Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: due date for vat payment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: empanelment :: VAT RATES :: VAT Audit :: TDS :: form 3cd :: Central Excise rule to resale the machines to a new company :: cpt :: list of goods taxed at 4%
 
 
« Latest Circulars »
 RBI Working Paper Series No. 5/2017: Comparison of Consumer and Wholesale Prices Indices in India: An Analysis of Properties and Sources of Divergence
 All Agency Banks and select offices of RBI to remain open on all days from March 25, 2017 to April 1, 2017
 RBI-Sources of Variation in Foreign Exchange Reserves in India during April-December 2016
 Developments in India’s Balance of Payments during the Third Quarter (October-December) of 2016-17
 RBI signs Memorandum of Understanding(MoU) on “Supervisory Cooperation and Exchange of Supervisory Information” with the Bank of Thailand
 RBI-Meeting Schedule of the Monetary Policy Committee for 2017-18
 RBI to conduct Overnight, 7 day and 14 day Variable rate Reverse Repo auctions under LAF on March 22, 2017
 Risk Management and Inter-bank Dealings: Operational flexibility for Indian subsidiaries of Non-resident Companies
 Master Directions on Issuance and Operation of Prepaid Payment Instruments in India
 RBI seeks comments on draft circular on Master Directions on Issuance and Operation of Pre-paid Payment Instruments (PPIs) in India
  Annual Closing of Government Accounts – Transactions of Central / State Governments – Special Measures for the Current Financial Year (2016-17)

RBI-Fund/Non-Fund based Credit Facilities to Overseas Joint Ventures / Wholly Owned Subsidiaries / Wholly owned Step-down Subsidiaries of Indian Companies
April, 23rd 2014

RBI/2013-14/568
DBOD.No.BP.BC.107/21.04.048/2013-14

April 22, 2014

The Chairman and Managing Director/Chief Executive Officer
All Scheduled Commercial Banks
(Excluding Local Area Banks and Regional Rural Banks)

Dear Sir,

Fund/Non-Fund based Credit Facilities to
Overseas Joint Ventures / Wholly Owned Subsidiaries /
Wholly owned Step-down Subsidiaries of Indian Companies

Please refer to our circular DBOD.IBD.BC.No.96/23.37.001/2006-07 dated May 10, 2007, in terms of which banks were permitted to extend fund/non-fund based credit facilities to overseas Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS)/Wholly owned Step-down Subsidiaries (WoSDS) of subsidiaries of Indian companies upto 20 per cent of their unimpaired capital funds (Tier I and Tier II capital) subject to certain conditions. The resource base for such lending should be funds held in foreign currency accounts, such as FCNR(B), EEFC, RFC etc., in respect of which banks have to manage the exchange risk.

2. Further, as per paragraph 5(b) of Notification No.FEMA 8/2000-RB dated May 3, 2000, Authorised Dealer Banks were permitted to extend guarantees to or on behalf of overseas JV/WOS of an Indian company in connection with its business. In terms of A.P. (DIR Series) Circular No.29 dated March 27, 2006, guarantees issued by banks in India in favour of overseas JV/WOS of Indian companies would be subject to prudential norms issued by the Reserve Bank from time to time.

3. The above measures were intended to assist Indian companies in their overseas business. However, it has been observed that banks are extending non-fund based credit facilities like guarantees/stand-by letter of credits/letter of comforts etc. on behalf of JV/WOS/WoSDS for purposes which are not connected with their business, rather, in certain cases, used to avail foreign currency loans for repayment of Rupee loans.

4. Accordingly, it is advised that, banks, including overseas branches/subsidiaries of Indian banks, shall not issue standby letters of credit/guarantees/letter of comforts etc. on behalf of overseas JV/WOS/WoSDS of Indian companies for the purpose of raising loans/advances of any kind from other entities except in connection with the ordinary course of overseas business. We further advise that while extending fund/non-fund based credit facilities to overseas JV/WOS/WoSDS of Indian companies in connection with their business, either through branches in India or through branches/subsidiaries abroad, banks should ensure effective monitoring of the end use of such facilities and its conformity with the business needs of such entities.

5. In terms of circular A.P. (DIR Series) Circular No.134 dated June 25, 2012, Indian companies in the manufacturing and infrastructure sector were allowed to avail of external commercial borrowings (ECBs) for repayment of Rupee loans availed of from domestic banking system and / or for fresh Rupee capital expenditure, under the approval route, subject to satisfying certain conditions. However, if the ECB is availed from overseas branches/subsidiaries of Indian banks, the risk remains within the Indian banking system. It has, therefore, been decided that repayment of Rupee loans availed of from domestic banking system through ECBs extended by overseas branches/subsidiaries of Indian banks will, henceforth, not be permitted.

6. As per instructions contained in paragraph 4(1)(i) of Notification No.FEMA 8/2000-RB dated May 3, 2000, Authorised Dealer Banks have been allowed to issue guarantees in respect of a debt, obligation or other liability incurred by an exporter, on account of exports from India. It was intended to facilitate execution of export contracts by the exporter and not for other purposes. It has, however, come to our notice that some exporter borrowers are using export advances, received on the strength of guarantees issued by Indian banks, for repayment of loans availed of from Indian banks. This is a clear violation of our instructions except in cases where banks have received approvals under FEMA and banks are advised to desist from such practices.

Yours faithfully,

(Rajesh Verma)
Chief General Manager

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
E-catalogue online catalogue E-brochure online brochure online product catalogue online product catalogue e-catalogue Indi

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions