CHAPTER 9
INVESTMENTS/OFFICES ABROAD
PART A - JOINT VENTURES SUBSIDIARIES ABROAD
9A.1 General
9A.2 Approvals of Proposals by Reserve Bank
9A.2A Blanket Investment Approval for Overseas Investment by
Indian Software Companies
9A.3 Export of Goods towards Equity
9A.4 Remittance towards Equity, Loans and Invoked Guarantees
9A.5 Approval of Proposals under EEFC Fast Track Window
9A.6 Approval of Proposals under GDR Fast Track Window
9A.7 Release of Exchange for other Purposes
9A.8 Acquisition of Shares and Issue of Holding Licences
9A.9 Acceptance of Directorship of Overseas Companies and
Acquisition of Qualification Shares
9A.10 Repatriation of Earnings and submission of
Reports/Accounts of foreign concern
9A.12 'In principle' Approval for Acquisition
PART B - REPRESENTATIVES ABROAD
9B.1 Establishment of Overseas Offices
9B.1A Credit facilities for overseas trading offices of Indian
companies
9B.2 Temporary Site/Project Offices Abroad
9B.3 Opening of Overseas Branches by Indian Banks
9B.4 Deleted
9B.5 Appointment/Posting of Correspondents/Representatives by
News papers/Periodicals/News Agencies
9B.6 Arrangements with Overseas News Services
Annexure:
- Guidelines for Indian Direct Investment in Joint Ventures and Wholly
Owned Subsidiaries Abroad
- Guidelines to Authorised Dealers for approval of proposals under EEFC
Fast Track Window
- Terms and conditions for investment in JV/WOS abroad under EEFC Fast
Track Window
INVESTMENTS/OFFICES ABROAD
PART A - JOINT VENTURES/SUBSIDIARIES ABROAD
General
9A.1
- Participation in overseas Joint Ventures(JV)/ setting up of Wholly Owned
Subsidiaries (WOS) abroad will involve remittance of cash, export of goods,
etc. from India towards the Indian company's equity contribution and will,
therefore, require Reserve Bank's approval under relevant provisions of FERA
1973. Proposals for investment in JV/WOS abroad are considered in accordance
with the Guidelines for Indian Direct Investment in Joint Ventures and
Wholly Owned Subsidiaries Abroad as notified by Government of India,
Ministry of Commerce vide their Notification No.4/1/93-EP (OI) dated 17th
August, 1995 (see Annexure I) and further amendments/modifications notified
thereto from time to time. These Guidelines, however, do not apply to
portfolio investment by Indian companies in foreign concerns and direct
investment in the banking sector. All approvals issued by Regional Offices
of Reserve Bank on the basis of approvals given by Government of India,
Ministry of Commerce prior to issue of the Guidelines dated 17th August 1995
shall continue to remain in force subject to the terms and conditions
stipulated in the relative approval letter issued by the Government of
India/ Reserve Bank and such other directions/instructions as may be issued
by the Government of India/Reserve Bank from time to time.
- Authorised dealers may keep themselves fully apprised of these
Guidelines and also subsequent amendments thereto notified from time to time
as also the other procedural instructions issued by Reserve Bank and bring
the contents thereof to the notice of their constituents.
Approval of proposals by Reserve Bank
9A.2
- Proposals involving Indian direct investment not exceeding U.S.$ 15
million, U.S.$ 30 million in respect of investments in SAARC countries and
Myanmar in a block of three calendar years in JVs/WOS abroad are considered
by Reserve Bank under its Fast Track Route. The investment is permitted
either in the form of cash remittance and/or capitalisation of exports,
technical know-how fees, etc. or by way of grant of loans or issue of
guarantees by Indian companies to/on behalf of the JV/WOS within the overall
limit of U.S.$ 15 million. Contingent liabilities like guarantees to be
issued to/on behalf of the overseas JV/WOS by the Indian promoter company
would be reckoned at 50% of their face value for determining the ceiling
amount of investment. Such applications are processed and cleared by the
Central Office of Reserve Bank within a period of 21 days from the date of
receipt of applications, provided (i) the amount of investment does not
exceed 25% of the annual average export/foreign exchange earnings of the
applicant Indian company (other than equity exports to their JV/WOS abroad)
in the preceding three years, (ii) other criteria laid down in the
Guidelines (Annexure I) are fulfilled and (iii) the application is complete
in all respects. Proposals for rupee investment in Nepal and Bhutan not
exceeding Indian Rs.120 crores are also considered by Reserve Bank under
this Fast Track Route without any linkage to the past export/foreign
exchange earnings of the Indian promoter company. In such cases the Indian
promoter company can repatriate all its entitlements like dividend, royalty,
technical know-how fees, etc. in Indian rupees instead of in foreign
exchange.
