• Could an Alternative investments funds dispatch a reserve/plan of any size?

    No, each scheme of the Alternative Investment Fund (other than angel fund) shall have corpus of at least INR twenty crore. In case of an angel fund, it shall have a corpus of at least INR ten crore.

    For more information, click here.

  • What is the meaning of Angel Fund?

    "Angel Fund” is a sub-category of Venture Capital Fund under Category I Alternative Investment Fund that raises funds from angel investors and invests in accordance with the provisions of AIF Regulations.

    For more information, click here.

  • What are the reporting requirements to SEBI for Alternate Investment Funds registered with SEBI?

    As per circular No.CIR/IMD/DF/10/2013 dated 29th July, 2013, Category I and II AIFs and the Category III AIFs which do not undertake leverage are required to submit report to SEBI on a quarterly basis while Category III AIFs which undertake leverage are required to submit the reports on a monthly basis. The formats for such reports are provided as a part of the said circular. All AIFs shall submit the report irrespective of whether or not the AIF has started activity.  

    Currently, all AIFs shall send reports to SEBI by email to aifreporting@sebi.gov.in. No physical reports are required to be filed with SEBI.

    For more information, click here.

  • What are Category III AIFs?

    Alternate Investment Funds (AIFs), which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs.

    For more information, click here

  • In what classifications can a candidate look for enrolment 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

    • Category I AIF: 
      • Venture capital funds (Including Angel Funds) 
      • SME Funds
      • Social Venture Funds
      • Infrastructure funds
    • Category II AIF 
    • Category III AIF

    For more information, click here.

  • What are Category II AIFs?

    Alternative Investment Funds (AIF) which do not fall in Category I and III and which do not undertake borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012 are Category II AIF.

    Various types of funds such as real estate funds, private equity funds, funds for distressed assets, etc. are registered as Category II AIF.

    For more information, click here

  • In which authoritative documents can an Alternative Investment Fund be set up?

    An alternative investment fund (AIF) under the SEBI (Alternative Investment Funds) Regulations, 2012 can be established or incorporated in the form of a trust or a company or a limited liability partnership or a body corporate.

    For more information, click here

  • What are Category I AIFs?

    Category I of the Alternative Investment Funds (AIF) include funds which invest in start-up, early stage ventures, social ventures, small & medium enterprises (SME), infrastructure or other sectors or areas which the Government or regulators consider as socially or economically desirable.

    It shall include venture capital funds, SME funds, social venture funds, infrastructure funds and such other AIF.

    For more information, click here

  • What is the upper limit for investors under Alternative Investment Fund (AIF)?

    No scheme of Alternative Investment Fund (AIF) shall have more than 1,000 investors, subject to the provisions of the Companies Act, 1956 if the AIF is formed as a company.

    For more information, click here

  • How can the investors redress their complaints against Alternative Investment Funds (AIFs)?

    SEBI has a web-based centralized grievance redress system called SEBI Complaint Redress System (SCORES) where investors can lodge their complaints against AIFs.

    For more information, click here.

  • What are the Reporting prerequisites for converting External commercial borrowing into equity?

    In case of partial or full conversion of ECB into equity, the reporting to the RBI will be as under:

    • For partial conversion, the converted portion is to be reported to the concerned Regional Office of the Foreign Exchange Department of RBI in Form FC-GPR prescribed for reporting of FDI flows, while monthly reporting to DSIM in ECB 2 Return will be with suitable remarks "ECB partially converted to equity".
    • For full conversion, the entire portion is to be reported in Form FC-GPR, while reporting to DSIM in ECB 2 Return should be done with remarks ECB fully converted to equity. Subsequent filing of ECB 2 Return is not required.
    • For conversion of ECB into equity in phases, reporting through ECB 2 Return will also be in phases.

    For more information, click here

  • 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 are the routes ECB can be raised in?

    Under the (External Commercial borrowing) ECB/Trade Credit (TC) framework, ECB/TC can be raised either under the automatic route or under the approval route. Under the approval route, the prospective borrowers are required to send their requests to the RBI through their banks for examination. 

  • Who are the eligible borrowers under ECB framework?

