Exim Bank's Line of Credit of USD 41.96 million

RBI/2014-15/144 A. P. (DIR Series) Circular No. 12

Exim Bank's Line of Credit of USD 41.96 million

to the Government of the Republic of Senegal

Export-Import Bank of India (Exim Bank) has entered into an Agreement dated December 06, 2013 with the Government of the Republic of Senegal for making available to the latter, a Line of Credit (LOC) of USD 41.96 million (USD Forty one million and nine hundred and sixty thousand) for financing eligible goods, machinery, equipment and services including consultancy services from India for the purpose of financing purchase of setting up of Modern Abattoir, Meat processing, Cold Storage, Rendering and Tannery Plant and Market Place in Senegal. The goods, machinery, equipment and services including consultancy services from India for exports under this Agreement are those which are eligible for export under the Foreign Trade Policy of the Government of India and whose purchase may be agreed to be financed by the Exim Bank under this Agreement. Out of the total credit by Exim Bank under this Agreement, the goods and services including consultancy services of the value of at least 75 per cent of the contract price shall be supplied by the seller from India and the remaining 25 percent goods and services may be procured by the seller for the purpose of Eligible Contract from outside India.

2. The Credit Agreement under the LOC is effective from June 25, 2014 and the date of execution of Agreement is December 06, 2013. Under the LOC, the last date for opening of Letters of Credit and Disbursement will be 48 months from the scheduled completion date(s) of contract(s) in the case of project exports and 72 months (December 05, 2019) from the execution date of the Credit Agreement in the case of supply contracts.

3. Shipments under the LOC will have to be declared on GR / SDF Forms as per instructions issued by the Reserve Bank from time to time.

4. No agency commission is payable under the above LOC. However, if required, the exporter may use his own resources or utilize balances in his Exchange Earners’ Foreign Currency Account for payment of commission in free foreign exchange. Authorised Dealer Category- l (AD Category-l) banks may allow such remittance after realization of full payment of contract value subject to compliance with the prevailing instructions for payment of agency commission.

5. AD Category-I banks may bring the contents of this circular to the notice of their exporter constituents and advise them to obtain full details of the Line of Credit from the Exim Bank’s office at Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or log on to www.eximbankindia.in.

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

Yours faithfully,

(C. D. Srinivasan)

Chief General Manager

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Foreign investment in India by SEBI registered Long term investors

RBI/2014-15/145 A. P. (DIR Series) Circular No. 13

Foreign investment in India by SEBI registered Long term investors in
Government dated Securities

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000-RB dated May 3, 2000, as amended from time to time, in terms of which SEBI registered Foreign Institutional Investors (FIIs), SEBI registered Qualified Foreign Investors (QFIs) and long term investors registered with SEBI may purchase, on repatriation basis Government securities and non-convertible debentures (NCDs) / bonds issued by an Indian company subject to such terms and conditions as mentioned therein and limits as prescribed for the same by RBI and SEBI from time to time.

2. Attention of AD Category-I banks is also invited to A.P. (DIR Series) Circular No.99 dated January 29, 2014 in terms of which the present limit for investments by FIIs, QFIs and long term investors in Government securities stands at USD 30 billion, out of which a sub-limit of USD 10 billion is available for investment by long term investors in Government dated securities.

3. On a review, it has been decided to enhance the investment limit in government securities available to FIIs/QFIs/FPIs by USD 5 billion by correspondingly reducing the amount available to long term investor from USD 10 billion to USD 5 billion within the overall limit of USD 30 billion. The incremental investment limit of USD 5 billion shall be required to be invested in government bonds with a minimum residual maturity of three years. Further, all future investment against the limit vacated when the current investment by an FII/QFI/FPI runs off either through sale or redemption shall also be required to be made in government bonds with a minimum residual maturity of three years. It is, however, clarified that there will be no lock-in period and FIIs/QFIs/FPIs shall be free to sell the securities (including that are presently held with less than three years of residual maturity) to the domestic investors.

4. The operational guidelines in this regard will be issued by SEBI.

5. All other existing conditions for investment in Government securities remain unchanged.

6. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

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

Yours faithfully,

(B.P.Kanungo)
Principal Chief General Manager

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FDI in India - Issue/Transfer of Shares or Convertible Debentures - Revised pricing guidelines

RBI/2014-15/129
A. P. (DIR Series) Circular No. 4

Foreign Direct Investment (FDI) in India -
Issue/Transfer of Shares or Convertible Debentures
- Revised pricing guidelines

Attention of Authorized Dealers Category – I (AD Category - I) banks is invited to Regulation 10(A)(b)(i), para 5 of Schedule 1, para 1(5) of Schedule 2 and para 2(iv) of Schedule 2A to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 (the Principal Regulations) notified vide Notification No. FEMA.20/2000-RB dated May 3, 2000 as amended from time to time, in terms of which, transfer/issue of shares of an Indian company is subject to pricing guidelines stipulated by the Reserve Bank and to A.P. (DIR Series) Circular No. 49 dated May 04, 2010, depicting the comprehensive position in this regard.

2. Attention of AD Category-I banks is also invited to Regulation 9 of the Principal Regulations read with A.P. (DIR Series) Circular No. 86 dated January 9, 2014 in terms of which optionality clauses have been allowed in equity shares and compulsorily and mandatorily convertible preference shares/debentures to be issued to a person resident outside India under the Foreign Direct Investment (FDI) scheme subject to conditions mentioned therein.

3. The extant pricing guidelines in respect of transfer/issue of shares and for exit from investment in equity shares with or without optionality clauses of listed/unlisted Indian companies have since been reviewed so as to provide greater freedom and flexibility to the parties concerned under the FDI framework. The new pricing guidelines shall be as under:

(i) In case of listed companies

(a) The issue and transfer of shares including compulsorily convertible preference shares and compulsorily convertible debentures shall be as per the SEBI guidelines;

(b) The pricing guidelines for FDI instruments with optionality clauses shall continue to be in accordance with A.P. (DIR Series) Circular No. 86 dated January 9, 2014, i.e., the non-resident investor shall be eligible to exit at the market price prevailing on the recognised stock exchanges subject to lock-in period as stipulated, without any assured return.

(ii) In case of unlisted companies

The issue and transfer of shares including compulsorily convertible preference shares and compulsorily convertible debentures with or without optionality clauses shall be at a price worked out as per any internationally accepted pricing methodology on arm’s length basis. Thus, the guiding principle will be that the non-resident investor is not guaranteed any assured exit price at the time of making such investment/agreement and shall exit at a fair price computed as above at the time of exit subject to lock-in period requirement as applicable in terms of A.P. (DIR Series) Circular No. 86 dated January 9, 2014.

4. The changes in the existing pricing guidelines for FDI applicable to transfer/issue of shares and for exit from foreign direct investment with optionality clauses for the unlisted Indian companies are given in the Annex 1 and Annex 2 respectively.

5. An Indian company taking on record in its books any transfer of its shares or convertible debenture by way of sale from a resident to a non-resident and a non-resident to a resident shall disclose in its balance sheet for the financial year, in which the transaction took place, the details of valuation of share or convertible debentures, the pricing methodology adopted for the same as well as the agency that has given/certified the valuation.

6. These directions shall come into effect from the date of the publication of the relative Notification in the Official Gazette.

7. All the other instructions of A. P. (DIR Series) Circular No.16 dated October 4, 2004 read with A.P. (DIR Series) Circular No.49 dated May 4, 2010 and A.P. (DIR Series) Circular No. 86 dated January 9, 2014 shall remain unchanged.

8. AD Category - I banks may bring the contents of this circular to the notice of their constituents and customers.

9 Reserve Bank has since amended the Principal Regulations through the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Seventh Amendment) Regulations, 2014 notified vide Notification No. FEMA.306/2014-RB dated May 23, 2014 c.f. G.S.R. No. 435(E) dated July 8, 2014.

