What changed
This master circular consolidates all existing instructions on direct investment by residents in joint ventures and wholly owned subsidiaries abroad into a single document. It replaces earlier circulars and notifications, providing a unified reference for banks and investors. The circular includes a sunset clause, expiring on July 1, 2013, after which an updated version will be issued.
What it means for you
Banks must use this circular as the single reference for processing overseas direct investment applications under FEMA. It streamlines compliance by bringing together all relevant rules, including automatic route limits, funding options, and reporting requirements. Lenders should update their internal procedures to align with this consolidated framework and ensure staff are trained on the updated guidelines.
What you must do
- Update internal compliance manuals to reference this master circular for all overseas direct investment transactions.
- Train staff on the consolidated rules, especially sections on automatic route, funding methods, and post-investment changes.
- Ensure designated branches follow the operational instructions for allotting Unique Identification Numbers and verifying investment evidence.
- Monitor the sunset clause and prepare for the updated circular expected after July 1, 2013.
Who it affects
All banks authorized to deal in foreign exchange, Indian residents making direct investments abroad, Compliance and forex departments of banks
What is the validity period of this master circular?
The circular has a sunset clause of one year and will stand withdrawn on July 1, 2013, to be replaced by an updated version.
Does this circular introduce new restrictions on overseas investments?
No, it consolidates existing instructions without introducing new restrictions. It covers the automatic route, prohibitions, and general permissions already in place.
Which regulations govern direct investment abroad under this circular?
The circular is issued under FEMA 1999, specifically Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended.