31 October, 2016
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Thirteenth Amendment) Regulations, 2016
RBI has, by way of a notification dated September 9, 2016 (‘FEMA 20 Notification’), amended the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Out- side India) Regulations, 2000 (‘FEMA 20 Regulations’), to inter alia: (i) permit 100% foreign direct investment (‘FDI’) under the automatic route in financial services activities regulated by financial sector regulators (as may be notified by the Government of India (‘GoI’)); (ii) remove the restriction for FDI, under the automatic route, in NBFCs engaged in any one of the 18 specified activities; (iii) remove the erstwhile minimum capitalization requirements, however, capitalization norms and other limits prescribed by the relevant financial sector regulator will still apply; and (iv) clarify that in sectors where financial services are not regulated / partially regulated by a financial sector regulator, then 100% FDI is permitted under the Government approval route subject to conditions including minimum capitalization requirements, as may be decided by the Government.
Foreign Exchange Management (Remittance of Assets) Regulations, 2016
RBI has, by way of a notification dated April 1, 2016, issued the Foreign Exchange Manage- ment (Remittance of Assets) Regulations, 2016 (‘2016 Remittance Regulations’), which supersedes the erstwhile regulations. Some of the key changes introduced under the 2016 Remittance Regulations are as follows: (i) any non-resident Indian (‘NRI’) or person of Indian origin desirous of remitting any amounts from a non-resident ordinary rupee (‘NRo’) account is now required to submit an undertaking to the authorized dealer (‘AD’) bank confirming that the remittances are being made from the balance arising from legitimate receivables in India, and not by borrowing from any other person or a transfer from any other NRO account; and (ii) it is no longer required for Indian companies remitting assets when under liquidation to furnish a tax clearance certificate from the relevant tax authorities.
Corrigendum to Foreign Exchange Management (Deposit) Regulations, 2016
RBI has issued a corrigendum dated September 8, 2016 (with effect from April 1, 2016) (‘Corrigendum’) to the Foreign Exchange Management (Deposit) Regulations, 2016 (‘Deposit Regulations’) clarifying that the restriction on ADs from allowing their branches / correspondents outside India to grant loans to or in favour of non–resident depositors or third parties for purposes other than for relending or carrying on agricultural / plantation activities or for investment in real estate business, has now been dispensed with.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
