Sunday 2 September 2018

Latest --Repo and Reverse Repo Rates

Liquidity Adjustment Facility – Repo and Reverse Repo Rates
As announced in the Third Bi-monthly Monetary Policy Statement, 2018-19 today, it has been decided by the Monetary Policy Committee (MPC) to increase the policy Repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 6.25 per cent to 6.50 per cent with immediate effect.
2. Consequent to the change in the Repo rate, the Reverse Repo rate under the LAF stands adjusted to 6.25 per cent with immediate effect.

Tuesday 7 August 2018

CHANGES IN (Liberalised Remittance Scheme) LRS

Liberalised Remittance Scheme – Harmonisation of Data and Definitions


Please refer to paragraph 18 of the Statement on Developmental and Regulatory Policies of the Second Bi-monthly Monetary Policy Statement for 2018-19released on June 6, 2018.

1. As indicated therein, it has been decided that furnishing of Permanent Account Number (PAN), which hitherto was not to be insisted upon while putting through permissible current account transactions of up to USD 25,000, shall now be mandatory for making all remittances under Liberalised Remittance Scheme (LRS).

2. Further, in the context of remittances allowed under LRS for maintenance of close relatives, it has been decided, in consultation with Government, to align the definition of ‘relative’ with the definition given in Companies Act, 2013 instead of Companies Act, 1956.

3. Master Direction No. 7/2015-16 dated January 01, 2016 on LRS is being updated simultaneously to reflect the above changes.

4. The directions contained in this circular have been issued under Sections 10(4), 11(1) and 11(2) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Thursday 24 May 2018

Purchase of immovable property in India by Non-Resident Individuals-SIMPLIFIED

These FAQs attempt to put in place the common queries that users have on the subject in easy to understand language. However, for conducting a transaction, the Foreign Exchange Management Act, 1999 (FEMA) and the regulations made or directions issued thereunder may be referred to. The relevant principal regulations are the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2018 issued vide Notification No. FEMA 21(R)/2018-RB dated March 26, 2018. The directions issued are consolidated in Part II of the Master Direction No 12 on Acquisition and Transfer of Immovable Property under Foreign Exchange Management Act, 1999. Amendments, if any, to the principal regulations are appended.
Q.1 How can Non-resident Indians (NRIs) / Overseas Citizens of India (OCIs) acquire immovable property in India?
Q.2 What are the accepted modes of payment for property acquired in India?
Q.3 Can Foreign Embassies/ Diplomats/ Consulate Generals acquire property in India?
Q.4 Can foreign nationals acquire property in India?
Q.5 How can a Long Term Visa (LTV) holder acquire property in India?
Q.6 Can a spouse of an NRI/ OCI who is not a NRI/ OCI acquire property in India?
Q.7 Can a non-resident repatriate the sale proceeds of immovable property in India?
Q.8 What is the meaning of transfer?
Q.1 How can a Non-resident Indian (NRI) and an Overseas Citizen of India (OCI) acquire immovable property in India?
ParticularsNRI/ OCI (regulation of FEMA 20(R))
Purchase (other than agricultural land/ farmhouse/ plantation etc) fromResident/ NRI/ OCI [3(a)]
Acquire as gift (other than agricultural land/ farmhouse/ plantation etc) fromResident/ NRI/ OCI [3(b)] who is a relative
Acquire (any IP) as inheritance froma. Any person who has acquired it under laws in force [3(c)];
b. Resident [3(c)]
Sell (other than agricultural land/ farmhouse/ plantation etc) toResident/ NRI/ OCI [3(e)]
Sell (agricultural land) toResident [3(d)]
Gift (other than agricultural land) toResident/ NRI/ OCI [3(e)]
Gift (agricultural land) toResident [3(d)]
Gift residential/ commercial propertyResident/ NRI/ OCI [3(e)]
Q.2 What are the accepted modes of payment for property acquired in India?
Answer: Payment for immovable property has to be received in India through banking channels and is subject to payment of all taxes and other duties/ levies in India. The payment can also be made out of funds held in NRE/ FCNR(B)/ NRO accounts of the NRIs/ OCIs. Payments should not be made through travellers’ cheque and foreign currency notes.
Q.3 Can Foreign Embassies/ Diplomats/ Consulate Generals acquire property in India?
Answer: Foreign Embassy/ Diplomat/ Consulate General, can purchase/ sell immovable property (other than agricultural land/ plantation property/ farm house) in India provided –
  1. Clearance from the Government of India, Ministry of External Affairs is obtained for such purchase/sale, and
  2. The consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through banking channels.
Q.4 Can foreign nationals acquire property in India?
Answer:
  1. Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or Democratic People’s Republic of Korea (DPRK), irrespective of their residential status, cannot, without prior permission of the Reserve Bank, acquire or transfer immovable property in India, other than on lease, not exceeding five years. This prohibition shall not be applicable to an OCI.
  2. Foreign nationals of non-Indian origin resident in India (except 11 countries listed at (a) above) can acquire immovable property in India.
  3. Foreign nationals of non-Indian origin resident outside India can acquire/ transfer immovable property in India, on lease not exceeding five years and can acquire immovable property in India by way of inheritance from a resident.
All other acquisitions/ transfers by foreign nationals will require the prior permission of RBI
Q.5 How can a Long Term Visa (LTV) holder acquire property in India?
Answer: Citizen of Pakistan, Bangladesh or Afghanistan belonging to minority community (Hindu, Christian, Sikh, Parsi, Buddhist, Jain) in that country and residing in India who has been granted an LTV by the Central government can purchase only one residential immovable property in India as dwelling unit for self-occupation and only one immovable property for carrying out self-employment. However, such acquisition is subject to the conditions as specified under Regulation 7 of Notification No. FEMA 20 (R)/2018-RB dated March 26, 2018.
Q.6 Can a spouse of an NRI/ OCI who is not a NRI/ OCI acquire property in India?
Answer: A person resident outside India, not being a Non-Resident Indian or an Overseas Citizen of India, who is a spouse of a Non-Resident Indian or an Overseas Citizen of India may acquire one immovable property (other than agricultural land/ farm house/ plantation property), jointly with his/ her NRI/ OCI spouse subject to the conditions laid down in regulation 6 of FEMA 21(R).
Q.7 Can a non-resident repatriate the sale proceeds of immovable property in India?
Answer:
(a) A person who has acquired the property U/s 6(5)iv of FEMA or his successor cannot repatriate the sale proceeds of such property without RBI approval.
(b) Repatriation up to USD 1 million per financial year is allowed, along with other assets under (Foreign Exchange Management (Remittance of Assets) Regulations, 2016) for NRIs/ PIOs and a foreign citizen (except Nepal/ Bhutan/ PIO) who has (i) inherited from a person referred to in section 6(5) of FEMA, or (ii) retired from employment in India or(c) is a non-resident widow/ widower and has inherited assets from her/ his deceased spouse who was an Indian national resident in India.
(c) NRIs/ PIOs can remit the sale proceeds of immovable property (other than agricultural land/ farm house/ plantation property) in India subject to the following conditions:
  1. The immovable property was acquired in accordance with the provisions of the foreign exchange law in force at the time of acquisition or the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2018;
  2. The amount for acquisition of the property was paid in foreign exchange received through banking channels or out of the funds held in foreign currency non-resident account or out of the funds held in non-resident external account;
  3. In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
Q.8 What is the meaning of transfer?
Answer: As per section 2(ze) of FEMA transfer means, sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien.

Purchase of immovable property outside India by Resident Individuals-(SIMPLIFIED)



  • These FAQs attempt to put in place the common queries that users have on the subject in easy to understand language. However, for conducting a transaction, the Foreign Exchange Management Act, 1999 (FEMA) and the regulations made or directions issued thereunder may be referred to. The relevant principal regulations are the Foreign Exchange Management (Acquisition and transfer of immovable property outside India) Regulations, 2015 issued vide Notification No. FEMA 7(R)/2015-RB dated January 21, 2016. The directions issued are consolidated in Part I of the Master Direction No 12 on Acquisition and Transfer of Immovable Property under Foreign Exchange Management Act, 1999. Amendments, if any, to the principal regulations are appended.
Q.1 Can a resident continue to hold immovable property outside India which was acquired by him when he was a non-resident?
Q.2 Can a resident individual send remittances and purchase property outside India?
Q.3 To whom do the restrictions of transferring property outside India not apply?
Q.4 How can immovable property be acquired outside India by a resident?
Q.1 Can a resident continue to hold immovable property outside India which was acquired by him when he was a non-resident?
Answer: According to section 6(4) of the FEMA, a person resident in India can hold, own, transfer or invest in any immovable property situated outside India if such property was acquired, held or owned by him/ her when he/ she was resident outside India or inherited from a person resident outside India.
Q.2 Can a resident individual send remittances and purchase property outside India?
Answer: A resident individual can send remittances under the Liberalised Remittance Scheme (LRS) for purchasing immovable property outside India. In case members of a family pool their remittances to purchase a property, then the said property should be in the name of all the members who make the remittances.
Q.3 To whom do the restrictions of transferring property outside India not apply?
Answer: The prohibition of a resident acquiring property outside India is not applicable if:
  1. The resident is a foreign national; or
  2. The property was acquired before July 8, 1947 and continued to be held after obtaining permission; or
  3. If it is acquired on a lease not exceeding five years
Q.4 How can immovable property be acquired outside India by a resident?
Answer: Immovable property can be acquired outside India:
  1. Under section 6(4) of FEMA.
  2. As an inheritance/ gift from a person (i) referred to in sec 6(4) of FEMA; or (ii) who has acquired it prior to July 8, 1947 (iii) who has acquired such property in accordance with the foreign exchange provisions in force at the time of such acquisition.
  3. Purchased with balances in the Resident Foreign Currency (RFC) account of the resident.
  4. As a gift from persons at (b) & (c) above, provided he is a relative of such persons.
  5. Purchased with remittances made under the Liberalised Remittance Scheme (LRS).
  6. Jointly with a relative provided there are no outflow of funds from India.
  7. By an Indian company having overseas offices, for housing its business or for residence of staff.

Micro, Small and Medium Enterprises-FAQ's

FREQUENTLY ASKED QUESTION

Q.1. What is the definition of MSME?

A.1. The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 in terms of which the definition of micro, small and medium enterprises is as under:
(a) Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:
(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;
(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and
(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.
In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No.S.O.1722 (E) dated October 5, 2006.
(b) Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) are specified below.
(i) A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;
(ii) A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore; and
(iii) A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.

Q.2. What is the status of lending by banks to this sector?

A.2. Bank’s lending to the Micro ,Small and Medium enterprises as under is eligible to be reckoned for priority sector advances:
a) MSMEs engaged in the manufacture or production of goods to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and as notified by the Government from time to time is reckoned for priority sector advances.
b) MSMEs engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006.
Detailed guidelines on lending to the Micro, Small and Medium enterprises sector are available in our Master Direction FIDD.MSME & NFS.12/06.02.31/2017-18 dated July 24, 2017. The instructions issued by RBI, to banks, on various matters are available on our website www.rbi.org.in.

Q.3. What is meant by Priority Sector Lending?

A.3. Priority sector lending include only those sectors as part of the priority sector, that impact large sections of the population, the weaker sections and the sectors which are employment-intensive such as agriculture, and Micro and Small enterprises. Detailed guidelines on Priority sector lending are available in our Master Direction on Priority sector lending no. FIDD.CO.Plan.1/04.09.01/2016-17 dated July 7, 2016.

Q.4. Are there any targets prescribed for lending by banks to MSMEs?

A.4. As per extant policy, certain targets have been prescribed for banks for lending to the Micro and Small enterprise (MSE) sector. In terms of the recommendations of the Prime Minister’s Task Force on MSMEs (Chairman: Shri T.K.A. Nair, Principal Secretary), banks have been advised to achieve a 20 per cent year-on-year growth in credit to micro and small enterprises, a 10 per cent annual growth in the number of micro enterprise accounts and 60 percent of total lending to MSE sector as on corresponding quarter of the previous year to Micro enterprises.

Q.5. Are there specialized bank branches for lending to the MSMEs?

A.5. Public sector banks have been advised to open at least one specialized branch in each district. The banks have been permitted to categorize their MSME general banking branches having 60% or more of their advances to MSME sector, as specialized MSME branches for providing better service to this sector as a whole. As per the policy package announced by the Government of India for stepping up credit to MSME sector, the public sector banks will ensure specialized MSME branches in identified clusters/centres with preponderance of small enterprises to enable the entrepreneurs to have easy access to the bank credit and to equip bank personnel to develop requisite expertise. Though their core competence will be utilized for extending finance and other services to MSME sector, they will have operational flexibility to extend finance/render other services to other sectors/borrowers.

Q.6. How many such specialized branches for lending to MSMEs are there?

A.6. As reported by Scheduled Commercial Banks (SCBs), on March 2017, there are 2998 specialized MSME branches.

Q.7. How do banks assess the working capital requirements of borrowers?

A.7. The banks have been advised to put in place loan policies governing extension of credit facilities for the MSE sector duly approved by their Board of Directors (Refer circular RPCD.SME & NFS.BC.No.102/06.04.01/2008-09 dated May 4, 2009). Banks have, however, been advised to sanction limits after proper appraisal of the genuine working capital requirements of the borrowers keeping in mind their business cycle and short term credit requirement. As per Nayak Committee Report, working capital limits to SSI units is computed on the basis of minimum 20% of their estimated turnover up to credit limit of Rs.5 crore.

Q.8. Is there any provision for grant of composite loans by banks?

