Exchange facility to foreign citizens

Exchange facility to foreign citizens

Attention of Authorized Persons is invited to the A.P. (DIR Series) Circular No. 16 dated November 9, 2016 giving certain exemptions to foreign tourists visiting India. In supersession of instructions issued therein, it has been decided that foreign citizens (i.e. foreign passport holders) can exchange foreign exchange for Indian currency notes up to a limit of ₹ 5000/- per week till December 15, 2016 subject to the tenderer submitting a self-declaration that this facility has not been availed of during the week. The Authorized Person shall keep the passport details and the above declaration on record. Authorized Person may also ensure that the total value of such exchange to Indian currency notes does not exceed ₹ 5000/- during the week.

2. The Instruction in respect of issue of prepaid instruments by Authorized Dealer Category I Bank shall continue.

Reserve Bank of India Act, 1934 – Section 42(1A)

Requirement for maintaining additional CRR

1.Under section 42(1) of Reserve Bank of India Act, 1934, all Scheduled Banks are required to maintain with Reserve Bank of India a Cash Reserve Ratio (CRR) of 4% of Net Demand and Time Liabilities (NDTL).

2. On a review of the current liquidity conditions after the withdrawal of legal tender status of ₹ 500/- and ₹ 1000/- denominations of bank notes issued by the Reserve Bank of India till November 8, 2016 (referred to as Specified Bank Notes), it has been decided to issue a directive under section 42(1A) of the Reserve Bank of India Act, 1934 requiring all Scheduled Commercial Banks/ Regional Rural Banks / all Scheduled Primary (Urban) Co-operative Banks / all Scheduled State Co-operative Banks to maintain with the Reserve Bank of India, effective from the fortnight beginning November 26, 2016 an incremental CRR of 100 per cent on the increase in NDTL between September 16, 2016 and November 11, 2016. As the incremental CRR is a temporary measure, it shall be reviewed on December 9, 2016 or even earlier.

Differences Between Master Air Waybill and House Air Waybill

Differences Between Master Air Waybill and House Air Waybill.

Master Air Waybill:

1. Issued by the actual carrier, such as Korean Airlines, Emirates Airlines etc.
2. Signed either by the carrier or an agent of the carrier.
3. Issued on a pre-printed form of an actual carrier's air waybill.
4. Always subject to IATA Rules and one of the the international air conventions (Warsaw Convention, Hague amendment, Montreal Convention, etc.) 
5. States the terms and conditions of the carriage, as a result consignee may have protection in case the goods are damaged or lost in transit.
6. States only MAWB number.

House Air Waybill:

1. Issued by the forwarder company, such as XYZ Forwarding Ltd, etc.
2. Signed by the forwarding company without any agency indication of the carrier.
3. Issued on a naturel form of an air waybill.
4. May or may not be subject to IATA Rules and one of the the international air conventions (Warsaw Convention, Hague amendment, Montreal Convention, etc.) 
5. States the terms and conditions of the forwarding company, as a result consignee will not be having a legal protection in case the goods are damaged or lost in transit.
6. States both MAWB and HAWB nu

Difference between SAC Code and HSN Code under GST tax system in India

SAC code and HSN code under GST in India

What does SAC code mean?

SAC stands for Service Accounting Codes which are adopted by the Central Board of Excise and Customs (CBEC) for identification of the services.

How does HSN code work under GST system in India?

HSN stands for Harmonized System of Nomenclature which is internationally accepted product coding system used to maintain uniformity in classification of goods.

The above information is about the difference between SAC code and HSN code under GST in India.

What is a Joker Clause in letter of credit?

Joker Clause?

Under normal circumstances a beneficiary should be able to collect all of the stipulated documents without the help of the applicant. This is how a reasonable and decent Letter of Credit works. But sometimes applicants include some clauses in the credits and manipulating letters of credit in a way that they require a document which can not be presented without the help of the applicant. In letter of credit terminology we called these clauses "Joker Clauses".


Joker Clauses can be seen either in Field 46-A Documents Required or 

Field 47-A Additional Conditions.


Some examples of "Joker clauses" which makes presentations dependent on applicants participation:


Example 1 : Certificate of acceptance signed by the authorized stuff of applicant
Example 2 : Certificate of acceptance issued by the applicant
Example 3 : Certificate of acceptance issued by the applicant' agent
Example 4 : Original beneficiary's invoice duly endorsed on reverse by two authorized official's of the applicant.

FAQs on Withdrawal of Legal Tender Character of the existing Bank Notes in the denominations of ₹ 500/- and ₹ 1000/-

1. Why is this scheme introduced?

The incidence of fake Indian currency notes in higher denomination has increased. For ordinary persons, the fake notes look similar to genuine notes, even though no security feature has been copied. The fake notes are used for antinational and illegal activities. High denomination notes have been misused by terrorists and for hoarding black money. India remains a cash based economy hence the circulation of Fake Indian Currency Notes continues to be a menace. In order to contain the rising incidence of fake notes and black money, the scheme to withdraw has been introduced.

2. What is this scheme?

The legal tender character of the existing bank notes in denominations of ₹500 and ₹1000 issued by the Reserve bank of India till November 8, 2016 (hereinafter referred to as Specified Bank Notes) stands withdrawn. In consequence thereof these Bank Notes cannot be used for transacting business and/or store of value for future usage. These Bank Notes can be exchanged for value at any of the 19 offices of the Reserve Bank of India or at any of the bank branches or at any Head Post Office or Sub-Post Office.

3. How much value will I get?

You will get value for the entire volume of notes tendered at the bank branches / RBI offices.

4. Can I get all in cash?

No. You will get upto ₹4000 per person in cash irrespective of the size of tender and anything over and above that will be receivable by way of credit to bank account.

5. Why I cannot get the entire amount in cash when I have surrendered everything in cash?

The Scheme does not provide for it, given its objectives.

6. ₹4000 cash is insufficient for my need. What to do?

You can use balances in bank accounts to pay for other requirements by cheque or through electronic means of payments such as Internet banking, mobile wallets, IMPS, credit/debit cards etc.

7. What if I don’t have any bank account?

You can always open a bank account by approaching a bank branch with necessary documents required for fulfilling the KYC requirements.

8. What if, if I have only JDY account?

A JDY account holder can avail the exchange facility subject to the caps and other laid down limits in accord with norms and procedures.

9. Where can I go to exchange the notes?

The exchange facility is available at all Issue Offices of RBI and branches of commercial banks/RRBS/UCBs/State Co-op banks or at any Head Post Office or Sub-Post Office.

10. Need I go to my bank branch only?

For exchange upto 4000 in cash you may go to any bank branch with valid identity proof.

For exchange over 4000, which will be accorded through credit to Bank account only, you may go to the branch where you have an account or to any other branch of the same bank.

In case you want to go to a branch of any other bank where you are not maintaining an account, you will have to furnish valid identity proof and bank account details required for electronic fund transfer to your account.

11. Can I go to any branch of my bank?

Yes you can go to any branch of your bank.

12. Can I go to any branch of any other bank?

Yes, you can go to any branch of any other bank. In that case you have to furnish valid identity proof for exchange in cash; both valid identity proof and bank account details will be required for electronic fund transfer in case the amount to be exchanged exceeds ₹4000.

13. I have no account but my relative / friend has an account, can I get my notes exchanged into that account?

Yes, you can do that if the account holder relative/friend etc. gives you permission in writing. While exchanging, you should provide to the bank, evidence of permission given by the account holder and your valid identity proof.

14. Should I go to bank personally or can I send the notes through my representative?

Personal visit to the branch is preferable. In case it is not possible for you to visit the branch you may send your representative with an express mandate i.e. a written authorisation. The representative should produce authority letter and his / her valid identity proof while tendering the notes.