- In addition to the Fast Track Route of Reserve Bank two more Fast Track
Windows,
viz. EEFC Fast Track Window and GDR Fast Track Window are available for
overseas investments which are explained in paragraphs 9A.5 and 9A.6.
Proposals which do not qualify for clearance under these Fast Track Windows
will be processed by the Special Committee constituted for this purpose by
the Reserve Bank. The Committee, while considering such proposals, will take
into account the quantum of EEFC/GDR funds to be utilised by the Indian
promoter companies for their overseas investment, their networth, scale of
operations and other criteria laid down in the Guidelines. Large investment
proposals involving amounts in excess of U.S.$ 15 million or its equivalent
will be referred to the Ministry of Finance for clearance. After the
proposals are cleared by the Committee/Ministry of Finance, the necessary
approvals will be issued by the Reserve Bank. In all cases of overseas
investments, the Indian promoter companies should repatriate to India,
through normal banking channels, dividends and other entitlements due to
them from their investments in JV/WOS abroad.
- Applications in form ODI, together with documents indicated therein, should
be
submitted, in four sets in respect of proposals coming under the Fast Track
Route (including rupee investment in Nepal and Bhutan) and in seven sets in
respect of other proposals coming under the Normal Route and Large
Investment Route with or without GDR/EEFC funds, to the Chief General
Manager, Exchange Control Department, Overseas Investment Division (OID),
Reserve Bank of India, Central Office, Amar Building, Fort, Mumbai 400 001.
Besides, in respect of cases which do not qualify for clearance under the
Fast Track Route of Reserve Bank, a copy of the proposal should be forwarded
simultaneously by speed post/courier to the concerned Indian Mission in the
host country, as indicated in form ODI.
- Where the Indian companies require approval under the Companies Act, 1956 or
any
other law for the proposed overseas investment, it shall be their
responsibility to obtain such approvals from the appropriate authority.
- Approval letter issued by Reserve Bank will contain the terms and conditions
to be
complied with as also the procedure to be followed for effecting actual
investment in overseas concern. Reserve Bank will also allot a unique
Identification Number for the JV/WOS. On receipt of necessary approval from
Reserve Bank, Indian parties should approach the concerned Regional Office
of the Exchange Control Department of Reserve Bank for making exports
towards equity participation, effecting remittance towards equity/loan, etc.
- Any proposal for addition/deletion of the terms and conditions of approval,
change
in size and pattern of investment, granting of loan and/or issue of
guarantee from India beyond the limit approved, etc. should be submitted to
Reserve Bank, Central Office, with a copy to the concerned Regional Office,
justifying the need for the proposal along with the latest information on
progress and achievements of the overseas concern and the revised
projections relating to profitability and repatriable entitlements, wherever
necessary. In respect of supplementary proposals envisaging enhancement of
equity, loan/guarantee or involving major changes in the existing terms and
conditions of approval resulting in revision in the projections of
profitability of the overseas concern and the promoter company's
entitlements therefrom, the required information should be furnished by way
of application in form ODS for prior approval.
Blanket Investment Approval for Overseas
Investment by Indian Software Companies
9A.2(A) In the case of overseas investment in the field of computer software
by Indian promoter companies with cumulative export/foreign exchange
realisation of U.S.$ 25 million or more in the preceding three years,
blanket investment approval will be given by Reserve Bank upto 50% of such
foreign exchange earnings subject to a maximum of U.S.$ 25 million in a
block of three consecutive financial years. The approved amount will be
inclusive of investments, if any, allowed by authorised dealer out of EEFC
accounts in terms of paragraph 9A.5. The ceiling of U.S.$ 25 million will
cover equity, loan and 50% of contingent liabilities like guarantees. An
Indian promoter company desiring to obtain such blanket approval should
submit an application in form ODB, along with documents indicated therein,
to the Chief General Manager, Exchange Control Department, Overseas
Investment Division (OID), Reserve Bank of India, Central Office, Amar
Building, Fort, Mumbai-400001. Remittances within the amount of blanket
approval may be made either for setting up a new JV/WOS abroad or for
additional equity or loan in respect of existing JV/WOS already approved by
the Reserve Bank/Government of India/authorised dealer. On receipt of such
blanket approval, the Indian promoter company may apply for release of
foreign exchange to the authorised dealer in form A2 along with the
particulars of investments in form ODI in respect of new JV/WOS and in form
ODS in respect of additional investment in an existing JV/WOS abroad.
