Foreign Exchange Developments
1. Opening of Diamond Dollar Accounts
(DDAs)
In terms of A.P. (DIR Series) Circular No. 51 dated
February 13, 2009 powers were delegated to AD
Category–I banks to open and maintain DDAs by eligible
firms and companies subject to certain terms and
conditions. It has now been decided that AD Category
- I banks should submit a statement giving the data on
the DDA balances maintained by them on a fortnightly
basis as per format annexed with this A.P. (DIR Series)
Circular, within seven days of close of the fortnight to
which it relates, to the Chief General Manager-in-
Charge, Foreign Exchange Department, Reserve Bank
of India, Trade Division, 5th Floor, Amar Building,
Mumbai – 400001.
[A.P. (DIR Series) Circular No.73
dated January 31, 2012]
2. Deferred Payment Protocols dated
April 30, 1981 and December 23, 1985
between Government of India and
erstwhile USSR
In terms of A.P. (DIR Series) Circular No. 54 dated
December 8, 2011, the Rupee value of the Special
Currency Basket was indicated as ` 73.923372 effective
from November 28, 2011.A further revision has taken
place on January 17, 2012 and accordingly, the Rupee
value of the Special Currency Basket has been fixed at ` 71.456679 with effect from January 20, 2012.
[A.P. (DIR Series) Circular No.74
dated February 1, 2012]
3. External Commercial Borrowings –
Simplification of procedure
As a measure of simplification of the existing
procedures, it was decided to delegate powers to the
designated AD category-I banks to approve the following
requests from the ECB borrowers, subject to specified
conditions:
a) Reduction in amount of ECB – The
designated AD Category-I bank may approve requests from ECB borrowers for reduction in loan
amount in respect of ECBs availed under the
automatic route, subject to conditions.
b) Changes/modifications in the drawdown
schedule when original average maturity
period is not maintained – designated AD
Category-I bank may approve requests from ECB
borrowers for changes/modifications in the
drawdown schedule resulting in the original
average maturity period undergoing change in
respect of ECBs availed both under the automatic
and approval routes, subject to conditions.
c) Reduction in the all-in-cost of ECB – The
designated AD Category-I bank may approve
requests from ECB borrowers for reduction in all in-cost, in respect of ECBs availed both under the
automatic and approval routes, subject to
conditions.
[A.P. (DIR Series) Circular No.75
dated February 7, 2012]
4. Clarification - Establishment of Project
Offices in India by Foreign Entities –
General Permission
In terms of Regulation 4 of Notification No.FEMA
22 /2000-RB dated May 3, 2000, viz., Foreign Exchange
Management (Establishment in India of Branch or
Office or other Place of Business) Regulations, 2000, as
amended from time to time, no person, being a citizen
of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran
or China, shall establish in India, a branch office or a
liaison office or a project office or any other place of
business by whatever name called, without the prior
permission of the Reserve Bank. Further, A.P. (DIR
Series) Circular No. 37 dated November 15, 2003
provides the guidelines regarding general permission
to a foreign entity for setting up a Project office in India,
subject to certain conditions.
It is clarified that the general permission accorded
in terms of the November 15, 2003 guidelines is subject
to the adherence to the provisions of Regulation 4 of Notification No.FEMA 22/2000-RB dated 3rd May 2000,
ibid, alongwith their specified conditions.
[A.P. (DIR Series) Circular No.76
dated February 9, 2012]
5. Anti-Money Laundering (AML)
standards/Combating the Financing of
Terrorism (CFT) Standards – Money
changing activities
The A.P.(DIR Series) Circular Nos.21 and 23 dated
September 19, 2011 specified the risks arising from the
deficiencies in AML/CFT regime of certain jurisdictions.
The Financial Action Task Force (FATF) has issued a
further Statement on October 28, 2011 on the subject
[copy enclosed with the A.P. (DIR Series) Circular].
Authorised Persons were accordingly advised to
consider the information contained in the enclosed
statement.
This, however, does not preclude Authorised
Persons from legitimate transactions with these
countries and jurisdictions.
