A.D. (M.A. Series) Circular No.35 (November 25, 1999)
RESERVE BANK OF INDIA
EXCHANGE CONTROL DEPARTMENT
CENTRAL OFFICE
MUMBAI-400 001
November 25, 1999
A.D. (M.A. Series) Circular No.35
To
All Authorised Dealers in Foreign Exchange
Dear Sirs,
Amendments to the Exchange Control Manual (ECM) and Memorandum PEM
It has been decided to amend/modify the Exchange Control regulations as stated in the
following paragraphs.
1.
Scheme of Amalgamation of the Indian branches of The British Bank of the Middle East
with the Indian branches of The Hongkong & Shanghai Banking Corporation Ltd.
Consequent to amalgamation of the Indian branches of The British Bank of the Middle East
with the Indian branches of The Hongkong & Shanghai Banking Corporation Ltd., The British Bank
of the Middle East has ceased to be an authorised dealer in foreign exchange. Accordingly, its name
has been deleted from the Annexure to Chapter I of ECM.
2.
Export of Software in Non-Physical form
In terms of paragraph 6D.2 of ECM, the valuation of exports declared on SOFTEX forms is
done by the designated official/s of the Department of Electronics at the Software Technology Parks
of India (STPI). The SOFTEX forms of exporters located outside STPI as also forms in respect of
export of video/TV software are also certified by designated official/s at the nearest STPI. It has now
been decided that the valuation of exports declared on SOFTEX forms by the units located in Export
Processing Zones may be done by the designated officials of Export Processing Zones.
3.
Precautions in Handling Import Documents
In terms of item 3 of Guidelines for Handling of Import Bills contained in Annexure to
Chapter 7 of ECM, certain categories of importers can receive import documents directly from
overseas sellers. It has now been decided that all limited companies viz. public limited companies,
deemed public limited companies and private limited companies may receive import documents
directly.
4.
Investment by Foreign Institutional Investors in schemes of Domestic Mutual Funds
Please refer to paragraph 10B.4 of ECM regarding investment in India by Foreign
Institutional Investors (FIIs) in shares/securities including units issued by domestic Mutual Funds.
Reserve Bank, vide its Notification No.F.E.R.A.212/99-RB dated 18th October 1999 (copy enclosed)
has granted general permission to Indian mutual funds to issue units or similar instruments under
schemes approved by SEBI, to FIIs with repatriation benefits, subject to certain conditions. This
would obviate the need for the mutual funds to obtain approval of Reserve Bank for issue of units to
FIIs.
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5.
Amendment to Memorandum PEM
Please refer to item A(g) of Annexure III to the Memorandum PEM relating to standard
conditions to be stipulated by Exim Bank/authorised dealers for opening of foreign currency accounts
abroad by the project exporters in terms of which the exporters are required to furnish to Reserve
Bank a quarterly statement of operations on such bank accounts abroad, duly supported by transcripts
with an explanation for each debit and credit entry exceeding U.S.$ 2,500 or its equivalent. On a
review, it has been decided that such explanation may be furnished in respect of individual
debit/credit entries exceeding U.S.$ 10,000 or its equivalent.
6.
The following consequential amendments may be carried out in the Exchange Control
Manual/Memorandum PEM.
Exchange Control Manual
Volume I
i)
The paragraph 6D.2 may be replaced by Slip 1.
ii)
Sub-paragraph (i) of paragraph 6D.3 may be replaced by Slip 2.
iii)
Sub-item (e) may be added under item 3 of Annexure to Chapter 7 as per Slip 3.
iv)
A new sub-paragraph (iv) may be added to paragraph 10B.4 as per Slip 4.
v)
Paragraph 10C.16A may be substituted by Slip 5.
Volume II
vi)
A new Notification No.F.E.R.A.212/99-RB dated 18th October 1999 may be added
under Section 19 as per Slip 6.
Memorandum PEM
vii)
The amount “U.S.$ 2,500” appearing in the second line of Sub-item (g) of item A of
Annexure III may be substituted by the amount “U.S.$ 10,000”.
7.
Authorised dealers may bring the contents of this circular to the notice of their concerned
constituents.
8.
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
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Slip 1
[AD/MA/ 35 /1999]
Valuation of software exports/
certification of SOFTEX form
6D.2 The valuation of exports declared on SOFTEX form will be done by the designated official/s
of the Department of Electronics (DOE) at the Software Technology Parks of India (STPI). The
SOFTEX forms of exporters located outside STPI as also forms in respect of export of video/TV
software will also be certified by designated official/s at the nearest STPI. DOE have made necessary
arrangement for certification/valuation of the Video/TV software declared on SOFTEX form with the
Ministry of Information and Broadcasting, Government of India, once in a week at the STPI. The
valuation of exports declared on SOFTEX Form by Units located in Export Processing Zones will be
done by the designated authority of the Export Processing Zone.