15. Can I withdraw from ATM?

It may take a while for the banks to recalibrate their ATMs. Once the ATMs are functional, you can withdraw from ATMs upto a maximum of ₹2,000/- per card per day upto 18th November, 2016. The limit will be raised to ₹4000/- per day per card from 19th November 2016 onwards.

16. Can I withdraw cash against cheque?

Yes, you can withdraw cash against withdrawal slip or cheque subject to ceiling of ₹10,000/- in a day within an overall limit of ₹20,000/- in a week (including withdrawals from ATMs) upto 24th November 2016, after which these limits shall be reviewed.

17. Can I deposit Specified Bank Notes through ATMs, Cash Deposit Machine or cash Recycler?

Yes, Specified Bank Notes can be deposited in Cash Deposits machines / Cash Recyclers.

18. Can I make use of electronic (NEFT/RTGS /IMPS/ Internet Banking / Mobile banking etc.) mode?

You can use NEFT/RTGS/IMPS/Internet Banking/Mobile Banking or any other electronic/ non-cash mode of payment.

19. How much time do I have to exchange the notes?

The scheme closes on 30th December 2016. The Specified banknotes can be exchanged at branches of commercial banks, Regional Rural Banks, Urban Cooperative banks, State Cooperative Banks and RBI till 30th December 2016.

For those who are unable to exchange their Specified Bank Notes on or before December 30, 2016, an opportunity will be given to them to do so at specified offices of the RBI, along with necessary documentation as may be specified by the Reserve Bank of India.

20. I am right now not in India, what should I do?

If you have Specified banknotes in India, you may authorise in writing enabling another person in India to deposit the notes into your bank account. The person so authorised has to come to the bank branch with the Specified banknotes, the authority letter given by you and a valid identity proof (Valid Identity proof is any of the following: Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff)

21. I am an NRI and hold NRO account, can the exchange value be deposited in my account?

Yes, you can deposit the Specified banknotes to your NRO account.

22. I am a foreign tourist, I have these notes. What should I do?

You can purchase foreign exchange equivalent to ₹5000 using these Specified Bank Notes at airport exchange counters within 72 hours after the notification, provided you present proof of purchasing the Specified Bank Notes.

23. I have emergency needs of cash (hospitalisation, travel, life saving medicines) then what I should do?

You can use the Specified Bank Notes for paying for your hospitalisation charges at government hospitals, for purchasing bus tickets at government bus stands for travel by state government or state PSU buses, train tickets at railway stations, and air tickets at airports, within 72 hours after the notification.

24. What is proof of identity?

Valid Identity proof is any of the following: Aadhaar Card, Driving License, Voter ID Card, Pass Port, NREGA Card, PAN Card, Identity Card Issued by Government Department, Public Sector Unit to its Staff.

25. Where can I get more information on this scheme?

Further information is available on our website (www.rbi.org.in) and the website of the Government of India (www.finmin.nic.in)

External Commercial Borrowings (ECB) by Startups

External Commercial Borrowings (ECB) by Startups 1. As per Announcement made by the Reserve Bank in the Fourth Bi-monthly Monetary Policy Statement for the year 2016-17 released on October 04, 2016, for permitting Startup enterprises to access loans under ECB framework. 2. Parameters for considering an entity as a Startup have since been published in the Official Gazette on February 18, 2016 by the Government of India. It is therefore decided, in consultation with the Government of India to permit AD Category-I banks to allow Startups to raise ECB under the following framework: a. Eligibility: An entity recognised as a Startup by the Central Government as on date of raising ECB. b. Maturity: Minimum average maturity period will be 3 years. c. Recognised lender: Lender / investor shall be a resident of a country who is either a member of Financial Action Task Force (FATF) or a member of a FATF-Style Regional Bodies;  Exclusion: Overseas branches/subsidiaries of Indian banks and overseas wholly owned subsidiary / joint venture of an Indian company will, however, not be considered as recognized lenders under this framework. d. Forms: The borrowing can be in the form of loans or non-convertible, optionally convertible or partially convertible preference shares. The funds should come from a country which fulfils the conditions at 2 (c) above. e. Currency: The borrowing should be denominated in any freely convertible currency or in Indian Rupees (INR) or a combination thereof. In case of borrowing in INR, the non-resident lender, should mobilise INR through swaps/outright sale undertaken through an AD Category-I bank in India. f. Amount: The borrowing per Startup will be limited to USD 3 million or equivalent per financial year either in INR or any convertible foreign currency or a combination of both. g. All-in-cost: Shall be mutually agreed between the borrower and the lender. h. End-uses: For any expenditure in connection with the business of the borrower. i. Conversion into equity: Conversion into equity is freely permitted, subject to Regulations applicable for foreign investment in Startups. j. Security: The choice of security to be provided to the lender is left to the borrowing entity. Security can be in the nature of movable, immovable, intangible assets (including patents, intellectual property rights), financial securities, etc., and shall comply with foreign direct investment / foreign portfolio investment / or any other norms applicable for foreign lenders / entities holding such securities. k. Corporate and personal guarantee: Issuance of corporate or personal guarantee is allowed. Guarantee issued by non-resident(s) is allowed only if such parties qualify as lender under paragraph 2(c) above. Exclusion: Issuance of guarantee, standby letter of credit, letter of undertaking or letter of comfort by Indian banks, all India Financial Institutions and NBFCs is not permitted. l. Hedging: The overseas lender, in case of INR denominated ECB, will be eligible to hedge its INR exposure through permitted derivative products with AD Category – I banks in India. The lender can also access the domestic market through branches/ subsidiaries of Indian banks abroad or branches of foreign bank with Indian presence on a back to back basis. m. Conversion rate: In case of borrowing in INR, the foreign currency - INR conversion will be at the market rate as on the date of agreement. 3. Other provisions like parking of ECB proceeds, reporting arrangements, powers delegated to AD banks, borrowing by entities under investigation, conversion of ECB into equity will be as included in the ECB framework announced vide A.P. (DIR Series) Circular No. 32 dated November 30, 2015. However, provisions on leverage ratio and ECB liability: Equity ratio will not be applicable. 4. It may be noted that Startups raising ECB in foreign currency, whether having natural hedge or not, are exposed to currency risk due to exchange rate movements and hence are advised to ensure that they have an appropriate risk management policy to manage potential risk arising out of ECBs.                                                                      *********