A.8. A composite loan limit of Rs.1 crore can be sanctioned by banks to enable the MSME entrepreneurs to avail of their working capital and term loan requirement through Single Window in terms of our Master Direction on lending to the MSME sector dated July 24, 2017. All scheduled commercial banks were advised by our circular RPCD.SME&NFS. BC.No.102/06.04.01/2008-09 on May 4, 2009 that the banks which have sanctioned term loan singly or jointly must also sanction working capital (WC) limit singly (or jointly, in the ratio of term loan) to avoid delay in commencement of commercial production thereby ensuring that there are no cases where term loan has been sanctioned and working capital facilities are yet to be sanctioned.
Q.9. What is Cluster financing?
A.9. Cluster based approach to lending is intended to provide a full-service approach to cater to the diverse needs of the MSE sector which may be achieved through extending banking services to recognized MSE clusters. A cluster based approach may be more beneficial (a) in dealing with well-defined and recognized groups (b) availability of appropriate information for risk assessment (c) monitoring by the lending institutions and (d) reduction in costs.
The banks have, therefore, been advised to treat it as a thrust area and increasingly adopt the same for SME financing. United Nations Industrial Development Organisation (UNIDO) has identified 388 clusters spread over 21 states in various parts of the country. The Ministry of Micro, Small and Medium Enterprises has also approved a list of clusters under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and Micro and Small Enterprises Cluster Development Programme (MSE-CDP) located in 121 Minority Concentration Districts. Accordingly, banks have been advised to take appropriate measures to improve the credit flow to the identified clusters.
Banks have also been advised that they should open more MSE focussed branch offices at different MSE clusters which can also act as counselling centres for MSEs. Each lead bank of the district may adopt at least one cluster (Refer circular RPCD.SME & NFS.No.BC.90/06.02.31/2009-10 dated June 29, 2010)
Q.10. What are the RBI guidelines on interest rates for loans disbursed by the commercial banks?
A.10. As part of the financial sector liberalisation, all credit related matters of banks including charging of interest have been deregulated by RBI and are governed by the banks' own lending policies. With a view to improve transparency in the methodology followed by banks for determining interest rates on advances and the efficiency of monetary policy transmission, from April 1, 2016, banks are required to sanction all their advances with reference to the Marginal cost of fund based lending rates (MCLR). In no case the interest rates on advances shall fall below MCLR. However, loans sanctioned under the Base rate/BPLR regime shall continue till the maturity or renewal. Banks shall have to provide an option to the customers to switch to the MCLR from Base rate/BPLR and this should not be treated as a foreclosure of existing facility.

Q.11. Can the MSE borrowers get collateral free loans from banks?

A.11. In terms of our circular RPCD.SME&NFS.BC.No.79/06.02.31/2009-10 dated May 6, 2010, banks are mandated not to accept collateral security in the case of loans upto Rs 10 lakh extended to units in the MSE sector. Further, in terms of our circular RPCD/PLNFS/BC.No.39/06.02.80/2002-04 dated November 3, 2003, banks may, on the basis of good track record and financial position of MSE units, increase the limit of dispensation of collateral requirement for loans up to Rs.25 lakh with the approval of the appropriate authority.

Q.12. What is the Credit Guarantee Fund Trust Scheme for MSEs?

A.12. The Ministry of MSME, Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with a view to facilitate flow of credit to the MSE sector without the need for collaterals / third party guarantees. The main objective of the scheme is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. The Credit Guarantee scheme (CGS) seeks to reassure the lender that, in the event of a MSE unit, which availed collateral - free credit facilities, failing to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 85 per cent of the outstanding amount in default.
The CGTMSE would provide cover for credit facility up to Rs. 200 lakh which have been extended by lending institutions without any collateral security and /or third party guarantees. A guarantee and annual service fee is charged by the CGTMSE to avail of the guarantee cover. For more details you may visit www.cgtmse.in.

Q.13. Is credit rating mandatory for the MSE borrowers?

A.13. Credit rating is not mandatory but it is in the interest of the MSE borrowers to get their credit rating done as it would help in credit pricing of the loans taken by them from banks.

Q.14. Why is credit rating of the MSME borrowers necessary?

A.14. With a view to facilitating credit flow to the MSME sector and enhancing the comfort-level of the lending institutions, the credit rating of MSME units done by reputed credit rating agencies should be encouraged. Banks are advised to consider these ratings as per availability and wherever appropriate structure their rates of interest depending on the ratings assigned to the borrowing MSME units.

Q.15. What are the guidelines for delayed payment of dues to the MSE borrowers?

A.15. With the enactment of the Micro, Small and Medium Enterprises Development (MSMED), Act 2006, for the goods and services supplied by the MSME units, payments have to be made by the buyers as under:
(i) The buyer is to make payment on or before the date agreed on between him and the supplier in writing or, in case of no agreement, before the appointed day. The agreement between seller and buyer shall not exceed more than 45 days.
(ii) If the buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank.
(iii) For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the interest as advised at (ii) above.
(iv) In case of dispute with regard to any amount due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, constituted by the respective State Government.
To take care of the payment obligations of large corporate borrowers to MSEs, banks have been advised that while sanctioning/renewing credit limits to their large corporate borrowers (i.e. borrowers enjoying working capital limits of Rs. 10 crore and above from the banking system), to fix separate sub-limits, within the overall limits, specifically for meeting payment obligations in respect of purchases from MSEs either on cash basis or on bill basis.
Banks were also advised to closely monitor the operations in the sub-limits, particularly with reference to their corporate borrowers’ dues to MSE units by ascertaining periodically from their corporate borrowers, the extent of their dues to MSE suppliers and ensuring that the corporates pay off such dues before the ‘appointed day’ /agreed date by using the balance available in the sub-limit so created. In this regard the relevant circular is circular IECD/5/08.12.01/2000-01 dated October 16, 2000 (reiterated on May 30, 2003, vide circular No. IECD.No.20/08.12.01/2002-03) available on our website.

