Foreign Exchange Developments
1. Exim Bank’s Line of Credit of USD 80
million to the Government of the
Republic of Burundi
Export-Import Bank of India (Exim Bank) has
concluded an Agreement dated May 24, 2011 with the
Government of the Republic of Burundi, making
available to the latter, a Line of Credit (LOC) of USD 80
million (USD Eighty million) for financing eligible
goods, machinery, equipment and services including
consultancy services from India for the purpose of
installation of the Kabu Hydro Electric Project in
Burundi. The goods, machinery, equipment and
services including consultancy services from India for
exports under this Agreement are those which are
eligible for export under the Foreign Trade Policy of the
Government of India and whose purchase may be
agreed to be financed by the Exim Bank under this
Agreement. Out of the total credit by Exim Bank under
this Agreement, the goods and services including
consultancy services of the value of at least 75 per cent
of the contract price shall be supplied by the sellers
from India and the remaining 25 per cent goods and
services (other than consultancy services) may be
procured by the sellers for the purpose of Eligible
Contract from outside India.
The Credit Agreement under the LOC is effective
from April 19, 2012 and the date of execution of
Agreement is May 24, 2011. Under the LOC, the last
date for opening of Letters of Credit and Disbursement
will be 48 months from the scheduled completion
date(s) of contract(s) in the case of project exports and
72 months (May 23, 2017) from the execution date of
the Credit Agreement in the case of supply contracts.
[A.P. (DIR Series) Circular No. 114
dated May 2, 2012]
2. Exim Bank’s Line of Credit of USD 70
million to the Government of the
Republic of Congo
Export-Import Bank of India (Exim Bank) has
concluded an Agreement dated December 14, 2011 with the Government of the Republic of Congo, making
available to the latter, a Line of Credit (LOC) of USD 70
million (USD seventy million) for financing eligible
goods, services, machinery and equipments including
consultancy services for the purpose of the Rural
Electrification Project in the Republic of Congo. The
machinery, equipment, goods and services including
consultancy services from India for exports under this
Agreement are those which are eligible for export under
the Foreign Trade Policy of the Government of India
and whose purchase may be agreed to be financed by
the Exim Bank under this Agreement. Out of the total
credit by Exim Bank under this Agreement, the goods
and services including consultancy services of the value
of at least 75 per cent of the contract price shall be
supplied by the seller from India and the remaining 25
per cent goods and services (other than consultancy
services) may be procured by the seller for the purpose
of Eligible Contract from outside India.
The Credit Agreement under the LOC is effective
from March 28, 2012 and the date of execution of
Agreement is December 14, 2011. Under the LOC, the
last date for opening of Letters of Credit and
Disbursement will be 48 months from the scheduled
completion date(s) of contract(s) in the case of project
exports and 72 months (December 13, 2017) from the
execution date of the Credit Agreement in the case of
supply contracts.
[A.P. (DIR Series) Circular No. 115
dated May 4, 2012]
3. Exim Bank’s Line of Credit of USD
382.37 million to the Government of
the Democratic Socialist Republic of
Sri Lanka
Export-Import Bank of India (Exim Bank) has
concluded an Agreement dated January 17, 2012 with
the Government of the Democratic Socialist Republic
of Sri Lanka, making available to the latter, a Line of
Credit (LOC) of USD 382.37 million (USD three hundred
eighty two million three hundred seventy thousand) for financing export of eligible goods and services
including consultancy services for the purpose of (i)
Track-laying on the Pallai-Kankesanthurai Railway Line
(USD 149.34 million), (ii) Setting up of signaling and
telecommunications system for the Northern Railway
Line (USD 86.52 million) and (iii) any other contracts
that may be mutually approved by the Government of
the Democratic Socialist Republic of Sri Lanka and the
Government of India in Sri Lanka (USD 146.51 million).
The goods and services including consultancy services
from India for exports under this Agreement are those
which are eligible for export under the Foreign Trade
Policy of the Government of India and whose purchase
may be agreed to be financed by the Exim Bank under
this Agreement. Out of the total credit by Exim Bank
under this Agreement, the goods and services including
consultancy services of the value of at least 75 per cent
of the contract price shall be supplied by the seller from
India and the remaining 25 per cent goods and services
(other than consultancy services) may be procured by
the seller for the purpose of Eligible Contract from
outside India.