Foreign Exchange Management (Manner of receipt and payment) Regulations, 2016

Foreign Exchange Management (Manner of receipt and payment) Regulations, 2016 The synopsis of the new Regulations notified is as under: 1. Manner of receipt in foreign Exchange : (1) AD bank may receive foreign exchange by way of remittance or by way of reimbursement from his branch or correspondent outside India against payment for exports from India or against any other payment in following manner : (A) Members of Asian Clearing Union (ACU) (i) Bangladesh, Myanmar, Pakistan, Sri Lanka and Republic of Maldives - a) Receipt for export of eligible goods and services, through ACU mechanism i.e. by debit to the ACU Dollar/Euro account in India of a bank of the member country in which the other party to the transaction is resident or by credit to the ACU Dollar/Euro account of the Authorised Dealer maintained with the correspondent bank in that member country, b) In any freely convertible currency for cases other than export of eligible goods and services, c) In respect of exports from India to Myanmar, payment may be received in any freely convertible currency or through the ACU mechanism from Myanmar. (ii) Nepal and Bhutan- a) In Rupees b) In respect of exports from India to Nepal, may be received in any freely convertible currency also, provided the importer resident in Nepal has been permitted by the Nepal Rashtra Bank to make payment in free foreign exchange. However, such receipts shall not be routed through the ACU mechanism. (iii) Islamic Republic of Iran – In all cases including receipts for export of eligible goods and services, in any freely convertible currency and/or as prescribed by Reserve Bank of India from time to time. (B) All countries other than those mentioned in (A) above:- (i) Receipt in rupees from the account of a bank situated in any country other than an ACU member, (ii) In any freely convertible currency. (2) (i) In respect of export from India, receipt shall be made in a currency appropriate to the place of final destination as mentioned in the declaration form irrespective of the country of the residence of the buyer,     (ii) Any other mode of receipt of export proceeds as prescribed by the Reserve Bank of India from time to time. (3) Payment for export of goods / software may be received from a Third Party (a party other than the buyer) as per specified conditions. (4) Receipt for exports may also be made in following manner: (i) In the form of a bank draft, cheque, pay order, foreign currency notes/traveller’s cheque from a buyer during his visit to India (ii) By debit to FCNR/NRE account in India; (iii) In rupees from the credit card servicing bank in India against the charge slip signed by the buyer; (iv) From a rupee account held in the name of an Exchange House with an Authorised Dealer if the amount does not exceed fifteen lakh rupees per export transaction; (v) In accordance with the directions issued by the Reserve Bank to Authorised Dealers, where the export is covered by the arrangement between the Central Government and the Government of a foreign country or by the credit arrangement entered into by the Exim Bank with a financial institution in a foreign state; (vi) In the form of precious metals i.e. gold / silver / platinum equivalent to value of jewellery exported by Gem & Jewellery units in Special Economic Zones and Export Oriented Units on the condition that the sale contract provides for the same and the value is declared in the relevant EDF; (vii) In addition to (i) and (iii) above, any person resident in India may also receive any payment other than for exports by means of postal order/postal money order issued by a post office outside India. 2. Manner of payment in foreign exchange: (1) AD bank may make payment in foreign exchange by way of remittance from India or by way of reimbursement to his branch or correspondent outside India against payment for import into India, or against any other payment in the following manner: (A) Members of Asian Clearing Union: (i) Bangladesh, Myanmar, Pakistan, Sri Lanka and Republic of Maldives - a) Payment for import of eligible goods and services by credit to the ACU Dollar/Euro account in India of a bank of the member country in which the other party to the transaction is resident or by debit to the ACU Dollar/Euro account of the Authorised Dealer maintained with the correspondent bank in that member country, b) In any freely convertible currency for cases other than import of eligible goods and services c) In respect of imports to India from Myanmar, payment may be made in any freely convertible currency or through the ACU mechanism from Myanmar. (ii) Nepal and Bhutan- Payment may be made in Rupees, (iii) Islamic Republic of Iran – In all cases including payments for import of eligible goods and services, in any freely convertible currency and/or as prescribed by Reserve Bank of India to ADs from time to time, (B) All countries other than those mentioned in (A) above: (i) Payment in rupees from the account of a bank situated in any country other than an ACU member, (ii) In any freely convertible currency. (2) In respect of imports into India; (i) where the goods are shipped from ACU member, but the supplier is resident of a country other than member of ACU (other than Nepal and Bhutan), payment may be made in rupees to the account of a bank situated in any country other than an ACU member or in any freely convertible currency, (ii) In all other cases, payment shall be made in a currency appropriate to the country of shipment of goods. (iii) Any other mode of payment as may be prescribed by the Reserve Bank of India from time to time. (3) Payments for import of goods / software may be made to a Third Party (a party other than the supplier) as per specified conditions. (4) Manner of Payment in certain cases: (A) Payments for import of goods may be made in foreign exchange through an international card held by him / in rupees from international credit card / debit card through the credit / debit card servicing bank in India against the charge slip signed by the importer / as prescribed by Reserve Bank from time to time, provided that the transaction is in conformity with the extant provisions including the Foreign Trade Policy in force. (B) Any person resident in India may also make payment as under: (i) in rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India; (ii) by means of a crossed cheque or a draft as consideration for purchase of gold or silver in any form imported by such person in accordance with the terms and conditions imposed under any order issued by the Central Government under the Foreign Trade (Development and Regulations) Act, 1992 or under any other law, rules or regulations for the time being in force; (iii) a company or resident in India may make payment in rupees to its non-whole time director who is resident outside India and is on a visit to India for the company’s work and is entitled to payment of sitting fees or commission or remuneration, and travel expenses to and from and within India, in accordance with the provisions contained in the company’s Memorandum of Association or Articles of Association or in any agreement entered into by it or in any resolution passed by the company in general meeting or by its Board of Directors, provided the requirements of any law, rules, regulations, directions applicable for making such payments are duly complied with.                                                                *********

