This document provides an overview of the regulatory framework for financial services in India and the foreign direct investment policy related to the sector. It discusses the Foreign Exchange Management Act of 1999, the liberalized foreign direct investment policy since 1991, and the types of foreign investment (FDI and portfolio investment). It then describes the components of the financial services sector in India and provides details on the allowed foreign investment levels and routes for various financial services sub-sectors like asset reconstruction companies, banking (private and public), insurance, etc. The growth and opportunities in the Indian financial services sector are also highlighted.
FERA was enacted in 1973 to regulate foreign exchange transactions and ensure optimal use of foreign currency reserves in India. It was replaced by FEMA in 1999 to facilitate foreign trade and payments while promoting an orderly foreign exchange market. FEMA simplified rules for foreign investment and removed criminal penalties for violations, treating them as civil offenses instead. The key objectives of both acts were to manage foreign capital flowing in and out of India and maintain the country's foreign exchange reserves.
This document provides an overview and introduction to the Foreign Exchange Management Act (FEMA) presented by Mr. Paresh P. Shah.
It begins with an overview of FEMA, including its objectives to facilitate external trade and payments and promote an orderly foreign exchange market. It discusses key sections of FEMA and amendments made by the Finance Act of 2015. It then defines important terms under FEMA such as capital account transactions, current account transactions, resident in India, and resident outside India.
The document also summarizes the fundamentals of FEMA, including that foreign exchange belongs to the Government of India except with permission, and that dealing in foreign exchange by residents in India and outside India is regulated. It highlights sections
Significant FCRA Amendments: What they are and How they affect you !!Suhel Goel
The document summarizes significant amendments to the Foreign Contribution (Regulation) Act of 2010 in India. Key changes include making the registration, permission and renewal processes online through a single form. Documentation like applications and attachments must now be digitally filed. Payment is made through an online gateway and correspondence with the Ministry occurs through email. Annual returns must include audited financial statements and foreign-funded organizations must publicly disclose more details of contributions received. The amendments aim to modernize the process and increase transparency.
This document provides the consolidated FDI policy circular of the Government of India effective from April 17, 2014. It defines key terms related to foreign direct investment such as foreign institutional investor, foreign portfolio investor, foreign venture capital investor, and outlines the general conditions, entry routes, caps and sector-specific conditions for foreign investment in India. The document is intended to provide a transparent, predictable and easily comprehensible framework for foreign direct investment in India.
The document discusses regulations related to external commercial borrowings (ECB) in India. Some key points:
- The Reserve Bank of India (RBI) regulates ECB through various notifications and circulars issued under the Foreign Exchange Management Act (FEMA). The key regulations currently are the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.
- ECB can be raised from recognized non-resident lenders in any freely convertible foreign currency or in Indian Rupees. There are limits on individual borrowing amounts and provisions for automatic and approval routes.
- Eligible borrowers include companies, partnership firms, LLPs etc. within certain limits based on FDI received. Certain
This document discusses due diligence requirements under the Foreign Exchange Management Act (FEMA) of 1999 in India. It provides an overview of FEMA, distinguishing between current account and capital account transactions. Current account transactions are generally permitted, while capital account transactions are regulated. The document outlines several types of business arrangements covered by FEMA and notes due diligence is required for liaison offices, branch offices, wholly owned subsidiaries, joint ventures, limited liability partnerships, foreign institutional investors, foreign venture capital investors, and Indian entities with overseas investments. Regulators like the Reserve Bank of India and rules established by the central government aim to facilitate foreign trade within the framework of FEMA.
No, this transaction cannot be undertaken based on Section 3(b) of FEMA.
Section 3(b) prohibits making any payment to or for the credit of any person resident outside India in any manner. In this case, Shyam, who is resident in India, is making the payment for the credit of Pradeep, who is resident outside India (an NRI).
However, Regulation 6(2) of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 allows a resident in India to make certain specified payments in rupees to NRIs, such as for boarding/lodging during visit to India. But the given transaction, where an immovable property is being purchased, does not
The document discusses foreign investment in real estate and construction development projects in India. Key points include:
- 100% FDI is permitted under the automatic route for construction development projects including townships, housing, real estate, etc.
- Certain conditions apply such as a 3 year lock-in period on repatriation of funds and sale of only developed plots with infrastructure.
- FDI is prohibited in real estate business and trading of real estate unless it is for development of integrated townships, affordable housing, etc.
- External commercial borrowings by eligible Indian entities from foreign lenders are also permitted within certain limits and for non-restricted end uses.
FERA was enacted in 1973 to regulate foreign exchange transactions and ensure optimal use of foreign currency reserves in India. It was replaced by FEMA in 1999 to facilitate foreign trade and payments while promoting an orderly foreign exchange market. FEMA simplified rules for foreign investment and removed criminal penalties for violations, treating them as civil offenses instead. The key objectives of both acts were to manage foreign capital flowing in and out of India and maintain the country's foreign exchange reserves.
This document provides an overview and introduction to the Foreign Exchange Management Act (FEMA) presented by Mr. Paresh P. Shah.
It begins with an overview of FEMA, including its objectives to facilitate external trade and payments and promote an orderly foreign exchange market. It discusses key sections of FEMA and amendments made by the Finance Act of 2015. It then defines important terms under FEMA such as capital account transactions, current account transactions, resident in India, and resident outside India.
The document also summarizes the fundamentals of FEMA, including that foreign exchange belongs to the Government of India except with permission, and that dealing in foreign exchange by residents in India and outside India is regulated. It highlights sections
Significant FCRA Amendments: What they are and How they affect you !!Suhel Goel
The document summarizes significant amendments to the Foreign Contribution (Regulation) Act of 2010 in India. Key changes include making the registration, permission and renewal processes online through a single form. Documentation like applications and attachments must now be digitally filed. Payment is made through an online gateway and correspondence with the Ministry occurs through email. Annual returns must include audited financial statements and foreign-funded organizations must publicly disclose more details of contributions received. The amendments aim to modernize the process and increase transparency.
This document provides the consolidated FDI policy circular of the Government of India effective from April 17, 2014. It defines key terms related to foreign direct investment such as foreign institutional investor, foreign portfolio investor, foreign venture capital investor, and outlines the general conditions, entry routes, caps and sector-specific conditions for foreign investment in India. The document is intended to provide a transparent, predictable and easily comprehensible framework for foreign direct investment in India.
The document discusses regulations related to external commercial borrowings (ECB) in India. Some key points:
- The Reserve Bank of India (RBI) regulates ECB through various notifications and circulars issued under the Foreign Exchange Management Act (FEMA). The key regulations currently are the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.
- ECB can be raised from recognized non-resident lenders in any freely convertible foreign currency or in Indian Rupees. There are limits on individual borrowing amounts and provisions for automatic and approval routes.
- Eligible borrowers include companies, partnership firms, LLPs etc. within certain limits based on FDI received. Certain
This document discusses due diligence requirements under the Foreign Exchange Management Act (FEMA) of 1999 in India. It provides an overview of FEMA, distinguishing between current account and capital account transactions. Current account transactions are generally permitted, while capital account transactions are regulated. The document outlines several types of business arrangements covered by FEMA and notes due diligence is required for liaison offices, branch offices, wholly owned subsidiaries, joint ventures, limited liability partnerships, foreign institutional investors, foreign venture capital investors, and Indian entities with overseas investments. Regulators like the Reserve Bank of India and rules established by the central government aim to facilitate foreign trade within the framework of FEMA.
No, this transaction cannot be undertaken based on Section 3(b) of FEMA.
Section 3(b) prohibits making any payment to or for the credit of any person resident outside India in any manner. In this case, Shyam, who is resident in India, is making the payment for the credit of Pradeep, who is resident outside India (an NRI).
However, Regulation 6(2) of the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016 allows a resident in India to make certain specified payments in rupees to NRIs, such as for boarding/lodging during visit to India. But the given transaction, where an immovable property is being purchased, does not
The document discusses foreign investment in real estate and construction development projects in India. Key points include:
- 100% FDI is permitted under the automatic route for construction development projects including townships, housing, real estate, etc.
- Certain conditions apply such as a 3 year lock-in period on repatriation of funds and sale of only developed plots with infrastructure.
- FDI is prohibited in real estate business and trading of real estate unless it is for development of integrated townships, affordable housing, etc.
- External commercial borrowings by eligible Indian entities from foreign lenders are also permitted within certain limits and for non-restricted end uses.
The document discusses the Foreign Exchange Management Act (FEMA) of India. It provides the following key details:
1. FEMA was passed in 1999 to replace the Foreign Exchange Regulation Act and make foreign exchange offenses civil offenses. It extends to all of India.
2. Unlike the previous act, FEMA took a more liberal approach by making everything permitted unless specifically prohibited, compared to prohibiting everything unless permitted.
3. The act gave the central government power to impose restrictions on foreign exchange transactions and the holding of foreign assets by Indian residents.
Presentation on press note 2,3,4 [2009] fema by ca. sudha g. bhushanTAXPERT PROFESSIONALS
The document summarizes a presentation on the Foreign Exchange Management Act (FEMA) in India. It discusses the key regulatory bodies that govern foreign investment - FEMA, the Reserve Bank of India, and the Department of Industrial Policy and Promotion. It also outlines the different routes of foreign investment, sectoral caps, guidelines for calculating direct and indirect foreign investment, and clarifications provided in recent press notes issued by the Department of Industrial Policy and Promotion relating to foreign investment policies.
This document provides an overview of a basic course on the Foreign Exchange Management Act (FEMA) and taxation of foreign remittances presented by Mr. Paresh P. Shah. It outlines the key topics to be covered including definitions under FEMA, fundamentals of FEMA such as restrictions on dealings in foreign exchange, holdings of foreign assets, and capital account transactions. It also lists some important sections of FEMA and provides brief explanations. The document serves as an agenda or program for the course that will educate participants on FEMA regulations and their implications.
The document discusses India's financial sector reforms since the 1990s. It notes that the financial sector has diversified and expanded rapidly, dominated by commercial banks. Major reforms include opening the foreign exchange market, allowing higher exposure limits for banks, and increasing investment limits for small industries. Key laws introduced include the PMLA, IDBI, SEZ, and National Tax Tribunal acts. The reforms represent a major overhaul that has brought India's financial system closer to international standards, though a gradual approach was taken and more reforms are still needed when combined with macroeconomic stability and broader economic reforms.
Reporting compliance under FEMA ACT,1999henal Sheth
1. The document discusses reporting requirements for foreign direct investment (FDI) in India as per the Master Direction-Reporting under Foreign Exchange Management Act, 1999.
2. It outlines various forms that must be filed for FDI-related transactions within specified timelines, such as Form FC-GPR for issuing equity instruments and Form FC-TRS for transfer of shares.
3. Late submission fees may be charged for delayed reporting and are calculated as a percentage of the amount involved in the transaction, with the percentage doubling every 12 months.
The document provides an overview of a basic course on the Foreign Exchange Management Act (FEMA) and taxation of foreign remittances presented by Mr. Paresh P. Shah. It discusses key topics that will be covered in the course including an overview of FEMA, important definitions, fundamentals of FEMA, current account transactions, capital account transactions, foreign direct investment in India, overseas direct investments, immovable property in India, exports and imports. It also lists various abbreviations commonly used and provides summaries of some key sections of FEMA related to dealing in foreign exchange, holding foreign exchange, current account transactions and capital account transactions.
The borrower account would be eligible under the scheme if:
1) The account was classified as SMA-1 as on 29th February 2020 i.e. the number of days past due was between 31-60 days.
2) The account was not classified as NPA or SMA-2 as on 29th February 2020. Since the number of days past due was less than 90 days as on 29th Feb 2020, the account would be classified as SMA-1 and hence eligible.
3) The borrower meets all other eligibility criteria like loan outstanding, turnover limit etc.
So in this case, since the number of days past due was less than 90, the account would be classified as S
Foreign exchange management (transfer or issue of security by a person reside...pgcinternational
This document outlines amendments made to regulations governing foreign exchange management in India. It defines key terms related to foreign ownership and control of Indian companies. It provides guidelines for calculating total foreign investment in an Indian company, including directly by non-residents and indirectly through downstream investments by Indian companies. It also outlines when government approval is required for transferring ownership or control of an Indian company to non-resident entities in sectors with investment caps.
This document provides an overview of the Indian financial sector and analyzes the impact of the global financial crisis. It discusses how India's gradual approach to financial liberalization and prudent regulatory policies helped limit the direct impact of the crisis. While growth declined, the financial sector was stabilized through liquidity measures and policy responses that targeted support for SMEs. Looking ahead, the proposed Basel III capital and liquidity standards will significantly impact Indian banks, with some norms posing more of a challenge to meet than others.
This document provides an overview and introduction to the Foreign Exchange Management Act (FEMA) in India. It covers key topics such as an overview of FEMA, important definitions, fundamentals of FEMA, sections of FEMA, case studies, and frequently asked questions. The document is intended to provide attendees of an intensive study course on FEMA with background information on the act through presentations on various aspects of FEMA regulations and practice in India.
This document provides an overview of a four day orientation course on overseas direct investment under FEMA. It discusses key topics like overseas direct investments under FEMA notification 120, branches outside India, eligible entities, limits under the automatic route and conditions for investments by resident individuals. The document also clarifies questions around eligible structures like trusts and defines important terms.
The document provides an overview of India's foreign direct investment policy as of April 2006. Some key points:
- FDI is allowed in most sectors up to 100% under the automatic route, which does not require government approval.
- Certain sectors such as retail, lottery, gambling and atomic energy are prohibited for FDI.
- The policy outlines equity limits and conditions for FDI in various sectors such as airports, air transport services, broadcasting, mining, insurance etc.
- Under the government approval route, proposals for FDI requiring approval are received by relevant departments.
- The document is organized into sections on the FDI policy, press notes on policy changes, and FDI statistics.
This document provides an overview and summary of key aspects of the Foreign Exchange Management Act (FEMA). It begins with an introduction to FEMA and its objectives. It then summarizes several important sections of FEMA, including sections 3-9 which cover substantive provisions around dealing in foreign exchange, current account transactions, and capital account transactions. Definitions of key terms like "capital account transaction", "current account transaction", and "person resident in India" are also summarized. The document concludes with summaries of fundamentals of FEMA compliance and important issues around the recent changes to the definitions of PIO and OCI.
South Korea has relied heavily on international trade due to lack of natural resources and small domestic market. It has sought to diversify trading partners to reduce dependence on a few markets. Cumulative foreign direct investment in South Korea from 1991-2006 was $40.63 billion, ranking it 9th globally. The banking sectors in both South Korea and India have grown and modernized since the 1980s through deregulation and privatization. South Korea's domestic credit levels as percentages of GDP are higher than India's.
