In the reporting week, the increase in the forex kitty was due to a rise in foreign currency assets (FCAs), a major component of the overall reserves, as per weekly data by the Reserve Bank of India (RBI).
The country’s foreign exchange reserves increased by $889 million to a lifetime high of $621.464 billion in the week ended August 6, 2021, RBI data showed on Friday.
In the previous week ended July 30, 2021, the reserves had surged by $9.427 billion to reach $620.576 billion.
In the reporting week, the increase in the forex kitty was due to a rise in foreign currency assets (FCAs), a major component of the overall reserves, as per weekly data by the Reserve Bank of India (RBI).
FCAs rose by $1.508 billion to $577.732 billion in the reporting week.
Gold reserves were down by $588 million to $37.057 billion in the reporting week, the data showed.
The special drawing rights (SDRs) with the International Monetary Fund (IMF) dipped by $1 million to $1.551 billion.
The country’s reserve position with the IMF also fell by $31 million to $5.125 billion, as per the data.
For improving the ease of doing business in India and to reduce the cost of compliance, RBI has made a review of requirements of submission of various forms and reports under FEMA and has decided to discontinue submission of 17 such returns/ reports with immediate effect.
Discontinuation of Returns/ Reports under Foreign Exchange Management Act, 1999
1. The attention of Authorised Persons is invited to the Master Direction- Reporting under Foreign Exchange Management Act, 1999 dated January 01, 2016, as amended from time to time, and other reporting related instructions issued by the Reserve Bank of India.
2. With a view to improve the ease of doing business and reduce the cost of compliance, the existing forms and reports prescribed under FEMA, 1999, were reviewed by the Reserve Bank. Accordingly, it has been decided to discontinue the 17 returns/ reports as listed in the Annexure with immediate effect.
3. The Master Direction- Reporting under Foreign Exchange Management Act, 1999 dated January 01, 2016, shall accordingly be updated to reflect the above changes. AD banks may bring the contents of this circular to the notice of their constituents.
4. The directions contained in this circular have been issued under Section 10(4) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.
List of Discontinued Reports
Sl. No.
Name of Report
Reporting Entity
Frequency
1
Category-wise transaction where the amount exceeds USD 5000 per transaction
AD Category-II
Monthly
2
Category-wise, transaction-wise statement where the amount exceeds USD 25,000 per transaction
AD Category- II
Monthly
3
Statement of Purchase transactions of USD 10,000 and above (including transactions of their franchisees)
FFMCs and AD Category- II
Monthly
4
Extension of Liaison Offices (LOs)
AD Category-I banks
As and when extension is granted
5
Extension of Project Offices (POs)
AD Category-I banks
As and when extension is granted
6
FII/FPI daily: Daily inflow/outflow of foreign fund on account of investment by FPIs
AD banks
Daily
7
FII/FPI Return (Monthly): Data relating to actual inflow/ outflow of remittances on account of investments by Foreign Institutional Investors (FIIs) in the Indian Capital market
AD Category-I banks
Monthly
8
FVCI reporting: Inflows/outflows of remittances on account of investments by Foreign Venture Capital Investor (FVCIs) and Market value of Investments made by FVCIs
AD Category-I banks/Custodian banks
Monthly
9
Reporting of Inflow/ Outflow details in respect of Mutual Fund by Asset Management Companies
Asset Management Companies
Quarterly
10
Market value of FII Investment in India on fortnightly basis
AD Category-I banks
Fortnightly
11
Market value of FII Investment in India on Monthly basis
AD Category-I banks
Monthly
12
FII holdings as percentage of floating stock
AD Category-I banks
Monthly
13
Form DRR for Issue/ transfer of sponsored/ unsponsored Depository Receipts (DRs)-Hardcopy**
Custodian
At the time of issue/transfer of depository receipts
14
ADR/ GDR Movement Report- two way fungibility
AD Category-I banks
Monthly
15
Repatriation of Sales proceeds of underlying shares represented by FCCBs/ GDRs/ ADRs
Custodian
Monthly
16
GDR/ ADR underlying shares issued, re deposited and released monthly reporting
Custodian
Monthly
17
Monitoring of disinvestments by Overseas Corporate Bodies
AD banks
Monthly
** Please note that it is only the hardcopy filing of form DRR that has been discontinued. The domestic custodian may continue to report the form DRR on FIRMS application in terms of Regulation 4(5) of FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019.