[A.P. (DIR Series) Circular No.77
dated February 15, 2012]
6. Anti-Money Laundering (AML)
standards/Combating the Financing of
Terrorism (CFT) Standards – Cross
Border Inward Remittance under
Money Transfer Service Scheme
The A.P.(DIR Series) Circular Nos.22 and 24 dated
September 19, 2011 specified the risks arising from the
deficiencies in AML/CFT regime of certain jurisdictions.
The Financial Action Task Force (FATF) has issued a
further Statement on October 28, 2011 on the subject
[copy enclosed with the A.P. (DIR Series) Circular].
Authorised Persons (Indian Agents) were accordingly
advised to consider the information contained in the
enclosed statement.
This, however, does not preclude Authorised
Persons (Indian Agents) from legitimate transactions
with these countries and jurisdictions.
[A.P. (DIR Series) Circular No.78
dated February 15, 2012]
7. Clarification - Purchase of Immovable
Property in India – Reporting
requirement
In terms of Regulation 5 of Notification No. FEMA
21/2000-RB viz., Foreign Exchange Management
(Acquisition and Transfer of Immovable Property in
India), Regulations, 2000 dated May 3, 2000, as
amended from time to time, when a person resident
outside India, who has established in India in
accordance with the Foreign Exchange Management
(Establishment in India of Branch or Office or other
Place of Business) Regulations, 2000, a branch, office
or other place of business, excluding a liaison office,
acquires any immovable property in India in accordance
with the provision of said regulation, the said person
has to file with the Reserve Bank a declaration in the
form IPI annexed to those regulations, not later than
ninety days from the date of such acquisition. As the
form is required to be submitted by such persons only,
the form is suitably amended to reflect the position.
It was clarified that the extant regulations do not
prescribe any reporting requirements for transactions
where a person resident outside India who is a citizen
of India or a Person of Indian Origin (PIO) as defined
in Regulation 2(c) of Notification No. FEMA 21/2000-RB,
ibid, acquire/s immovable property in India in
accordance with the said provisions of the aforesaid
Notification. Form IPI has been, accordingly, amended
for greater clarity.
[A.P. (DIR Series) Circular No.79
dated February 15, 2012]
8. Export of Goods and Services-
Simplification and Revision of Softex
Procedure
In terms of Regulation 6 of the Notification
No.FEMA 23/2000-RB dated May 3, 2000 viz., Foreign
Exchange Management (Export of Goods and Services)
Regulations, 2000, as amended by the Notification
No.FEMA 36/2001-RB dated February 2, 2001, which
designated officials of the Ministry of Information
Technology, Government of India at the Software
Technology Parks of India (STPIs) or at Free Trade Zones
(FTZs) or Export Processing Zones (EPZs) or Special Economic Zones(SEZs), had been authorised to certify
exports declared through SOFTEX Forms.
Considering the spurt in the volume of software
exports from India in recent times, the complexity of
work contracts involved, the voluminous nature of
contract agreements and the duration involved in
execution of each contract as well as the time-consuming
process involved in the certificatiton of
SOFTEX forms, the matter was revisited and a revised
procedure was given below, has now been finalised in
consultation with the stakeholders involved.
[A.P. (DIR Series) Circular No.80
dated February 15, 2012]
9. Export of Goods and Services –
Receipt of advance payment for
export of goods Involving shipment
(manufacture and ship) beyond one
year
In terms of sub-regulation (2) of Regulation 16 of
the Foreign Exchange Management (Export of Goods
and Services) Regulations, 2000, notified vide
Notification No.FEMA.23/RB-2000, dated 3rd May 2000,
as amended from time to time, prior approval of the
Reserve Bank is required to be obtained by an exporter
for receipt of advance where the export agreement
provides for shipment of goods extending beyond the
period of one year from the date of receipt of advance
payment. With a view to liberalizing the procedure, it
has been decided to permit AD Category- I banks to
allow exporters to receive advance payment for export
of goods which would take more than one year to
manufacture and ship and where the ‘export agreement’
provides for shipment of goods extending beyond the
period of one year from the date of receipt of advance
payment subject to conditions.
