FED User

Investment by FIIs in IPO / pre-IPO issues of companies engaged
in real estate development

The Foreign Exchange Department, Reserve Bank of India has been receiving references from Authorised Dealer banks/ companies engaged in real estate development seeking clarification regarding proposed investments in the Initial Public Offering (IPO) / pre-IPO issues by Foreign Institutional Investors (FIIs).

2. In this regard it is clarified as under:

(i) Foreign Institutional Investors (FIIs) are permitted to purchase shares or convertible debentures of an Indian company under the Portfolio Investment Scheme, subject to the terms and conditions of Schedule 2 to the Notification No. FEMA 20/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended from time to time.

(ii) In terms of FEMA Notification No. 1/2000-RB dated May 3, 2000, viz. Foreign Exchange Management (Permissible Capital Account Transactions) Regulation, 2000, foreign investment in India, in any form, is prohibited in "real estate business". For the purpose of this regulation, ‘real estate business’ shall not include development of townships, construction of residential /commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships.

(iii) However, it is clarified that investment by FIIs in pre-IPO offering would be treated on par with Foreign direct Investment (FDI) in terms of lock-in period as applicable to FDI in construction development projects including housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships. This would be without prejudice to any other law.

The corresponding provisions of (ii) and (iii) above, find place in para 5.23 – Development of Townships, Housing, Built-up infrastructure and Construction development activities, of Chapter 5 of the Consolidated FDI Policy Circular No. 1 dated March 31, 2010 notified by the Department of Industrial Policy and Promotion, Government of India.

(iv) Therefore, SEBI registered FIIs can invest in IPO / pre-IPO issues of companies in construction and development projects other than real estate (as defined in FEMA Notification No. 1/2000-RB dated May 3, 2000) subject to the terms and conditions stipulated in Schedule 2 to FEMA Notification No. 20/2000-RB dated May 3, 2000, as amended from time to time, provided that the FII investment in pre-IPO offerings are treated at par with the FDI in terms of the lock-in period as applicable to FDI in construction development projects including housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, townships.

RBI revises Internal Control Guidelines for Forex Business

The Reserve Bank of India has today issued the revised Guidelines for “Internal Control over Foreign Exchange Business”.

First framed in 1981, the Internal Control Guidelines (ICG) were revised in December, 1996. The need to revise them once again was felt in the context of rapid pace of evolution of the forex markets in India and abroad as also, developments in information technology and its progressive usage in banks. A Group comprising officials from the Reserve Bank of India, Foreign Exchange Dealers’ Association of India, Fixed Income Money Market and Derivatives Association of India, State Bank of India, ICICI Bank and Standard Chartered Bank looked into the updation of the Internal Control Guidelines to make them contemporary and benchmark document.

The document is designed to provide a scale of standards for the banks in the conduct of their foreign exchange business and is available on our website (www.rbi.org.in).

R. R. Sinha
Deputy General Manager

Press Release : 2010-2011/1116

Sending of currencies by NRIs/OCIs through post to their relatives in India on the advice from the foreign branches of Indian banks

As per Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 dated December 29, 2015, as amended from time to time, a person resident outside India is not permitted to send currency through postal channels. Therefore, banks may issue suitable instructions to their branches outside India not to advise people to send currencies through postal channels.

EDPMS- Clarification on closure of export bills

FE.CO.Trade (EXP) No.4334/05.31.042/2017-18

November 16, 2017

All Authorised Dealer Category I Banks

Madam / Dear Sir

EDPMS- Clarification on closure of export bills

While monitoring the progress made by AD banks in clearing pendency in EDPMS, it is observed by RBI that as on November 15, 2017, a total of 1.43 million entries are outstanding in EDPMS with shipping bill date beyond 2 years. This comes to 12.76 per cent of the total shipping bills. Number of shipping bills outstanding beyond 9 months comes to 4.6 million as on date, which is 22.68 per cent of the total number of shipping bills in EDPMS.

