Professional Documents
Culture Documents
by : DR. T.K. JAIN AFTERSCHOOL centre for social entrepreneurship sivakamu veterinary hospital road
Who is resident?
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Authorised dealers can release upto $25000 for a business trip to any country except Nepal and Bhutan. If you want more amount, you have to obtain permission from RBI.
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List of the countries where you cannot take foreign exchange as identified by FATF (FINANCIAL ACTION TASK FORCE) see the website : www.fatf-gafi.org
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Normally a person can get foreign currency notes upto $2000 when he visits abroad, but when a person is visiting Iraq or Libya, he can get upto $5000 .
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Go to any authorised dealer / money exchanger and collect foreign exchange against rupees. You can do it in cash upto Rs. 50000. if the amount is more than Rs. 50000, you have to do it against cheque / draft.
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ICC
With international credit card, you can make payment of international journals, international payments etc. You can also buy international book and meet personal expenses in foreign exchange through ICC.
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Foreign Traveller
A foreign traveller can keep upto Rs. Rs. 5000, and foreign currency upto $5000 and total foreign exchange upto $10000. if the amount is more than this limit, the traveller will have to make declaration at airport in Currency Declaration form at the customs office.
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Schedule I
for residents in India :
insurance policy out of india investment in foreign security export / import of foreign currency etc.
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Role of AD
They have follow all the rules and ensure that they give money as per FEMA. They can release foreign exchange upto $25000 for business trip, $100000 for education / employment / medical purpose and upto $10000 for tourism purpose. They have to ensure that forign exchange is repatriated as per law.
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OPENING L/C
Importer will approach his bank for opening an L/C L/C = Letter of credit the bank of the importer will give a guarantee about payment to the bank of the exporter under L/C. When the exporter exports, he can obtain immediate payment from his bank on producing L/C of the importer's bank. The banks will have transaction between 5 DECEMBER 09 www.afterschoool.tk 27 themselves.
Mode of payment
Authorised dealers will ensure that payment regarding impor is made in account. Cash payments are not permitted. In case advance payment is made, physical goods must come in 3 months. If the amount is more than $25000 then there must be a guarantee from some international bank. Proper EC copy must be submitted by the importer
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Import payments must be settled within 6 months from the date of import. If it is more than 6 months, then it will be treated as ECB (external commercial borrowing) and will require prior permission of RBI/ Government
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Export remittances
The exporter has to declare exports to RBI and has to ensure that payments are received within time and as per approved methods of payments. Payments can be collected through bank account / international credit card / FCNR / NRE account / escrow account etc
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Examples : project exports, export as contract against imports, elongated payment period, exports relating to agrements of government of India or other governments
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SEZ
If you are operating from SEZ you are permitted to have foriegn currency account with an authorised dealer
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Authorised dealers
These are listed with RBI as per FEMA, they have to obtain RBI permission for some specified business transactions. Example: they cannot give guarantee in favour of exporters without RBI permission unless that exporter is listed as non-caution exporter.
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Forfaiting
Factoring and forfaiting can be undertaken by EXIM bank / authorised dealers. Under this they collect payments regarding export receivables against commission.
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New trends....
Indian companies are now permitted to have foreign exchange accounts in other countries and to have properties in other coutnries (with prior approval from RBI) and they can acquire businesses / firms in other countries also as per their business requiremetns (as per govt. Policies) .
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PEM
PEM stands for Project Export memorandum when companies are entering into project exports, they have to follow guidelines relating to this. Project exports generally has deferred payments - therefore prior permission must obtained before enteringi into PEM.
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Other provisions
Authorised dealers have to ensure that they get copesof GR Form and other documents required andforeign currency is used for acutal import / export and all required documents are submitted.
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FDI
Upto 100% Foreign Direct Investment is permitted under automatic route in many sectors. Investors will have to inform regional office of RBI in 30 days of remittances. In some sectors industrial licence is required and in some sectors, FDI is not permitted. But in most of the sector, now it is permitted including atomic energy etc.
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Within 30 days of share issue to Non-residents, FC GPR form has to be submitted. They have to submit all the details like they have implemented all the provisions of companies act & FEMA for this purpose.
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Transfer from NR
Now non residents can transer shares to other non-residents / residents and such transfer can be for consideration / as a gift. This tranfer can be only to an NRI / resident Indian. They can also sell it in stock exchanges through brokers. They will have to take NOC from income tax department
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Tranfer by residents
As per RBI notification of 2000, residents can also tranfer to non-residents as per FEMA so long as it is in automatic route. You have to keep in mind SEBI (Substantial acquisition of shares and takeover) regulation 1997 + required regulations under IRDA or other such laws.
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PORTFOLIO INVESTMENT
FIIs including asset management companies, mutual funds, hedge funds etc. Are permitted to invest in shares in India. FII have to invest in ratio of 70:30 in equity and debt when they invest in India, they are also permitted to invest as 100% debt.
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FII dealings
FII can deal through stock exchanges without RBI permission, but if they are dealing without stock exchanges, they have to obtain permission from RBI.
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NRI dealings
NRIs have to deal through NRE /FCNR account only. Sometimes they are permitted to deal in NRO account also when they are investing on non-repatriation basis.
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PERMITTED FIIs
FOLLOWNG CAN REGISTER AS FII WITH RBI & SEBI: banks, pension funds, hedge funds, mutual funds, insurance companies, investment funds etc.
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ECB
External commercial borrowings : Indian comapnies can raise loans from other countries through various routes like : FRN (floating rate note), ECP (euro commercial paper), FCCB (foreign currency convertible bond), NIF (note issue facility), syndicate loan, etc.
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ECB MECHANISMS
Companies engage in many ECB mechanisms like : arbitrage hedging underwriting fund raising etc.
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ADR /GDR
American depository receipt / Global depository receipt are permitted by RBI as per scheme of 1993, companies can also sponsor issue of ADR / GDR. Infosys, Wipro etc. Are some of the companies which went for ADR / GDR during 1990s. After ADR/ GDR company will have to submit return in proforma as per annexure C of RBI notification 2000.
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Upto $2million of royalty upto 5% of domestic sale or 8% of export sale is permitted as royalty.
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EEFC account
Exchange Earners Foreign Currency account a person who has earned foreign currency can retain 50% of the foreign currency earned in EEFC account with authorised dealers. This account can be used for current account transactions or for permitted capital account transactions.
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RFC account
Resident foreign currency account if an NRI is returning India for ever, he can keep his foreign currency in RFC account and there are no restriction on use of funds in RFC account.
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A Resident who lives in India but receives foreign exchange payments / honorarium can open RFC (Domestic) account for retaining such payments.
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Residents can use upto $25000 for payments for permitted transactions per annum in this scheme Foreign Exchange Management (current account transactions) rules 2000 schedule I and II.
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