Q.16. What is debt restructuring of advances?

A.16. A viable/potentially viable unit may apply for a debt restructuring if it shows early stage of sickness. In such cases the banks may consider to reschedule the debt for repayment, consider additional funds etc. A debt restructuring mechanism for units in MSME sector has been formulated and advised to all commercial banks. The detailed guidelines have been issued to ensure restructuring of debt of all eligible small and medium enterprises. Prudential guidelines on restructuring of advances have also been issued which harmonises the prudential norms over all categories of debt restructuring mechanisms (other than those restructured on account of natural calamities). The relevant circulars in this regard are circular DBOD.BP.BC.No.34/21.04.132/2005-06 dated September 8, 2005and circular DBOD.No.BP.BC.37/21.04.132/2008-09 dated August 27, 2008 which are available on our website www.rbi.org.in.

Q.17. How can a bank or creditor identify incipient stress in MSME account?

Before a loan account of a Micro, Small and Medium Enterprise turns into a Non-Performing Asset (NPA), banks or creditors should identify incipient stress in the account by creating three sub-categories under the Special Mention Account (SMA) category as given in the Table below:
SMA Sub-categoriesBasis for classification
SMA-0Principal or interest payment not overdue for more than 30 days but account showing signs of incipient stress
SMA-1Principal or interest payment overdue between 31-60 days
SMA-2Principal or interest payment overdue between 61-90 days
Q.18.What are the salient features of the guidelines on ‘Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs)’?
A.18 The salient features of the Framework are as under:
i) Before a loan account of an MSME turns into a Non-Performing Asset (NPA), banks or creditors should identify incipient stress in the account by creating three sub-categories under the Special Mention Account (SMA) category as given in the Framework.
ii) Any MSME borrower may also voluntarily initiate proceedings under this Framework.
iii) Committee approach to be adopted for deciding corrective action plan.
iv) Time lines have been fixed for taking various decisions under the Framework.

Q. 19. On which accounts are the provisions of the above Framework applicable?

A. 19. The provisions made in this framework shall be applicable to MSMEs having loan limits up to Rs.25 crore, including accounts under consortium or multiple banking arrangement (MBA).

Q.20. How does the committee resolve the stress in the accounts under the Framework?

A. 20. The Committee may explore various options to resolve the stress in the account. The Committee shall not endeavour to encourage a particular resolution option and may decide the CAP as per the specific requirements and position of each case. The options under CAP by the Committee may include:
i) Rectification;
ii) Restructuring;
iii) Recovery
For more details you may refer to circular no. FIDD.MSME & NFS.BC.No.21/06.02.31/2015-16 dated March 17, 2016.

Q. 21. What are the RBI guidelines on One Time Settlement Scheme (OTS) for MSEs for settlement of their NPAs?

A.21. Scheduled commercial banks have been advised in terms of our circular RPCD.SME&NFS. BC.No.102/06.04.01/2008-09 dated May 4, 2009 to put in place a non -discretionary One Time Settlement scheme duly approved by their Boards. The banks have also been advised to give adequate publicity to their OTS policies. (Refer circular RPCD.SME&NFS. BC.No.102/06.04.01/2008-09 dated May 4, 2009)

Q.22. Apart from the loans and other banking facilities, do the banks provide any guidance to MSE entrepreneurs?

A.22. Yes, banks provide following services to the MSE entrepreneurs:
(i) Rural Self Employment Training Institutes (RSETIs)
At the initiative of the Ministry of Rural Development (MoRD), Rural Self Employment Training Institutes (RSETIs) have been set up by various banks all over the country. These RSETIs are managed by banks with active co-operation from the Government of India and State Governments. RSETIs conduct various short duration (ranging preferably from 1 to 6 weeks) skill upgradation programmes to help the existing entrepreneurs compete in this ever-changing global market. RSETIs ensure that a list of candidates trained by them is sent to all bank branches of the area and co-ordinate with them for grant of financial assistance under any Govt. sponsored scheme or direct lending.
(ii) Financial Literacy and consultancy support:
Banks have been advised to either separately set up special cells at their branches, or vertically integrate this function in the Financial Literacy Centres (FLCs) set up by them, as per their comparative advantage. Through these FLCs, banks provide assistance to the MSE entrepreneurs in regard to financial literacy, operational skills, including accounting and finance, business planning etc. (Refer circular RPCD.MSME & NFS.BC.No.20/06.02.31/2012-13 dated August 1, 2012)
Further, with a view to providing a guide for the new entrepreneurs in this sector, a booklet titled “Nurturing Dreams, Empowering Enterprises – Financing needs of Micro and Small Enterprises – A guide” has been launched on August 6, 2013 by the Reserve Bank. The booklet has been placed on our website www.rbi.org.in under the following path & URL:
RBI main page – Financial Education – Downloads – For Entrepreneurs
(http://rbi.org.in/financialeducation/FinancialEnterprenure.aspx)
Also, Financial Literacy Centres operated by Scheduled commercial Banks have been advised vide our circular FIDD.FLC.BC.No.22/12.01.018/2016-17 dated March 02, 2017 to conduct target specific financial literacy camps wherein one of the target groups identified is MSEs.