The Credit Agreement under the LOC is effective
from April 11, 2012 and the date of execution of
Agreement is January 17, 2012. Under the LOC, the last
date for opening of Letters of Credit and Disbursement
will be 48 months from the scheduled completion
date(s) of contract(s) in the case of project exports and
72 months (January 16, 2018) from the execution date
of the Credit Agreement in the case of supply contracts.
[A.P. (DIR Series) Circular No. 116
dated May 4, 2012]
4. Transfer of Funds from Non-Resident
Ordinary (NRO) account to Non-
Resident External (NRE) Account
As per recommendations of the Committee to
Review the Facilities for Individuals Under FEMA, 1999
(Chairperson: Smt. K.J. Udeshi) it has been decided that
henceforth NRI as defined in Foreign Exchange
Management (Deposit) Regulations, 2000 contained in
Notification No. FEMA.5/2000-RB dated 3rd May 2000,
as amended from time to time, shall be eligible to
transfer funds from NRO account to NRE account
within the overall ceiling of USD one million per financial year subject to payment of tax, as applicable
(i.e., as applicable if funds were remitted abroad). Such
credit of funds to NRE account shall be treated as
eligible credit in terms of paragraph 3(j) of Schedule-1
of Notification No. FEMA.5/2000-RB dated 3rd May
2000.
[A.P. (DIR Series) Circular No. 117
dated May 7, 2012]
5. Release of Foreign Exchange for
Miscellaneous Remittances
With a view to further liberalising the
documentation requirements, the limit for foreign
exchange remittance for miscellaneous purposes
without documentation formalities, has been raised
from USD 50,00 to USD 25,000 with immediate effect.
It is clarified that Authorised Dealers need not
obtain any document, including Form A-2, except a
simple letter as stated above as long as the foreign
exchange is being purchased for a current account
transaction (not included in the Schedules I and II of
Government Notification on Current Account
Transactions), and the amount does not exceed USD
25000 or its equivalent and the payment is made by a
cheque drawn on the applicant’s bank account or by a
Demand Draft. AD banks shall prepare dummy A-2 so
as to enable them to provide purpose of remittance for
statistical inputs for Balance of Payment.
[A.P. (DIR Series) Circular No. 118
dated May 7, 2012]
6. External Commercial Borrowings
(ECB) Policy – Utilisation of ECB
proceeds for Rupee expenditure
It has been decided that at the time of availing
Loan Registration Number (LRN) from the Reserve
Bank, borrowers should provide bifurcation of the
utilisation of the ECB proceeds towards foreign
currency and Rupee expenditure in Form-83.
The primary responsibility to ensure that the ECB
proceeds meant for Rupee expenditure in India are
repatriated to India for credit to their Rupee accounts
with AD Category-I banks in India as per A.P. (DIR Series) Circular No. 52 dated November 23, 2011 is that
of the borrower concerned and any contravention of
the ECB guidelines will be viewed seriously and will
invite penal action under the Foreign Exchange
Management Act (FEMA), 1999. The designated AD
bank is also required to ensure that the ECB proceeds
meant for Rupee expenditure are repatriated to India
immediately after drawdown.
[A.P. (DIR Series) Circular No. 119
dated May 7, 2012]
7. Foreign Direct Investment (FDI) in
India – Issue of equity shares under
the FDI scheme allowed under the
Government route
With a view to incentivising use of machinery
embodying the latest state-of-the-art technology,
compliant with international standards, in terms of
being green, clean and energy efficient, it has now been
decided to exclude conversion of imported second-hand
machinery from the purview of this provision.
[A.P. (DIR Series) Circular No. 120
dated May 8, 2012]
8. Foreign investment in Commodity
Exchanges and NBFC Sector –
Amendment to the Foreign Direct
Investment (FDI) Scheme
The extant policy for foreign investment in
commodity exchanges, has since been reviewed and it
has been decided that prior approval of the Government
(FIPB) would be required only for FDI component and
Government approval would not be required for
investment by registered FIIs in commodity exchanges.