    All entities except a Limited Liability Partnership are allowed to obtain ECB as per the prescribed guidelines.

  • What is the earliest when an External Commercial Borrowing can be matured?

    Minimum average maturity period (MAMP) is three years for all external commercial borrowings (ECB). However, for ECB raised from foreign equity holder and utilised for specific purposes, as detailed in sub-section 2.1 of the Annex, the MAMP is five years. Similarly, for ECB up to INR 3.5 b per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP is one year.

    For more information, click here

  • What is the procedure of raising ECB?

    Entities looking to raise ECB may approach the RBI with an ECB application form in prescribed format for examination through their AD Category I bank. Cases shall be considered keeping in view the overall guidelines, macroeconomic situation and merits of the specific proposals.

    ECB proposals received by the RBI above certain threshold limit (re-fixed from time to time) would be placed before the Empowered Committee set up by the Reserve Bank. The Empowered Committee will have external as well as internal members and the Reserve Bank will take the decision based on the recommendation of the Empowered Committee.

    Entities desirous to raise ECB under the automatic route may approach an AD Category I bank with their proposal along with duly filled Form 83. Formats of ECB Form and Form 83 are available at Annex I and II respectively of Part V of the Master Directions Reporting under Foreign Exchange Management Act, 1999.

    For more information, click here

  • What are the reporting requirements under ECB?

    Borrowings under ECB Framework are subject to following reporting requirements apart from any other specific reporting required under the framework:

    • Loan Registration Number (LRN): Any draw-down in respect of an ECB should happen only after obtaining the LRN from the RBI. To obtain the LRN, borrowers are required to submit duly certified Form ECB, which also contains terms and conditions of the ECB, in duplicate to the bank
    • Changes in terms and conditions of ECB: Changes in ECB parameters in consonance with the ECB norms, including reduced repayment by mutual agreement between the lender and borrower, should be reported to the DSIM through revised Form ECB at the earliest, in any case not later than seven days from the changes effected. While submitting revised Form ECB the changes should be specifically mentioned in the communication 
    • Monthly reporting of actual transactions: The borrowers are required to report actual ECB transactions through Form ECB 2 Return (Annex II) through the AD Bank on monthly basis so as to reach DSIM within seven working days from the close of month to which it relates. Changes, if any, in ECB parameters should also be incorporated in Form ECB 2 Return
  • Are the shipping/airline companies allowed to raise External Commercial Borrowing for import of second hand vessels?

    Yes, shipping and airline companies can raise external commercial borrowings (ECB) for import of vessels and aircrafts, however, only under Track I of the ECB framework.

    For more information, click here

  • Who are eligible lenders under ECB framework?

    Lender for ECB purposes should be:

    • A resident of Financial Action Task Force (FATF) [or International organization of Securities commissions (IOSC) compliant country
    • Multilateral and regional financial institution where India is a member country
    • Individuals, if they are foreign equity holders or for subscription to bond/debentures listed abroad
    • Foreign branches / subsidiaries of Indian Banks – only for FCY ECB except FCCBs and FCEBs
  • 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.

  • What is procedure of issuing Foreign Currency Convertible Bonds?

    A.  For listed companies

    • Any Indian company not eligible to raise funds from the Indian capital market or restrained from accessing securities market by SEBI is not eligible to issue FCCB
    • Erstwhile Overseas Corporate Bodies not eligible to invest in India through portfolio and entities prohibited to buy, sell or deal in securities by SEBI are not eligible to subscribe to FCCB
    • Pricing of GDR/ FCCB should not be less than the higher of either average of weekly high and low of closing prices of related shares for six months preceding the relevant date or average of weekly high and low of closing prices of related shared for two weeks preceding the relevant date
    • The voting rights shall be as per the provisions of The Companies Act 2013

    B. For unlisted companies

    • Companies which have not yet accessed GDR/ FCCB route for raising capital in international market need to get listed in the domestic market
    • Companies which have already issued GDR/ FCCB in the international market would now require listing in the domestic market on making profit beginning 2005-06 or within 3 years of such issue
  • What is the procedure for reporting the issue of shares against conversion of External Commercial Borrowing?