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

Yours faithfully,

(B.P. Kanungo)
Principal Chief General Manager

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Annex 1

(A.P. (DIR Series) Circular No. 4 dated 15.07.2014)

Sr. No.	Issue/Transfer of Shares	Existing Provisions	Revised Provisions
1.	Issue of Shares	Issue of Shares to non-residents Price of shares issued to persons resident outside India under this Schedule, shall not be less than (a) the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company is listed on any recognised stock exchange in India; (b) the fair valuation of shares done by a SEBI registered Category - I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method, where the shares of the company is not listed on any recognised stock exchange in India ; and (c) the price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by the Reserve Bank from time to time, where the issue of shares is on preferential allotment.	Issue of Shares to non-residents Price of shares issued to persons resident outside India under this Schedule, shall not be less than No Change in existing clause (a) (b) the fair valuation of shares done as per any internationally accepted pricing methodology for valuation of shares on arm’s length basis, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker where the shares of the company are not listed on any recognised stock exchange in India This provision is omitted
2.	Transfer of Shares	Transfer by Resident to Non-resident(i.e. to foreign national, NRI, FII and incorporated non-resident entity other than erstwhile OCB) (a) where shares of an Indian company are listed on a recognized stock exchange in India, the price of shares transferred by way of sale shall not be less than the price at which a preferential allotment of shares can be made under the SEBI Guidelines, as applicable, provided that the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date of purchase or sale of shares. (b) where the shares of an Indian company are not listed on a recognized stock exchange in India, the transfer of shares shall be at a price not less than the fair value to be determined by a SEBI registered Category – I - Merchant Banker or a Chartered Accountant as per the discounted free cash flow method. The price per share arrived at should be certified by a SEBI registered Category-I-Merchant Banker / Chartered Accountant.	Transfer by Resident to Non-resident(i.e. to foreign national, NRI, FII, QFI, RFPI and incorporated non-resident entity other than erstwhile OCB) No Change in the existing clause (a) (b) where the shares of an Indian company are not listed on a recognized stock exchange in India, the transfer of shares shall be at a price not less than the fair value worked out as per any internationally accepted pricing methodology for valuation of shares on arm’s length basis which should be duly certified by a Chartered Accountant or a SEBI registered Merchant Banker.
3.	Transfer of Shares	Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national, NRI and FII) to Resident Price of shares transferred by way of sale, by non-resident to resident shall not be more than the minimum price at which the transfer of shares can be made from a resident to a non-resident as given in para 2 above.	Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national, NRI, FII, QFI and RFPI) to Resident No Change in the existing clause

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Annex 2

(A.P. (DIR Series) Circular No.4 dated 15.07.2014 )

c.f. Annex to A.P.(DIR Series) Circular No. 86 dated January 9, 2014	Earlier condition	Revised condition
Para 2(b)	(ii) In case of unlisted company, the non-resident investor shall be eligible to exit from the investment in equity shares of the investee company at a price not exceeding that arrived at on the basis of Return on Equity (RoE) as per the latest audited balance sheet. Any agreement permitting return linked to equity as above shall not be treated as violation of FDI policy/FEMA Regulations. Note: For the above purpose, RoE shall mean Profit After Tax / Net Worth; Net Worth would include all free reserves and paid up capital. (iii) Investments in Compulsorily Convertible Debentures (CCDs) and Compulsorily Convertible Preference Shares (CCPS) of an investee company may be transferred at a price worked out as per any internationally accepted pricing methodology at the time of exit duly certified by a Chartered Accountant or a SEBI registered Merchant Banker. The guiding principle would be that the non-resident investor is not guaranteed any assured exit price at the time of making such investment/agreement and shall exit at the price prevailing at the time of exit, subject to lock-in period requirement, as applicable.	(ii) In case of an unlisted company, the non-resident investor shall be eligible to exit from the investment in equity shares, Compulsorily Convertible Debentures (CCDs) and Compulsorily Convertible Preference Shares (CCPS) of the investee company at a price not exceeding that arrived at as per any internationally accepted pricing methodology on arm’s length basis, duly certified by a Chartered Accountant or a SEBI registered Merchant Banker. The guiding principle would be that the non-resident investor is not guaranteed any assured exit price at the time of making such investment/agreements and shall exit at the fair price computed as above at the time of exit, subject to lock-in period requirement, as applicable.

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Issue of Long Term Bonds by Banks – Financing of Infrastructure and Affordable Housing