2. As the aforesaid position cannot be treated as satisfactory, we advise you to give due attention for clearance of pendency in EDPMS. Further, for the purpose of helping AD banks to clearing outstanding entries in EDPMS, following clarification are issued:-

a) Export payment through credit card: In cases where payment for export has been made through a credit card, certain information like remitter’s name, address, country, etc may not be available thus leading non-closure of Shipping Bills/Inward Remittance Message (IRM). In such cases of payment of export transactions through credit cards, AD bank may close the relevant entries by using the following information:

b) Involvement of two different currencies: As extant regulations permit raising of export invoices either in freely convertible currency or Indian rupees with condition that export proceeds have to be realized in freely convertible currency. It is clarified that export proceeds may be realized in any freely convertible currency which may be different from the currency mentioned in the shipping bill. In the EDPMS, the AD banks may use two fields for reporting the amount – one in realised currency and other in equivalent amount of declared currency in shipping bill (invoiced currency). For example, if the amount is declared in the shipping bill in USD but export realisation is in Euro, then the AD bank should lodge the bill in USD in their internal system based on export documents submitted by exporters and, at the time of realisation, the currency and amount should be reported in EURO while the invoiced amount should be reported in USD. At the same time, if the freight and insurance amount is paid in INR by the exporter itself, the same may be reported in EDPMS under the same logic. The extract of currency and amount of settlement (prn.xml) file as given below may be referred for closing the entries in EDPMS.

c) Tracking of cases referred to Directorate of Enforcement (DoE): AD banks are required to follow up with the exporters for submission of export documents for closing the entries in EDPMS. In case of non-submission of documents /non-cooperation by the errant exporters even after several follow up including sending of letters through registered post by AD, they may refer such cases to DoE. To track the cases reported to DoE, a suitable flag in EDPMS will be added shortly so that AD bank can mark the same in EDPMS.

Yours faithfully

Vivek Kumar
Assistant General Manager

EDPMS–Closure of entries

As you are aware that RBI is continuously following up with AD banks for clearance of pendency in Export Data Processing and Monitoring System (EDPMS). During the course of discussion on various issues related to outstanding entries in EDPMS with select bankers and more recently with select exporters, RBI has come across following areas on which instructions / clarifications are required to be issued so as to help AD banks in closure of entries:

1. Export realisation through entities like Paypal and Amazon;

2. Export through FTWZ units;

3. Export through courier ports.

2. Accordingly, the following instructions/clarifications are issued:

i. Export Payment through Paypal and Amazon: In cases of export realisation through market place like Amazon and/or cases where payment is received through Paypal, PayU or similar mechanism, if certain information regarding actual buyer’s name, address, country, etc. is not available, the AD banks who are maintaining the account of the exporters may use the following information in respect of relevant fields for generation of Inward Remittance Message (IRM )and close the entries in EDPMS provided they are otherwise satisfied with the bonafides of transactions and also they are sure that there is no KYC / AML concern:

ii. Exports through FTWZ units: In case of export of goods held on behalf of the DTA unit by a Free Trade Warehouse Zone (FTWZ) unit, if the IE code (IEC) of latter was captured in the SEZ system, (and, accordingly, instead of actual exporter’s, the IEC of FTWZ unit is getting reflected in EDPMS) and where the export proceeds is realised by the actual exporter, AD banks may close the outstanding entries in EDPMS based on the name of actual exporter declared as a second party in the Shipping bill against the proceeds realised by the latter.

iii. Export through Courier Ports: In cases of export through Courier Port, where courier agency is filing shipping bills in bulk with the Express Cargo Clearance System (ECCS) of Customs through a simplified form called Courier Shipping Bill (CSB) (as the exports are neither captured in the Customs‘ centralised system (ICEGATE) nor manual bill of entry/EDF forms are generated at Customs level, no corresponding shipping bill entry gets added in the EDPMS but Inward Remittance Message gets added in EDPMS) the AD banks may close open IRM using the IRM adjustment/closure message by selecting indicator as export done through couriers based on submission of CSB by the exporter to AD banks.

AD banks may please find the letter dated December 14, 2017 issued in this regard ‘here’.

Monthly Statements indicating the details of remittances made by NRIs/PIOs Foreign nationals out of the NRO accounts

In terms of Part VI of the Master Direction on Reporting dated January 01, 2016 as amended from time to time, with a view to having access to more real time data the AD - Category I banks are required to furnish the monthly statement on remittances made from NRO Accounts in the requisite format to General Manager-in-Charge, Foreign Exchange Department, Foreign Investments Division (NRFAD), Reserve Bank of India, Central Office Cell, Parliament Street, New Delhi 110 001 within 7 days of the end of the reporting month.

It has been observed that some of the AD Category I banks are forwarding the said statement to Foreign Investments Division (NRFAD), Reserve Bank of India, Central Office, Mumbai. It is therefore, reiterated that the statement may be sent to Foreign Exchange Department, Foreign Investments Division (NRFAD), Reserve Bank of India, Central Office Cell, Parliament Street, New Delhi (and not to Foreign Investments Division (NRFAD), Reserve Bank of India, Central Office, Mumbai).