RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI 400 001
A.D.(M.A. Series) Circular No.48 December 14, 1998To
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 stated in the following paragraphs.
1. Rupee Accounts of Exchange Houses
In terms of paragraphs 5A.17 and 6A.6(iii) of ECM remittances through exchange houses for financing trade transactions are permitted upto Rs.50,000/- per transaction. It has now been decided to raise this limit to Rs.2,00,000/- (Rupees two lakhs only) per transaction.
2. Remittance of collections in rupees by
agents in India in respect of advertisements
in overseas print media
2.1 Attention of authorised dealers is invited to paragraph 8C.2(ii) of ECM in terms of which Indian agents of foreign newspapers/periodicals are required to approach Reserve Bank for grant of general permission for remittance of net advertisement charges i.e. after deduction of commission and Income-tax. etc. collected by them, to their overseas principals.
2.2 It has now been decided to delegate powers to authorised dealers to allow remittance of net advertisement charges collected in rupees by Indian agents of foreign newspapers/ periodicals/internet companies on submission of the following documents:
- Form A2 together with clippings/text of the advertisements which appeared in the overseas print media/internet.
- A schedule of rates/quotations and invoice/bill from the overseas principal indicating the amount due to them and commission due to Indian agent under the agency agreement.
- A certificate/undertaking regarding compliance with the Income Tax Provisions (cf. paragraph 3B.10).
- In case of advertisements for public issue of equity shares of Indian companies, declaration from the competent authority of the concerned company to the effect that total expenditure in foreign exchange on conference, advertisements, publicity abroad, etc. is within 1% of the total value of the equity shares (including premium amount, if any) earmarked for FIIs/OCBs/NRIs against payment in foreign exchange.
- A letter of approval issued by the Ministry of Finance (Department of Economic Affairs), Government of India, New Delhi in case of advertisements from Central/State Government Departments/Undertakings.
- A statement indicating how the net remittable amount has been arrived at, duly certified by a Chartered Accountant.
- A declaration from the applicant that he has not remitted or applied for remittance of these collections through any other authorised dealer.
3. Remittance of Magazine subscriptions
by recognised agents
At present subscription agents in India have to apply to Reserve Bank for permission to collect in rupees the amount of subscriptions to foreign magazines and to remit the net amount of subscription to overseas publishers/distributors. It has now been decided that remittance of net amount of such subscription collections may be allowed by authorised dealers subject to the following conditions:
- None of the magazines subscribed should be on the banned list.
- Remittances of net amount of subscription after deduction of commission/discount, handling charges due to the collection agent in India (i.e. applicant) is made direct to the overseas publishers/distributors of the magazines/periodicals against their invoices/price lists.
- Applications for remittances should be made on form A2 together with documentary evidence (viz. invoices from overseas publishers, etc.) and a statement showing how the remittable amount has been arrived at net of commission, handling charges, etc. duly certified by Chartered Accountant.
- Authorised dealers should satisfy themselves that subscription amounts from overseas subscribers (including subscribers from Nepal/Bhutan) have been received in foreign exchange.
- A declaration from the applicant that he has not remitted the cost of the magazines/periodicals separately through any other authorised dealer.
4. Foreign visits by whole-time directors
of public sector banks and financial
institutions - Release of foreign
exchange towards entertainment allowance
In terms of item V of Part A of Annexure I to Chapter 8 of ECM authorised dealers are permitted to release foreign exchange to Chief Executive Officers of Public Sector banks/financial institutions for their travel abroad for business purposes with prior approval of Ministry of Finance. In terms of the Notification No.F.No.18/1/97-BOI dated 11th December 1997 issued by Ministry of Finance (Banking Division), henceforth prior approval of Government of India will be necessary only if the visit abroad by these officials exceed the number of days indicated in the Notification. Accordingly, authorised dealers may release foreign exchange to such officials for their business visits abroad without prior approval of Ministry of Finance if the visit does not exceed the number of days indicated in the above Notification. If the duration of the visit exceeds the specified period, exchange may be released only against approval of the Ministry of Finance. Authorised dealers may also release foreign exchange towards entertainment upto U.S.$ 5000/- to the Chairman/Managing/ Executive Director and upto U.S.$ 2000/- to other officials of the public sector banks and financial institutions.