[A.P. (DIR Series) Circular No.81
dated February 21, 2012]
10. Release of Foreign Exchange for
Imports – Further Liberalisation
In terms of A.P.(DIR Series) Circular No. 106 dated June
19, 2003 applications by persons, firms and companies
for making payments, exceeding US$ 500 or its equivalent towards imports into India must be made
in Form A-1.
Based on suggestions received from the various
stake holders, the said limit has been reviewed and it
has been decided as a measure of liberalization to raise
the above limit for foreign exchange remittance towards
imports without any documentation formalities, from
US$ 500 or its equivalent to US$ 5,000 or its equivalent,
with immediate effect.
It is clarified that the ADs need not obtain any
document, including Form A-1, except a simple letter
from the applicant containing the basic information
viz., the name and the address of the applicant, name
and address of the beneficiary, amount to be remitted
and the purpose of remittance, as long as the exchange
being purchased is for a current account transaction
(and is not included in the Schedules I and II of the
Foreign Exchange Management (Current Account
Transactions) Rules, 2000 framed by Government of
India vide Notification No. G.S.R.381 (E) dated May 3,
2000, as amended from time to time, the amount does
not exceed US$ 5000 or its equivalent and the payment
is made by a cheque drawn on the applicant’s bank
account or by a Demand Draft.
[A.P. (DIR Series) Circular No.82 dated February 21, 2012]
11. Import of Gold on Loan Basis- Tenor
of Loan and Opening of Stand - By
Letter of Credit
In terms of para 4A 23.2 and para 4A 23.3 of the
Hand Book of Procedures (HBP) Vol. I of the Foreign
Trade Policy (FTP) 2009-14, ‘the export has to be
completed within a maximum period of 90 days from
the date of release of gold on loan basis’, and that, ‘the
exporter shall have flexibility to fix the price and repay
gold loan within 180 days from date of export’.
Accordingly, the maximum tenor of gold loan becomes
270 days at present (i.e. 90 days for manufacture and
export + 180 days for fixing the price and repayment)
as per FTP 2009-14.
AD Category-I Banks may, accordingly, note to
comply that (i) the maximum period of gold loan shall
be as per the Foreign Trade Policy 2009-14 or as notified by the Government of India from time to time, in this
regard and (ii) the tenor of SBLC, for import of gold on
loan basis, where ever required, should also be in line
with the tenor of gold loan.
[A.P. (DIR Series) Circular No.83
dated February 27, 2012]
12. Import of Gold on Loan Basis- Tenor
of Loan and Opening of Stand - By
Letter of Credit
The following changes shall be effected in
reporting of R-Returns from the next financial year (i.e.,
transactions taking place from April 1, 2012):
i. The purpose codes for classification and reporting
of foreign exchange transactions in FETERS should
be as per the revised classification. Accordingly,
all AD category-I banks are advised to report all
foreign exchange transactions as per the revised
purpose code list with effect from fi rst fortnight
of April 2012 as per the attached guidelines.
ii. AD banks may indicate purpose codes for all
foreign exchange transactions (including receipts
under non-export transactions below ` 5 lakhs)
under FETERS. The present system of reporting
of non-export transactions below ` 5 lakhs (a) on
a consolidated basis in BoP file and (b) submission
of purpose-wise distribution of a sample of such
small receipt transactions (as part of R-return in
the URS file under FETERS), will be discontinued
for transactions beyond March 31, 2012.
iii. The amount field in all FETERS files will be
increased to 15-digit format.
iv. 6-digit port code will be used uniformly for
reporting under FETERS.
[A.P. (DIR Series) Circular No.84
dated February 29, 2012]
13. External Commercial Borrowings
(ECB) for Infrastructure facilities
within National Manufacturing
Investment Zone (NMIZ)
As per the extant guidelines, availing of ECB is
permissible for the infrastructure sector, which is
defined to include (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port
and airport, (vi) industrial parks, (vii) urban
infrastructure (water supply, sanitation and sewage
projects), (viii) mining, refining and exploration and
(ix) cold storage or cold room facility, including for farm
level pre-cooling, for preservation or storage of
agricultural and allied produce, marine products and
meat. Developers of SEZ were also allowed to provide
such infrastructure facilities within the SEZ.