RBI/2014-15/127 DBOD.BP.BC.No.25/08.12.014/2014-15  Issue of Long Term Bonds by Banks – Financing of Infrastructure and Affordable Housing In the Union Budget 2014-15, presented on July 10, 2014, the Hon’ble Finance Minister announced that: “131. Long term financing for infrastructure has been a major constraint in encouraging larger private sector participation in this sector. On the asset side, banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure. On the liability side, banks will be permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending (PSL).” 2. While flexible structuring for long term loans to infrastructure sector on the asset side of the banks’ balance sheets is dealt with separately vide our circular DBOD.BP.BC.No.24 /21.04.132/2014-15 dated July 15, 2014, this circular addresses the liability side of the banks’ balance sheets; raising long term funds for lending to key infrastructure. 3. Apart from what is technically defined as infrastructure, affordable housing is another segment of the economy which both requires long term funding and is of critical importance. Government has stressed the importance of availability of cheap credit to make housing affordable for the Economically Weaker Sections (EWS), Lower Income Group (LIG) and Medium Income Group (MIG) segments of the population. Accordingly, the Reserve Bank intends to ease the way for banks to raise long term resources to finance their long term loans to infrastructure as well as affordable housing. This will help promote both growth and stability, as well as improve the supply side. 4. In this context, a reference is invited to our circular DBOD.No.BP.BC.90/21.01.002/2003-04 dated June 11, 2004 on ‘Issue of Long-term Bonds by Banks’, whereby banks were allowed to issue long term bonds (other than which qualify as Tier II capital) with a minimum maturity of 5 years to the extent of their exposure of residual maturity of more than 5 years to the infrastructure sector, in order to facilitate banks to raise long-term resources for funding their long-term commitments and concurrently to assist banks in reducing asset-liability mismatches in the longer term maturities. 5. While banks have been raising resources in a significant way by way of issuance of Tier II capital bonds, it is, however, observed that issuance of long term bonds for funding loans to infrastructure sector, has not picked up at all, even though both are similar in terms of minimum tenor and application of reserve requirements. 6. In view of the above observations and in order to ensure adequate credit flow to infrastructure sector as also towards the affordable housing needs of the country by encouraging banks to optimally utilize the long-term financing avenues already available to them to finance their lending to these sectors, the prudential guidelines on this issue have been reviewed with a view to minimize certain regulatory pre-emptions. Accordingly, instructions given in the above-mentioned circular dated June 11, 2004 have been modified and the revised guidelines for issue of long-term bonds are given in the Annex to this circular. Yours faithfully, (Sudarshan Sen) Chief General Manager-in-Charge Annex Issue of Long Term Bonds by Banks – Financing of Infrastructure and Affordable Housing Banks can issue long-term bonds with a minimum maturity of seven years to raise resources for lending to (i) long term projects in infrastructure sub-sectors, and (ii) affordable housing. 2. Definitions (i) Infrastructure Sub-sectors: Sub-sectors as defined in our circular DBOD.BP.BC.No.66/08.12.014/2013-14 dated November 25, 2013 on Financing of Infrastructure - Definition of 'Infrastructure Lending' updated from time to time (ii) Affordable Housing: For the purpose of this circular, lending to affordable housing is defined as housing loans eligible under priority sector lending by the RBI (please see the Appendix and as updated from time to time), and also housing loans to individuals upto Rs. 50 lakhs for houses of values upto Rs. 65 lakhs located in the six metropolitan centres viz. Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad and Rs. 40 lakhs for houses of values upto Rs. 50 lakhs in other centres for purchase/construction of dwelling unit per family. RBI will periodically review the definition of affordable housing on account of inflation. 3. Type of bond The instrument shall be fully paid, redeemable and unsecured and would rank pari-passu along with other uninsured, unsecured creditors. 4. Currency of issue The bonds shall be denominated in Indian Rupees. 5. Maturity period The minimum maturity period of the long-term bonds shall be seven years. 6. Amount There will not be any restriction on the quantum of such bonds to be issued by banks; however, the regulatory incentives will be restricted to the bonds that are used to incrementally finance long term projects in infrastructure and loans for affordable housing. Any incremental infrastructure and affordable housing loans acquired from other banks and financial institutions to be reckoned for regulatory incentives will require prior approval of RBI. Recognizing that current outstanding lending to infrastructure and affordable housing will mature steadily (the regulations below assume 6 years), the eligible credit to infrastructure and affordable housing will be computed as per the schedule and formulae given in paragraph 7 below. 7. Credit eligible for regulatory incentives Period Eligible Credit = EC From the date of circular till March 31, 2015 B - 0.84A April 1, 2015 – March 31, 2016 B - 0.7A April 1, 2016 – March 31, 2017 B - 0.56A April 1, 2017 – March 31, 2018 B - 0.42A April 1, 2018 – March 31, 2019 B - 0.28A April 1, 2019 – March 31, 2020 B - 0.14A April 1, 2020 onwards B Where, A = Outstanding ‘Standard’ loans1 to Infrastructure sector (project loans) and affordable housing on the date of this circular B = Outstanding ‘Standard’ loans1 to Infrastructure sector (project loans) and affordable housing on the date of issuance of the bonds Regulatory Incentives 8. Compliance with reserve requirements These bonds will be exempted from computation of net demand and time liabilities (NDTL) and would therefore not be subjected to CRR/SLR requirements. However, this exemption will be subject to a ceiling of the eligible credit mentioned in paragraph 7 above. Therefore, DTL for the bank which has issued long term bonds in terms of this circular will be computed as given below: Demand and Time Liabilities (DTL) for the purpose of maintaining CRR & SLR calculated in terms of Master Circular DBOD.No.Ret.BC.11/12.01.001/2014-15 dated July 1, 2014 on ‘Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR)’ as updated from time to time. I Amount of long-term credit eligible for regulatory incentives as per paragraph 7 above. EC Outstanding long term bonds issued to finance infrastructure loans and affordable housing loans, in terms of this circular LB DTL for the bank which has issued long term bonds in terms of this circular I – Min (EC and LB) 9. Relaxation in priority sector lending norms Eligible bonds will also get exemption in computation of Adjusted Net Bank Credit (ANBC) for the purpose of Priority Sector Lending (PSL), as per the computation given below: Bank Credit in India (As prescribed in item No.VI of Form ‘A’ (Special Return as on March 31st ) under Section 42 (2) of the RBI Act, 1934. II Bills Rediscounted with RBI and other approved Financial Institutions + Advances extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption from CRR/SLR requirements, till their maturity. III Net Bank Credit (NBC)* IV = (II-III) Bonds/debentures in Non-SLR categories under HTM category + other investments eligible to be treated as priority sector + Outstanding Deposits, as on preceding March 31st, under RIDF, Warehouse Infrastructure Fund, Short term Co-operative Rural Credit Refinance Fund and Short Term RRB Fund with NABARD V ANBC (Computation as given in Master Circular RPCD.CO.Plan.BC 10/04.09.01/2014-15 dated July 1, 2014 on Priority Sector Lending- Targets and Classification) VI = IV+V ANBC after issuance of long-term bonds for infrastructure and affordable housing VI - Min (EC and LB) * For the purpose of priority sector only. Banks should not deduct / net any amount like provisions, accrued interest, etc. from NBC. Note - It has been observed that some banks are subtracting prudential write off at Corporate/Head Office level while reporting Bank Credit as above. In such cases it must be ensured that bank credit to priority sector and all other sub-sectors so written off should also be subtracted category wise from priority sector and sub-target achievement. All types of loans, investments or any other item which are treated as eligible for classifications under priority sector target/sub-target achievement should also form part of Adjusted Net Bank Credit. Other requirements 10. Options The bonds should be issued in plain vanilla form without call or put option. 11. Rate of interest The bonds may be issued with a fixed or floating rate of interest. The floating rate of interest shall be referenced to market determined benchmark rates. 12. Method of issueThe bonds may be issued through a public issue or private placement in full compliance with SEBI guidelines / norms including mandatory rating and listing. 13. Cross-holding Cross-holding of such bonds among the banks will not be permitted. 14. Eligibility for deposit insurance The bonds will not be eligible for deposit insurance. 15. Regulatory/Statutory compliance Banks issuing long-term bonds shall be required to comply with all relevant statutory and regulatory requirements. 16. FEMA requirement Banks shall comply with the FEMA requirements, if applicable . 17. Reporting requirements The banks issuing long term bonds shall submit a report to Department of Banking Supervision (DBS), Reserve Bank of India giving details of the bonds issued, such as amount raised, maturity of the instrument, rate of interest, together with a copy of the offer document, soon after the issue is completed. 18. Review The RBI will review these instructions periodically, particularly those relating to computation of DTL for the purpose of exemption from CRR/SLR as also computation of ANBC for the purpose of PSL. Appendix Housing Loans Eligible under Priority Sector Lending (i) Loans to individuals up to Rs.25 lakh in metropolitan centres with population above ten lakh and Rs.15 lakh in other centres for purchase/construction of a dwelling unit per family excluding loans sanctioned to bank’s own employees. (ii) Loans for repairs to the damaged dwelling units of families up to Rs.2 lakh in rural and semi- urban areas and up to Rs.5 lakh in urban and metropolitan areas. (iii) Bank loans to any governmental agency for construction of dwelling units or for slum clearance and rehabilitation of slum dwellers subject to a ceiling of Rs.10 lakh per dwelling unit. (iv) The loans sanctioned by banks for housing projects exclusively for the purpose of construction of houses only to economically weaker sections and low income groups, the total cost of which do not exceed Rs.10 lakh per dwelling unit. For the purpose of identifying the economically weaker sections and low income groups, the family income limit of Rs.1,20,000 per annum, irrespective of the location, is prescribed. (v) Bank loans to Housing Finance Companies (HFCs), approved by NHB for their refinance, for on-lending for the purpose of purchase/construction/reconstruction of individual dwelling units or for slum clearance and rehabilitation of slum dwellers, subject to an aggregate loan limit of Rs.10 lakh per borrower, provided the all inclusive interest rate charged to the ultimate borrower is not exceeding lowest lending rate of the lending bank for housing loans plus two percent per annum. The eligibility under priority sector loans to HFCs is restricted to five percent of the individual bank’s total priority sector lending, on an ongoing basis. The maturity of bank loans should be co-terminus with average maturity of loans extended by HFCs. Banks should maintain necessary borrower-wise details of the underlying portfolio. 1Loans of original maturities of more than seven years and net of Bills rediscounted with RBI and other approved financial institutions

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Data Format for Furnishing of Credit Information to Credit Information Companies and other Regulatory Measures

RBI/2014-15/125
UBD. CO. BPD. PCB. Cir. No. 4/16.74.000/2014-15

Data Format for Furnishing of Credit Information to
Credit Information Companies and other Regulatory Measures

A Committee to Recommend Data Format for Furnishing of Credit Information to Credit Information Companies (Chairman: Shri Aditya Puri) was constituted by the Reserve Bank of India (RBI). The Report of the Committee was placed on RBI’s website on March 22, 2014 inviting comments on the recommendations of the Committee. The Report of the Committee is available for reference on RBI’s website which  can be viewed using the linkhttp://rbi.org.in/scripts/PublicationReportDetails.aspx? UrlPage=&ID=763.