The document provides an overview of India's foreign exchange management policy and foreign trade scenario over the years. It discusses the evolution from strict controls under FERA to a more liberalized management system under FEMA. Foreign exchange reserves have increased substantially from $6 billion in 1991 to over $270 billion in 2007 due to large capital inflows. Exports and imports have both increased steadily over the years, with imports generally exceeding exports, leading to a trade deficit.
Mr. Paresh Shah gave a presentation on the key aspects of the Foreign Exchange Management Act (FEMA). The presentation provided an overview of FEMA, including its objectives to facilitate external trade and payments. It discussed important sections of FEMA related to current account transactions, capital account transactions, and restrictions on dealings in foreign exchange. It also defined key terms under FEMA such as capital account transactions, current account transactions, person resident in India, and person resident outside India. The presentation concluded with discussing some fundamentals of FEMA related to ownership of foreign exchange, restrictions on dealings in foreign exchange, and holding of foreign exchange.
This document outlines an analytical framework for implementing flexible inflation targeting in India. It provides context on India's monetary policy and inflation trends since 2000. The key points are:
1. India experienced three phases of inflation since 2000 - moderate inflation and strong growth from 2000-2008, higher inflation from 2008-2013, and lower inflation since 2013.
2. During 2000-2008, inflation was low and stable despite supply shocks, due to weak demand and administered fuel prices. However, inflation breached targets in 2008 due to high global commodity prices and overheating concerns.
3. The document proposes using a Quarterly Projection Model within a flexible inflation targeting framework to help the Reserve Bank of India respond optimally
This was presented by CA. Sudha G. Bhushan as a key note speaker in the national seminar on Foreign INvestment Flows in India organised by Lala Lajpat Rai Institute of Management.
FERA was replaced by FEMA to facilitate India's globalization efforts by liberalizing foreign exchange regulations. FERA was enacted in 1973 during low foreign exchange reserves, requiring stringent controls, while FEMA was enacted in 1999 to promote trade and remove FERA's restrictive provisions. Key differences include FERA presumed guilt while FEMA presumes innocence, and FERA imposed criminal penalties while FEMA imposes civil penalties. FEMA's objectives are facilitating external trade, payments, and maintaining foreign exchange markets.
The document discusses the Foreign Exchange Management Act (FEMA) of India. It provides the following key details:
1. FEMA was passed in 1999 to replace the Foreign Exchange Regulation Act and make foreign exchange offenses civil offenses. It extends to all of India.
2. Unlike the previous act, FEMA took a more liberal approach by making everything permitted unless specifically prohibited, compared to prohibiting everything unless permitted.
3. The act gave the central government power to impose restrictions on foreign exchange transactions and the holding of foreign assets by Indian residents.
Presentation on press note 2,3,4 [2009] fema by ca. sudha g. bhushanTAXPERT PROFESSIONALS
The document summarizes a presentation on the Foreign Exchange Management Act (FEMA) in India. It discusses the key regulatory bodies that govern foreign investment - FEMA, the Reserve Bank of India, and the Department of Industrial Policy and Promotion. It also outlines the different routes of foreign investment, sectoral caps, guidelines for calculating direct and indirect foreign investment, and clarifications provided in recent press notes issued by the Department of Industrial Policy and Promotion relating to foreign investment policies.
This document provides an overview of a basic course on the Foreign Exchange Management Act (FEMA) and taxation of foreign remittances presented by Mr. Paresh P. Shah. It outlines the key topics to be covered including definitions under FEMA, fundamentals of FEMA such as restrictions on dealings in foreign exchange, holdings of foreign assets, and capital account transactions. It also lists some important sections of FEMA and provides brief explanations. The document serves as an agenda or program for the course that will educate participants on FEMA regulations and their implications.
The document discusses India's financial sector reforms since the 1990s. It notes that the financial sector has diversified and expanded rapidly, dominated by commercial banks. Major reforms include opening the foreign exchange market, allowing higher exposure limits for banks, and increasing investment limits for small industries. Key laws introduced include the PMLA, IDBI, SEZ, and National Tax Tribunal acts. The reforms represent a major overhaul that has brought India's financial system closer to international standards, though a gradual approach was taken and more reforms are still needed when combined with macroeconomic stability and broader economic reforms.
Reporting compliance under FEMA ACT,1999henal Sheth
1. The document discusses reporting requirements for foreign direct investment (FDI) in India as per the Master Direction-Reporting under Foreign Exchange Management Act, 1999.
2. It outlines various forms that must be filed for FDI-related transactions within specified timelines, such as Form FC-GPR for issuing equity instruments and Form FC-TRS for transfer of shares.
3. Late submission fees may be charged for delayed reporting and are calculated as a percentage of the amount involved in the transaction, with the percentage doubling every 12 months.
The document provides an overview of a basic course on the Foreign Exchange Management Act (FEMA) and taxation of foreign remittances presented by Mr. Paresh P. Shah. It discusses key topics that will be covered in the course including an overview of FEMA, important definitions, fundamentals of FEMA, current account transactions, capital account transactions, foreign direct investment in India, overseas direct investments, immovable property in India, exports and imports. It also lists various abbreviations commonly used and provides summaries of some key sections of FEMA related to dealing in foreign exchange, holding foreign exchange, current account transactions and capital account transactions.
The borrower account would be eligible under the scheme if:
1) The account was classified as SMA-1 as on 29th February 2020 i.e. the number of days past due was between 31-60 days.
2) The account was not classified as NPA or SMA-2 as on 29th February 2020. Since the number of days past due was less than 90 days as on 29th Feb 2020, the account would be classified as SMA-1 and hence eligible.
3) The borrower meets all other eligibility criteria like loan outstanding, turnover limit etc.
So in this case, since the number of days past due was less than 90, the account would be classified as S
Foreign exchange management (transfer or issue of security by a person reside...pgcinternational
This document outlines amendments made to regulations governing foreign exchange management in India. It defines key terms related to foreign ownership and control of Indian companies. It provides guidelines for calculating total foreign investment in an Indian company, including directly by non-residents and indirectly through downstream investments by Indian companies. It also outlines when government approval is required for transferring ownership or control of an Indian company to non-resident entities in sectors with investment caps.
This document provides an overview of the Indian financial sector and analyzes the impact of the global financial crisis. It discusses how India's gradual approach to financial liberalization and prudent regulatory policies helped limit the direct impact of the crisis. While growth declined, the financial sector was stabilized through liquidity measures and policy responses that targeted support for SMEs. Looking ahead, the proposed Basel III capital and liquidity standards will significantly impact Indian banks, with some norms posing more of a challenge to meet than others.
This document provides an overview and introduction to the Foreign Exchange Management Act (FEMA) in India. It covers key topics such as an overview of FEMA, important definitions, fundamentals of FEMA, sections of FEMA, case studies, and frequently asked questions. The document is intended to provide attendees of an intensive study course on FEMA with background information on the act through presentations on various aspects of FEMA regulations and practice in India.
This document provides an overview of a four day orientation course on overseas direct investment under FEMA. It discusses key topics like overseas direct investments under FEMA notification 120, branches outside India, eligible entities, limits under the automatic route and conditions for investments by resident individuals. The document also clarifies questions around eligible structures like trusts and defines important terms.
The document provides an overview of India's foreign direct investment policy as of April 2006. Some key points:
- FDI is allowed in most sectors up to 100% under the automatic route, which does not require government approval.
- Certain sectors such as retail, lottery, gambling and atomic energy are prohibited for FDI.