Authorised dealers may allow remittances to the extent of the amount
mentioned in the Blanket Approval without seeking further approval from
Reserve Bank. Immediately after effecting remittance, authorised dealer
should forward a copy of Form A2 together with a copy of Form ODI or ODS (in
duplicate) as the case may be giving the details of investment, citing the
number and date of the blanket approval, to the concerned Regional Office of
Reserve Bank. On receipt of particulars of investment, Reserve Bank will
allot a unique Identification Number in respect of newly set up JV/WOS.
Authorised dealers would continue to forward original A2 form alongwith the
R-Return in which the sale is reported as hitherto.
Export of Goods towards Equity
9A.3
Export of goods from India towards equity participation should be declared
on GR form
which should be submitted to the Regional Office of Reserve Bank for prior
approval since the proceeds of such exports will not be repatriated to India
as normally required under the existing Exchange Control Regulations. Copies
of GR forms should thereafter be submitted to Customs authorities in the
normal manner. Within 15 days of effecting the shipment of the
machinery/goods, the Indian party should submit to the concerned Regional
Office of Reserve Bank a copy of the final invoice through his banker (duly
certified by the latter) indicating, among others, name of the vessel,
shipping bill number, date of shipment, details of the goods and price
thereof. The duplicate GR form along with the share certificates of the
equivalent value issued by the overseas JV/WOS and the application in form
FAD 2 for holding foreign currency shares should be submitted to the
concerned Regional Office of Reserve Bank within six months from the date of
shipment.
Remittances towards equity, loans and invoked guarantees
9A.4
- Where the approval granted by Reserve Bank for setting up of JV/WOS abroad
provides for
equity contribution by way of cash remittance the Indian promoters should
apply for release of exchange to the concerned Regional office of Reserve
Bank through their bankers in form A 2. In case, however, the remittance is
to be effected out of the funds held in their EEFC account, prior permission
from Reserve Bank will not be necessary. After effecting the remittance, the
particulars thereof, along with the certificate of the authorised dealer
concerned, should be reported by the Indian company to the concerned
Regional Office of Reserve Bank within 15 days from the date of such
remittance.
- Similarly in cases where the approval granted provides for grant of loan by
the Indian
promoters to overseas JV/WOS, the aforesaid procedure should be followed and
the particulars of remittances made should be reported by the Indian company
to the concerned Regional Office of Reserve Bank within 15 days from the
date of remittance. Where issue of guarantee by the Indian promoters has
been specifically approved by Reserve Bank, a certified copy of such
guarantee, as and when issued, should be submitted to the concerned Regional
Office of Reserve Bank within 15 days from the date of issue of such
guarantee to/on behalf of the overseas concern. In the event of such
guarantee being invoked, the Indian promoters should approach the concerned
Regional office of Reserve Bank through the concerned authorised dealer for
permission to effect the remittance towards the invoked guarantee. After
effecting the remittance, the particulars thereof should be reported to
Reserve Bank by the Indian promoters as in the case of remittances made for
equity and for loan.
Note : For subscription to shares of overseas joint ventures/wholly owned
subsidiaries by employees of Indian promoter company in the field of
software refer to paragraph 12.7A
Approval of proposals under EEFC Fast Track Window
9A.5
- Investments up to U.S.$ 15 million including the amount of investments
approved by
Reserve Bank under its Fast Track Route, in a block of three years, would be
allowed by authorised dealers from out of the balances held in the Exchange
Earners' Foreign Currency (EEFC) Account of the Indian promoter company
without reference to Reserve Bank. The ceiling of U.S.$ 15 million will
cover equity, loan and 50% of the contingent liabilities like guarantee.
This limit of U.S.$ 15 million will be applicable for a block of three years
commencing from the first month of relative calendar half-year in which the
first approval is accorded either by Reserve Bank or the authorised dealer,
as the case may be. For example, if an approval by Reserve Bank or the
authorised dealer was issued in the month of September 1997, the block of
three years will be from 1st July 1997 to 30th June 2000 and if it was
issued in the month of April 1997, the block of three years will be from 1st
January 1997 to 31st December 1999.