    In case of partial or full conversion of external commercial borrowing (ECB) into equity, the reporting to the Reserve Bank of India (RBI) happens as under:

    • For partial conversion -  Converted portion to be reported to the concerned Regional Office of the Foreign Exchange Department of RBI in Form FC-GPR, while monthly reporting to the Department of Statistics and Information Management (DSIM) in ECB 2 Return (Annex III)
    • For full conversion - Entire portion is to be reported in Form FC-GPR, while reporting to DSIM in ECB 2 Return.
    • For conversion in phases - Reporting through ECB 2 Return will also be in phases

    For more information, click here

  • What is meant by Downstream Investment?

    ‘Downstream Investment’ means indirect foreign investment, by an eligible Indian entity, into another Indian company / LLP, by way of subscription or acquisition.

    For more information, click here.

  • What is the subsidy under Micro Units Development and Refinance Agency?

    There is no subsidy for the loan given under Pradhan Mantri Mudra Yojana (PMMY). However, if the loan proposal is linked to some Government scheme, wherein the Government is providing capital subsidy, it will be eligible under PMMY also.

    For more information, click here

  • What is the procedure for reporting of transfer of shares?

    Reporting of transfer of shares between residents and non-residents and vice- versa is to be done in Form FC-TRS (Section-4). The Form FC-TRS should be submitted to the AD Category-I bank, within 60 days from the date of receipt of the amount of consideration.

    For more information, click here.

  • 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.

  • Could ECB be profited for reimbursement of local INR credit?

    Yes, however, it is only permitted if external commercial borrowing (ECB) is raised from direct and indirect equity holders or from a Group company, and provided the loan is for a minimum average maturity of five years.

    ECB raised under Tracks I or III for repayment of Rupee loans, must be raised from a foreign equity holder.

    For more information, click here

  • Is it possible for Indian Companies to issue employees' stock option and/or sweat equity shares?

    Yes, an Indian company may issue “employees’ stock option” and/or “sweat equity shares” to its employees/ directors or employees/ directors of its holding company or joint venture or wholly owned overseas subsidiary/ subsidiaries who are resident outside India subject to provisions contained in Companies Act 2013 and SEBI Act 1992.

    For more information, click here

  • 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 are the reporting requirements for foreign currency convertible bond/depository receipts Issues?

    The domestic custodian needs report the issue/transfer of sponsored/unsponsored depository receipts as per DR Scheme 2014 in ‘Form DRR’ given in Section 5, Annexure 6 of the Consolidated FDI Policy, 2017, within 30 days of close of the issue/ program.

    For more information, click here

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  • What is the grievance mechanism available against bank officials, in the event of non sanction of loan?

    Any grievance against non consideration of MUDRA loan can be registered with the higher authorities in the respective Bank like Regional Manager/Zonal Manager of the Bank, provided there is any lapse from the bank officials in sanctioning the loan.

  • Is there any standard format of application to avail MUDRA loans?

    Yes. In respect of Shishu category, an one page application format has been designed which has been posted in MUDRA website. In respect of Kishor and Tarun category, a 3 page indicative application format has been designed and the same is also posted in MUDRA website.

  • 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.

  • Is there any requirement for a life insurance for MUDRA scheme?

    Life insurance is not required for loans under PMMY.

  • 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 are the various types of loan options available under Pradhan Mantri MUDRA Yojana?

    Under MUDRA scheme, the following loans are available to eligible company:

    • Shishu: covering loans upto INR 50,000
    • Kishor: covering loans above INR 50,000 and upto INR 5 lakh
    • Tarun: covering loans above INR 5 lakh and upto INR 10 lakh

    For more information, click here

  • 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.

  • What is Pradhan Mantri Mudra Yojana?

    Pradhan Mantri Mudra Yojana (PMMY) is a scheme launched by the Hon’ble Prime Minister for providing loans upto INR 10 Lakhs to non-corporate, non-fam small/ micro enterprises.

    For more information, click here.

  • Under PMMY-Shishu loans, what is the turn around time for processing the loan proposal?

    For Shishu loans, normally 7 to 10 days is the turn around time for processing the loan proposals on receipt of complete information.

    Please refer to link for more information

  • How much interest rate is charged on a Micro Units Development and Refinance Agency (MUDRA) loan?