2. On examination of the recommendations of the Committee and the comments/suggestions received, it has been decided to implement the following recommendations with modifications, wherever appropriate:

i. Credit Information Reports (CIRs) / Credit Bureau Usage in all Lending Decisions and Account Opening: Urban Cooperative Banks (UCBs) should include in their credit appraisal processes/loan policies, suitable provisions for obtaining CIRs from one or more Credit Information Companies (CICs) so that the credit decisions are based on information available in the system. In this context, as commercial borrowers’ data is not adequately populated with the CICs, to start with, UCBs may institute board approved policies for credit bureau usage in all lending decisions and account opening to retail borrowers/ consumer borrower segment. [Recommendation 8.9]

ii. Populating Commercial Data Records in Databases of all CICs: A roadmap in regard to CICs populating their databases in respect to corporate borrowers is required to be laid out. For this purpose, UCBs are advised to report data in respect of their corporate borrowers to the CICs in a timely manner with immediate effect. After a period of six months, UCBs should start using data available with the CICs in respect of commercial / corporate borrowers, under a Board approved policy. [Recommendation 8.8]

iii. Standardisation of Data Format: With a view to streamlining the process of data submission by UCBs to CICs, it has been decided to standardise the formats for data submission by the UCBs to the CICs. The data format as perAnnex I should be taken as the base for standardisation of data format for consumer and commercial borrowers. These formats should be put in use by the UCBs for reporting to CICs with immediate effect. The data format would be a non-proprietary reporting format and henceforth would be known as “Uniform Credit Reporting Format”. The segment viz. consumer and commercial will be denoted appropriately in parentheses, for example, “Uniform Credit Reporting Format (Consumer)”. These should be uniformly adopted by the UCBs. [Recommendation 8.10 (a)]

iv. Technical Working Group: It has been decided to constitute a Technical Working Group comprising of representatives from Scheduled Commercial Banks (a member each from a Public Sector Bank, a Private Sector Bank and a Foreign Bank), Urban Cooperative Banks, Regional Rural Banks (RRBs), All India Notified Financial Institutions, CICs, NBFCs, HFCs, IBA and MFIN to institutionalise a continuing mechanism for reviewing and making changes where necessary to the data formats. This Working Group should review the data formats periodically, say once a year, and suggest modifications to the same. It would frame rules on all data fields for various data formats, viz. consumer, commercial and MFI. The data formats after finalisation by the Group will be submitted to RBI for approval. In order to implement the recommendations relating to the Technical Working Group, CIBIL will act as the convenor of the Group and take the lead to operationalize the recommendation. To start with, the Working Group may take up, on a priority basis, changes in the commercial borrower segment, where there is an urgent need to capture data required for sharing of information among member banks/FIs under consortium/multiple banking arrangements and to aid in implementation of the instructions at paragraph 2 (ii) above. The Working Group should also incorporate the additional fields as detailed in Annex II. [Recommendations 8.10 (b) and 8.11]

v. Rectification of Rejected Data: CICs are required to share with UCBs the logic and validation processes involved in data acceptance so that instances of data rejection can be minimised. The reasons for rejection need to be parameterised and circulated among the UCBs concerned. Rejection reports should be made simple and understandable so that they can be used for fixing reporting and data level issues. UCBs should rectify the rejected data and upload the same with the CICs within seven days of receipt of such rejection report. [Recommendation 8.15]

vi. Data Quality Index: A common Data Quality Index would assist UCBs in determining the gaps in their data and also move towards improving their performance over a period of time. In addition, they would also be able to rank their own performance against that of their peers and identify their relative position. UCBs may adopt this Data Quality Index for assessing the quality of data submissions and make efforts towards improving data quality and minimising data rejections, within a time period of six months. [Recommendation 8.16]

vii. Best Practices for UCBs: Every UCB should take into account the best practices as detailed in Annex III while formulating or reviewing the policy and procedure under the Credit Information Companies (Regulation) Act, 2005 (CICRA) with the approval of their Board of Directors. [Recommendation 8.25]

3. The other recommendations of the Committee would be further examined before taking a decision on their implementation. UCBs are advised to implement the instructions contained in this circular, as per the time schedule indicated.

Yours faithfully,

(Scenta Joy)
General Manager

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Levy of foreclosure charges/pre-payment penalty on Floating Rate Loans

RBI/2014-15/121 DNBS(PD).CC.No.399/03.10.42/2014-15

Levy of foreclosure charges/pre-payment penalty on Floating Rate Loans

Please refer to paragraph (iii) of Guidelines on Fair Practices Code for NBFCs issued vide Circular DNBS(PD) CC No. 80/03.10.042/2005-06 dated September 28, 2006 and paragraph 2(A) (iii) of Master Circular DNBS(PD).CC.No.388 /03.10.042/2014-15 dated July 1, 2014.

2. As a measure of customer protection and also in order to bring in uniformity with regard to prepayment of various loans by borrowers of banks and NBFCs, it is advised that NBFCs shall not charge foreclosure charges/ pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect.

Yours faithfully,

(K.K. Vohra)
Principal Chief General Manager

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Clarification on proof of Address

RBI/2014-15/120DNBS (PD).CC. No 398/03.10.42/2014-15

 ,

Know Your Customer (KYC) Norms / Anti-Money Laundering (AML) Standards /Combating of Financing of Terrorism (CFT) / Obligation of NBFCs under Prevention of Money Laundering Act (PMLA), 2002- Clarification on proof of Address

Please refer to paragraph I 8 and Annex VIII of Master Circular DNBS (PD) CC No. 387/03.10.42/ 2014-15 dated July 1, 2014 on Know Your Customer (KYC) Norms / Anti-Money Laundering (AML) Standards/Combating of Financing of Terrorism (CFT) / Obligation of banks under Prevention of Money Laundering Act (PMLA), 2002 on Know Your Customer (KYC) Norms / Anti-Money Laundering (AML) Standards / Combating of Financing of Terrorism (CFT) / Obligation of banks under PMLA, 2002 regarding requirement of proof of address while opening deposit account by individuals.

2. Reserve Bank has been receiving representations / references from various quarters especially migrant workers, transferred employees, etc. regarding problems faced in submitting a proof of current / permanent address while opening a deposit account. The matter has since been examined in the light of amendment to the Prevention of Money Laundering Rules (Maintenance of Records), 2005, and accordingly it has been decided to simplify the requirement of submission of 'proof of address' as follows :

a) Henceforth, customers may submit only one documentary proof of address (either current or permanent) while opening a deposit account or while undergoing periodic updation. In case the address mentioned as per 'proof of address' undergoes a change, fresh proof of address may be submitted to the NBFC within a period of six months.

b) In case the proof of address furnished by the customer is not the local address or address where the customer is currently residing, the NBFC may take a declaration of the local address on which all correspondence will be made by the NBFC with the customer. No proof is required to be submitted for such address for correspondence/local address. This address may be verified by the NBFC through 'positive confirmation' such as acknowledgment of receipt of (i) letter (ii) telephonic conversation; (iii) visits; etc. In the event of change in this address due to relocation or any other reason, customers may intimate the new address for correspondence to the NBFC within two weeks of such a change.

3. Deposit taking NBFCs may revise their KYC policy in the light of the above instructions and ensure strict adherence to the same.