- The policy outlines equity limits and conditions for FDI in various sectors such as airports, air transport services, broadcasting, mining, insurance etc.
- Under the government approval route, proposals for FDI requiring approval are received by relevant departments.
- The document is organized into sections on the FDI policy, press notes on policy changes, and FDI statistics.
This document provides an overview and summary of key aspects of the Foreign Exchange Management Act (FEMA). It begins with an introduction to FEMA and its objectives. It then summarizes several important sections of FEMA, including sections 3-9 which cover substantive provisions around dealing in foreign exchange, current account transactions, and capital account transactions. Definitions of key terms like "capital account transaction", "current account transaction", and "person resident in India" are also summarized. The document concludes with summaries of fundamentals of FEMA compliance and important issues around the recent changes to the definitions of PIO and OCI.
South Korea has relied heavily on international trade due to lack of natural resources and small domestic market. It has sought to diversify trading partners to reduce dependence on a few markets. Cumulative foreign direct investment in South Korea from 1991-2006 was $40.63 billion, ranking it 9th globally. The banking sectors in both South Korea and India have grown and modernized since the 1980s through deregulation and privatization. South Korea's domestic credit levels as percentages of GDP are higher than India's.
The document provides an overview of India's foreign exchange management policy and foreign trade scenario over the years. It discusses the evolution from strict controls under FERA to a more liberalized management system under FEMA. Foreign exchange reserves have increased substantially from $6 billion in 1991 to over $270 billion in 2007 due to large capital inflows. Exports and imports have both increased steadily over the years, with imports generally exceeding exports, leading to a trade deficit.
Mr. Paresh Shah gave a presentation on the key aspects of the Foreign Exchange Management Act (FEMA). The presentation provided an overview of FEMA, including its objectives to facilitate external trade and payments. It discussed important sections of FEMA related to current account transactions, capital account transactions, and restrictions on dealings in foreign exchange. It also defined key terms under FEMA such as capital account transactions, current account transactions, person resident in India, and person resident outside India. The presentation concluded with discussing some fundamentals of FEMA related to ownership of foreign exchange, restrictions on dealings in foreign exchange, and holding of foreign exchange.
This document outlines an analytical framework for implementing flexible inflation targeting in India. It provides context on India's monetary policy and inflation trends since 2000. The key points are:
1. India experienced three phases of inflation since 2000 - moderate inflation and strong growth from 2000-2008, higher inflation from 2008-2013, and lower inflation since 2013.
2. During 2000-2008, inflation was low and stable despite supply shocks, due to weak demand and administered fuel prices. However, inflation breached targets in 2008 due to high global commodity prices and overheating concerns.
3. The document proposes using a Quarterly Projection Model within a flexible inflation targeting framework to help the Reserve Bank of India respond optimally
This was presented by CA. Sudha G. Bhushan as a key note speaker in the national seminar on Foreign INvestment Flows in India organised by Lala Lajpat Rai Institute of Management.
FERA was replaced by FEMA to facilitate India's globalization efforts by liberalizing foreign exchange regulations. FERA was enacted in 1973 during low foreign exchange reserves, requiring stringent controls, while FEMA was enacted in 1999 to promote trade and remove FERA's restrictive provisions. Key differences include FERA presumed guilt while FEMA presumes innocence, and FERA imposed criminal penalties while FEMA imposes civil penalties. FEMA's objectives are facilitating external trade, payments, and maintaining foreign exchange markets.
This document provides an overview of the Foreign Exchange Regulation Act (FERA) and the Foreign Exchange Management Act (FEMA) in India.
FERA was introduced in 1973 to conserve foreign exchange reserves during a period of economic challenges. It imposed strict controls on foreign exchange transactions. FEMA replaced FERA in 1999 to liberalize controls in line with India's economic reforms. FEMA aims to facilitate external trade and payments while maintaining an orderly foreign exchange market. It removed many restrictions and simplified rules to encourage greater foreign investment. Key similarities between the acts include regulatory bodies and enforcement powers, while FEMA introduced more flexibility compared to FERA.
This document provides information about the regulatory framework for foreign direct investment (FDI) and foreign institutional investment (FII) in India. It discusses the history and liberalization of FDI policies in India. It outlines the sectors that allow FDI and the caps on foreign ownership. It also discusses the legal basis and procedures for FDI approval. For FIIs, it defines what an FII is, the eligible entities, and the registration process with SEBI.
The document discusses the Foreign Exchange Regulation Act (FERA) of 1973 and its replacement by the Foreign Exchange Management Act (FEMA) of 1999. Some key points:
- FERA was introduced in 1973 during an economic crisis to conserve foreign exchange resources by regulating foreign transactions. However, over time it became too restrictive as the economy liberalized.
- FEMA was introduced in 1999 to replace FERA and bring foreign exchange laws in line with India's increasingly open economy. It removed many restrictions and made rules simpler to encourage foreign investment.
- While both acts aimed to regulate foreign exchange, FERA did so in a more controlling way through criminal penalties, whereas FEMA takes a milder
The document provides information on the Foreign Exchange Regulation Act (FERA) and its replacement, the Foreign Exchange Management Act (FEMA). Some key points:
FERA was passed in 1973 to regulate foreign exchange transactions and was very restrictive. FEMA was passed in 1999 to replace FERA and liberalize foreign exchange controls by removing many restrictions on foreign investment. FEMA aims to facilitate external trade and payments and promote an orderly foreign exchange market. It assigns an important role to the Reserve Bank of India in administering the act.
The key differences between FERA and FEMA include FEMA being less complex with fewer sections, removing presumptions of intent, expanding the definition of authorized persons, aligning the
The document summarizes key aspects of the Foreign Exchange Management Act (FEMA) in India:
1) FEMA replaced the older Foreign Exchange Regulation Act (FERA) in 1999 to liberalize foreign exchange policies and make offenses civil rather than criminal.
2) It consolidated and amended laws relating to foreign exchange to facilitate trade and maintain foreign exchange markets.
3) FEMA is administered by the Reserve Bank of India and enforced by an Enforcement Directorate based in New Delhi.
ICAI-WIRC - FEMA Conference - New Consolidated FDI Policy - 19.08.2011P P Shah & Associates
This document provides an overview and analysis of India's new consolidated foreign direct investment (FDI) policy that took effect on April 1, 2011. It defines key terms related to FDI, describes the legal framework for foreign investment in India, and outlines the automatic route for investment and sectors requiring government approval. The presentation also examines recent changes to sectoral caps, modes of share issuance, documentation requirements, and frameworks for portfolio investment.
The document provides an overview of the Foreign Exchange Management Act (FEMA) in India. It discusses that FEMA is the rulebook that governs foreign exchange transactions and aims to streamline such transactions, protect national interests, attract foreign investment, and empower individuals. FEMA comprises various chapters, rules, regulations, notifications, and circulars. It outlines the overall structure and scheme of FEMA, including its objectives to facilitate external trade and payments, manage foreign investment, and safeguard interests of resident Indians.
The document provides an overview of the Foreign Exchange Management Act 1999 (FEMA) and compares it to the previous Foreign Exchange Regulation Act 1973 (FERA). It discusses the objectives and key differences between the two acts. Specifically:
- FEMA replaced FERA and aims to facilitate external trade and payments while promoting an orderly foreign exchange market in India. This is a shift from FERA's objective of conserving foreign exchange reserves through strict regulation.
- FEMA is civil legislation while FERA was criminal, removing the threat of imprisonment for minor offenses. FEMA also takes a permissive approach, allowing all activities unless expressly prohibited.