ASSOCHAM Secretary said that by amending the FDI rules through the Press Note No 3 , the Department for Promotion of Industry and Internal Trade, has not only brought the FDI proposals for greenfield investments but also infusion into the existing projects, under the ‘government route’
The government has amended the Foreign Direct Investment
(FDI) policy to discourage opportunistic investment in Indian companies by
neighbouring countries in the midst of the Coronavirus pandemic.
This comes after China’s central bank recently raised stake
in Housing Development Finance Corporation (HDFC) to a little over 1 percent.
As per the new amendment, FDI investments into Indian
companies from the neighbouring countries will now require a nod from the
government. This will be applicable to all countries that share a land border
with India – such as China among others.
The amendment specifies that transfer of ownership of Indian
companies arising out of FDI investments from neighbouring countries will now
also be subject to government approval.
Similar FDI restrictions were earlier placed on Pakistan and
Bangladesh.
These changes were notified via a Press Note by the
Department for Promotion of Industry and Internal Trade (DPIIT).
As per the note, “Government has reviewed the FDI policy for
curbing opportunistic takeovers or acquisitions of Indian companies due to the
current COVID-19 pandemic.”
The note states: “A non-resident entity can invest in India,
subject to the FDI Policy except in those sectors/activities which are
prohibited. However, an entity of a country, which shares land border with
India or where the beneficial owner of an investment into India is situated in
or is a citizen of any such country, can invest only under the Government
route.”
“Further, a citizen of Pakistan or an entity incorporated in
Pakistan can invest, only under the Government route, in sectors/activities
other than defence, space, atomic energy and sectors/activities prohibited for
foreign investment,” it said.
“In the event of the transfer of ownership of any existing
or future FDI in an entity in India, directly or indirectly, resulting in the
beneficial ownership falling within the restriction/purview of the mentioned
sectors, such subsequent change in beneficial ownership will also require
Government approval,” it added.
The decision will take effect from the date of Foreign Exchange
Management Act (FEMA) notification.
Earlier, reports said that market regulator Securities and
Exchange Board of India (SEBI) was monitoring equity transactions in India by
Chinese companies and banks. Such transactions have come under the scanner at a
time when the share prices of companies have dropped due to the economic impact
of the coronavirus pandemic.
Globally, transactions by Chinese firms and institutions
have come under scrutiny recently since the assets are being purchased at low
valuations. Nations such as the US, Japan and Australia have already placed
restrictions on Chinese companies buying assets.
The regulator wants to tighten the rules amid concerns that various variants of P-Notes have been floated since the implementation of GAAR on April 1.
The regulator plans to put in place a clear bar on non-resident Indians (NRIs) and entities owned by them and resident Indians subscribing to participatory notes, a move aimed at preventing possible round-tripping or laundering of black money.
The Securities and Exchange Board of India (SEBI) is set to tweak its regulations to this effect at its upcoming board meeting on April 26 after the finance ministry recently wrote to the regulator. Such a restriction is already implied through the answer to a frequently asked question (FAQ) but the regulator feels this lacks legal sanctity.
“Most of Sebi’s FAQs themselves clearly state that they should not be regarded as interpretation of law, and that they should not be treated as a binding opinion or guidance from SEBI,” said Moin Ladha, associate partner, Khaitan & Co. “Therefore, in case of any contradictions between the regulations and FAQs, the regulations would prevail. While FAQs do indicate the position SEBI is taking, they cannot be said to override or expand the scope of the regulations.”