Q.23. What is the role of Banking Codes and Standard Board of India (BCSBI) for MSEs?

A.23. The Banking Codes and Standards Board of India (BCSBI) has formulated a Code of Bank's Commitment to Micro and Small Enterprises. The Code sets minimum standards of banking practices for banks to follow when they are dealing with Micro and Small Enterprises (MSEs) as defined in the Micro Small and Medium Enterprises Development (MSMED) Act, 2006. It provides protection to MSEs and explains how banks are expected to deal with MSEs for their day to-day operations and in times of financial difficulty. The Code may be accessed on the website of BCSBI www.bcsbi.org.in.

Q. 24. Is there a guideline for facilitating timely and adequate credit flow during ‘Life Cycle’ of MSEs?

A.24. Yes, guidelines on ‘Streamlining flow of credit to Micro and Small Enterprises (MSEs) for facilitating timely and adequate credit flow during their ‘Life Cycle’ were issued to Scheduled Commercial Banks (SCBs) vide our circular FIDD.MSME & NFS.BC.No.60/06.02.31/2015-16 dated August 25, 2015.

Q.25. What are the salient features of the guidelines on ‘Streamlining flow of credit to Micro and Small Enterprises (MSEs) for facilitating timely and adequate credit flow during their ‘Life Cycle’?

A. 25. In terms of the captioned guidelines, banks have been advised to review and tune their existing lending policies to the MSE sector by incorporating therein the following provisions so as to facilitate timely and adequate availability of credit to viable MSE borrowers especially during the need of funds in unforeseen circumstances:
i) To extend standby credit facility in case of term loans
ii) Additional working capital to meet with emergent needs of MSE units
iii) Mid-term review of the regular working capital limits, where banks are convinced that changes in the demand pattern of MSE borrowers require increasing the existing credit limits of the MSEs, every year based on the actual sales of the previous year.
iv) Timelines for Credit Decisions

Q.26. What is Trade Receivables Discounting System (TReDS)?

A. 26. The objective of TReDS is to create Electronic Bill Factoring Exchanges which could electronically accept and settle bills so that MSMEs could encash their receivables without delay. This will not only give them greater access to finance but will also put greater discipline on corporates to pay their dues on time. For more details you may refer to RBI guidelines for setting up and operating TReDS on https://www.rbi.org.in/Scripts/FS_PressRelease.aspx?prid=32664&fn=9.
Q.27. What is the Certified Credit Counsellors (CCC) Scheme?
A.27 In terms of announcement in para 48 of First Bi-monthly Monetary Policy Statement, 2016-17, Reserve Bank laid down a framework for accreditation of credit counsellors which was shared with SIDBI for laying down operational guidelines. Accordingly, the scheme was launched by SIDBI in July 2017. As per the scheme, Certified Credit Counsellors are institutions or individuals registered with SIDBI who shall assist MSMEs in preparing project reports in a professional manner which would, in turn, help banks make more informed credit decisions.

Priority Sector Lending - Targets and Classification- As Per RBI Guidelines .....

FREQUENTLY ASKED QUESTIONS


1. What are the different categories under priority sector?
Priority Sector includes the following categories:
(i) Agriculture
(ii) Micro, Small and Medium Enterprises
(iii) Export Credit
(iv) Education
(v) Housing
(vi) Social Infrastructure
(vii) Renewable Energy
(viii) Others
2. What are the Targets and Sub-targets for banks under priority sector?
The targets and sub-targets for banks under priority sector are as follows:
CategoriesDomestic scheduled commercial banks (excluding Regional Rural Banks and Small Finance Banks) and Foreign banks with 20 branches and aboveForeign banks with less than 20 branches
Total Priority Sector
40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.
40 per cent of Adjusted Net Bank Credit or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, to be achieved in a phased manner by 2020.
Agriculture #18 per cent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.