- Key changes include removing restrictions on current account transactions and simpl
The document discusses the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India's (RBI) role in managing foreign exchange in India. It provides background on FEMA replacing the previous Foreign Exchange Regulation Act. The RBI acts as the custodian and manager of foreign exchange reserves in India through its "Exchange Control Department." It aims to maintain stability in exchange rates by regulating inflows and outflows. The three main agencies that regulate foreign direct investment in India are RBI, DIPP, and FIPB.
FEMA was introduced in 2000 to replace the FERA and facilitate India's growing integration into the global economy. FEMA liberalized India's foreign exchange laws and moved away from a system of strict permissions to one based on regulations. It aims to facilitate external trade and payments while maintaining orderly foreign exchange markets. FEMA is supported by various rules and regulations issued by the RBI and governed by different bodies like the RBI, Directorate of Enforcement, and governed by related acts like the Foreign Trade Act and Prevention of Money Laundering Act.
The Foreign Exchange Regulation Act (FERA) was passed in 1973 to strictly control foreign exchange transactions and minimize dealings in foreign exchange and securities due to India's low foreign exchange reserves. It required all foreign exchange earned by Indian residents to be surrendered to the government. Major violations were treated as criminal offenses. The Act was replaced in 1999 by the Foreign Exchange Management Act (FEMA) to relax foreign exchange controls and manage rather than regulate foreign capital flows as India liberalized its economy. FEMA gave the central government power to impose restrictions on foreign exchange transactions through authorized persons.
FDI & FEMA Reinforcing Indian Economy - 2015Gaurav Goyal
The document discusses the need for foreign direct investment (FDI) in India to support economic growth and development. It notes that while FDI brings capital, technology, jobs and other benefits, attracting FDI is challenging given the global economic slowdown and India's bureaucracy. The government needs to create a predictable environment to attract more of the approximately $18 billion in annual FDI needed to meet GDP growth targets and reduce the current account deficit. Liberalizing sectors like retail and aviation is a start, but further reforms are required.
Why does India need FDI, How will FDI benefit us, What will be the disadvantages? Read everything you wanted to know about Foreign Direct Investment and the role played by Foreign Exchange Management Act, in this Research Report from Resurgent India
Project on Forign Institutional Investors Secondary DataRuchita Iyer
The document provides information on Foreign Institutional Investors (FIIs) in India. Some key points:
- FIIs are entities established outside of India that propose investments in Indian securities. They must register with SEBI.
- The biggest source of FII investment is Participatory Notes, which allow overseas investors to invest in Indian markets without direct registration.
- FIIs bring both benefits like improved market breadth/depth and risks like increased speculation. Strict regulations govern FII investment, registration, and ongoing compliance.
Foreign exchange is applicable on all type of foreign inflow in the India. Fema is applicable venture funding in india. all investment by NRI in india subject to FEMA regulations.
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Similar to Background material fdi-in_financial_services (20)
Long Term Visa (LTV) is granted to the following categories of persons of Bangladesh, Afghanistan and Pakistan coming to India on valid travel documents i.e. valid passport and valid visa, and seeking permanent settlement in India with a view to acquire Indian citizenship:-
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ii. Bangladesh/ Pakistan women married to Indian nationals and staying in India; or Afghanistan nationals married to Indian nationals in India and staying in India.
iii. Indian origin women holding Bangladesh/ Afghanistan/ Pakistan nationality married to Bangladesh/ Afghanistan/ Pakistan nationals and returning to India due to widowhood/ divorce and having no male members to support them in Bangladesh/ Afghanistan/ Pakistan.
iv. Cases involving extreme compassion.
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The document provides an overview of a comprehensive course on foreign exchange management under the Foreign Exchange Management Act, 1999 (FEMA). It includes details of the faculty conducting the course, CA Sudha G Bhushan, as well as an outline of topics to be covered related to FEMA regulations for non-resident Indians, resident Indians, contraventions under FEMA, and residential status determination. Examples are also provided to illustrate residential status analysis for individuals and companies under various scenarios. The goal of the course is to explore opportunities and provide advisory services related to FEMA compliance.
In a move to further rationalize and liberalise the overseas investment central Government and Reserve Bank of India notified Foreign Exchange Management (Overseas Investment) Rules, 2022 and Foreign Exchange Management (Overseas Investment) Regulations, 2022 respectively on 22 Aug 2022.
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As per section 92 of the Income Tax Act,1961 “Any
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expense incurred or to be incurred in connection with
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SHALL DISCUSS REGARDING DRAFTING AND THE
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University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
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Background material fdi-in_financial_services
1. Various Aspects under FEMA
Financial Services
BY CA. Sudha G. Bhushan
This Document provides an overview pertaining to regulatory
framework of Financial Services sector in India and the
Foreign Direct Investment Policy pertaining to same
12/18/2010
2. Contents
Overview of Foreign Exchange Management Act, 1999
Foreign Direct Investment Policy
About Financial Services
Components of Financial Services
FDI in Financial Services
Indian financial Service Sector – Growth and opportunity
| By CA. Sudha G. Bhushan
3. Overview of Foreign Exchange Management Act, 1999
The preamble of the act says that it is an Act to consolidate and amend the law relating to
foreign exchange with the objective of facilitating external trade and payments and for
promoting the orderly development and maintenance of foreign exchange market in India.
Foreign Exchange Management Act, 1999 (“FEMA”) has come in force from 1st June, 2000
by replacing Foreign Exchange Regulations Act (“FERA”). The main change that has been
brought is that FEMA is a civil law, whereas the FERA was a criminal law. FERA was popular
for its draconian provisions. The shift of FERA to FEMA was the shift of control of foreign
exchange to regulation and promotion and orderly development of Foreign exchange. FEMA
is forward looking legislation which aims to facilitate foreign trade.
FEMA aims to achieve self regulation instead of imposed restrictions. The rationale for strict
regulations under FERA 1973 after Independence was that India was left with little forex
reserves and during the oil –crisis of seventies ballooning oil import bills further drained
foreign exchange reserves. Unsatisfactory reserves made it imperative to put in place
stringent controls to conserve foreign exchange and to utilise it in the best interest of the
country.
FEMA has 49 Sections of which 9 Sections (Sections 1 to 9) are substantive and the rest are
procedural or administrative. RBI is entrusted with the administration and implementation
of FEMA. RBI has so far issued over 200 Notifications, each of which contains several
regulations for a particular class of transactions, e.g., Notification No. FEMA/21/RB-2000,
deals with acquisition and transfer of immovable property in India.
Notifications are type of self contained set of regulations, which are mostly divided into
three broad parts
(i) Short title and commencement
(ii) Definitions and
(iii) Other provisions
It is interesting to note that the same term may be defined differently for different purposes
in different Notifications. For example, the term “Person of Indian Origin (PIO)” is defined
differently in three Notifications, namely
(i) FEMA 13/2000-RB pertaining to remittance of assets,
(ii) FEMA 21/2000-RB pertaining to acquisition and transfer of immovable property in India
and
| By CA. Sudha G. Bhushan
4. (iii) FEMA 24/2000-RB pertaining to investment in a firm or a proprietary concern in India.
The definition section of each Notification makes it clear that the words and expressions
used therein, but not defined in that particular Notification, shall have the same meanings
respectively assigned to them in the Act. Therefore, wherever a particular term is defined in
the Notification, the meaning to be assigned is unique to that Notification and mostly cannot
be applied to another.