P-notes are a derivative instruments issued offshore to those who want to bet on the country’s stocks and bonds without registering themselves with SEBI. The regulator wants to tighten the rules amid concerns that various variants of P-notes have been floated since the implementation of General Anti Avoidance Rules (GAAR) on April 1.
Investments via P-notes had declined to a 43-month low of Rs 1.57 lakh crore in December but rebounded in January to Rs 1.75 lakh crore before dropping again to Rs 1.70 lakh crore in February. There could be a resurgence in P-note issuance as these are exempted from capital gains tax under the amended tax treaties with Singapore and Mauritius that took effect on April 1.
Legal experts said the concept of NRI itself is a grey area and defining it would be crucial for regulators. They said the prohibition should be strictly enforced to prevent round-tripping of Indian money. “The concern of round-tripping of Indian money, particularly when leading industrialists may have a foreign passport, was always a concern,” said Sandeep Parekh, founder, Finsec Law Advisors. SEBI relies on the income tax definition on what constitutes an NRI.
“The concept of who is an NRI itself is a grey zone ranging from income tax definition which is based on residency to citizenship laws which are typically drafted very broadly to include any person of Indian origin and their kith and kin who are born abroad,” Parekh said. “Defining an NRI within this spectrum would be crucial to allow legitimate money in from immigrants who have left India several generations ago and are doing exceedingly well.”
In recent discussions with a leading custodian, the latter gathered the impression that the regulator was not comfortable with NRIs as a group holding a majority interest in a Category II foreign portfolio investors (FPIs) even though regulations do not restrict this. Rules require Category II FPIs to be broad-based — the minimum number of investors should be 20 and no single investor can hold more than 49%. However, NRIs as a group cannot hold more than 49% in Category III FPIs.
Country’s foreign exchange reserves rose by USD 2.81 billion to reach a life-time high of USD 365.49 billion in the week to July 29, helped by rise in foreign currency assets, the Reserve Bank said today.
In the previous week, the reserves had dropped by USD 664 million to USD 362.69 billion.
Foreign currency assets (FCAs), a major component of the overall reserves, rose USD 2.79 billion to USD 341.04 billion in the reporting week, RBI data showed.
FCAs, expressed in dollar terms, include the effect of appreciation/depreciation of non-US currencies such as euro, pound and yen held in the reserves.
Gold reserves remained unchanged at USD 20.58 billion.
The country’s special drawing rights with International Monetary Fund increased by USD 8.5 million to USD 1.48 billion while the reserve position rose by USD 13.6 million to USD 2.39 billion, RBI said.
With startups raising funds from a variety of offshore sources, including individuals, private equity players and crowdsourcing, the RBI has set up a dedicated helpline for advice on cross-border remittances which are subject to guidelines issued under the foreign exchange management act.
Although businesses are supposed to know the law before they raise capital, many of the startups are being promoted by very young and inexperienced individuals. Moreover, the amount raised by some of them run into only a few lakhs, making it difficult for them to hire law firms.
The helpline is actually an email ID (helpstartup@rbi.org.in) through which RBI will respond to queries. The central bank said that it will offer guidance/assistance to them for undertaking cross-border transactions within the ambit of the regulatory framework.
“While seeking guidance, the enterprises should provide complete information to the RBI and mention the specific issues on which they need guidance in relation to the Foreign Exchange Management regulations. This would enable the personnel attending the helpline to offer timely and effective information.”
In his Independence Day speech, Prime Minister Narendra Modi had announced that government would take measures to promote startups in the country. Since then, the government has sought inputs from investors like SoftBank president Nikesh Arora and Snapdeal CEO Kunal Bahl and former Infosys director Mohandas Pai. The department of industrial policy and promotion had drawn up an action plan to address concerns of entrepreneurs. One of the issues raised was the cumbersome process in complying with the Foreign Exchange Management Act (FEMA) documentation.
Startups usually undertake a wide range of cross-border transactions including those related to investment. Cross-border transactions of resident Indians are subject to the regulatory regime provided by the Foreign Exchange Management Act, 1999.
