• What are Category I AIFs?

    AIFs which invest in start-up or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable and shall include venture capital funds, SME Funds, social venture funds, infrastructure funds and such other Alternative Investment Funds as may be specified.

    Please refer to section 3(4)(a) of SEBI (Alternative Investment Funds) Regulations, 2012 at link for more information.

  • In what categories can an applicant seek registration as an AIF?

    Applicants can seek registration as an AIF in one of the following categories, and in sub-categories thereof, as may be applicable: [Ref. Regulation 3(4)] a) Category I AIF: o Venture capital funds (Including Angel Funds) o SME Funds o Social Venture Funds o Infrastructure funds b) Category II AIF c) Category III AIF.

    Please refer to section 3(4) of SEBI (Alternative Investment Funds) Regulations, 2012 at the link for more information.

  • What does Alternative Investment Funds stand for?

    Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

    For more information, click here.

  • Can shipping/airlines companies raise ECB under Track I for import of second hand vessels?

    Yes, only under the approval route.

  • Can External Commercial Borrowing be used for funding real estate?

    No, no activity under real estate is permitted as eligible end use for raising ECB.

    For more information, click here.

  • What is the minimum Average Maturity Period of ECBs?

    Track I:

    i) 3 years for ECB up to $ 50 million or its equivalent.

    ii) 5 years for ECB beyond $ 50 million or its equivalent.

    iii) 5 years for eligible borrowers (Companies in infrastructure sector, Non-Banking Financial Companies - Infrastructure Finance Companies (NBFCIFCs), NBFCs-Asset Finance Companies (NBFC-AFCs), Holding Companies and Core Investment Companies (CICs)) irrespective of the amount of borrowing.

    iv) 5 years for Foreign Currency Convertible Bonds (FCCBs)/ Foreign Currency Exchangeable Bonds (FCEBs) irrespective of the amount of borrowing. The call and put option, if any, for FCCBs shall not be exercisable prior to 5 years.

    Track II: 10 years irrespective of the amount

    Track III: Same as under Track I.

    Please refer to section 2.4.1 at the following link.

  • What are the available routes for raising ECB?

    ECBs can be raised either under the automatic route or under the approval route. For the automatic route, the cases are examined by the Authorised Dealer Category-I (AD Category-I) banks. Under the approval route, the prospective borrowers are required to send their requests to the RBI through their ADs for examination. While the regulatory provisions are mostly similar, there are some differences in the form of amount of borrowing, eligibility of borrowers, permissible end-uses, etc. under the two routes. While the first six forms of borrowing, mentioned Q3 can be raised both under the automatic and approval routes, FCEBs can be issued only under the approval route.

    Please refer to section 2.3 at the following link.

  • What are the various types of ECB?

    ECB includes Loans, Securitized instruments, Buyers’ and supplier’s credit, Foreign Currency Convertible Bonds (FCCBs). Financial Lease and Foreign Currency Exchangeable Bonds (FCEBs). 

    For more information, click here.

  • What is the ECB Framework?

    The framework for raising loans through ECB comprises the following three tracks:

    Track I : Medium term foreign currency denominated ECB with minimum average maturity of 3/5 years.

    Track II : Long term foreign currency denominated ECB with minimum average maturity of 10 years.

    Track III : Indian Rupee (INR) denominated ECB with minimum average maturity of 3/5 years.

    Please refer to section 2.1 of link for more information.

  • What does External Commercial Borrowing (ECB) denote?

    ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities conforming to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

    For more information, click here.

  • Who is a Foreign Venture Capital Investor (FVCI)?

    FVCI refers to an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI(FVCI) Regulations} and proposes to make investment in accordance with FDI Regulations.

  • What are the regulations on Remittance on winding up/liquidation of Companies?

    AD Category-I banks have been allowed to remit winding up proceeds of companies in India, which are under liquidation, subject to payment of applicable taxes. Liquidation may be subject to any order issued by the court winding up the company or the official liquidator in case of voluntary winding up under the provisions of the Companies Act 2013 as applicable. AD Category-I banks shall allow the remittance provided the applicant submits:

    a) No objection or Tax clearance certificate from Income Tax Department for the remittance.

    b) Auditor's certificate confirming that all liabilities in India have been either fully paid or adequately provided for.

    c) Auditor's certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, as applicable.

    d) In case of winding up otherwise than by a court, an auditor's certificate to the effect that there are no legal proceeding spending in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance.

    Please refer to subsection 1.1(iii) of Annexure-6 of Consolidated FDI Policy at link for more information.

  • Is interest repatriable?

    Interest on fully, mandatorily & compulsorily convertible debentures is also freely repatriable without any restrictions (net of applicable taxes). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time.

  • Are dividends repatriable?

    Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time.

  • What is meant by ‘AD Category-I Bank'?

    ‘AD Category-I Bank’ means a bank (Scheduled Commercial, State or Urban Cooperative) which is authorized under Section 10 (1) of FEMA to undertake all current and capital account transactions according to the directions issued by the RBI from time to time.

  • What are the regulations pertaining to issue of Foreign Currency Convertible Bonds (FCCBs) and Depository Receipts (DRs)?

    An Indian company issuing shares/ convertible debentures to a person resident outside India shall receive the amount of consideration/ FDI by:

    a) Inward remittance through normal banking channels;

    b) Debit to NRE/ FCNR (B) account of a person concerned maintained with an AD Category I bank;

    c) Debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category – I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration;

    d) Conversion of royalty/ lump sum/ technical know-how fee due for payment or conversion of ECB;

    e) Conversion of pre-incorporation/ pre-operative expenses incurred by the a non-resident entity up to a limit of five percent of its capital or $ 5 lakhs whichever is less;

    f) Conversion of import payables/ pre incorporation expenses/ can be treated as consideration for issue of shares with the necessary approval

    g) Against any other funds payable to a person resident outside India, the remittance of which does not require the prior approval of the Reserve Bank or the Government of India; and

    h) Swap of capital instruments, provided where the Indian investee company is engaged in a Government route sector, prior Government approval shall be required.

    Please refer to link1 or Consolidated FDI Policy at link2 for more information.

  • What is the method of payment and remittance/credit of sale proceeds for a person residing outside India?

    The sale consideration in respect of the shares purchased by a person resident outside India shall be remitted to India through normal banking channels. 

    In case the buyer is a FII, FPI, payment should be made by debit to its Special Non-Resident Rupee Account. 

    In case the buyer is a NRI, the payment may be made by way of debit to his NRE/FCNR (B) accounts. 

    However, if the shares are acquired on non-repatriation basis by NRI, the consideration shall be remitted to India through normal banking channel or paid out of funds held in NRE/FCNR (B)/NRO accounts. 

    The sale proceeds of shares (net of taxes) sold by a person resident outside India may be remitted outside India. In case of FII/FPI, the sale proceeds may be credited to its special Non-Resident Rupee Account. In case of NRI, if the shares sold were held on repatriation basis, the sale proceeds (net of taxes) may be credited to his NRE /FCNR (B) accounts and if the shares sold were held on non repatriation basis, the sale proceeds may be credited to his NRO account subject to payment of taxes. The sale proceeds of shares (net of taxes) sold by an OCB may be remitted outside India directly if the shares were held on repatriation basis and if the shares sold were held on non-repatriation basis, the sale proceeds may be credited to its NRO (Current) Account subject to payment of taxes, except in the case of OCBs whose accounts have been blocked by Reserve Bank.

    Please refer to subsection-4 of 'Section 1' of Annexure-3 of Consolidated FDI Policy at link for more information.

  • What is the procedure to be followed after investment is made under the Automatic Route or with Government approval?

    a) On receipt of share application money: (i) An Indian company receiving investment from outside India for issuing shares/convertible debentures/preference shares under the FDI Scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank not later than 30 days from the date of receipt in the Advance Reporting Form (as in Section 1 of Annexure 6 of Consolidated FDI Policy), through an AD Category-I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report (Section-2) on the non-resident investor from the overseas bank remitting the amount. 

    b) The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported. Upon issue of shares to non-resident investors: i) The Indian company has to file Form FC-GPR, not later than 30 days from the date of issue of shares. (ii) Form FC-GPR has to be duly filled up and signed by Managing Director/Director/Secretary of the Company and submitted to the Authorized Dealer of the company, who will forward it to the Reserve Bank. 

    c) The following documents have to be submitted along with the form: (a) A certificate from the Company Secretary of the company certifying that: (A) all the requirements of the Companies Act, as applicable, have been complied with; (B) terms and conditions of the Government of India approval, if any, have been complied with; (C) the company is eligible to issue shares under these Regulations; and (D) the company has all original certificates issued by authorized dealers in India evidencing receipt of amount of consideration. (b) A certificate from SEBI registered Merchant Banker or Chartered Accountant indicating the manner of arriving at the price of the shares isIndiad to the persons resident outside India. (c) The report of receipt of consideration as well as Form FC-GPR have to be submitted by the AD Category-I bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the registered office of the company is situated. (d) Annual return on Foreign Liabilities and Assets (Section-3) should be filed on an annual basis by the Indian company, directly with the Reserve Bank. This is an annual return to be submitted by 15th of July every year, pertaining to all investments by way of direct/portfolio investments/reinvested earnings/other capital in the Indian company made during the previous years (i.e. the information submitted by 15th July will pertain to all the investments made in the previous years up to March 31). 

    d) The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date. The details of overseas investments in the company both under direct/portfolio investment may be separately indicated.

    e) Issue of bonus/rights shares or stock options to persons resident outside India directly or on amalgamation/merger/demerger with an existing Indian company, as well as issue of shares on conversion of ECB/royalty/lump-sum technical know-how fee/import of capital goods by units in SEZs, has to be reported in Form FC-GPR.

    Please refer to subsection 2 of Annexure-6 of Consolidated FDI Policy at link for more information.

  • What documents are required for sale of shares by a person resident outside India?

    Documents required for the sale of shares by a person resident outside India:

    i) Consent Letter duly signed by the seller and buyer or their duly appointed agent indicating the details of transfer i.e. number of shares to be transferred, the name of the investee company whose shares are being transferred and the price at which shares are being transferred.

    ii) Where the Consent Letter has been signed by their duly appointed agent the Power of Attorney Document authorizing the agent to purchase/sell shares by the seller/buyer. In case there is no formal Sale Agreement, letters exchanged to this effect may be kept on record.

    iii) If the sellers are NRIs/OCBs, the copies of RBI approvals evidencing the shares held by them on repatriation/non-repatriation basis. The sale proceeds shall be credited NRE/NRO account, as applicable.

    iv) Certificate indicating fair value of shares from a Chartered Accountant.

    v) No Objection / Tax Clearance Certificate from Income Tax authority/Chartered Account.

    vi) Undertaking from the buyer to the effect that the Pricing Guidelines have been adhered to.

    Please refer to subsection 5.2 of 'section 1' of Annexure-3 Consolidated FDI Policy at link for more information.

  • What documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift?

    Documents to be submitted by a resident person for transfer of shares to a person resident outside India by way of gift:

    i) Name and address of the transferor (donor) and the transferee (donee).

    ii) Relationship between the transferor and the transferee.

    iii) Reasons for making the gift.

    iv) In case of Government dated securities and treasury bills and bonds, a certificate issued by a CA on market value of such security.

    v) In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security.

    vi) In case of shares and convertible debentures, a certificate from a Chartered Accountant on the value of such securities according to the guidelines issued by Securities & Exchange Board of India or as per any internationally accepted pricing methodology on arm’s length basis for listed companies and unlisted companies, respectively.

    vii) Certificate from the concerned Indian company certifying that the proposed transfer of shares/convertible debentures by way of gift from resident to the non-resident shall not breach the applicable sectoral cap/ FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per cent of the paid up capital of the company.

    viii) An undertaking from resident transferor that value of security to be transferred together with any security already transferred by transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of $ 50,000during a financial year*.

    ix) A declaration from donee accepting partly paid shares or warrants that donee is aware of the liability as regards calls in arrear and consequences thereof.

    Please refer to 'section 2' of Annexure-3 Consolidated FDI Policy at link for more information.