Further, under the extant FDI policy, ‘leasing and
finance’ is one of the 18 NBFC activities wherein FDI
up to 100 per cent is permitted under automatic route,
subject to minimum capitalisation norms. It is hereby
clarified that FDI is permitted only in ‘financial leases’
(financial leasing activity) and not in ’operating leases’
(operating leasing activity).
[A.P. (DIR Series) Circular No. 121
dated May 8, 2012]
9. Risk Management and Inter Bank
Dealings
The Reserve Bank of India has reviewed the
interest rate and the end use of the FCNR (B) deposits
vide its circular DBOD.Dir.BC.102/13.03.00/2011-12
dated May 4, 2012. Accordingly, it has been decided
that FCNR (B) funds representing deposit liabilities may
be utilised for making loans to resident constituents
for meeting -
i. their foreign exchange requirements or
ii. for the rupee working capital/capital
expenditure needs of exporters/corporates
who have a natural hedge or a risk management
policy for managing the exchange risk subject
to the prudential/interest-rate norms, credit
discipline and credit monitoring guidelines in
force.
[A.P. (DIR Series) Circular No. 122
dated May 9, 2012]
10. Risk Management and Inter-Bank
Dealings
On a review it has been decided to fix the intra-day
open position/daylight limit of the Authorised Dealers
at five times the Net Overnight Open Position Limit
available to them or the existing Intra-day open position
limit as approved by the Reserve Bank, whichever is
higher, for positions involving Rupee as one of the
currencies.
[A.P. (DIR Series) Circular No. 123
dated May 10, 2012]
11. Exchange Earner’s Foreign Currency
(EEFC) Account
On a review of the Scheme, it has been decided
as under:-
a) 50 per cent of the balances in the EEFC
accounts should be converted forthwith into
rupee balances and credited to the rupee
accounts as per the directions of the account
holder. This process may be completed within
a fortnight from the date of the circular and compliance reported to the Chief General
Manager, Foreign Exchange Department,
Central Office, Trade Division, Amar Building,
Sir P.M. Road, Fort, Mumbai 400 001.
b) In respect of all future forex earnings, an
exchange earner is eligible to retain 50 per cent
(as against the previous limit of 100 per cent)
in non-interest bearing EEFC accounts. The
balance 50 per cent shall be surrendered for
conversion to rupee balances.
c) The facility of EEFC scheme is intended to
enable exchange earners to save on conversion/
transaction costs while undertaking forex
transactions in future. This facility is not
intended to enable exchange earners to
maintain assets in foreign currency, as India
is still not fully convertible on Capital Account.
Accordingly, EEFC account holders henceforth
will be permitted to access the forex market
for purchasing foreign exchange only after
utilising fully the available balances in the
EEFC accounts. ADs may, accordingly, obtain
a declaration while selling foreign exchange
to their constituents.
It may be noted that the provisions at paragraph
2(b) and 2(c) above will apply, mutatis mutandis, also
to holder of either a Resident Foreign Currency Account
(RFC) or a Diamond Dollar Account (DDA).
[A.P. (DIR Series) Circular No. 124
dated May 10, 2012]
12. Exim Bank’s Line of Credit of USD 13
million to the Government of the
Republic of Mozambique
Export-Import Bank of India (Exim Bank) has
concluded an Agreement dated September 1, 2011 with
the Government of the Republic of Mozambique,
making available to the latter, a Line of Credit (LOC) of
USD 13 million (USD thirteen million) for the purpose
of financing of Solar Photo Voltaic Module Manufacturing
plant in Mozambique. The goods, machinery, equipment
and services including consultancy services from India for exports under this Agreement are those which are
eligible for export under the Foreign Trade Policy of the
Government of India and whose purchase may be
agreed to be financed by the Exim Bank under this
Agreement. Out of the total credit by Exim Bank under
this Agreement, the goods and services including
consultancy services of the value of at least 75 per cent
of the contract price shall be supplied by the seller from
India and the remaining 25 per cent goods and services
(other than consultancy services) may be procured by
the seller for the purpose of Eligible Contract from
outside India.
The Credit Agreement under the LOC is effective
from April 23, 2012 and the date of execution of
Agreement is September 1, 2011. Under the LOC, the
last date for opening of Letters of Credit and
Disbursement will be 48 months from the scheduled
completion date(s) of contract(s) in the case of project
exports and 72 months (August 31, 2017) from the
execution date of the Credit Agreement in the case of
supply contracts.