- Proposals of overseas investment which involve cash remittance of equity and
loan
or guarantee should only be permitted by authorised dealers under this
Window. Authorised dealers should not approve cases where the overseas
investment proposals involve capitalisation of export proceeds of plant and
machinery/goods, utilisation of Euro-issue proceeds, etc. for which the
Indian promoter companies have to make an application to Reserve Bank or the
Ministry of Finance as the case may be.
- Proposals of Indian companies involving contingent liabilities, such as,
extension of
corporate/bank guarantee to/on behalf of their JV/WOS abroad may be approved
by the authorised dealer maintaining the EEFC account subject to a margin
amount equivalent to 50% of the guarantee being earmarked separately in the
EEFC account of the applicant company for the entire tenure of the guarantee
and within the overall ceiling of U.S.$ 15 million. If and when the relative
guarantee is invoked, such earmarked funds have to be utilised towards
satisfaction of the guarantee claim and for the shortfall amount, the
balances available in the EEFC account should be used. In case, funds in the
EEFC account are not adequate, the Indian promoter company may acquire
foreign exchange from the market. Credit risk involved in allowing such
facility of guarantee has to be assessed by the concerned authorised dealer
keeping in view the usual norms and commercial judgement.
An Indian promoter company proposing to make overseas investment in JV/WOS
under the EEFC Fast Track Window should submit an application to the
concerned authorised dealer with whom the EEFC account is maintained in form
ODA, in triplicate, alongwith the documents indicated therein. In case the
Indian promoter company holds more than one EEFC account with authorised
dealers, the overseas investment under this scheme should be routed through
a specific EEFC account maintained with a particular branch of an authorised
dealer. For proposals for additional equity, loan and guarantee, in respect
of JV/WOS already approved by Reserve Bank or the authorised dealer,
application should also be made in form ODA, in triplicate, to the concerned
authorised dealer citing Reserve Bank Identification Number. For such
supplementary proposals, particulars furnished earlier to the authorised
dealer, when the first application (in form ODA) was submitted, need not be
repeated and revised particulars may only be indicated. The amount of Indian
promoter's contribution under the supplementary proposals alongwith earlier
approvals granted by Reserve Bank/authorised dealer should not exceed U.S.$
15 million in a block of three years. Where the amount of investment exceeds
U.S.$ 15 million in a block of three years, such proposals should not be
considered by authorised dealers and the applicant should be advised to
approach Reserve Bank.
- Guidelines to be followed by authorised dealers for processing applications
underEEFC Fast Track window and the procedure and the terms and conditions to be
complied with by the applicants are given in Annexures II and III
respectively.
A.D.(M.A. Series) Circular No.26
Approval of proposals under GDR Fast Track Window
9A.6
Investments up to a maximum of 50% of GDRs to be raised would be permitted
by the
Ministry of Finance, Government of India, under its normal GDR approval
process with overseas investments as a permitted end-use. Applications for
the purpose should be made by Indian promoter companies directly to the
Government of India, Ministry of Finance as per the procedure laid down for
Euro Issue (see paragraph 10B.10) indicating, inter alia, the details of
overseas investment proposed to be made out of such GDR issues (viz.,nature
of the overseas concern, country of location, line of activity, amounts of
investment by way of equity/loan, etc. and Identification/Approval Number
issued by Reserve Bank in respect of existing JV/WOS). On receipt of
approval from the Ministry of Finance, the concerned Indian promoter company
may utilise the Euro issue proceeds for such approved overseas investments
subject to compliance with the usual requirements. Such investments will,
however, be subject to the terms and conditions to be complied with by the
Indian promoter company from the point of view of Exchange Control
regulations which will be communicated by the Ministry of Finance while
conveying their approval to the Indian promoter company. The Indian promoter
company should inform the details of such investments immediately to the
Chief General Manager, Exchange Control Department (Overseas Investment
Division), Reserve Bank of India, Central Office, Amar Building, Mumbai 400
001, indicating the names of the foreign concerns, amount of investment, the
line of activity, country of location, Reserve Bank's
Approval/Identification Number in case of an existing JV/WOS, etc. In
respect of investments in a new JV/WOS abroad, Reserve Bank will communicate
its Identification Number to the Indian promoter company which should be
quoted in all future correspondence.