Yours faithfully,

(Sindhu Pancholy)
Deputy General Manager

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FEMA, 1999 – Import of Rough, Cut and Polished Diamonds

RBI/2014-15/119
A.P. (DIR Series) Circular No.2

Foreign Exchange Management Act, 1999 – 

Import of Rough, Cut and Polished Diamonds

Attention of Authorised Dealer Category – I (AD Category – I) banks is invited to the A.P.(DIR Series) Circular No.59 dated May 6, 2011, in terms of which AD Category – I banks were permitted to approve Suppliers’ and Buyers’ Credit (Trade Credit), including the usance period of Letters of Credit for import of Rough, Cut and Polished Diamonds for a period not exceeding 90 days from the date of shipment.

2. Taking into consideration the representations received from the diamond importers and the GJEPC, it has been decided, in consultation with the Government of India, that the Clean Credit i.e. credit given by a foreign supplier to its Indian customer/ buyer, without any Letter of Credit (Suppliers’ Credit) / Letter of Undertaking (Buyers’ Credit) / Fixed Deposits from any Indian financial institution for import of Rough, Cut and Polished Diamonds, may be permitted for a period not exceeding 180 days from the date of shipment. The revised directions will come into force with immediate effect.

3. AD Category – I banks should ensure that due diligence is undertaken and Know-Your-Customer (KYC) Norms and Anti-Money Laundering (AML) Standards, issued by the Reserve Bank are adhered to while undertaking the import transactions. Further, any large or abnormal increase in the volume of business should be closely examined to ensure that the transactions are bonafide. All other instructions relating to imports of Rough, Cut and Polished Diamonds shall continue.

4. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

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

Yours faithfully

(C.D. Srinivasan)
Chief General Manager

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Financial Literacy activities conducted by Financial Literacy Centres and rural branches of banks – monitoring system

RBI/2014-15/118
RPCD.FLC.No. 218-348/12.01.018/2014-15

Financial Literacy activities conducted by Financial Literacy Centres and rural branches of banks – monitoring system

Please refer to our circulars RPCD.FLC.No.12452/12.01.018/2011-12 dated June 6, 2012 and RPCD.FLC.No.7641/12.01.018/ 2012-13 dated January 31, 2013 issuing operational guidelines for conduct of financial literacy camps by FLCs and rural branches of banks.

2. We have been reviewing the financial literacy activities undertaken by Financial Literacy Centres (FLCs) for last two years on the basis of a quarterly report received through SLBC of the respective states and it is observed that FLCs have achieved considerable progress in creating awareness and linking the excluded segment to the banking system. Since rural branches of banks are also mandated to conduct a minimum of one financial literacy camp in a month, it has been decided to monitor their activities also on quarterly basis as per reporting format given in Annex II.

3. Since the literacy camps are being conducted for last two years, it is time now to measure the extent of financial inclusion achieved through these camps. For the purpose, the existing quarterly report on financial literacy activities conducted by FLCs has been modified as given in Annex I.

4. As hitherto, SLBC/UTLBCs are advised to submit the above mentioned quarterly reports in the prescribed formats given inAnnex I and Annex II, to the respective Regional Offices of RBI within 20 days after the end of each quarter. The reports for the quarter ended June 2014 may be submitted to our Regional Office on or before August 14, 2014.

Yours faithfully

(A Udgata)
Principal Chief General Manager

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Annex I

Financial literacy Centres - Report for the quarter ended ------

Sr. No.

State

District

Location (Metro, Urban, Semi-Urban, Rural)

Address

Date of start of functioning

Name of Sponsoring Bank

No. of literacy camps undertaken during the quarter as per RBI guidelines using standardized financial literacy material of RBI

No. of persons participated in literacy camps during the quarter

Out of persons participated, no. of persons already having bank account at the time of attending the camp

Out of persons participated, no. of persons opened bank account after attending the camp

---

Annex II

Rural Branches - Report of conduct of Financial Literacy camps for quarter ended ----

SR

State

District

No.of Rural Branches in the State

No. of Rural Branches which have conducted literacy camps as per RBI guidelines using standardized financial literacy material of RBI in the quarter

No. of literacy camp conducted as per RBI guidelines using standardized financial literacy material of RBI

No. of persons participated

Out of persons participated, no. of persons already having bank account at the time of attending the camp

Out of persons participated, no. of persons opened bank account after attending the camp

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Master Circular on Compounding of Contraventions under FEMA, 1999