[A.P. (DIR Series) Circular No. 125
dated May 10, 2012]
13. Deferred Payment Protocols dated
April 30, 1981 and December 23, 1985
between Government of India and
erstwhile USSR
AD Category-I banks are advised that a further
revision has taken place on April 23, 2012 and
accordingly, the Rupee value of the Special Currency
Basket has been fixed at `73.305676 with effect from
April 26, 2012.
[A.P. (DIR Series) Circular No. 126
dated May 14, 2012]
14. Foreign investment in NBFC Sector
under the Foreign Direct Investment
(FDI) Scheme – Clarification
It is clarified that the activity ‘leasing and finance’,
which is one among the eighteen NBFC activities
wherein FDI up to 100 per cent is permitted under the
automatic route, subject to minimum capitalisation norms, covers only ‘financial leases’ and not ‘operating
leases’, in so far as the NBFC sector is concerned.
[A.P. (DIR Series) Circular No. 127
dated May 15, 2012]
15. Exchange Earner’s Foreign Currency
(EEFC) Account
It is clarified that the conversion of the EEFC balances
into rupee balances will only be applicable to available
balances in the EEFC account which may be arrived at
by netting off earmarked amounts on account of
outstanding forward/option contracts booked before
May 10, 2012.
[A.P. (DIR Series) Circular No. 128
dated May 16, 2012]
16. Risk Management and Inter-Bank
Dealings
In view of the recent developments in the foreign
exchange market, until further review, it has been
decided as under:
i. The current Net Overnight Open Position Limit
(NOOPL) of the banks as applicable to the
positions involving Rupee as one of the
currencies shall not include the positions
undertaken in the Currency Futures/Options
segment in the exchanges.
ii. The positions in the exchanges (both Futures
and Options) cannot be netted/offset by
undertaking positions in the OTC market and
vice-versa. The positions initiated in the
exchanges shall be liquidated/closed in the
exchanges only.
iii. The position limit for the trading member AD
Category-I bank in the exchanges for trading
Currency Futures and Options shall be US$
100 million or 15 per cent of the outstanding
open interest, whichever is lower.
The AD Category- I banks are advised that they
may bring down their positions to the above limits
within June 30, 2012.
[A.P. (DIR Series) Circular No. 129
dated May 21, 2012]
17. Deferred Payment Protocols dated
April 30, 1981 and December 23, 1985
between Government of India and
erstwhile USSR
AD Category-I banks are advised that a further
revision has taken place on May 4, 2012 and accordingly,
the Rupee value of the Special Currency Basket has been
fixed at `75.594562 with effect from May 9, 2012.
[A.P. (DIR Series) Circular No.130
dated May 25, 2012]
18. Overseas Direct Investments by Indian
Party-Online Reporting of Overseas
Direct Investment in Form ODI
Under the online reporting system, AD Category
– I banks could generate the UIN online under the
automatic route. However, reporting of subsequent
remittances under the automatic route as well as the
approval route was to be done online in Part II of form
ODI, only after receipt of the letter from the Reserve
Bank confirming the UIN.
It has now been decided to communicate the UIN
in respect of cases under the Automatic Route to the
ADs/Indian Party through an auto generated e-mail to
the email-id made available by the AD/Indian Party.
Accordingly, with effect from June 01, 2012 (Friday),
the auto generated e-mail, giving the details of UIN
allotted to the JV/WOS under the automatic route, shall
be treated as confirmation of allotment of UIN, and no
separate letter shall be issued by the Reserve Bank to
the Indian party and AD Category - I bank confirming
the allotment of UIN.
It may also be noted that the subsequent
remittances under the automatic route and remittances
under the approval route are to be reported online in
Part II of form ODI, only after receipt of the e-mail
communication/confirmation conveying the UIN.
The applications in form ODI for overseas direct
investment under the approval route would continue
to be submitted to the Reserve Bank in physical form
as hitherto, in addition to the online reporting of Part
I of the Form as contemplated in A.P. (DIR Series)
Circular No. 36 dated February 24, 2010.
[A.P. (DIR Series) Circular No.131
dated May 31, 2012] |