Within the 18 percent target for agriculture, a target of 8 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher is prescribed for Small and Marginal Farmers.
Not applicable
Micro Enterprises7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher.Not applicable
Advances to Weaker Sections10 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higherNot applicable
# Domestic banks have been directed to ensure that their overall direct lending to non-corporate farmers does not fall below the system-wide average of the last three years achievement.
3. What are the categories under ‘Agriculture’?
The activities covered under Agriculture are classified under three sub-categories viz. Farm credit, Agriculture infrastructure and Ancillary activities.
4. Whether limits are prescribed for loans sanctioned to Micro, Small and Medium Enterprises to be classified as priority sector?
For classification under priority sector, no limits are prescribed for bank loans sanctioned to Micro, Small and Medium Enterprises engaged in the manufacture or production of goods under any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and as notified by the Government from time to time. The manufacturing enterprises are defined in terms of investment in plant and machinery under MSMED Act 2006.
Bank loans to Micro, Small and Medium Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006, irrespective of loan limits, are eligible for classification under priority sector, w.e.f. March 1, 2018.
5. What is the applicable limit and purpose for social infrastructure loans under priority sector?
Bank loans up to a limit of ₹ 5 crore per borrower for building social infrastructure for activities namely schools, health care facilities, drinking water facilities and sanitation facilities (including loans for construction/ refurbishment of toilets and improvement in water facilities in the household) in Tier II to Tier VI centres are eligible for classification under priority sector.
Bank credit to Micro Finance Institutions (MFI) extended for on-lending to individuals/ members of SHGs/ JLGs for water and sanitation facilities is also eligible for classification as priority sector loans under ‘Social Infrastructure’ subject to certain criteria.
6. What is the applicable limit and purpose for loans for renewable energy under priority sector?
Bank loans up to a limit of ₹ 15 crore to borrowers for purposes like solar based power generators, biomass based power generators, wind mills, micro-hydel plants and for non-conventional energy based public utilities viz. street lighting systems, and remote village electrification are eligible to be classified under priority sector loans under ‘Renewable Energy’. For individual households, the loan limit is ₹ 10 lakh per borrower.
7. What is the loan limit for education under priority sector?
Loans to individuals for educational purposes including vocational courses upto ₹ 10 lakh irrespective of the sanctioned amount are eligible for classification under priority sector.
8. What is the limit for housing loans under priority sector?
Loans to individuals up to ₹ 28 lakh in metropolitan centres (with population of ten lakh and above) and loans up to ₹ 20 lakh in other centres for purchase/construction of a dwelling unit per family, are eligible to be considered as priority sector provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed ₹ 35 lakh and ₹ 25 lakh, respectively. Housing loans to banks’ own employees are not eligible for classification under priority sector.
9. What is included under Weaker Sections under priority sector?
Priority sector loans to the following borrowers are eligible to be considered under Weaker Sections category:-
No.Category
1.Small and Marginal Farmers
2.Artisans, village and cottage industries where individual credit limits do not exceed ₹ 1 lakh
3.Beneficiaries under Government Sponsored Schemes such as National Rural Livelihoods Mission (NRLM), National Urban Livelihood Mission (NULM) and Self Employment Scheme for Rehabilitation of Manual Scavengers (SRMS)
4.Scheduled Castes and Scheduled Tribes
5.Beneficiaries of Differential Rate of Interest (DRI) scheme
6.Self Help Groups
7.Distressed farmers indebted to non-institutional lenders
8.Distressed persons other than farmers, with loan amount not exceeding ₹ 1 lakh per borrower to prepay their debt to non-institutional lenders
9.Individual women beneficiaries up to ₹ 1 lakh per borrower
10.Persons with disabilities
11.Overdrafts upto ₹ 5,000/- under Pradhan Mantri Jan-DhanYojana (PMJDY) accounts, provided the borrowers’ household annual income does not exceed ₹ 100,000/- for rural areas and ₹ 1,60,000/- for non-rural areas
12.Minority communities as may be notified by Government of India from time to time
In States, where one of the minority communities notified is, in fact, in majority, item (12) will cover only the other notified minorities. These States/ Union Territories are Jammu & Kashmir, Punjab, Meghalaya, Mizoram, Nagaland and Lakshadweep.
10. Is bank credit to Micro Finance Institutions (MFIs) treated as priority sector lending?
Bank credit to MFIs (NBFC-MFIs, societies, trusts, etc) extended for on-lending to individuals and also to members of SHGs/JLGs is eligible for categorisation as priority sector advance under respective categories viz., Agriculture, Micro, Small and Medium Enterprises, Social Infrastructure and Others subject to the criteria laid down in para 19 of the Master Direction FIDD.CO.Plan.1/04.09.01/2016-17 dated July 7, 2016 (updated as on April 16, 2018) on Priority Sector Lending – Targets and Classification.
11. What are Priority Sector Lending Certificates (PSLCs)?
Priority Sector Lending Certificates (PSLCs) are a mechanism to enable banks to achieve the priority sector lending target and sub-targets by purchase of these instruments in the event of shortfall. This also incentivizes surplus banks as it allows them to sell their excess achievement over targets thereby enhancing lending to the categories under priority sector. Under the PSLC mechanism, the seller sells fulfilment of priority sector obligation and the buyer buys the obligation with no transfer of risk or loan assets.
12. What are the instructions to Banks with regard to acknowledgement of priority sector loan applications?
Banks should provide acknowledgement for loan applications received under priority sector loan. A time limit is required to be prescribed by the Bank Board within which the bank communicates its decision in writing to the applicants.
13. What is the rate of interest for loans under priority sector?
The rate of interest on bank loans will be as per directives issued by the Department of Banking Regulation of RBI, from time to time. Priority sector guidelines do not lay down any preferential rate of interest for priority sector loans.
14. Where are the latest instructions on Priority Sector Lending available?
The latest instructions on Priority Sector Lending – Targets and Classification have been issued vide RBI Master Direction FIDD.CO.Plan.1/04.09/01/2016-17 dated July 7, 2016 (updated as on April 16, 2018)
15. What is the effective date of removal of credit cap on MSME (Services) for classification under priority sector?
With regard to Para 3 of FIDD Circular dated March 1, 2018, it is clarified that the banks can reckon the entire outstanding portfolio to MSMEs, engaged in providing or rendering of services as defined in terms of equipment under MSME Act, 2006, under priority sector without any credit cap, from the date of the circular, i.e., March 1, 2018.