Unpaid External Commercial Borrowings (ECB) – Extension and conversion

External Commercial Borrowings (ECB) – Extension and conversion

2. Under the extant ECB guidelines, designated AD Category-I banks can approve requests from borrowers for changes in repayment schedule during the tenure of the ECB, i.e., prior to maturity, provided average maturity and all-in-cost are in conformity with applicable ceilings/ norms. To simplify the procedure relating to ECB, it has been decided to delegate the powers to designated AD Category-I banks to approve requests from borrowers for extension of matured but unpaid ECB, subject to the following conditions: No additional cost is incurred; Lender’s consent is available; Reporting requirements are fulfilled. 3. Further, powers are also delegated to designated AD Category – I bank to approve cases of conversion of matured but unpaid ECB into equity subject to same conditions as set out in paragraph 2 while ensuring that conversion is within the terms mentioned in paragraph C.14 of Annex to Circular dated November 30, 2015 as referred to above. 4. It should also be noted that if the ECB borrower concerned has availed credit facilities from the Indian banking system including overseas branches/subsidiaries, any extension of tenure / conversion of unpaid ECBs into equity (whether matured or not) shall be subject to applicable prudential guidelines issued by the Department of Banking Regulation of RBI, including guidelines on restructuring.  5. Further, such conversion into equity shall also be subject to consent of other lenders, if any, to the same borrower or at least information regarding conversions shall be exchanged with other lenders of the borrower.

Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy

Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy

Review of sectoral caps and simplification of Foreign Direct Investment (FDI) Policy In all sectors where there is a limit/cap on foreign investment, such limit/cap shall be reckoned in a composite manner. In other words, "sectoral cap", i.e., the maximum amount which can be invested by foreign investors in an entity will include all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedules 1, 2, 2(A), 3, 6, 8, 9 and 10 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000.  Foreign Currency Convertible Bonds (FCCBs) and Depository Receipts (DRs) having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment under such composite limit/cap.  However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment under the composite limit/cap. “Total foreign investment" in an Indian company will be the sum total of direct and indirect foreign investments. Portfolio investment up to aggregate foreign investment level of 49% or sectoral /statutory cap, whichever is lower, will not be subject to either Government approval or compliance with the sectoral conditions, as the case may be, provided such investment does not result in change in ownership leading to control of Indian entities .  Other foreign investments will be subject to conditions of Government approval and compliance of sectoral conditions as laid down in the FDI policy and the related Regulations under the Foreign Exchange Management Act 1999. The onus of compliance with the sectoral/statutory caps on foreign investment and attendant conditions, if any, shall be on the company receiving foreign investment. A company shall be considered as owned by resident Indian citizens if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens.  A Limited Liability Partnership (LLP) will be considered as owned by resident Indian citizens if more than 50% of the investment in such an LLP is contributed by resident Indian citizens and/ or entities which are ultimately ‘owned and controlled by resident Indian citizens’ and such resident Indian citizens and entities have majority of the profit share. Foreign investment in LLP is permitted under the automatic route if the LLP is engaged in sector where 100% FDI is allowed and there are no attendant FDI linked performance conditionalities to the sector. Foreign investment up to 100 percent under the automatic route has been permitted in the plantation sector which includes tea plantations, coffee plantations, rubber plantations, cardamom plantations, palm oil tree plantations and olive oil tree plantations.  There have been changes in the foreign investment cap in other sectors. The updated Annex-B to schedule-1 has been notified vide Notification No. FEMA 362/2016-RB dated February 15, 2016. Manufacturing has been given a precise definition and foreign investment up to 100% under the automatic route is permitted in manufacturing subject to the conditions of the FDI policy and the provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000.