    The interest rates are deregulated, and the banks have been advised to charge reasonable interest rates within the overall RBI guidelines.
    For more information, click here.

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  • Which are the intermediaries involved in an issue?

    The intermediaries (registered with SEBI) involved in an issue, are Merchant Bankers to the issue (known as Book Running Lead Managers (BRLM) in case of book built public issues), Registrars to the issue, and Bankers to the issue & Underwriters to the issue who are associated with the issue for different activities. Their addresses, telephone/fax numbers, registration number, and contact person and email addresses are disclosed in the offer documents.
    i) Merchant Banker: Merchant banker does the due diligence to prepare the offer document which contains all the details about the company. They are also responsible for ensuring compliance with the legal formalities in the entire issue process and for marketing of the issue.
    ii) Registrars to the Issue: They are involved in finalizing the basis of allotment in an issue and for sending refunds, allotment details, etc.
    iii) Bankers to the Issue: The Bankers to the Issue enable the movement of funds in the issue process and therefore enable the registrars to finalize the basis of allotment by making clear funds status available to the Registrars.
    iv) Underwriters: Underwriters are intermediaries who undertake to subscribe to the securities offered by the company in case these are not fully subscribed by the public, in case of an underwritten issue.

    Please refer to page 22 of link for more information.

  • Once the shares are issued, how can one report it?

    An Indian company should file Form , not later than 30 days from the date of issue of shares. The Form should be duly filled and signed by the Managing Director/Director/ Secretary of the company and submitted to the Authorised Dealer of the company who will forward it to the RBI.

    For detailed list of documents, refer to Sub-section 2.2 of Annexure 6 of the FDI policy.

    For more information, click here

  • In case, the company has not issued shares to the public and it is not listed on the stock exchange, can an application be made for convertible securities in the company?

    Yes, an application can be made for public issue of convertible securities even if the company has not issued shares to the public and is not listed on the stock exchange.

    Please refer to page 9 of link for more information

  • What does Depository Receipts mean?

    DRs refer to negotiable securities representing INR denominated equity shares of a company and issued outside of India by a Depository bank on behalf of the company. The DRs listed and traded in US markets are known as American Depository Receipts (ADRs). The DRs listed and traded except in the US markets are known as the Global Depository receipts (GDRs).

  • What is a letter of offer?

    A letter of offer is a document addressed to the shareholders of the target company containing disclosures of the acquirer/ PACs, target company, their financials, justification of the offer price, the offer price, number of shares to be acquired from the public, purpose of acquisition, future plans of acquirer, if any, regarding the target company, change in control over the target company , if any, the procedure to be followed by acquirer in accepting the shares tendered by the shareholders and the period within which all the formalities pertaining to the offer would be completed.

    For more information, click here.

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

    The various instruments that can be issued by an Indian company include:


    1) Equity shares; fully, compulsorily and mandatorily convertible debentures/ preference shares

    2) Non-convertible, optionally convertible or partially convertible debentures/ preference shares

    3) Rights issue

    4) Composite issue

    5) Bonus issue

    6) Institutional placement program

    7) Convertible note

    8) Depository receipt (DR)

    9) Foreign currency convertible bonds (FCCB)

    10) Security receipt

    11) Two-way fungibility scheme

    12) Warrants & partly-paid shares

    For more information, click here

     

  • For how long an investment in public issue is required to be kept open?

    The period for which an issue is required to be kept open is:
     1) For Fixed price public issues: 10 working days
     2) For Book built public issues: 7 working days extendable by 3 days in case of a revision in the price band
     3) For Rights issues: 30 days.

    For more information, click here.

  • 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.

  • Whether a Foreign investor can invest in rights shares issued by an Indian company at a discount?

    There are no restrictions under FEMA for investment in Rights shares issued at a discount by an Indian company under the provisions of the Companies Act, 2013. The offer on rights basis to the person resident outside India shall be:

    • In case of shares of a company listed on a recognized stock exchange in India, at a price, as determined by the company
    • In case of shares of a company not listed on a recognized stock exchange in India, at a price, which is not less than the price at which the offer on right basis is made to resident shareholders
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