Thursday 22 March 2018

FREQUENTLY ASKED QUESTIONS ON FREQUENTLY ASKED QUESTIONS ON Remittance of Assets (FEMA 1999)

Remittance of Assets
These FAQs attempt to put in place the common queries that users have on the subject in easy to understand language. However, for conducting a transaction, the Foreign Exchange Management Act, 1999 (FEMA) and the Regulations made or directions issued thereunder may be referred to. The relevant principal regulations are the Foreign Exchange Management (Remittance of Assets) Regulations, 2016 issued vide Notification No. FEMA 13 (R)/2016-RB dated April 01, 2016. The directions issued are consolidated in the Master Direction No 13 on Remittance of Assets.
Q1. What is meant by Remittance of Assets?
Q2. What are the assets out of/from which funds may be remitted and by whom?
Q.3 Who is a Resident?
Q.4 What is meant by ‘not permanently resident’?
Q5. Which are the cases related to Remittance of Assets for which prior approval of RBI is to be sought for effecting the remittance?
Q6. What are the Tax implications in respect of Remittance of Assets?
Q1. What is meant by Remittance of Assets?
Answer: ‘Remittance of assets' means remittance outside India of funds representing
a deposit with a bank or a firm or a company of:
  1. provident fund balance
  2. superannuation benefits
  3. amount of claim or maturity proceeds of Insurance policy
  4. sale proceeds of shares, securities, immovable property or any other asset held in India
Q2. What are the assets out of/ from which funds may be remitted and by whom?
Answer:
A foreign national of non-Indian origin (other than Nepal/ Bhutan/ PIO)An NRI/ PIOIndian entityA branch or office established in India by a person resident outside India
1. The person has retired from employment in India.
2. Inherited assets from a person referred to in Sec 6(5)1 of FEMA
3. The person is a non-resident widow/ widower and has inherited assets from her/ his deceased spouse who was an Indian national resident in India.
May remit up to USD 1 Million in a financial year
1. From the balances of NRO account – subject to declaration*
2. Sale proceeds of assets
3. Assets acquired from legacy/ inheritance/ deed of settlement
May remit up to USD 1 Million in a financial year
*Where the remittance is to be made from the balances held in the NRO account, the Authorised Dealer should obtain an undertaking from the account holder stating that “the said remittance is sought to be made out of the remitter’s balances held in the account arising from his/ her legitimate receivables in India and not by borrowing from any other person or a transfer from any other NRO account and if such is found to be the case, the account holder will render himself/ herself liable for penal action under FEMA.”
Its contribution towards PF/ superannuation fund/ pension for expatriate employee who are resident but not permanently resident.Remit its winding up proceeds after submission of requisite documents
Q.3 Who is a Resident?
Ans. Resident as defined in Sec 2(v) 2 of FEMA, 1999. Further, the onus is on the individual to prove his/ her residential status, if questioned by any authority.
Q.4 What is meant by ‘not permanently resident’?
Ans. Not permanently resident means a person resident in India for employment of a specified duration (irrespective of length) or for a specific job duration which does not exceed three years.
Q5. Which are the cases related to Remittance of Assets for which prior approval of RBI is to be sought for effecting the remittance?
Answer: RBI approval is required if:
(i) Remittance is in excess of USD 1,000,000 (US Dollar One million only) per financial year:
  1. on account of legacy, bequest or inheritance to a citizen of foreign state, resident outside India; and
  2. by NRIs/ PIOs out of the balances held in NRO accounts/ sale proceeds of assets/ the assets acquired by way of inheritance/ legacy.
(ii) Hardship will be caused to a person if remittance from India is not made to such a person.
Q6. What are the Tax implications in respect of remittance of assets?
Ans. All remittances are subject to payment of taxes as applicable in India – Authorised Dealers are to convince themselves on this aspect.

1 A person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India.
2 Section 2(v): "person resident in India" means-
(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include-
(A) a person who has gone out of India or who stays outside India, in either case-
  1. for or on taking up employment outside India, or
  2. for carrying on outside India a business or vocation outside India, or
  3. for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than-
  1. for or on taking up employment in India, or
  2. for carrying on in India a business or vocation in India, or
  3. for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;