5. Remittance towards architectural services
provided by foreign architects
In terms of item XI(A) of Part B of Annexure I to Chapter 8 of ECM authorised dealers are allowed to permit remittance of expenses for feasibility/pre-feasibility studies in respect of projects in India subject to a ceiling of U.S.$ 1,00,000. It has now been decided that authorised dealers may also allow remittances upto U.S.$ 1,00,000, without reference to Reserve Bank, towards architectural services provided by foreign architects to Indian companies engaged in development of real estates and housing in India subject to the documentation and condition mentioned under the above referred item.
6. Loans in India to Non-residents against
shares/securities/properties held by them in India
Attention of authorised dealers is drawn to items (d) and (e) of paragraph 10D.2(iii) of ECM in terms of which repayment of the housing loans granted to NRIs can be made by the NRI borrower either by remittances from abroad through normal banking channel or out of funds in NRE/FCNR/NRO account in India. It has now been decided to permit repayment of the outstanding housing loans granted to NRIs out of the funds held in the borrowers' NRNR accounts also.
7. Form A4
In terms of paragraph 13A.7 of ECM Form A4 should be completed in respect of operations on the NRO accounts where the transactions are for Rs.10,000 and above. It has now been decided that, henceforth, form A4 should be completed for all credit transactions for Rs.1,00,000/- and above. As regards debit transactions, form A4 should be completed only if the transaction relates to investment in shares/securities/commercial paper of Indian companies or for purchase of immovable property in India, if the amount involved is Rs.1,00,000/-or more.
8. Continuance of loan/overdrafts to/from
residents who become non-residents
8.1 In terms of paragraph 13A.12(d) of ECM, persons who had availed of loans or overdraft facilities while resident in India and who subsequently become non-residents, are allowed to repay the loan/overdraft as also make payment of interest out of remittances from abroad through normal banking channel or funds held in their non-resident (External)/Non-resident ordinary account. It has now been decided that authorised dealers may allow the repayment out of borrowers' FCNR/NRNR accounts also.
8.2 In case a person of Indian nationality/origin resident in India who had granted loan to another resident subsequently becomes a non-resident, the repayment of the loan by the resident borrower should be made by credit to the NRO account of the lender maintained with a bank in India.
9. STAT 7 - Statement of operations in EEFC
Accounts - Discontinuation of
In terms of paragraph 14D.10 of ECM, authorised dealers are required to submit a quarterly statement in form STAT 7 giving a summary of operations in EEFC accounts maintained with them. It has been decided to discontinue submission of this statement to Reserve Bank with immediate effect.
10. The following consequential amendments may be carried out in the Exchange Control Manual.
Volume I i) The figure Rs.50,000 appearing in paragraph 5A.17 and 6A.6(iii) may be substituted by Rs.2,00,000.
ii) In paragraph 8C.2(ii) last 2 sentences may be deleted and a new sub-paragraph (iii) may be added to paragraph 8C.2 as per Slip 1.
iii) A new paragraph 8C.2A as per Slip 2 may be inserted after paragraph 8C.2 to Chapter 8 and its entry made in the Index of the Chapter.
iv) The last sentence appearing in item V of Part A of the Annexure I to Chapter 8 under the caption "Documentation" may be replaced by -
Approval of the Ministry of Finance, Government of India should be obtained and certified copy thereof should be attached to the application, only if the visit abroad of the Chief Executive Officers of public sector banks/financial institutions exceeds the number of days indicated in Ministry of Finance (Banking Division), Government of India notification F.No.18/1/97-BOI dated 11th December 1997 (Annexure IA).
v) Annexure IA as per Slip 3 may be inserted after Annexure I to Chapter 8 and its entry made in the Index of the said chapter.
vi) A new sub-paragraph (c) may be added as per Slip 4 to item V of Part A of Annexure I to Chapter 8 under the heading "Quantum of exchange".
vii) New item XI(B) may be added to Part B of Annexure I to Chapter 8 as per Slip 5 and existing item XI(B) may be renumbered as XI(C).
viii) The word "/NRNR" may be added after NRO in items (d) and (e) of paragraph 10D.2(iii).
ix) Paragraph 13A.7 may be substituted by Slip 6.
x) In line 3 of paragraph 13A.12(d) word "FCNR/NRNR" may be inserted after the word "Non-resident (External)".
xi) A new sub-paragraph (e) may be added to paragraph 13A.12 as per Slip 7.
xii) Paragraph 14D.10 and its entry in the Index of Chapter 14 may be deleted.