PDF FILE - CLICK HERE RBI/2014-15/1 Master Circular No. 9/2014-15 July 01, 2014 To, All Authorised Dealer Category - I Banks and Authorised Banks Madam / Sir, Master Circular on Compounding of Contraventions under FEMA, 1999 The compounding of contraventions under Foreign Exchange Management Act (FEMA), 1999 is a voluntary process by which an applicant can seek compounding of an admitted contravention of any provision of FEMA, 1999 under Section 13(1) of the FEMA, 1999. 2. This Master Circular consolidates the existing instructions on the subject of "Compounding of Contraventions under FEMA, 1999" at one place. The list of underlying circulars / notifications, consolidated in this Master Circular, is furnished in the Appendix. 3. This Master Circular is being updated from time to time as and when the fresh instructions are issued. The date up to which the Master Circular has been updated is suitably indicated. 4. This Master Circular may be referred to for general guidance. The Authorised Persons and the Authorised Dealer Category – I banks may refer to respective circulars/ notifications for detailed information, if so needed. Yours faithfully, (B.P.Kanungo) Principal Chief General Manager INDEX General Compounding Powers Delegation of Powers Process of Compounding Scope and Manner of Compounding Issue of the Compounding Order Post-compounding Procedure Pre-requisites of Compounding Annex I. Foreign Exchange (Compounding Rules), 2000 Format of Application II. Details to be furnished for FDI,ECB,ODI,LO/BO III. ECS Mandate Appendix List of Rules/ A.P. (DIR Series) Circulars consolidated 1. General 1.1 In terms of Section 13(1) , Chapter IV of FEMA 1999, if any person contravenes any provision of FEMA, 1999, or any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorization is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where the amount is quantifiable or up to Rupees Two lakh, where the amount is not quantifiable and where the contravention is a continuing one, further penalty which may extend to Rupees Five thousand for every day after the first day during which the contravention continues. The provisions of Section 15 of FEMA, 1999 permit compounding of contraventions and empower the Compounding Authority to compound any contravention as defined under Section 13 of the Act on an application made by the person committing such contravention. In terms of rule 4 of the Foreign Exchange (Compounding Proceedings) Rules, 2000, the powers to compound the contraventions have been prescribed for compounding authorities with regard to the sum involved in such contravention and no contravention shall be compounded unless the amount involved in the contravention is quantifiable. 1.2 The Government of India has, in consultation with the Reserve Bank placed the responsibility of administering compounding of contraventions with the Reserve Bank, except contraventions under Section 3(a) of FEMA, 1999. Accordingly, Foreign Exchange (Compounding Proceedings) Rules, 2000 have been framed by the Government of India empowering the Reserve Bank to compound contraventions under FEMA, 1999 with a view to provide comfort to individuals and corporate community by minimizing transaction costs, while taking severe view of willful, malafide and fraudulent transactions. 2. Compounding Powers 2.1 The compounding powers of the Reserve Bank and the Directorate of Enforcement (DoE), respectively, are as under: (a) Reserve Bank has been empowered to compound the contraventions of all the Sections of FEMA, 1999, except clause (a) of Section 3 of the Act, ibid. (b) Directorate of Enforcement would exercise powers of compounding under clause (a) of Section 3 of FEMA, 1999 (dealing essentially with Hawala transactions). 2.2 For effective implementation of compounding process under FEMA, 1999, the Government of India has framed the procedure for compounding of contraventions. Once a contravention has been compounded by the Compounding Authority, no proceeding or further proceeding will be initiated or continued, as the case may be, against the contravener. 3. Delegation of Powers 3.1 As a measure of customer service and in order to facilitate the operational convenience, compounding powers were delegated to the Regional Offices of the Reserve Bank of India to compound the following contraventions of FEMA , 1999: Sr. No. FEMA Regulation Brief Description of Contravention 1 Paragraph 9(1)(A) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Delay in reporting inward remittance received for issue of shares. 2 Paragraph 9(1)(B) of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Delay in filing form FC(GPR) after issue of shares. 3 Paragraph 8 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Delay in issue of shares/refund of share application money beyond 180 days, mode of receipt of funds, etc. 4 Paragraph 5 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Violation of pricing guidelines for issue of shares. 5 Regulation 2(ii) read with Regulation 5(1) of FEMA 20/2000-RB dated May 3, 2000 Issue of ineligible instruments such as non-convertible debentures, partly paid shares, shares with optionality clause, etc. 6 Paragraph 2 or 3 of Schedule I to FEMA 20/2000-RB dated May 3, 2000 Issue of shares without approval of RBI or FIPB respectively, wherever required. 3.2 The above contraventions can be compounded by all Regional Offices (except Kochi and Panaji) without any limit on the amount of contravention. Kochi and Panaji Regional offices can compound the above contraventions for amount of contravention below Rupees one hundred lakh (Rs.1,00,00,000/-). The contraventions above Rupees one hundred lakh (Rs.1,00,00,000/-) under the jurisdiction of Panaji and Kochi Regional Offices and all other contraventions of FEMA will continue to be compounded at Cell for Effective Implementation of FEMA (CEFA), Mumbai, as hitherto. 3.3. Accordingly, applications for compounding related to the above contraventions may be submitted by the concerned entities to the respective Regional Offices under whose jurisdiction they fall. For all other contraventions, applications may continue to be submitted to CEFA, Foreign Exchange Department, 5th floor, Amar Building, Sir P.M.Road, Fort, Mumbai 400001. 4. Process of Compounding 4.1 An application for compounding of a contravention under FEMA, 1999 may be submitted to the Compounding Authority (CA) on being advised of a contravention under FEMA, 1999, either through a memorandum or suo moto on being made or on becoming aware of the contravention. The format of the application is appended to the Foreign Exchange (Compounding Proceedings) Rules, 2000 (Annex-I). 4.2 Along with the application in the prescribed format, the applicant may also furnish the details as per the enclosed Annexes(Annex-II) relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as applicable, a copy of the Memorandum of Association and latest audited balance sheet along with an undertaking that they are not under investigation of any agency such as DOE, CBI, etc. in order to complete the compounding process within the time frame. 4.3 All applications for compounding whether on the advice of the Regional Office concerned or suo-moto, relating to the contraventions mentioned at paragraph 3.1 (a) and (b) above and up to the amount of contravention stated therein, may be submitted by the companies/individuals falling under the jurisdiction of the aforesaid Regional Offices directly to the Regional Office concerned, together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at the concerned Regional Office. Applications for compounding of all other contraventions together with the prescribed fee of Rs.5000/- by way of a demand draft drawn in favour of “Reserve Bank of India” and payable at Mumbai may be submitted to: The Compounding Authority, [Cell for Effective implementation of FEMA (CEFA)], Foreign Exchange Department, 5th floor, Amar Building, Sir P.M. Road, Fort, Mumbai- 400001. 4.4 On receipt of the application for compounding, the proceedings would be concluded and an order issued by the CA within 180 days from the date of the receipt of the application for compounding. The time limit for this purpose would be reckoned from the date of receipt of the completed application for compounding by the Reserve Bank. 4.5 The CA may call for any additional information, record or any other document relevant to the compounding proceedings. Such additional information/ documents are required to be submitted within the period as may be specified by the CA and the application may be rejected if such information/documents are not submitted within the prescribed time. 4.6 The application will be examined in terms of sub rule (1) of rule (4) of the Foreign Exchange (Compounding Proceedings) Rules, 2000 to assess whether the contravention is compoundable and the amount of contravention is accordingly quantified. 4.7 The nature of contravention is ascertained keeping in view, inter alia, the following indicative points : a. whether the contravention is technical and / or minor in nature and needs only an administrative cautionary advice; b. whether the contravention is serious in nature and warrants compounding of the contravention; and c. whether the contravention, prima facie, involves money-laundering, national and security concerns involving serious infringement of the regulatory framework. However, the Reserve Bank reserves the right to classify the contraventions as stated above and neither the contravener nor others have any right to classify any contravention as technical suo moto. 4.8 It is clarified that whenever a contravention is identified by the Reserve Bank or brought to its notice by the entity involved in contravention by way of a reference other than through the prescribed application for compounding, the Bank will continue to decide (i) whether a contravention is technical and/or minor in nature and, as such, can be dealt with by way of an administrative/ cautionary advice; (ii) whether it is material and, hence, is required to be compounded for which the necessary compounding procedure has to be followed or (iii) whether the issues involved are sensitive / serious in nature and, therefore, need to be referred to the Directorate of Enforcement (DOE). However, once a compounding application is filed by the concerned entity suo moto, admitting the contravention, the same will not be considered as ‘technical’ or ‘minor’ in nature and the compounding process shall be initiated in terms of section 15 (1) of Foreign Exchange Management Act, 1999 read with Rule 9 of Foreign Exchange (Compounding Proceedings) Rules, 2000. 4.9 The disposal of the compounding application is made by issue of a Compounding Order specifying the provisions of FEMA,1999 or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999, in respect of which contravention has taken place. 