Release of Exchange for other purposes
9A.7
- Authorised dealers have been permitted to release exchange up to U.S.$
100,000 by
Indian companies to overseas consultants for conducting feasibility studies
for projects to be set up/acquired abroad, vide item XI(B) of Part B of
Annexure I to Chapter 8. Applications involving remittances beyond U.S.$
100,000 should be referred to the concerned Regional Office of Reserve Bank
giving full details. Permission granted by authorised dealer/Reserve Bank
for remittance for conducting such feasibility studies should not be
construed as 'in principle' approval for setting up/acquiring any overseas
concern.
- For release of exchange for meeting preliminary/pre-operative expenses in
connection with
JV/WOS abroad approved by Government of India/Reserve Bank, applications
should be made to the concerned Regional Office of Reserve Bank. Such
applications would be considered by Reserve Bank keeping in view, inter
alia, the nature of the project, total project cost, need for meeting such
expenses from India, etc. subject to such conditions as deemed necessary
including repatriation of amounts so released. Remittances towards recurring
expenses for the upkeep of the JV/WOS will, however, not be permitted.
Acquisition of Shares and issue of Holding Licence
9A.8
Where equity contributions are made by way of cash remittance or
capitalisation of exports,
royalty, technical know-how fees, etc., Indian promoter companies are
required to receive share certificates of equivalent value from the overseas
JV/WOS within three months from the date of effecting such cash remittance
or the date on which the royalty, fees, etc. become due for payment. As soon
as shares are acquired from the overseas concern, Indian companies should
apply in form FAD 2 to the concerned Regional Office of Reserve Bank for
obtaining necessary licence to hold such foreign securities as required
under Section 19(1)(e) of FERA, 1973. In case of bonus shares issued by the
overseas JV/WOS, the Indian promoter company while applying for holding
licence in form FAD 2 should also submit certified copies of the Board
resolution of the overseas concern approving and allotting the bonus shares.
They should also file an Annual Return of Foreign Currency Shares held in
JV/WOS abroad in form FAD 3 as at the end of every calendar year.
Acceptance of Directorship of Overseas Companies and Acquisition of
Qualification Shares
9A.9
Persons resident in India are free to accept appointments as directors on
the boards of the
overseas companies. They will, however, require permission from Reserve Bank
for remittance towards acquisition of qualification shares, if any, of the
overseas companies for which application should be made in form A2 together
with an offer letter of the overseas company to the concerned Regional
Office of Reserve Bank through an authorised dealer. In approved cases, on
receipt of shares from the foreign concern, an application in form FAD 2
should be made to the concerned office of Reserve Bank by the director
concerned for issue of necessary holding licence. Such directors are
required to repatriate to India promptly, remuneration, if any, received by
way of sitting fees, etc. through normal banking channels.
Repatriation of Earnings and Submission of Report/Accounts
9A.10 Indian promoter companies participating in JV/WOS abroad should repatriate
to India
their foreign exchange entitlements/earnings due from the overseas concern
by way of dividend, royalty, technical know-how fees, etc. Bank certificates
supporting repatriation should be furnished to the concerned Regional Office
of Reserve Bank. They are also required to submit to the concerned Regional
Office of Reserve Bank every year an Annual Performance Report in form APR
alongwith certified true copies of audited Profit and Loss Account statement
and Balance Sheet togetherwith the report of the Board of Directors of the
overseas company adopting the accounts. Till such time the overseas concern
commences commercial operations/production, Indian companies are also
required to submit to Reserve Bank, a Half-yearly Progress Report in form
HPR on the status of implementation of the project. Failure to repatriate
the entitlements/earnings and submit the required reports and other
information/clarifications, as and when called for by Reserve Bank, will
amount to violation of the terms and conditions of the approval granted by
Reserve Bank and as such, will be an offence under FERA 1973.
Disinvestment/Winding up/Liquidation of foreign concern
9A.11
Indian participants in overseas JV/WOS are not permitted to sell or transfer
or otherwise
dispose of, wholly or partly, the shares held by them in such companies
without prior approval of Reserve Bank. Proposals for disinvestment, which
should be accompanied by a share valuation certificate from a Chartered
Accountant justifying the sale price, are generally approved subject to
Indian promoter company repatriating all its entitlements/dues including the
proceeds of outstanding non-equity exports.
