What changed
RBI issued Master Circular No.02/2007-08, consolidating all prior AP (DIR Series) circulars and FEMA notifications on foreign investment, immovable property acquisition, and establishment of branch/liaison/project offices. The circular includes a sunset clause, meaning it will be withdrawn on July 1, 2008, and replaced by an updated version.
What it means for you
Banks must now refer to this single master circular for all foreign investment-related compliance, replacing multiple earlier circulars. The one-year validity means lenders need to stay alert for the 2008 update. Key areas covered include FDI pricing, reporting, transfer of shares, and NRI/FII portfolio investments.
What you must do
- Update internal compliance manuals to reference this master circular for all foreign investment transactions.
- Train staff on the consolidated rules for FDI, immovable property, and branch office setups.
- Monitor the sunset clause and prepare for the updated circular due by July 1, 2008.
- Ensure accurate reporting of FDI inflows and share transfers as per the circular's guidelines.
Who it affects
Category-I Authorised Dealer banks, Indian companies receiving foreign investment, Foreign investors and NRIs, Branches and liaison offices of foreign entities
What is the sunset clause in this master circular?
The circular is valid only until July 1, 2008, after which it will be withdrawn and replaced by an updated master circular on the same subject.
Does this circular change the FDI entry routes?
No, it consolidates existing rules. FDI remains freely permitted in most sectors under the automatic or government route, as per the government's FDI policy.
Which FEMA notifications are covered in this circular?
It covers FEMA 20/2000-RB (foreign investment), FEMA 21/2000-RB (immovable property), FEMA 22/2000-RB (branch/liaison offices), and FEMA 24/2000-RB (investment in partnership firms).