Keeping in view the infrastructural needs of the
proposed National Manufacturing Investment Zones
(NMIZs), it has now been decided to allow developers
of NMIZ also to avail of ECB under the “approval route”
for providing infrastructure facilities within the NMIZ,
as indicated above.
[A.P. (DIR Series) Circular No.85
dated February 29, 2012]
14. Know Your Customer (KYC) norms /
Anti-Money Laundering (AML)
standards / Combating the Financing
of Terrorism (CFT) / Obligation of
Authorised Persons under Prevention
of Money Laundering Act (PMLA),
2002, as amended by Prevention of
Money Laundering (Amendment) Act,
2009- Assessment and Monitoring of
Risk – Money Changing Activities
The Government of India had constituted a
National Money Laundering / Financing of Terror Risk
Assessment Committee to assess money laundering
and terror financing risks, a national AML / CFT strategy
and institutional framework for AML/CFT in India.
Assessment of risk of Money Laundering /Financing of
Terrorism helps both the competent authorities and
the regulated entities in taking necessary steps for
combating ML / FT adopting a risk-based approach. This
helps in judicious and efficient allocation of resources
and makes the AML/CFT regime more robust. The
Committee has made recommendations regarding
adoption of a risk-based approach, assessment of risk
and putting in place a system which would use that
assessment to take steps to effectively counter ML/FT.
The recommendations of the Committee have since been accepted by the Government of India and need
to be implemented. Accordingly, APs should take steps
to identify and assess their ML/TF risk for customers,
countries and geographical areas as also for products/
services/ transactions/delivery channels, in addition to
what has been prescribed in the aforesaid circular,
referred to in paragraph 4 of the above-mentioned
circular dated November 27, 2009. APs should have
policies, controls and procedures, duly approved by
their boards, in place to effectively manage and mitigate
their risk adopting a risk-based approach as discussed
above. As a corollary, APs would be required to adopt
enhanced measures for products, services and
customers with a medium or high risk rating.
APs may design risk parameters according to their
activities for risk based transaction monitoring, which
will help them in their own risk assessment.
[A.P. (DIR Series) Circular No.86
dated February 29, 2012]
15. Know Your Customer (KYC) norms /
Anti-Money Laundering (AML)
standards / Combating the Financing
of Terrorism (CFT) / Obligation of
Authorised Persons under Prevention
of Money Laundering Act (PMLA),
2002, as amended by Prevention of
Money Laundering (Amendment) Act,
2009 - Assessment and Monitoring of
Risk - Cross Border Inward Remittance
under Money Transfer Service Scheme
The Government of India had constituted a
National Money Laundering/Financing of Terror Risk
Assessment Committee to assess money laundering
and terror financing risks, a national AML/CFT strategy and institutional framework for AML/CFT in India.
Assessment of risk of Money Laundering /Financing of
Terrorism helps both the competent authorities and
the regulated entities in taking necessary steps for
combating ML/FT adopting a risk-based approach. This
helps in judicious and efficient allocation of resources
and makes the AML/CFT regime more robust. The
Committee has made recommendations regarding
adoption of a risk-based approach, assessment of risk
and putting in place a system which would use that
assessment to take steps to effectively counter ML/FT.
The recommendations of the Committee have since
been accepted by the Government of India and need
to be implemented.
Accordingly, APs (Indian Agents) should take steps
to identify and assess their ML/TF risk for customers,
countries and geographical areas as also for products/
services/ transactions/delivery channels, in addition to
what has been prescribed in the aforesaid circular,
referred to in paragraph 5 of the above-mentioned
Circular dated November 27, 2009. APs (Indian Agents)
should have policies, controls and procedures, duly
approved by their boards, in place to effectively manage
and mitigate their risk adopting a risk-based approach
as discussed above. As a corollary, APs (Indian Agents)
would be required to adopt enhanced measures for
products, services and customers with a medium or
high risk rating.
APs (Indian Agents) may design risk parameters
according to their activities for risk based transaction
monitoring, which will help them in their own risk
assessment.
[A.P. (DIR Series) Circular No.87
dated February 29, 2012]
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