4.10 Where there is sufficient cause for further investigation, the Reserve Bank may refer the matter to the Directorate of Enforcement for further investigation and necessary action under FEMA, 1999, or to the Anti- Money Laundering Authority instituted under the Prevention of Money Laundering Act (PMLA), 2002 or to any other agencies, as deemed fit. Such applications will be disposed of by returning the application to the applicant. 5. Scope and Manner of Compounding 5.1 The CA will exercise jurisdiction in respect of the contraventions admitted to have been committed in relation to any of the provisions of the FEMA, 1999, or any rule, regulation, notification, direction or order issued in exercise of the powers under FEMA, 1999. 5.2 The application for compounding will be disposed of on merits, upon consideration of the records and submissions and at the absolute discretion of the CA. The following factors, which are only indicative, may be taken into consideration for the purpose of passing the Compounding Order and for arriving at the quantum of sum on payment of which contravention shall be compounded: (i) the amount of gain of unfair advantage, wherever quantifiable, made as a result of the contravention; (ii) the amount of loss caused to any authority / agency / exchequer as a result of the contravention; (iii) economic benefits accruing to the contravener from delayed compliance or compliance avoided; (iv) the repetitive nature of the contravention, the track record and / or history of non-compliance of the contravener; (v) contravener’s conduct in undertaking the transaction and disclosure of full facts in the application and submissions made during the personal hearing; and (vi) any other factor considered relevant and appropriate. 6. Issue of the Compounding Order 6.1 An opportunity for personal hearing is given to the applicant for further submission of documents in person in support of the application within a specified period. The contravener or its authorized representative can choose not to appear in person or make any submissions before the CA for personal hearing The CA will proceed with the processing of the compounding application on the basis of information and documents available in the application for compounding. 6.1.1 It is clarified that appearing for a personal hearing before the compounding authority is optional and the applicant can choose not to appear for it. The applicant may enclose full information relating to the case as prescribed in AP (Dir series) Circular Nos. 56 and 57 dated June 28, 2010 and December 13, 2011 respectively, with the application or thereafter and may exercise his discretion with regard to appearing for hearing. Further, if the applicant opts for appearing for the personal hearing, the Reserve Bank would encourage the applicant to appear directly for it rather than being represented / accompanied by legal experts / consultants, as compounding is only for admitted contraventions. (as amended vide Press release no. 2012-2013/1215 dated January 18, 2013) 6.2 The Compounding Authority will pass a compounding order on the basis of the averments made in the application as well as other documents and submissions made in this context by the contravener during the personal hearings, if any. 6.3 Where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16 of FEMA, 1999 as the case may be, one copy of the compounding order made under sub rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 will be provided to the applicant (the contravener) and also to the Adjudicating Authority. 7. Post-compounding procedure 7.1 The sum for which the contravention is compounded as specified in the order of compounding under sub-rule (2) of Rule 8 of Foreign Exchange (Compounding Proceedings) Rules, 2000 is payable by way of a demand draft in favour of the “Reserve Bank of India” within fifteen days from the date of the order of compounding of such contravention. The demand draft has to be deposited in the manner as directed in the compounding order. 7.2 On realization of the demand draft for the sum for which contravention is compounded, a certificate in this regard shall be issued by the Reserve Bank subject to the specified conditions, if any, in the order. 7.3 The provisions of the Rules do not confer any right on the contravener, after a compounding order is passed, to seek to withdraw the order or to hold the compounding order as void or request a review of the order passed by the CA. 7.4 In case of failure to pay the sum compounded within the time specified in the compounding order, it shall be deemed in terms of Rule 10 of the Foreign Exchange (Compounding Proceedings) Rules, 2000, that the contravener had never made an application for compounding of any contravention under these Rules. 7.5 In respect of the contraventions of FEMA, 1999 (as defined in section 13 of the FEMA, 1999), which are not compounded by the Compounding Authority, other relevant provisions of FEMA, 1999, including reference to the Directorate of Enforcement shall apply. 8. Pre-requisites for compounding process 8.1 In respect of a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under the Compounding Rules, such contraventions would not be compounded. Such contravention would be dealt with under relevant provisions of the FEMA, 1999 for contravention. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. 8.2 Contraventions relating to any transaction where proper approvals or permission from the Government or statutory authority concerned, as the case may be, have not been obtained, such contraventions would not be compounded unless the required approvals are obtained from the authorities concerned. In case the application has to be returned for this reason or any other reason, the application fees of Rs.5000/- received along with the application fees is also returned. To expedite the refund of compounding fees in such cases, it has been decided to credit the same to the applicant’s account through NEFT. The applicants are advised to furnish their mandate and details of their bank account as per Annex III along with the application in the prescribed format and other documents required to be submitted in terms of the instructions contained in A.P. (DIR Series)Circular Nos. 56 and 57 dated June 28, 2010 and December 13, 2011 respectively. 8.3 Cases of contravention, such as, those having a money laundering angle, national security concern and / or involving serious infringements of the regulatory framework or where the contravener fails to pay the sum for which contravention was compounded within the specified period in terms of the compounding order, shall be referred to the Directorate of Enforcement for further investigation and necessary action under FEMA, 1999 or to the authority instituted for implementation of the Prevention of Money Laundering Act 2002, (PMLA) or to any other agencies, for necessary action , as deemed fit. 8.4 The Reserve Bank generally advises the persons concerned of their choice and option to make an application for compounding as and when such contraventions come to its notice. The facts constituting such contraventions will be brought to the notice of the Directorate of Enforcement in case no application for compounding is made within the time indicated by the Reserve Bank. Authorised Dealers may take necessary steps to ensure that checks and balances are incorporated in systems relating to dealing with and reporting of foreign exchange transactions to Reserve Bank so that contraventions of provisions of FEMA, 1999 due to the acts of omission and commission of the Authorised Dealers do not occur. In terms of Section 11(3) of FEMA, 1999, the Reserve Bank may impose on the authorized person a penalty for contravening any direction given by the Reserve Bank under this Act or failing to file any return as directed by the Reserve Bank. (as amended vide AP DIR Circular No.76 dated January 17, 2013) Annex-I Foreign Exchange (Compounding Proceedings) Rules, 2000 Notification No. G.S.R.383(E) dated 3rd May 2000 As amended vide G.S.R.443(E) dated November 2, 2002  G.S.R. 609 (E) dated September 13, 2004 and  G.S.R. 613 (E) dated August 27, 2008 In exercise of the powers conferred by section 46 read with sub-section (1) of section 15 of the Foreign Exchange Management Act, 1999 (42 of 1999) the Central Government hereby makes the following rules relating to compounding contraventions under chapter IV of the said Act, namely:- 1. Short title and commencement – (1) These rules may be called the Foreign Exchange (Compounding Proceedings) Rules 2000. (2) They shall come into force on the 1st day of June, 2000. 2. Definitions - In these rules, unless the context otherwise requires - (a) 'Act' means the Foreign Exchange Management Act, 1999 (42 of 1999); (b) 'authorised officer' means an officer authorised under sub-rule (1) of rule 3; (c) 'applicant' means a person who makes an application under section 15 (1) of the Act to the compounding authority; (d) 'Compounding Order' means an order issued under sub-section (1) of Section 15 of the Act; (e) 'Form' means a form appended to these rules; (f) 'section' means a section of the Act; (g) all other words and expressions used in these rules and not defined but defined in the Act, shall have the meaning respectively assigned to them in the Act. 3. (1) 'Compounding Authority' means the persons authorised by the Central Government under sub-section (1) of section 15 of the Act, namely; (a) an officer of the Enforcement Directorate not below the rank of Deputy Director or Deputy Legal Adviser (DLA). (b) An officer of the Reserve Bank of India not below the rank of the Assistant General Manager. 4. Power of Reserve Bank to compound contravention - 1[(1) If any Person contravenes any provisions of Foreign Exchange Management Act, 1999 (42 of 1999) except clause (a) of Section 3 of the Act.] (a) in case where the sum involved in such contravention is ten lakhs rupees or below, by the Assistant General Manager of the Reserve Bank of India; (b) in case where the sum involved in such contravention is more than rupees ten lakhs but less than rupees forty lakhs, by the Deputy General Manager of Reserve Bank of India; (c) in case where the sum involved in the contravention is rupees forty lakhs or more but less than rupees hundred lakhs by the General Manager of Reserve Bank of India; (d) in case the sum involved in such contravention is rupees one hundred lakhs or more, by the Chief General Manager of the Reserve Bank of India; Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable. (2) Nothing contained in sub-section (1) shall apply to a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under these rules. Explanation: For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. (3) Every officer specified under sub-rule (1) of rule 4 of the Reserve Bank of India shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Governor of the Reserve Bank of India. (4) Every application for compounding any contravention under this rule shall be made in Form to the Reserve Bank of India, Exchange Control Department, Central Office, Mumbai along with a fee of Rs. 5000/- by Demand Draft in favour of compounding authority. 