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Slip 2
[AD/MA/ 35 /1999]
Disposal of SOFTEX forms
6D.3 (i)
After certifying all the three copies of the SOFTEX form, the designated officials of
Government of India at STPI and designated authorities of Export Processing Zones will forward the
original directly to the nearest office of the Exchange Control Department of Reserve Bank the day it
is received or the next day and return the duplicate to the exporter. The triplicate will be retained by
the Department of Electronics for their record.
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Slip 3
[AD/MA/ 35 /1999]
(e)
Import bills received by all limited companies viz. public limited, deemed public limited and
private limited companies.
______________________________________________________________________________
Slip 4
[AD/MA/ 35 /1999]
Investment by Foreign Institutional Investors
10B.4
(iv)
Reserve Bank vide its Notification No.F.E.R.A.212/99-RB dated 18th October 1999 has
granted general permission to mutual funds in India to issue units or similar instruments to FIIs under
the schemes approved by Securities and Exchange Board of India and to send such units/instruments
out of India to their global custodians, as also to repurchase units/instruments from FIIs (cf. paragraph
10C.16A).
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Slip 5
[AD/MA/ 35 /1999]
Investment in schemes of Domestic Mutual Funds
10C.16A
(i)
Reserve Bank, by its Notification Nos. F.E.R.A.195/99-RB dated 30th March
1999 and No. F.E.R.A. 212/99-RB dated 18th October 1999, has granted general permission under
Section 19(1)(d) and 19( 1)(a) read with Section 9 (1) (a) of the Foreign Exchange Regulation Act,
1973 to domestic mutual funds referred to in clause (23D) of Section 10 of the Income Tax Act,
1961:(a)
to issue units or any other similar instrument,on repatriation basis, to
NRIs/OCBs/PIOs/FIIs under the schemes floated by them with the approval of the
Securities and Exchange Board of India, subject to the conditions mentioned under
(ii), below.
(b)
to send such units/instruments out of India to the place of residence or location, as the
case may be, of the non-resident investor, or to their global custodians in the case of
FIIs.
(c)
to repurchase units or similar instruments issued to NRIs/OCBs/PIOs/FIIs and to
make payment therefor to them;
(ii)
the general permission to issue units referred to in (i)(a) is subject to the following
conditions:(a)
The mutual fund should comply with the terms and conditions stipulated by the
Securities and Exchange Board of India.
(b)
The amount representing investment should be received by inward remittance through
normal banking channels or by debit to the NRE/ FCNR account of the non-resident
investor or Special Non-Resident Rupee account of the FII maintained with an
authorised dealer/ designated bank in India.
(iii)
The net amount representing the dividend/interest and maturity proceeds may be remitted
through normal banking channel or credited to NRE/FCNR/NRO/NRSR account of the non-resident
investor or Special Non-Resident Rupee Account of the FII.
(iv)
Authorised dealers may allow the credit of net amount of dividend/interest or the maturity
proceeds/ repurchase value to the NRE/FCNR account of the non-resident investor or Special Nonresident Rupee account of the FII or allow remittance thereof only on production of a certificate from
the mutual fund that the investment was made out of inward remittance from abroad or from the funds
held in NRE/FCNR account of the non-resident investor maintained with an authorised dealer or
Special Non-Resident Rupee Account of the FII with a designated bank in India and subject to
compliance with the provisions of paragraph 3B.10.
__________________________________________________________________________________
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Slip 6
[AD/MA/ 35 /1999]
Notification No.F.E.R.A. 212 /99-RB dated 18th October 1999
In pursuance of clause(a) and clause(d) of sub-section (1) of Section 19 read with clause (a) of
sub-section (1) of Section 9 of the Foreign Exchange Regulation Act, 1973 ( 46 of 1973), the Reserve
Bank is pleased to permit a Mutual Fund as referred to in Clause (23D) of Section 10 of Income-tax
Act 1961.
2.
(a)
to issue, units or similar instruments under Schemes approved by Securities and
Exchange Board of India to Foreign Institutional Investors(FIIs) subject to para 2
below.
(b)
to send such units/instruments out of India to their global custodians.
(c)
to repurchase units or other instruments issued to FIIs and make payment therefor,
subject to para 3 below.
The general permission granted herein to issue units is subject to the following conditions:(a)
the Mutual Fund complies with terms and conditions stipulated by Securities and
Exchange Board of India;
(b)
The amount representing the investment is received by debit to the Special NonResident Rupee Account of the FII maintained with a designated bank, approved by
the Bank.
3.
The general permission granted herein to repurchase units is subject to the condition that the
amount representing dividend/interest and maturity proceeds are credited to Special Non-Resident
Rupee Account.
Explanation:
Foreign Institutional Investor means an institution established or incorporated outside India and
registered with SEBI which proposes to make investment in India in securities, as defined in
SEBI(FII) Regulations 1995.
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