In principle' Approval for Acquisition
9A.12
- In case an Indian company desires to have an 'in principle' approval for
acquisition of an overseas concern through bidding/tender procedure, which may involve
remittance towards Earnest Money Deposit (EMD) or issue of bid bond
guarantee by a bank in India in favour of the overseas authorities,
application should be submitted to Central Office of Reserve Bank by way of
a letter, atleast one month prior to the last date for submission of bid to
the overseas authority, along with following documents:
- Certified relevant extracts of bidding guidelines,
- Chartered Accountant's certificate indicating the valuation of shares and
assets of the overseas concern justifying the acquisition price,
- Project/feasibility report on the proposal, and
- Application in form ODI, duly filled in to the extent applicable.
Where the final investment does not qualify for clearance under 'Fast Track
Route', a copy each of the proposal should be forwarded simultaneously by
speed post/courier to (i) Ministry of Commerce [EP(OI) Section], Government
of India (GOI) (ii) Ministry of Finance (Department of Economic
Affairs),GOI,(iii) Ministry of External Affairs (Economic Division), GOI,
(iv) Department of Company Affairs, GOI, New Delhi and (v) the concerned
Indian Mission in the host country, as indicated in form ODI.
- In case of final investment proposal in the post-award stage, Indian company
should
furnish suitable documentary evidence in support of winning the bid citing
Reserve Bank's reference number granting 'in principle' approval and apply
afresh to Reserve Bank under copy to the concerned Indian Mission in the
manner indicated in form ODI.
PART B - OFFICES AND REPRESENTATIVES ABROAD
Establishment of Overseas Offices
9B.1
- Firms/Companies in India desiring to open offices (trading/non-trading) or
post
representatives abroad including offices/representatives sought to be
opened/posted abroad for promotion of their exports should submit
applications to their bankers (authorised dealers) in form OBR alongwith the
particulars of their turnover duly certified by their auditors and also a
declaration to the effect that they have not approached/would not approach
any other authorised dealer for the facility being applied for. Authorised
dealers may release exchange towards initial expenditure as also for
recurring expenses of the office as under, provided the applicant fulfils
the following conditions:
|
Category |
Initial Expenditure |
Recurring Expenditure (per annum) |
| (a) |
EEFC Account |
No limit for remittances out of EEFC funds. |
No limit for holders remittances outof EEFC funds.
|
| (b) |
Firms/companies
not having EEFC
accounts or not
having sufficient
funds EEFC accouts.
|
Up to 2% of their average annual sales/income turnover during last two years. |
Up to 1% of their average annual
sales/income turnover during last
two years. |
NOTES:
A.
The above limits are applicable for all the overseas offices of the
applicant taken together. In regard to category (b) above the ceiling is
inclusive of remittances, if any, allowed out of EEFC Account.
B.
In the case of newly established 100% EOUs or Units in EPZs and
Hardware/Software Technology Parks, exchange may be released as per their
estimated requirements for initial as well as recurring expenses on
verification of suitable documentary evidence during the first two years of
their operation. From third year onwards, exchange may be released as per
item (a) or (b) above.
C.
Remittances towards actual retainer fees may be allowed to be made to the
overseas agents engaged for rendering services for promotion of exports by
Indian firms/companies provided (a) the applicant does not have a
non-trading/trading office or representative posted at that centre, (b) the
eligibility criteria as stated in (i) above is satisfied and (c) the amount
of retainer fee is within the ceiling fixed for recurring expenses of all
the overseas offices taken together as stated above.
D.
Firms/companies wishing to take Indian goods such as floor covering,
furniture and other items for office use may approach Reserve Bank for grant
of GR waiver in respect of such exports.
- Remittance facilities on the above basis may be allowed initially for a
period of two
years only, after obtaining confirmation from the applicant that they have
completed all legal and other formalities in India and abroad in connection
with the opening of trading/non-trading office or for posting a
representative abroad. While issuing approval the following terms and
conditions should be advised to the applicant.
- The overseas office should not create any financial liabilities contingent
or otherwise for the Head Office in India.
- Exchange released by the authorised dealer should be strictly utilised for
the purpose(s) for which it is released. The unused exchange may be
repatriated to India under advice to the authorised dealer.
