A summary of the Circulars published by the Reserve Bank of India (RBI) in the month of May 2012.

1. HEDGE-SQUARE CONSULTANCY SERVICES PRIVATE LIMITED
.
FEMA SNAPS OF MAY 2012
UP TO 20TH MAY, 2012
Following is the summary of the Circulars published by the Reserve Bank of India (RBI) in the
month of May 2012. The Circulars covered below are up to 20th May, 2012.

2. No. Circular Date Snaps
No.
1. 128 16.05.2012 Balances Held in EEFC Account
Vide previous Circular No. 124, as described in SRN No. 2 below, RBI stated that 50% of the balances
in the EEFC accounts shall be converted in to rupee balances and accordingly shall be credited to the
rupee account, as per direction of account holder.
Vide this Circular No. 128 RBI stated that the above said position in Circular No. 124, would only be
applicable to available balances in the account, which may be arrived at by netting off earmarked
amounts on account of outstanding forward / option contracts booked before May 10, 2012.
2. 124 10.05.2012 Balances Held in EEFC Account
Vide this Circular RBI stated that 50% of the balances in the EEFC accounts shall be converted in to
rupee balances and accordingly shall be credited to the rupee account. For the existing funds lying in to
EEFC the position should be made clear within 15 days of this Circular.
Further from now on EEFC account holders are permitted to access the forex market for purchasing
foreign exchange only after utilising all the balances held in the EEFC accounts. RBI has also applied
these provisions to all future transactions carried by the holders in Resident Foreign Currency Account
(RFC) and in Diamond Dollar Account (DDA). The
3. 121 08.05.2012 Foreign Investment in Commodity Exchanges and NBFC
Vide this Circular need of government approval in case of FII component for investment in Commodity
Exchanges has been done away with and now FII can invest up to 23% in Commodity Exchanges by
using automatic route. Previous to this ceiling of 49 per cent mentioned with FDI limit of 26 per cent
and FII limit of 23 per cent under Portfolio Investment Scheme (PIS), subject to conditions stated
therein.
Further leasing & finance activity of NBFC where 100% FDI is allowed under automatic route, it is
clarified that said FDI is allowed only in case of financial lease and not in operating lease, subject to
minimum capitalisation norms. (The same position was clarified vide Circular No. 127 dated 15th
May, 2012)
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3. 4. 120 08.05.2012 Issue of Equity Shares Against Import of Machinery
RBI had discontinued the option of issuing equity shares against the import of second hand machinery
vide this circula,r to promote use of machinery embodying the latest state-of-the-art technology and
which is compliant with international standards. The move was taken to increase the productivity by
utilising latest technologies.
5. 118 07.05.2012 Release of Foreign Exchange for Miscellaneous Remittance
Vide this Circular RBI stated and clarified that in case of foreign exchange remittance up to the amount
of USD 25,000, for a current account transaction (not included in the Schedules I and II of Government
Notification on Current Account Transactions), a simple letter containing basic information of
applicant will serve the purpose rather than submitting all the documents including of Form A2. Prior
to said liberalisation, said limit was USD 5000.
6. 117 07.05.2012 Transfer of Funds from NRO Account to NRE Account
By following recommendation given by of Smt. K. J. Udeshi, vide this Circular, NRI’s (a person
resident outside India who is a citizen of India or is a person of Indian origin) has been allowed to
transfer funds from NRO account to NRE account within the overall ceiling of USD one million per
financial year. Said transfer is permissible, subject to payment of tax as applicable.
Hemant Shah
Hedge-Square Consultancy Services Pvt. Ltd.
Contact: +91 - 9870551611
Email: hemant@hedge-square.com
Website: www.hedge-square.com
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