The Reserve Bank of India, RBI on Monday said that Indian companies will require to obtain its prior permission to open, hold and maintain foreign currency account -FCA abroad for the purpose of overseas direct investments. The RBI has issued a notification to this effect. According to the notification, the host country regulations stipulate that the investments into the country is required to be routed through a designated account and FCA should be opened, held and maintained as per the regulation.
It said that the remittances sent to the FCA by the Indian company should be utilised only for making overseas direct investment into the joint venture or wholly-owned subsidiaries abroad. The Indian company should also submit the details of debits and credits in the FCA on yearly basis to the designated bank with a certificate from the statutory auditors, certifying that the FCA was maintained as per the host country laws.
A. P. (DIR Series) Circular No.101,
Date – April 02, 2012
Overseas Direct Investments – Liberalisation / Rationalisation
Attention of the Authorised Dealer (AD – Category I) banks are invited to the Notification No. FEMA 10/2000-RB dated May 3, 2000 [Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000] (the Notification), as amended from time to time.
2. As per the extant provisions of FEMA, an Indian party (as defined under Notification No. FEMA 120/RB-2004 dated July 07, 2004, as amended from time to time) is required to obtain prior permission of the Reserve Bank to open, hold and maintain Foreign Currency Account in a foreign country for the purpose of overseas direct investments in that country, in case the regulation of the host country requires that the investment in the country is to be made through a particular account to be opened with the commercial bank of the country.
3. To provide operational flexibility to the Indian party, it has been decided to liberalise the regulations pertaining to opening / holding / maintaining the Foreign Currency Account by Indian party outside India as under:
An Indian party will now be allowed to open, hold and maintain Foreign Currency Account (FCA) abroad for the purpose of overseas direct investments subject to the following terms and conditions:
4. Necessary amendments to the Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) Regulations, 2000 are being issued separately.
5. AD – Category I banks may bring the contents of this circular to the notice of their constituents and customers concerned.
6. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.
(Dr. Sujatha Elizabeth Prasad)
Chief General Manager