RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI 400001

May 19, 1999
AD (MA Series ) Circular No.17

To,

All Authorised Dealers in Foreign Exchange

Dear Sirs,

Amendments to Exchange Control Manual (ECM)

It has been decided to amend/modify exchange control regulations as set out in the following paragraphs:

1. Agency Commission on ExportsIn terms of paragraph 6E.2(i)(a) of the Exchange Control Manual (ECM) authorised dealers have been permitted to allow remittance of commission on exports subject to the condition, among others, that the amount of commission should have been declared on GR/PP/SOFTEX/SDF form or the exporter has submitted a ‘No Objection Certificate’ from Customs authorities or Department of Electronics, Government of India, as the case may be. On a review, it has been decided that authorised dealers may allow remittance of commission on exports within the prescribed limit (i.e. 12.5% of invoice value) even in cases where the amount of commission has not been declared on Export Declaration Forms by the exporters, without insisting on a ‘No Objection Certificate’ from Customs authorities or the Department of Electronics, as the case may be, after satisfying themselves about the reasons adduced by the exporter for not declaring the amount of commission on relative Export Declaration Form and provided a valid agreement/written understanding between the exporter and the overseas agent/beneficiary for payment of commission subsists.

2. Liberalisation of regulations regarding Portfolio Investments applicable to Non-residents of Indian Nationality (NRIs)/Persons of Indian Origin (PIOs)/Overseas Corporate Bodies (OCBs)

In terms of paragraph 10C.21(iv) and (v), authorised dealers have been permitted to renew the general permission granted by Reserve Bank to individual NRIs under the Portfolio Investment Scheme for a further period of five years at a time. Applications for renewal of general permission to OCBs are, however, required to be referred to Reserve Bank. It has now been decided that authorised dealers may also renew the general permission granted by Reserve Bank to OCBs under the Portfolio Investment Scheme for a further period of five years at a time. Authorised dealers may, however, note to obtain the latest certificate in form OAC/OAC1 from the OCB concerned before renewing the general permission.

3. Opening of Foreign Currency Accounts by Foreign Embassies/Missions/Diplomats

Hitherto Foreign Embassies/Missions/Diplomats were permitted to maintain Foreign Currency Accounts only with the Main Offices of State Bank of India at New Delhi, Mumbai, Calcutta and Chennai. It has now been decided that Foreign Embassies/Missions/ Diplomats may open foreign currency accounts with any authorised dealer in India without the approval of Reserve Bank subject to the following conditions:

The accounts should be funded by inward remittance in convertible currencies.

Funds from such accounts can be utilised for payments for import of goods, purchases from Bonded Stores, payment of passage fare, etc.

Funds held in these accounts, if converted in rupees cannot be reconverted into foreign currency for credit to the accounts.

The balances in the account may be repatriated/transferred abroad without the approval of Government of India/Reserve Bank.

While the accounts of Diplomatic Missions may be maintained in the form of Current/Fixed Deposit accounts, Foreign Diplomats may maintain Current/Savings Bank/Fixed Deposit accounts subject to usual terms and conditions of operating these accounts.

4. Remittance to Overseas Protection and Indemnity Clubs

In terms of paragraph 15A.9 of ECM, prior approval of Reserve Bank is required for payment to overseas Protection and Indemnity Clubs (P & I Clubs) by Indian shipowners towards membership subscriptions either by remittance from India or out of funds held in their foreign currency accounts. It has now been decided that authorised dealers may allow remittances by shipping companies, who are their constituents towards subscription to P & I Clubs in accordance with the approval granted to shipping companies by the Ministry of Finance, Government of India under the General Insurance Business (Nationalisation) Act, 1972.

5. Remittance of Income on Investments on non-repatriation basis

In terms of paragraphs 10C.24A(i) and (ii) Non-resident Persons of Indian nationality/origin (NRIs) and Overseas Corporate Bodies (OCBs) predominantly owned by NRIs are required to submit an application in Form RCI (in duplicate), to a designated branch of an authorised dealer, for repatriation of net income/interest (i.e. after payment of tax) earned in India. The application in Form RCI was required to be submitted by the applicant in duplicate when the remittance of income was subject to the prior approval of Reserve Bank. Since powers to allow such remittances have been delegated to authorised dealers it is no more necessary for the applicant to submit Form RCI in duplicate.