Thus, interpretation and application of FEMA provisions and Notifications require utmost
care. FEMA is applicable to the whole of India. The expression “whole of India” would
indicate that the provisions of the Act are applicable to all transactions taking place in India.
Thus, any person who is present in India at the time of transaction has to comply with
provisions of FEMA. FEMA is applicable to all branches, offices and agencies outside India
owned or controlled by a person resident in India. Thus, FEMA has retained its extra-
territorial application, as under FERA.
The Enforcement of FEMA is done through Reserve Bank of India and Central Government.
The power has been given to Central Government [section 46] and RBI [Section 47] to lay
down detailed rules and regulations to carry out the various provisions of the Act. Where
under Section 47 the reserve bank of India can make regulations governing procedural and
administrative aspects of FEMA the central government have been given the power to make
rules governing enforcement of FEMA.The Central Government has established a Directorate
of Enforcement for the purpose of enforcement of Act [section 36]. Officers under
Directorate of enforcement are known as officers of Enforcement. These officers can
investigate the contraventions of FEMA.
| By CA. Sudha G. Bhushan
5. Foreing
Exchange
management
Act, 1999
Master Regulations -
circulars Reserve Bank
Regulatory
Framework
Rules- Central
Circulars
Goverment
Notifications
| By CA. Sudha G. Bhushan
6. Foreign Direct Investment Policy
To fulfill the need of freeing the Indian industry from excessive official control and for
promoting foreign investments in India in necessary sectors the much required liberalization
of Indian economy was brought in by Industrial Policy of 1991. From then the Indian
economy is more facilitating to Foreign Direct investment in all form.
The intent and objective of the Government is to promote foreign direct investment through
a transparent, predictable, simple and clear policy framework and the which reduces
regulatory burden.
Foreign Direct Investment in India is regulated under FEMA and it regulations. FDI by non-
resident in resident entities through transfer or issue of security to person resident outside
India is a ‘Capital account transaction’ under FEMA, 1999. Keeping in view the current
requirements, the Government from time to time comes up with new regulations and
amendments/changes in the existing ones through order/allied rules, Press Notes, etc. The
Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry,
Government of India makes policy pronouncements on FDI through Press Notes/ Press
Releases which are notified by the Reserve Bank of India as amendment to notification
No.FEMA 20/2000-RB dated May 3, 2000. These notifications take effect from the date of
issue of Press Notes/ Press Releases, unless specified otherwise therein. The procedural
instructions are issued by the Reserve Bank of India vide A.P.Dir. (series) Circulars. The
regulatory framework over a period of time thus consists of Acts, Regulations, Press Notes,
Press Releases, Clarifications, etc.
Foreign Investment can be in two ways
(i) Foreign Direct Investment (FDI) and
(ii) Foreign Portfolio Investment.
“Investment’ is usually understood as financial contribution to the capital of an enterprise or
purchase of shares in the enterprise. ‘Foreign investment’ is investment in an enterprise by
a Non-Resident irrespective of whether this involves new capital or reinvestment of
earnings. One of the difference between FDI and Foreign Portfolio investment is the
objective with which the investment is made. The main motivation of investor of Foreign
Direct Investment is a strategic long term relationship with the direct investment enterprise
to ensure the significant degree of influence by the direct investor in the management of the
direct investment enterprise. Direct investment allows the direct investor to gain access to
the direct investment enterprise which it might otherwise be unable to do. However the
objectives of portfolio investment is different whereby investors do not generally expect to
influence the management of the enterprise.
FDI is defined by International Monetary Fund (IMF) and Organization for Economic
Cooperation and Development(OECD) as a category of cross border investment made by a
resident in one economy (the direct investor) with the objective of establishing a ‘lasting
interest’ in an enterprise (the direct investment enterprise) that is resident in an economy
other than that of the direct investor. In the Indian context, ‘FDI’ means investment by non-
resident entity/person resident outside India in the capital of the Indian company under
Schedule 1 of FEM(Transfer or Issue of Security by a Person Resident Outside India)
Regulations 2000.
| By CA. Sudha G. Bhushan
7. It is the policy of the Government of India to attract and promote productive FDI in
activities which significantly contribute to industrialization and socio-economic development.
FDI supplements domestic capital and technology.
FDI EQUITY INFLOWS (MONTH-WISE) DURING THE FINANCIAL YEAR 2010-11:
Financial Year Amount of FDI inflows Amount of FDI inflows
2010-11 (In Rs. Crore) (In US$ mn)
( April-March )
April 2010 9,697 2,179
May 2010 10,135 2,213
June 2010 6,429 1,380
July 2010 8,359 1,785
August 2010 6,196 1,330
September 9,754 2,118
2010
Total 50,570 11005
2010-11 (up
to September
2010)
# Figures are provisional, subject to reconciliation with RBI, Mumbai.
Soruce : www.dipp.nic.in
For detailed statistics on FDI follow:
http://www.dipp.nic.in/fdi_statistics/indian_FDI_September2010.pdf
| By CA. Sudha G. Bhushan
9. Financial Services Sector
Financial Services are defined as a bundle of intangible utilities aimed at satisfying the
needs of users. Financial Services bridges the gap between savers and those who need
funds. A financial service perform
1. Identification of resources for efficient allocation
2. Providing constant evaluation of allotted of resources
3. Providing liquidity to investors
Financial System of any country consists of financial markets, financial intermediation and
financial instruments or financial products.
There are multiple regulators for various financial services in India. For eg; Reserve Bank of
India, IRDA
Financial services in India have prevailed since time immemorial. Kautilya’s Arthashatra can
said to be the first organized literature on financial service where he has amply described
the rules and regulations of money and mint management. The old instruments, like hundi
resemble the bill of exchange or promissory note or bearer cheque of contemporary
financial markets.
Financial services can be categorized into two groups, namely
1. Fund based activities and
2. Non fund based activities
Fund based activities are those where there is involvement of funds like underwriting,
portfolio management, venture capital, private equity, structural finance etc. Non funds
based financial services are those where intellectual property is used and advices are
offered. A fee or commission is charged for rendering services. The service sector in India
has been witnessing a boom in recent times. In addition to the strong growth in IT/ITES,
the Indian financial services sector is considered to be stable and progressive, and has been
a major beneficiary of India’s growth story.
The growing attractiveness of the financial services has triggered the entry of global majors.
Aggressive plans of incumbents coupled with the entry of new players are expected to
further drive the growth of sector. Liberalization, privatization and Globalization have further
strengthened the financial services in India.
| By CA. Sudha G. Bhushan
10. Asset
reconstruction
companies
Non Banking
Banking -
Finance
Private Sector
Companies
Financial
Credit
Services
Banking -
Information
Public Sector
Companies
Commodity
Insurance
Exchanges
| By CA. Sudha G. Bhushan
11. FDI Policy in Financial Services
(A) Asset Reconstruction Companies
‘Asset Reconstruction Company’ (ARC) means a % of FDI CAP/Equity: - 49% of paid
company registered with the Reserve Bank of up capital
India under Section 3 of the Securitisation and
Reconstruction of Financial Assets and
Route: - Government
Enforcement of Security Interest Act, 2002
(SARFAESI Act).
SARFAESI Act was famed with the purpose to regulate securitization and reconstruction of
financial assets and enforcement of security interest and for matters connected therewith or
incidental thereto.