5. The Power of Enforcement Directorate to compound contraventions - 2[(1) If any Person contravenes provisions of Section 3(a) of Foreign Exchange Management Act.] (a) in case where the sum involved in such contravention is five lakhs rupees or below, by the Deputy Director of the Directorate of Enforcement; (b) in case where the sum involved in such contravention is more than rupees five lakhs but less than rupees ten lakhs, by the Additional Director of the Directorate of Enforcement; (c) in case where the sum involved in the contravention is rupees ten lakhs or more but less than fifty lakhs rupees by the Special Director of the Directorate of Enforcement; (d) in case where the sum involved in the contravention is rupees fifty lakhs or more but less than one crore rupees by Special Director with Deputy Legal Adviser of the Directorate of Enforcement; (e) in case the sum involved in such contravention is one crore rupees or more, by the Director of Enforcement with Special Director of the Enforcement Directorate. Provided further that no contravention shall be compounded unless the amount involved in such contravention is quantifiable. (2) Nothing contained in sub-section (1) shall apply to a contravention committed by any person within a period of three years from the date on which a similar contravention committed by him was compounded under these rules. Explanation: For the purposes of this rule, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. (3) Every officer of the Directorate of Enforcement specified under sub-rule (1) of this rule shall exercise the powers to compound any contravention subject to the direction, control and supervision of the Director of Enforcement. (4) Every application for compounding any contravention under this rule shall be made in Form to the Director, Directorate of Enforcement, New Delhi, along with a fee of Rs.5000 by DD in favour of the Compounding Authority. 6. Where any contravention is compounded before the adjudication of any contravention under section 16, no inquiry shall be held for adjudication of such contravention in relation to such contravention against the person in relation to whom the contravention is so compounded. 7. Where the compounding of any contravention is made after making of a complaint under sub-section (3) of section 16, such compounding shall be brought by the authority specified in rule 4 or rule 5 in writing, to the notice of the Adjudicating Authority and on such notice of the compounding of the contravention being given, the person in relation to whom the contravention is so compounded shall be discharged. 8. Procedure for Compounding - (1) The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. (2) The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerned as expeditiously as possible as and not later than 180 days from the date of application. 9. Payment of amount compounded - 3The sum for which the contravention is compounded as specified in the order of compounding under sub-rule (2) of rule 8, shall be paid by demand draft in favour of the Compounding Authority within fifteen days from the date of the order of compounding of such contravention. 10. In case a person fails to pay the sum compounded in accordance with the rule 9 within the time specified in that rule, he shall be deemed to have never made an application for compounding of any contravention under these rules and the provisions of the Act for contravention shall apply to him. 11. No contravention shall be compounded if an appeal has been filed under section 17 or section 19 of the Act. 12. Contents of the order of the Compounding Authority - (1) Every order shall specify the provisions of the Act or of the rules, directions, requisitions or orders made there under in respect of which contravention has taken place along with details of the alleged contravention. (2) Every such order shall be dated and signed by the Compounding Authority under his seal. 13. Copy of the order - One copy of the order made under rule 8(2) shall be supplied to the applicant and the Adjudicating Authority as the case may be. Format of Application Form (See Rule 4 or 5) (To be filled in duplicate and shall be accompanied by certified copy of the Memorandum issued) 1. Name of the applicant (in BLOCK LETTERS) 2. Full address of the applicant (including Phone and Fax Number and email id) 3. Whether the applicant is resident in India or resident outside India [Please refer to Section 2(v) of the Act] 4. Name of the Adjudicating Authority before whom the case is pending 5. Nature of the contravention [according to sub-section (1) of Section 13] 6. Brief facts of the case 7. Details of fee for application of compounding 8. Any other information relevant to the case I/We declare that the particulars given above are true and correct to the best of my/our knowledge and belief and that I/We am/are willing to accept any direction/order of the Compounding Authority in connection with compounding of my/our case. Dated : (Signature of the Applicant) Name Annex-II- FDI Details to be furnished along with application for compounding of contravention relating to Foreign Direct Investment in India Name of the applicant Date of incorporation Income-tax PAN Nature of activities under taken (Please give NIC code – 1987) Brief particulars about the foreign investor Details of foreign inward remittances received by Applicant Company from date of incorporation till date Table A Sl.No. Name of Remitter Total Amount (INR) Date of Receipt Reported to RBI on* Delay if any Total * date of reporting to RBI and not AD Table B Name of Investor Date of allotment of shares Number of shares allotted Amount for which shares allotted Date of reporting to RBI* Delay if any Total * date of reporting to RBI and not AD Table C Sl. No. Name of Remitter Total Amount (INR) Date of Receipt Excess share application money Date of refund of share application money Amount in forex RBI approval letter and date Total Table D Authorised Capital Sl. No. Date Authorised Capital With effect from Date of Board meeting Date of filing with ROC A= B+C Please give supporting documents Table A- Copies of FIRC with date stamp of receipt at RBI Table B- Copies of FCGPR with date stamp of receipt at RBI Table C – letter seeking refund/ allotment of shares- approval letter from RBI A2 form Copies of Balance Sheet during the period of receipt of share application money and allotment of shares Nature of contravention and reasons for the contravention Annex II- ECB Details to be furnished along with application for compounding of contravention relating to External Commercial Borrowing Name of the applicant Date of incorporation Income-tax PAN Nature of activities under taken (Please give NIC code – 1987) Brief particulars about the foreign lender Is the applicant an eligible borrower? Is the lender eligible lender? Is the lender an equity holder? What is the level of his holding at the time of loan agreement? Details of ECB Date of Loan agreement Amount in Foreign Currency and Indian Rupee Rate of interest Period of loan Repayment particulars Details of draw down Date of draw down Amount in Foreign Currency Amount in INR       Details of LRN Number- application and receipt Details of ECB 2 returns submitted; Period of return: Date of submission Details of Utilization of ECB in Foreign Currency and Indian Rupee Nature of contravention and reasons for the contravention All supporting documents may be submitted Annex II- ODI Details to be furnished along with application for compounding of contravention relating to Overseas Investment Name of the applicant Date of incorporation Income-tax PAN Nature of activities under taken (Please give NIC code – 1987) Name of Overseas entity Date of incorporation of overseas entity Nature of activities under taken by overseas entity Nature of entity- WOS/JV Details of remittance sent- Date of remittance; Amount in FCY and in INR Details of other financial Commitment Details of UIN applied and received Date of receipt of share certificate Approval of other regulators if required Details of APRs submitted: For the period ended; date of submission Nature of contravention and reasons for the contravention All supporting documents may be submitted Annex II - Branch Office / Liaison Office Details to be furnished along with application for compounding of contravention relating to Branch/Liaison Office in India Name of the applicant Date of incorporation Income-tax PAN Nature of activities under taken (Please give NIC code – 1987) Date of approval for opening of Liaison Office/ Branch Office Validity period of the approval Income and expenditure of the LO/BO Dates of submission of Annual activity Certificates Nature of contravention and reasons for the contravention All supporting documents may be submitted Annex III ELECTRONIC CLEARING SERVICE (ECS) MANDATE FORM 1. Name of the Party (Beneficiary) - 2. Particulars of the Bank Account - Name of the Bank Name of the Branch - Address: Telephone No: 9 Digit MICR Code Number: (as appearing on the cheque issued by the Bank) IFSC Code Type of Account : SAVINGS / CURRENT Account No. : (as appearing on the cheque book issued by the Bank) (Please attaché photocopy of a blank cheque for verification of the bank account details) I/We hereby declare that the particulars given above are correct and complete. If the transaction is delayed or not effected at all for reasons of incomplete or incorrect information, I/We would not hold the user institution responsible. Signature of the Authorised Signatory (Name of the Authorised Signatory) Date : Place : Official Stamp Appendix List of Rules/ A.P. (DIR Series) Circulars consolidated in the Master Circular Compounding of contraventions of FEMA, 1999 Rules Sl No Rules No. Date 1 Foreign Exchange (Compounding Proceedings) Rules, 2000 May 3, 2000 2 Foreign Exchange (Compounding Proceedings) Rules, 2002 (Amendment) November 2, 2002 3 Foreign Exchange (Compounding Proceedings) Rules, 2004 (Amendment) September 13, 2004 4 Foreign Exchange (Compounding Proceedings) Rules, 2004 (Amendment) August 27, 2008 A.P.(DIR Series) Circular No. 56 dated June 28, 2010. A.P.(DIR Series) Circular No. 57 dated December 13, 2011. A.P.(DIR Series) Circular No. 11 dated July 31, 2012. A.P.(DIR Series) Circular No. 76 dated January 17, 2013. Press release no. 2012-2013/1215 dated January 18, 2013. A.P.(DIR Series) Circular No. 20 dated August 12, 2013. A.P.(DIR Series) Circular No.117 dated April 4, 2014 1 GSR 613(E) dated August 27, 2008 2 GSR 609 (E) dated September 13, 2004 3 GSR 443(E) dated November 2, 2002

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