Volume IIxiii) The format STAT 7 and its entry in the Appendix IV 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 48/1998]
Paragraph 8C.2(iii)
Authorised dealers may allow remittances of net rupee collections made by Indian agents of foreign newspapers/periodicals or Internet companies representing charges for advertisements in overseas print media, after deduction of income tax, commission and other charges, if any, due to the applicants. to the overseas companies subject to submission of following documents:
a) Form A2 together with clipping/text of the advertisement.
b) Invoice/bill from the overseas publisher/Internet company, indicating the total charges, amount of commission etc. due to the applicant and the net remittable amount (A copy of the agency agreement or any other documentary evidence in support of commission payable to the applicant should also be enclosed to the application).
c) A statement indicating how net remittable amount has been arrived at, duly certified by a Chartered Accountant.
d) A certificate/undertaking regarding compliance with Income Tax provisions (cf. paragraph3B.10).
e) An approval letter from the Ministry of Finance, Department of Economic Affairs, Government of India, New Delhi in case the advertisement is released by Central/State Government Departments/Undertakings.
f) In case of advertisement for public issue of equity shares of Indian companies, a declaration from the competent authority of the concerned company to the effect that the total expenditure in foreign exchange on conference, advertisements, publicity abroad is within 1% of the total value of the equity shares (including premium amount, if any) allotted to FIIs/OCBs/NRIs against payment in foreign exchange.
g) A declaration from the applicant that he has not applied for remittance of these collections to any other authorised dealer.
NOTE: A. Authorised dealers may allow remittance in advance subject to the provisions of paragraph 8C.10 towards cost of advertisement in print media or on Internet, out of EEFC account of the advertiser concerned provided the overseas agency insists advance remittance and an undertaking has been obtained from the applicant that he would submit documentary evidence in support of publication of advertisement within 3 months from the date of remittance. Authorised dealers should follow up submission of documentary evidence with the remitter.
B. The instructions contained in paragraph 8C.2(iii) are not applicable for remittance of charges for advertisements over foreign television media.
Slip 4[AD/MA 48/1998]
V. Quantum of Exchange
(C) Entertainment allowance
(i) Chairman/Managing/Executive Not exceeding U.S.$ 5000/-
Director
(ii) Other officials Not exceeding U.S.$ 2000/-
Slip 5[AD/MA 48/1998]
XI(B) Architectural services provided by foreign architects
Remittance of charges for architectural services provided by foreign architects to Indian companies engaged in development of real estate and housing in India subject to the documents and special condition enumerated under item XI(A) above.
Quantum of Exchange
Up to U.S.$ 1,00,000.
Slip 6[AD/MA 48/1998]
Form A4 3A.7 While form A4 should be completed in respect of operations on the account where the credit transactions are for Rs.1,00,000/- and above (except interest earned on funds in the account or on deposits held by the account holder), in respect of debit transactions, Form A4 should be completed only if the transaction relates to investment in shares/securities/commercial paper of Indian companies or for purchase of immovable property in India, and the amount involved is Rs.1,00,000/- or more. Forms A4 need not be forwarded to Reserve Bank but should be retained with authorised dealers for scrutiny at the time of audit/inspection. Form A4 need not be forwarded to the non-resident constituent for completion. As far as possible, authorised dealers should have the form completed by the resident party to the transaction or complete it themselves after obtaining requisite particulars from resident beneficiary or remitter as the case may be.
Slip 7[AD/MA 48/1998]
3A.12
In case a person of Indian nationality/origin resident in India who had granted loan to another resident subsequently becomes a non-resident, the repayment of the loan by the resident borrower should be made by credit to the NRO account of the lender maintained with a bank in India.
Slip 2[AD/MA 48/1998]
Remittance of magazine subscription
by recognised agents
8C.2A Authorised dealers may allow remittance of net rupee collections made by Indian agents towards subscription to foreign magazines/periodicals to overseas publishers/distributors after deduction of commission, handling charges, etc. due to the Indian agent (i.e. applicant) subject to the following conditions:
(a) None of the magazines subscribed should be on the banned list.
(b) Remittances of net amount of subscription after deduction of commission/discount, handling charges due to the collection agent in India (i.e. applicant) is made direct to the overseas publishers/distributors of the magazines/periodicals against their invoices/price lists.
(c) Applications for remittances should be made on form A2 together with documentary evidence (viz. invoices from overseas publishers, etc.) and a statement showing how the remittable amount has been arrived at net of commission, handling charges, etc. duly certified by Chartered Accountant.
(d) Authorised dealers should satisfy themselves that subscription amounts from overseas subscribers (including subscribers from Nepal/Bhutan) have been received in foreign exchange.
(e) A declaration from the applicant that he has not remitted the cost of the magazines/periodicals separately through any other authorised dealer.
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