As defined in the Act "asset reconstruction" means acquisition by any securitisation
company or reconstruction company of any right or interest of any bank or financial
institution in any financial assistance for the purpose of realisation of such financial
assistance;
Presently 49% of FDI is allowed in ARC under Government Route subject to following
conditions as mentioned below:
(i) Persons resident outside India, other than Foreign Institutional Investors (FIIs),
can invest in the capital of Asset Reconstruction Companies (ARCs) registered with
Reserve Bank only under the Government Route. Such investments have to be
strictly in the nature of FDI. Investments by FIIs are not permitted in the equity
capital of ARCs.
(ii) However, FIIs registered with SEBI can invest in the Security Receipts (SRs)
issued by ARCs registered with Reserve Bank. FIIs can invest upto 49 per cent of
each tranche of scheme of SRs, subject to the condition that investment by a single
FII in each tranche of SRs shall not exceed 10 per cent of the issue.
(iii)Any individual investment of more than 10% would be subject to provisions of
section 3(3) (f) of Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002.
Key Players in Market: - Arcil etc
| By CA. Sudha G. Bhushan
12. (B) Banking –Private sector
Private
The Banking sector is most predominant sector in any financial system. FDI in private
banking sector is allowed upto 74% including investment by FIIs. Following are the further
ing including
conditions:
(1) The limit of 74% limit will include investment under the Portfolio Investment Scheme
(PIS) by FIIs, NRIs and shares acquired prior to September 16, 2003 by erstwhile OCBs,
and continue to include IPOs, Private placements, GDR/ADRs and acquisition of shares from
existing shareholders.
(2) The aggregate foreign investment in a private bank from all sources will be allowed up
e
to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26
per cent of the paid up capital will have to be held by residents, except in regard rega
to a wholly-owned subsidiary of a foreign bank.
owned
(3) The stipulations as above will be applicable to all investments in existing private sector
banks also.
Branches
A wholly-
owned
subsidiary
a subsidiary
-
Investment
74%
Foreing Banks in India
| By CA. Sudha G. Bhushan
13. (4) The permissible limits under portfolio investment schemes through stock exchanges for
FIIs and NRIs will be as follows:
In case of FIIs
In the case of FIIs, individual FII holding is restricted to 10 per cent of the total paid-up
capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital,
which can be raised to 49 per cent of the total paid -up capital by the bank concerned
through a resolution by its Board of Directors followed by a special resolution to that effect
by its General Body.FII investment limit is 49 per cent of the total paid-up capital.
In the case of NRIs
Individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation
and non repatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-
up capital both on repatriation and non-repatriation basis. However, NRI holding can be
allowed up to 24 per cent of the total paid-up capital both on repatriation and non-
repatriation basis provided the banking company passes a special resolution to that effect in
the General Body.
Private Bank with JV with Insurance sector
Applications for foreign direct investment (FDI route) in private banks having joint
venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI)
for consideration in consultation with the Insurance Regulatory and Development Authority
(IRDA) in order to ensure that the 26 per cent limit of foreign shareholding applicable for
the insurance sector is not being breached.
Other conditions:
a) Transfer of shares under FDI from residents to non-residents will continue to require
approval of RBI and Government as applicable.
b) The policies and procedures prescribed from time to time by RBI and other institutions
such as SEBI, Department of Company Affairs and IRDA on these matters will apply as
applicable.
c) RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank,
if such acquisition results in any person owning or controlling 5 per cent or more of the
paid up capital of the private bank will apply to non-resident investors as well.
| By CA. Sudha G. Bhushan
14. Setting up of a subsidiary by foreign banks
(a) Foreign banks will be permitted to either have branches or subsidiaries but not
both.
(b) Foreign banks regulated by banking supervisory authority in the home country
and meeting Reserve Bank’s licensing criteria will be allowed to hold 100 per cent
paid up capital to enable them to set up a wholly-owned subsidiary in India.
(c) A foreign bank may operate in India through only one of the three channels viz.,
(i) branches
(ii) a wholly-owned subsidiary and
(iii) a subsidiary with aggregate foreign investment up to a maximum of 74
per cent in a private bank.
(d) A foreign bank will be permitted to establish a wholly-owned subsidiary either
through conversion of existing branches into a subsidiary or through a fresh banking
license. A foreign bank will be permitted to establish a subsidiary through acquisition
of shares of an existing private sector bank provided at least 26 per cent of the paid
capital of the private sector bank is held by residents at all times.
(e) A subsidiary of a foreign bank will be subject to the licensing requirements and
conditions broadly consistent with those for new private sector banks.
(f)Guidelines for setting up a wholly-owned subsidiary of a foreign bank to be issued
separately by RBI.
(g) All applications by a foreign bank for setting up a subsidiary or for conversion of
their existing branches to subsidiary in India will have to be made to the RBI.
At present there is a limit of ten per cent on voting rights in respect of banking companies,
and this should be noted by potential investor.
Key Foreign Banks in India: - ABN AMRO, Bank of America, HSBC, Deutsche Bank, Citibank
India, Barclays Bank etc
| By CA. Sudha G. Bhushan
15. (C) Banking- Public Sector
The FDI can be made subject to Banking Companies (Acquisition & Transfer of
Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India
and its associate Banks.
FDI limit is 20% (FDI and Portfolio Investment) through Government route.
(D) Financial Infrastructure in the Securities Market
Foreign investment is permitted in infrastructure companies in Securities Markets in
(a) Stock exchanges
(b) Depositories and
(c) Clearing corporations
The investment has to be done in compliance with SEBI Regulations and subject to the
following conditions:
(i) There is a composite ceiling of 49 per cent for Foreign Investment, with a FDI limit of 26
per cent and an FII limit of 23 per cent of the paid-up capital;
(ii) FDI will be allowed with specific prior approval of FIPB; and
(iii) FII can invest only through purchases in the secondary market.
(E) Commodity Exchanges
A commodity exchange is a place where various commodities and derivatives are bought
and sold. Commodities exchanges usually trade on commodity futures. Futures trading in
commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity
Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures
market. With a view to infuse globally acceptable best practices, modern management skills
and latest technology, it was decided to allow foreign investment in Commodity Exchanges.
The FDI allowed in the sector is 49% including the investment from FIIs. The other
conditions of investment are as follows:
1. Investment by Registered FII under Portfolio Investment Scheme (PIS) will be
limited to 23%
2. Investment under FDI Scheme shall be limited to 26%
3. The investment can be made though Government Route only
4. FII purchases shall be restricted to secondary market only and
5. No non-resident investor/ entity, including persons acting in concert, will hold more
than 5% of the equity in these companies.
Key players: National Commodity & Derivatives Exchange Limited (NCDEX), Multi
commodity exchange of India Ltd
| By CA. Sudha G. Bhushan
16. (F) Credit Information Companies (CIC)
Credit information company means a company FDI Cap: - 49% (FDI & FII)
formed and registered under the Companies Act,
1956 (1 of 1956) and which has been granted a Route: Government
certificate of registration under sub-section (2) of
Section 5 of Credit Information Companies
(Regulation) Act, 2005.
“Credit information” means any information relating to—
(i) the amounts and the nature of loans or advances, amounts outstanding under
credit cards and other credit facilities granted or to be granted, by a credit institution
to any borrower;
(ii) the nature of security taken or proposed to be taken by a credit institution from
any borrower for credit facilities granted or proposed to be granted to him;
(iii) the guarantee furnished or any other non-fund based facility granted or
proposed to be granted by a credit institution for any of its borrowers;
(iv) the creditworthiness of any borrower of a credit institution;
(v) any other matter which the Reserve Bank may, consider necessary for inclusion
in the credit information to be collected and maintained by credit information
companies, and, specify, by notification, in this behalf;
Foreign Investment in allowed till 49% under approval route. Following are further
conditions:
1. Foreign investment is permitted under the Government route, subject to regulatory
clearance from RBI.