    *RBI’s A.P. (DIR Series) Circular No. 14 Dated 15.09.2011

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  • What is the eligibility of persons for availing MUDRA loans?

    Any Indian Citizen who has a business plan for a non farm income generating activity such as manufacturing, processing, trading or service sector whose credit need is less than $ 15340 can approach either a Bank, MFI or NBFC for availing of MUDRA loans under PMMY. The usual terms and conditions of the lending agency may have to be followed for availing of loans under PMMY. The lending rates are as per the RBI guidelines issued in this regard from time to time.

    Please refer to Link for more information

  • What are the agencies providing loans under Micro Units Development and Refinance Agency?

    Pradhan Mantri Mudra Yojana (PMMY) loans will be extended by all Public sector Banks such as PSU banks, Regional Rural Banks (RRBs), Cooperative Banks, Private Sector Banks, Foreign Banks, Micro Finance Institutions and Non-Banking Finance Companies.
    For more information, click here.

  • I intend to work on franchisee model. Can MUDRA help me?

    MUDRA operates a special refinance scheme for traders and shopkeepers. You can avail the facilities under the scheme as per your requirements from any banks/MFIs/NBFCs in the area.

    Please refer to link for more information

  • I have graduated recently. I want to start my own business. Can MUDRA help me?

    MUDRA loans are available in three categories. For small business, loans up to $ 768 is available under the ‘Shishu’ category and beyond $ 768 and up to $ 7678 under the ‘Kishor’ category. It also offers loans beyond $ 7679 and up to $ 15360 under the Tarun category. Depending on the nature of business and project requirement you can access finance from one of the intermediaries of MUDRA as per the norms.

    Please refer to Link for more information

  • What is the rate of interest on MUDRA loans?

    The interest rates are deregulated and the banks have been advised to charge reasonable interest rates within the overall RBI guidelines.

    Please refer to link for more information.

  • Who are the objective customers of MUDRA/ What sort of borrowers are qualified for help from MUDRA?

    Non–Corporate Small Business Segment (NCSB) comprising of millions of proprietorship / partnership firms running as small manufacturing units, service sector units, shopkeepers, fruits/ vegetable vendors, truck operators, food-service units, repair shops, machine operators, small industries, artisans, food processors and others, in rural and urban areas.

    For more information, click here.

  • What does the MUDRA scheme entail?

    MUDRA, which stands for Micro Units Development & Refinance Agency Ltd, is a financial institution being set up by the Government of India under Pradhan Mantri Mudra Yojana (PMMY) for development and refinancing micro unit enterprises. It was announced by the Hon’ble Finance Minister while presenting the Union Budget for 2015-16. The purpose of MUDRA is to provide funding to the non-corporate small business sector through various last-mile financial institutions like banks, non-banking financial institutions (NBFC) and micro finance institutions (MFI).

    For more information, click here.

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  • What are Infrastructure Investment trusts (InvITs)?

    An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return. InvITs work like mutual funds or real estate investment trusts (REITs) in features. InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector.

  • What is a Right Issue?

    A Right Issue is an issue of shares or convertible securities to existing shareholders as on a particular date (record date) fixed by the issuer. The rights are offered in a particular ratio to the number of shares or convertible securities held as on the record date.

  • What is a Public Issue?

    A Public Issue is an issue / offer of shares or convertible securities made available to new investors for becoming part of shareholders’ family of the issuer. It further includes:
    1) IPO: an unlisted company making either a fresh issue of shares or convertible securities offers its existing shares or convertible securities for sale or both for the first time to the public. Issuer’s shares or convertible securities can now be listed or traded on Stock Exchanges.
    2) FPO: an already listed company making either a fresh issue of shares or CS to the public or an offer for sale to the public.

  • What are the different kinds of issues which can be made by an Indian company in India?

    The different kind of issues which can be made by an Indian company in India are illustrated below:
    1) Public Issue: Includes Initial Public Offering (IPO) & Further Public Offering (FPO)
    2) Rights Issue
    3) Composite Issue
    4) Bonus Issue
    5) Private Placement: Includes Preferential issue, Qualified Institutional Placement
    6) Institutional Placement Program

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