FDI via Conversion of Import Payables: Timeline Relaxed
Current · Source: Reserve Bank of India · RBI/2011-12/295 · issued 09 Dec 2011 · ~2 min read
Quick answerRBI has eased the timeline for converting import payables for capital goods into FDI under the Government route. Earlier, the conversion itself had to be completed within 180 days; now, only the application needs to be submitted within that period.
The rule, in the simplest words
If you buy big machines (capital goods) from abroad and want to pay by giving the seller shares (FDI), you used to have to finish the whole share-giving within 180 days of the machine being shipped. Now you only need to send in your application (a complete request form) within those 180 days.
If you spent money to start your company (pre-incorporation expenses) and want to pay that back by giving shares, you used to have to finish the share-giving within 180 days of the company being created. Now you only need to send in your complete application within those 180 days.
Your bank (AD bank) must check that your application is fully filled out before sending it to the government, so there are no delays.
How it plays out — a real example
A forex & trade-finance officer in Mumbai is helping a customer who imported gold-processing machines 150 days ago. The customer wants to pay by giving shares to the foreign seller. The officer tells the customer, 'Good news! You don't have to finish the share transfer by day 180. Just make sure your complete application is submitted to us before that deadline, and we'll handle the rest.'
What changed
Earlier, conversion of import payables for capital goods into FDI had to be completed within 180 days from shipment. Now, only the application (complete in all respects) must be made within 180 days. Similarly, for pre-operative/incorporation expenses, the earlier requirement of capitalization completion within 180 days from incorporation is replaced by the requirement to file a complete application within 180 days.
What it means for you
Banks and their customers get breathing room: the hard deadline for actual conversion is removed, replaced by a softer deadline for filing the application. This reduces pressure on companies to finalise valuations and documentation within the same window. AD banks must ensure applications are complete before submission to avoid delays.
What you must do
Update internal checklists to reflect that only the application (not the conversion) must be filed within 180 days from shipment/incorporation.
Advise customers to submit complete applications well before the 180-day deadline to avoid rejection.
Monitor pending cases where conversion was not completed within 180 days; they may now qualify if a complete application is filed in time.
Who it affects
Category-I Authorised Dealer Banks, Indian companies receiving FDI via conversion of import payables, Foreign investors supplying capital goods or funding pre-operative expenses
❓ Common questions
Does this circular change the 180-day timeline for actual conversion of import payables into equity?
Yes. Earlier, the conversion itself had to be completed within 180 days from shipment. Now, only the submission of a complete application for conversion must be made within that period.
What happens if the application is incomplete when filed within 180 days?
The circular specifies that the application must be 'complete in all respects' to meet the deadline. Incomplete applications may not be considered as having met the timeline.
Does this circular affect the Government route approval process for FDI?
No. The circular only relaxes the timeline for filing the application. All other conditions from the earlier circular (June 30, 2011) remain unchanged, including the need for Government route approval.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/295
A. P. (DIR Series) Circular No.55
December 09, 2011
To
All Category-I Authorised Dealer Banks
Madam / Sir,
Foreign Direct Investment (FDI) in India - Issue of equity shares under the
FDI scheme allowed under the Government route
Attention of Authorised Dealers Category – I (AD Category - I) banks is invited to the A.P. (DIR Series) Circular No. 74 dated June 30, 2011 , allowing thereby issue of equity shares/ preference shares under the Government route by conversion of import of capital goods, / machineries / equipments (including second-hand machineries) and pre-operative / pre-incorporation expenses (including payments of rent, etc.), subject to terms and conditions stated therein.
2. It has now been decided to amend certain conditions in the aforesaid A.P. (DIR Series) Circular. The amended conditions are given in the Annex .
3. All the other instructions contained in the A.P. (DIR Series) Circular No. 74 dated June 30, 2011 shall remain unchanged.
4. AD Category - I banks may bring the contents of the circular to the notice of their customers/constituents concerned.
5. Necessary amendments to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 ( Notification No. FEMA 20/2000-RB dated May 3, 2000 ) are being notified separately.
6. 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,
(Rashmi Fauzdar)
Chief General Manager
Annex
[A. P. (DIR Series) Circular No. 55
dated December 09, 2011]
c.f. A.P.(DIR Series) Circular No. 74 dated June 30, 2011
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/295 · issued 09 Dec 2011. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are an IT/Systems lead at a bank this circular applies to (Category-I Authorised Dealer Banks, Indian companies receiving FDI via conversion of import payables, Foreign investors supplying capital goods or funding pre-operative expenses), your first concrete step on “FDI via Conversion of Import Payables: Timeline Relaxed” is: “Update internal checklists to reflect that only the application (not the conversion) must be filed within 180 days from shipment/incorporation.” (RBI issued this 09 Dec 2011).
Circular: RBI/2011-12/295 -- FDI via Conversion of Import Payables: Timeline Relaxed
Issued: 09 Dec 2011
Action required: Update internal checklists to reflect that only the application (not the conversion) must be filed within 180 days from shipment/incorporation.
Action required: Advise customers to submit complete applications well before the 180-day deadline to avoid rejection.
Action required: Monitor pending cases where conversion was not completed within 180 days; they may now qualify if a complete application is filed in time.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6867&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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