2. Investment by a registered FII under the Portfolio Investment Scheme would be
permitted up to 24% only in the CICs listed at the Stock Exchanges, within the
overall limit of 49% for foreign investment. Such FII investment would be permitted
subject to the conditions that:
(a) No single entity should directly or indirectly hold more than 10% equity.
(b) Any acquisition in excess of 1% will have to be reported to RBI as a
mandatory requirement; and
(c) FIIs investing in CICs shall not seek a representation on the Board of
Directors based upon their shareholding.
Players:-
(a) Credit Information Bureau of India Ltd (CIBIL)
(b) Equifax Credit Information Services [backed by Crisil and Tata Capital]
(c) Experian Credit Information Company of India [US based]
(d) Highmark Credit Information Services
| By CA. Sudha G. Bhushan
17. (G) Insurance
The Insurance sector in India is regulated by INSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY ACT, 1999. The objective of act is to provide for the establishment of an
Authority to protect the interests of holders of insurance policies, to regulate, promote and
ensure orderly growth of the insurance industry and for matters connected therewith or
incidental thereto and further to amended the Insurance Act, 1938, the Life Insurance
Corporation Act, 1956 and the General Insurance Business(Nationalisation) Act, 1972.There
have been lot of changes in the sector since it has opened for private participation in 2000
following the recommendations of the Malhotra Committee report. Presently FDI upto 26%
is allowed under automatic route. Other conditions are as follow:
(1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1999, is allowed under
the automatic route.
(2) This will be subject to the condition that Companies bringing in FDI shall obtain
necessary license from the Insurance Regulatory & Development Authority for undertaking
insurance activities.
List of Private Companies in Life Insurance
Name of the Private Life % of Name of the Foreign
Insurance Foreign partner
Company Equity
Allianz Bajaj Life Insurance 26 Allianz
Co. Ltd.
Birla Sun Life Insurance Co. 26 Sunlife
Ltd.
HDFC Standard Life 18.60 Standard Life
Insurance Co.
Ltd.
ICICI Prudential Life 26 Prudential
Insurance Co.
Ltd.
ING Vysya Life Insurance Co. 26 ING
Ltd
Max New York Life Insurance 26 New York Life
Co.
Ltd.
MetLife India Insurance Co. 25.99 Metlife
Ltd.
Om Kotak Mahindra Life 26 Old Mutual
Insurance
Co. Ltd.
26 Cardiff
SBI Life Insurance Co. Ltd.
| By CA. Sudha G. Bhushan
18. List of Private Companies in General Insurance
Name of the Private % of Name of the
General Foreign Foreign partner
Insurance Company Equity
Royal Sundaram Alliance 26 Royal Sun Alliance
Insurance
Co. Ltd
ICICI Lombard General 26 Lombard
Insurance
Co. Ltd
IFFCO-Tokio General 26 Tokio Marine
Insurance Co.
Ltd
Tata-AIG General Insurance 26 AIG
Co. Ltd
| By CA. Sudha G. Bhushan
19. (H) Non-Banking Finance Companies (NBFC)
Foreign investment in NBFC is allowed under the automatic route in the following activities:
1. Merchant Banking
2. Under Writing
3. Portfolio Management Services
4. Investment Advisory Services
5. Financial Consultancy
6. Stock Broking
7. Asset Management
8. Venture Capital
9. Custodian Services
10. Factoring
11. Leasing & Finance
12. Housing Finance
13. Forex Broking
14. Credit Card Business
15. Money Changing Business
16. Micro Credit
17. Rural Credit
Minimum capitalization norms for Fund based Activities
FDI Limit Minimum capitalization Capital Infusion
requirement
Foreign capital upto 51% US $0.5 million to be brought upfront
Foreign capital more than US $ 5 million to be brought upfront
51% and upto 75%
Foreign capital more than US $ 50 million US$ 7.5 million to be
75% brought upfront and the
balance in 24 months.
100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up
step down subsidiaries for specific NBFC activities, without any restriction on the number of
operating subsidiaries and without bringing in additional capital.
Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can
also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries
also complying with the applicable minimum capitalisation norm mentioned above.
Minimum capitalization norms for Non Fund based Activities
FDI Limit Minimum capitalization Capital Infusion
requirement
For all permitted non- US $0.5 million upfront
fund based NBFCs
irrespective of the level
of foreign investment
| By CA. Sudha G. Bhushan
20. NBFC with Non- Fund based activities would not be permissible for such a company
to set up any subsidiary for any other activity, nor it can participate in any equity of
an NBFC holding/operating company.
(vii) This will be subject to compliance with the guidelines of RBI.
Investment
advisory
Services
Credit rating Financial
Agencies Consultancy
Non-Fund
Based
activities
Money
Forex
Changing
Broking
Business
(2) Venture Capital Fund (VCF)
A Foreign Venture Capital Investor (FVCI) may contribute up to 100% of the capital of an
Indian Venture Capital Undertaking and may also set up a domestic asset management
company to manage the fund. All such investments can be made under automatic route in
terms of Schedule 6 to Notification No. FEMA 20.
A SEBI registered FVCI can also invest in domestic venture capital fund registered under the
SEBI (Venture Capital Fund) Regulations, 1996. Such investments would also be subject to
RBI regulations and FDI policy. However, in case the entity undertaking venture capital fund
activity is a Trust registered under the Indian Trust Act, 1882, FDI would be permitted
under the Government route. FVCIs are also allowed to invest in other companies subject to
FDI Regulations.
| By CA. Sudha G. Bhushan
21. Indian financial Service Sector – Growth and opportunity
India is the largest democracy and 4th largest economy in the world. With its consistent
growth performance and abundant high skilled man power, India provides enormous
opportunities for investment, both domestic and foreign. Since the beginning of reforms in
1991, major reform initiative has been taken in the field of investment, trade, financial
sector, exchange control simplification of procedure. India provides liberal, attractive and
investor friendly investor.
The Financial Services sector in India has emerged as a mature and sophisticated system.
System which is inherently strong, functionally diverse and displays efficiency and flexibility.
This is a sector which is further expected to witness increasing consolidation, sophistication
and maturity in future. As compared to other developed markets, the Indian financial
services sector is largely under penetrated with a huge potential for growth keeping in
consideration government thrust on liberalization on one side and rising income, increasing
awareness of financial products, strong equity market growth on the other.
Indian Financial Services sector provides very promising investment for global investors.
Backed by favorable regulatory reforms and institutional framework, robust earning of the
corporate sector and a booming capital market, favorable demographics with a growing
consumer and investor class, increased saving in the economy channelised into the creation
of productive assets. In Financial year 09 the contribution of financial services sector to
India's GDP was 15% which is the second-largest component after trade, hotels, transport
and communication all combined together[as per the Banking & Finance Journal, released
by an FICCI in August 2010].
The robust financial services sector and vibrant Indian Economy have given birth
to plethora of emerging opportunities which are expected to gain prominence in
the long term based on regulatory and market developments.
| By CA. Sudha G. Bhushan
22. DISCLAIMER
The analysis/views in this booklet do not purport to be and should not be treated as legal
opinion.
****
In case of clarification please
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| By CA. Sudha G. Bhushan