- The details of bank account opened in the overseas countries should be
promptly reported to authorised dealer
- The approval granted for the purpose should be made valid for 6 months from
the date thereof, within which time the applicant should open its overseas
office or post representative abroad. In case the overseas office is not
opened or the representative is not posted abroad within this period, an
intimation in writing to that effect should be sent to the authorised dealer
immediately after expiry of 6 months period. Fresh application for release
of exchange should be submitted to the authorised dealer as and when the
overseas office is desired to be opened.
- Profits, if any, earned by the overseas office/s should be repatriated to
India.
- The following statements should be submitted by the applicant to the
authorised dealer:
- A statement showing details of initial expenses incurred together with
suitable documentary evidence, wherever possible, within three months from
the date of release of exchange for that purpose.
- Annual account of trading/non-trading office abroad duly certified by
statutory Auditors/Chartered Accountants.
- Authorised dealer should send a report of permission granted for opening of
trading/
non-trading office/posting of representative abroad in form ORA on a monthly
basis to the Regional Office of Reserve Bank. The statement should be
submitted to the concerned office of Reserve Bank within ten days from the
close of month. Where remittances are made by utilising funds held in EEFC
accounts, authorised dealers may obtain from the applicants a statement in
form ORR. Copies of ORR statements should be submitted to Reserve Bank by
authorised dealers after adding their certification thereon alongwith the
monthly statements in form ORA. The records relating to the remittance
facilities should be kept in a systematic manner by authorised dealers so as
to facilitate inspection. A `nil' statement in form ORA may be sent if no
permission is granted during the month, for the above purpose.
- The renewal of remittance facility after two years may be granted, provided
proper
accounts of utilisation of foreign exchange released are furnished to the
authorised dealer.
- Applications from firms/companies who do not satisfy the conditions in (i)
above are
required to be made in form OBR to the concerned Regional Office under whose
jurisdiction the Registered/Head Office of the applicant is situate. The
applicant should justify the need for setting up the office. Reserve Bank
will also consider applications for posting technical representatives abroad
by manufacturer exporters of sophisticated machinery etc. to provide
technical support, after sales service etc.
NOTE:
Setting up of offices and posting of representatives abroad and meeting
their expenses from out of foreign exchange retained abroad or from foreign
exchange released by Reserve Bank for any other purpose or from out of
proceeds of exports or any income earned abroad is prohibited.
- Firms/companies having trading offices abroad operating on 'no
remittance' basis or maintained out of funds in EEFC accounts need not apply
for renewal of permission to continue the existing office abroad. However,
annual statements as indicated in paragraph 9B.1(ii)(f) should be submitted
to the authorised dealer.
Credit facilities for overseas trading
offices of Indian companies
9B.1A Reserve Bank considers, on merits, request from Export Houses/Trading
Houses/Star Trading Houses/Super Star Trading Houses to avail of fund
based/non-fund based facilities for their trading offices abroad from
overseas banks. Application in such cases should be made to the Chief
General Manager, Reserve Bank of India, Exchange Control Department (Export
Division), Mumbai together with full particulars of the exchange facilities
availed of for maintenance of the overseas office concerned, full details of
terms and conditions subject to which the facilities are being extended by
the overseas bank and the need for availing of the credit facilities by the
overseas trading office.
Temporary Site/Project Offices Abroad
9B.2
Indian firms/companies executing contracts/projects abroad with the approval
of the
appropriate authority are permitted under a general permission granted by
Reserve Bank to set up site/project offices abroad provided that such
offices are maintained out of project receipts and remittances from India
are not required. These offices are required to be closed down and surplus
foreign exchange earnings repatriated to India after completion of the
project (See paragraph D.1 of Memorandum PEM).
Opening of Overseas Branches by Indian Banks
9B.3
Opening of branches abroad by Indian banks requires permission of Reserve
Bank under
Section 23 of the Banking Regulation Act, 1949. Indian banks wishing to open
branches abroad should apply to the Chief General Manager, Department of
Banking Operations and Development, Reserve Bank of India, Central Office,
Mumbai. After the application has been approved by that Department, the bank
should apply to the Chief General Manager, Exchange Control Department (Forex
Markets Division), Reserve Bank of India, Central Office, Mumbai for release
of foreign exchange for initial remittance, if such remittance is necessary.
NOTE:
Opening of representative offices abroad by Indian banks also requires
permission of both the Department of Banking Operations and Development and
the Exchange Control Department of Reserve Bank.
Maintenance of Overseas Offices
9B.4
Deleted.
