RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001
November 5, 1999 A.D.(M.A. Series) Circular No.33

To,

All Authorised Dealers in Foreign Exchange

Dear Sirs,

Indian Direct Investment in Joint Ventures(JV)/Wholly Owned Subsidiaries (WOS) Abroad

It has been decided to amend/modify the Exchange Control regulations regarding Indian Direct Investment in Joint Ventures(JV)/Wholly Owned Subsidiaries (WOS) abroad as stated in the following paragraphs.

2. Approval of proposals by Reserve Bank

As authorised dealers are aware, one of the conditions subject to which approvals are granted by the Reserve Bank for Indian direct investment abroad by Indian companies under the Reserve Bank Fast Track route and Normal route is that the amount of investment should be repatriated in full by way of dividend, royalty, etc. within a period of five years. With a view to facilitating direct investment in Joint Ventures (JV)/Wholly Owned Subsidiaries (WOS) abroad by Indian companies, Government of India, Ministry of Commerce vide its Notification No. 4/1/93-EP(OI) dated 18th May 1999, has dispensed with this condition.

3. Half-Yearly Progress Report (HPR)

In terms of paragraph 9A.10 of ECM, Indian promoter companies of JV/WOS abroad are required to submit to Reserve Bank a Quarterly Progress Report in form QPR, in duplicate, on the status of implementation of the project. It has now been decided that with effect from the half-year ending December 1999, Indian companies should submit such progress reports at half-yearly intervals.

4. Statement for EEFC Fast Track Route.

In terms of paragraph 4 of Annexure II to Chapter 9 of ECM, authorised dealers are required to submit form ODA-1 immediately after making remittances from the EEFC Account. Authorised dealers are also required to submit a consolidated monthly statement in form ODA-2, in duplicate, showing the approvals granted and remittances made towards overseas investments out of funds held in EEFC accounts, to the concerned Regional Offices of the Reserve Bank, within 7 days from the close of the month. It has now been decided to dispense with the submission of monthly statement in form ODA-2. Accordingly, authorised dealers, will now have to submit the details of approvals granted and remittances made only in the revised form ODA-1 to the concerned Regional Offices of the Reserve Bank, not later than two days from the date of approval/remittance, as the case may be. It may be noted that report in form ODA-1 should be submitted on each occasion when a fresh approval is granted or an additional investment is approved in the existing JV/WOS abroad, as also when remittance is effected under the proposals approved by authorised dealers, as the case may be.

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

Volume I

(i) The existing condition (ii) in paragraph 9A.2(i) beginning with the words "the amount of investment" and ending with the words "within a period of five years" may be deleted and the existing conditions (iii) and (iv) may be renumbered as (ii) and (iii), respectively.
(ii) Paragraph 9A.2 (ii) may be replaced by Slip 1.
(iii) In the first sentence of paragraph 9A.10, the concluding words "within the stipulated period as per the extant guidelines" may be deleted. In the same paragraph, the words "Quarterly Progress Report in form QPR" may be replaced by the words "Half-yearly Progress Report in form HPR"

Annexure I to Chapter 9

(iv) The condition (iii) in paragraph 5.1, starting with the words "the amount of investment" and ending with the words "whichever is earlier" may be deleted and the condition (iv) may be renumbered as (iii).

(v) Item (d) in paragraph 7.1 may be deleted and items (e) and (f) may be renumbered as (d) and (e), respectively.

(vi) In the Note at the end of Annexure I, the word ‘and’ appearing after the words ‘2nd November 1998’ may be deleted and the words ‘and 18th May 1999’ may be added after the words "3rd May 1999".

Annexure II to Chapter 9

(vii) Paragraph 4 of the Annexure II may be replaced by Slip 2.

Volume II

(viii) In the index to Appendix IV (forms) under alphabet ‘Q’ the entry for form QPR may be deleted. The alphabet ‘H’ may be inserted after alphabet ‘G’ and the following entry may be made thereunder. "HPR.....Half-yearly Progress Report on the status of implementation of the project of the Indian JV/WOS abroad".
(ix) In the Index to Appendix IV, entry of form ODA-2 may be deleted.
(x) The existing form ODA-1 may be replaced by a revised form ODA-1 as per Slip 3.
In Form QPR

(a) The title of form "QPR" may be changed to "HPR".
(b) In the caption, the words "Quarterly Progress Report (QPR)" may be substituted by the words "Half-yearly Progress Report (HPR)".
(c) The words "quarter" and "QPR" wherever they appear in the form may be substituted by the words "half year" and "HPR", respectively.
6. Authorised dealers may bring the contents of this circular to the notice of their concerned constituents.

7. 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/ 33 /1999]
Approval of proposals by Reserve Bank

9A.2 (ii) In addition to the Fast Track Route of Reserve Bank two more Fast Track Windows, viz. EEFC Fast Track Window and GDR Fast Track Window are available for overseas investments which are explained in paragraphs 9A.5 and 9A.6. Proposals which do not qualify for clearance under these Fast Track Windows will be processed by the Special Committee constituted for this purpose by the Reserve Bank. The Committee, while considering such proposals, will take into account the quantum of EEFC/GDR funds to be utilised by the Indian promoter companies for their overseas investment, their networth, scale of operations and other criteria laid down in the Guidelines. Large investment proposals involving amounts in excess of U.S.$ 15 million or its equivalent will be referred to the Ministry of Finance for clearance. After the proposals are cleared by the Committee/Ministry of Finance, the necessary approvals will be issued by the Reserve Bank. In all cases of overseas investments, the Indian promoter companies should repatriate to India, through normal banking channels, dividends and other entitlements due to them from their investments in JV/WOS abroad.

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Slip 2
[AD/MA/ 33 /1999]
Annexure II to Chapter 9
4. Immediately after granting approvals/effecting remittances out of the EEFC account, the authorised dealer should advise the concerned Regional Office of the Reserve Bank within two days the details of approvals granted and/or remittances made, in form ODA-1. The form ODA-1 should be submitted on each occasion when a fresh approval is granted or additional investment is approved in the existing JV/WOS as also when any remittance is effected under such approvals. Authorised dealers should record the details of approvals granted/remittances effected thereunder in a register and note therein company-wise particulars (viz., name of the Indian promoter company, amount and date of approval, amount and date of actual remittance, unique Identification/Approval Number given by the Reserve Bank, etc.)

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