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    FEMA Updates

    AUGUST ‘16

     

    1. Holding of FCA by Insurance Companies and Start Ups

     

    RBI vide Notification No. FEMA 10 (R)/ (1)/2016-RB dated June 01, 2016has amended FEM (Foreign Currency Accounts by a person resident in India) (Amendment) Regulations, 2016, whereby RBI has permitted Insurance Companies and StartUp Companies to open and hold Foreign Currency Accounts with banks outside India.

     

    For more details plese refer the notification

     

    1. DIPP Consolidated FDI Policy of 2016

     

    DIPP has issued Consolidated FDI Policy Circular of 2016, vide its file no. D/o IPP F. No. 5(1)/2016-FC-1, dated 07/06/2016 to consolidate and update the extant FDI regulations.

     

    For details plese refer the circular

     

    1. External Commercial Borrowings (ECB) – Approval Route cases:

     

    RBI vide A.P. (DIR Series) Circular No. 80 dated June 30, 2016has amended the guidelines for processing the matters pertaining to ECB under approval route. It is stated that with a view to rationalizing and expediting the process of giving approval, it has been decided that ECB proposals received in the Reserve Bank above a certain threshold limit (refixed from time to time) be placed before the Empowered Committee. The Reserve Bank will take a final decision in the cases taking into account the recommendation of the Empowered Committee. All other aspects of the ECB policy shall remain unchanged.

     

    1. Settlement System under Asian Clearing Union (ACU):

     

    RBI vide A.P. (DIR Series) Circular No. 81 dated June 30, 2016has invited the attention of AD Category-I, giving participants in ACU mechanism the option to settle their transactions either in ‘ACU Dollar’ or in ‘ACU Euro’. The 'ACU Dollar' and 'ACU Euro' is equivalent in value to one US Dollar and one Euro, respectively.

    As the payment channel for processing ‘ACU Euro’ transactions is under review, it has become necessary to temporarily suspend operations in ‘ACU Euro’ with effect from July 01, 2016. Accordingly, all eligible current account transactions including trade transactions in ‘Euro’ are permitted to be settled outside the ACU mechanism until further notice.

     

     

    1. Discontinuation of Reporting of Bank Guarantee on behalf of service importers

     

    RBI vide A.P. (DIR Series) Circular No. 01 dated July 07, 2016has invited the attention of AD Category-I, on ‘Other Remittance Facilities’ in terms of which, AD Category-I banks were permitted to issue guarantees in favour of a non-resident service provider on behalf of their resident customers importing services, subject to the conditions laid therein. AD Category-I banks were also advised to report to the Chief General Manager-in- Charge, Foreign Exchange Department, Foreign Investments Division (EPD), Reserve Bank of India, Central Office, Mumbai-400001 details about invocation of bank guarantee for service imports.

     

    On a review of the reporting requirements and to reduce the burden of compliance, AD Category I banks are advised to discontinue submission of such reports with immediate effect. They may, however, maintain records of such invocations and furnish the required details to RBI whenever sought.

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