Appointment/Posting of Correspondents/Representatives by
Newspapers/Periodicals/News Agencies
9B.5
- Indian newspapers/periodicals having a minimum daily/per issue circulation
of
50,000 copies and Indian news agencies recognised by the concerned
Administrative Ministry of Government of India may engage the services of
correspondents/representatives abroad without the prior permission of
Reserve Bank. Authorised dealers may allow remittances in such cases as
under:
- The actual amount of exchange required towards monthly/maintenance expenses
(salary, allowances, house rent etc.) of the correspondent/representative
posted abroad as per the terms of their appointment. Other office expenses
such as office rent, telephone/cable charges, postage, stationery etc. as
also travel within the country of posting or visits to other countries to
cover international events or specific assignments can be remitted on actual
basis. Remittance can also be sent in advance on the basis of estimates
furnished, subject to accounting. However, wherever 'collect telex' facility
has been made available by the Director General, Overseas Communication
Service, Mumbai to the correspondent/representative in respect of sending
telex message from foreign countries to India on a regular basis,
remittances of telex charges would not be admissible.
- All remittances to the correspondents/ representatives posted in one country
abroad should be remitted through one branch of an authorised dealer to be
designated by the company. There is, however, no objection to designating
different branches of authorised dealers for making remittances to
correspondents / representatives posted to different countries.
Applications from Indian newspapers/periodicals which do not satisfy the
above criteria and applications for posting of correspondent/representative
on temporary basis for covering international events or on specific
assignments should be referred to Reserve Bank for prior approval.
- Indian Newspapers/periodicals/news agencies companies desiring to appoint
correspondent/s or representative/s abroad and satisfying the conditions
laid down in sub-paragraph (I) should advise by letter, the
name/nationality/address of the correspondent/representative, country of
posting and terms of appointment together with a certified copy of the
consent letter from the correspondent/representative to the terms of
appointment to the designated branch of authorised dealer through whom the
remittances to the correspondent will be made by them, under intimation to
the concerned office of Reserve Bank within whose jurisdiction the company's
Head/Registered Office is situate. A certificate from the Audit Bureau of
Circulation or the Company's auditors, confirming the circulation figures
(in the case of newspapers/periodicals) or a copy of the recognition of the
concerned Administrative Ministry of Government of India (in the case of
news agency) should also be sent to the designated branch along with the
letter. Applications for remittances to be made to the
correspondent/representative under the arrangement should be made by the
Indian company direct to the authorised dealer concerned on form A2
separately in respect of each correspondent/representative. The
newspaper/periodical/news agency should submit to the designated branch of
authorised dealer, in duplicate, a half-yearly statement as on 30th
September/31st March every year in form CNP duly certified by its auditors,
giving item-wise details of expenditure incurred in foreign exchange by each
correspondent/representative. The statement should be submitted to the
designated branch within one month of the close of the half-year to which it
pertains.
- On receipt of the application from the Indian newspaper/periodical/news
agency on
form A2, the designated branch of the authorised dealer may allow the
remittance after ensuring that the amount of remittance is in conformity
with conditions (a) AND (b) of sub-paragraph (i). The designated branch
should keep a proper record (correspondent-wise) of remittances made and
verify the same with the half-yearly statements in form CNP received from
the company and also forward to Reserve Bank one copy of the statement after
completing the certificate in Part C of the statement, within 15 days of the
receipt from the newspaper/periodical/news agency.
Arrangements with Overseas News Services
9B.6
Indian newspapers/news agencies may be required in the normal course of
their
business, to make arrangements for obtaining news features, pictures,
photographs, colour pictures, cartoons, crossword puzzles, etc. from
overseas news agencies,feature agencies, etc. on a regular basis against
payment. Indian newspapers/news agencies wishing to enter into such
arrangements should first approach Government of India (Ministry of
Information and Broadcasting) for prior approval for the arrangements
indicating full details of the arrangements such as nature of the material
to be supplied by the overseas news service, remuneration payable therefor,
etc. Applications for remittance should be made by Indian newspapers/news
agencies to authorised dealers alongwith the letter of sanction in original
from the Ministry of Information and Broadcating and the relative invoice
received from the overseas news agency, etc. Authorised dealers may allow
the remittances strictly in accordance with the approval issued by the Govt.
of India, Ministry of Information and Broadcasting. A photo copy of the
Government's letter of approval and the relevant contract with the overseas
company should be kept on record for verification by internal
auditors/Reserve Bank.