchanges: 49% FDI is permitted under Approval Route

Broadcasting Carriage Services: position as to FDI modified in following manner

Broadcasting

Sector / Activity % of FDI Entry Route

Broadcasting Carriage Services

Teleports, Direct to Home, Cable Networks, Mobile TV,

Headend-in-the Sky Broadcasting Services

74% Automatic up to 49 %

Govt. Rout beyond 49 % and up to 74 %

Cable Networks 49% Automatic

Broadcasting Control Content Services

Terrestrial Broadcasting FM and/or UP-linking of Non-‘News

& Current Affairs’ TV Channels/ Down-linking of TV

Channels

26% Government

Up- linking of Non-;News & Current Affairs’ TV Channels/

Down –Linking of TV Channels

100% Government

Circular No. 32 – Amendment to the Foreign Direct Investment Scheme

Vide this Circular RBI mandated submission of report containing information as to the foreign entity, to the Director

General of Police (DGP) of the state, where office of such BO/ LO/ PO is situated, within 5 (Five) working days of the LO/

BO/ PO becoming functional and also on annual basis. Copy of said report shall also be submitted to the concerned

Authorised Dealer (AD) Bank.

Circular No. 35 – Establishment of Liaison Offices (LO) /Branch Offices (BO) /

Project Offices (PO) in India by Foreign Entities – Reporting Requirement

2

Circular No. 36 – Foreign Direct Investment (FDI) in India - Allotment of Shares

to Person Resident Outside India under Memorandum of Association (MoA) of

an Indian Company - Pricing Guidelines

Vide this Circular RBI has allowed to issue shares and/or convertible debentures to non-residents at the face value when

non-residents make investment in an Indian company in compliance with the provisions of the Companies Act, 1956, by

way of subscription to Memorandum of Association. Previously pricing was to be made using DCF method of valuation.

Contact: +91 9870 551611 / +91 97699 51611

Email: hemant@hedge-square.com

Web: www.hedge-square.com © 2012 Hedge-Square Consultancy Services Pvt.

Ltd.

This material and the information contained herein prepared by Hedge-Square Consultancy Services

Pvt. Ltd. (HSQ), is intended to provide general information on a particular subject or subjects and is

not an exhaustive treatment of such subject(s). None of HSQ’s officials or their related entities is, by

means of this material, rendering professional advice or services. The information is not intended to

be relied upon as the sole basis for any decision which may affect you or your business.