6. Import of drawings/designs through E-Mail/Fax

In terms of paragraph 7A.26 of ECM, authorised dealers are permitted to allow remittance towards import of software through Datacom channels/Internet, subject to production of documents prescribed therein. It has now been decided that authorised dealers may also allow remittances towards import of drawings and designs received by E-Mail/Fax, subject to production of similar documents, prescribed in the paragraph referred to above for import of software.

7. The following consequential amendments may be carried out in the Exchange Control Manual.

Volume I

The paragraph 6E.2(i)(a) may be substituted by a new paragraph as per Slip 1.

The paragraph 10C.21(iv) and (v) may be substituted by Slip 2.

A new paragraph 14F.6 may be added as per Slip 3 and its entry may be made in the Index.

The paragraph 15A.9(i) may be substituted by Slip 4.

Paragraph 7A.26 may be substituted by Slip 5.

Volume II

The words ‘in Duplicate’ appearing in item 1 of instructions under Form RCI may be deleted.

8. Authorised dealers may bring the contents of this circular to the notice of their concerned constituents.

9. The directions contained in this circular have been issued under section 73 (3) of the Foreign Exchange Regulation Act ,1973 ( 46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.

Yours faithfully,
B. MAHESHWARAN
Chief General Manager

Slip 1
[AD/MA 17/1999]
Agency Commission on Exports
6E.2

(i) (a) Amount of commission has been declared on GR/PP/SDF/SOFTEX form and accepted by Custom authorities or Department of Electronics, Government of India as the case may be. In cases where the commission has not been declared on GR/PP/SOFTEX form, remittance thereof may be allowed after satisfying about the reasons adduced by the exporter for not declaring commission on Export Declaration Form, provided a valid agreement/written understanding between the exporter and/or agent/beneficiary for payment of commission subsists.

Slip 2
[AD/MA 17/1999]

10C.21

(iv) NRIs/OCBs intending to invest on non-repatriation basis should submit their applications in Form NRI and NRC respectively, through a designated branch of an authorised dealer, to Reserve Bank (Central Office). Reserve Bank will grant general permission to the concerned authorised dealer to purchase shares/debentures of Indian companies, securities (other than bearer securities) of the Central or any State Government and Treasury Bills on behalf of the NRI/OCB subject to the condition that the payment for such investment is received through inward remittance or from the investor’s NRE/FCNR/NRO/NRSR account. The general permission granted by Reserve Bank would be initially valid for a period of five years. Authorised dealers may themselves renew the permission granted by Reserve Bank to individual NRIs as well as OCBs for a period of five years at a time.

(v) NRIs and OCBs intending to invest with repatriation benefits should submit their applications through a designated branch of an authorised dealer in Form RPI and RPC respectively. Reserve Bank will grant general permission to the designated branch for purchase of shares/debentures of Indian companies, securities (other than bearer securities) of the Central or any State Government and Treasury Bills subject to the conditions that

the payment is received through an inward remittance in foreign exchange or by debit to the investor’s NRE/FCNR account.

investment made by any single NRI/OCB investor in equity/preference shares and convertible debentures of any listed Indian company does not exceed 5% of its total paid-up equity or preference capital or 5% of the total paid-up value of each series of convertible debentures issued by it.

NRIs/OCBs take delivery of the shares/convertible debentures purchased and give delivery of the shares/convertible debentures sold under the Scheme.

The general permission granted by Reserve Bank will be valid initially for a period of five years. Authorised dealers may themselves renew the permission granted by Reserve Bank to individual NRIs as well as OCBs for a further period of five years at a time. Authorised dealers may note to obtain the latest OAC/OAC 1 certificate from the OCB concerned before renewing the permission.