What changed
RBI issued Master Circular No.15/2012-13 consolidating all prior circulars on foreign investment under FEMA 1999, including FDI, Portfolio Investment Scheme, foreign venture capital, and investments in partnership firms. The circular includes a sunset clause, standing withdrawn on July 1, 2013, to be replaced by an updated version.
What it means for you
For banks, this circular simplifies compliance by providing a single reference document for foreign investment rules, reducing the need to track multiple circulars. It reinforces existing pricing, reporting, and sectoral limit requirements, and clarifies procedures for escrow accounts, pledge of shares, and remittance of sale proceeds. Banks must ensure their systems align with the consolidated framework.
What you must do
- Update internal compliance manuals to reference this master circular for all foreign investment transactions.
- Train staff on the consolidated entry routes, pricing guidelines, and reporting requirements for FDI and PIS.
- Verify that customer documentation for foreign investments adheres to FEMA 20/2000-RB and FEMA 24/2000-RB as amended.
- Monitor sunset clause: prepare for the updated circular expected by July 1, 2013.
Who it affects
Category-I Authorised Dealer banks, Banks handling FDI and FII transactions, Banks dealing with NRI investments under PIS, Banks facilitating foreign venture capital investments
Does this master circular introduce any new foreign investment rules?
No, it consolidates existing rules from earlier circulars and notifications under FEMA 1999. No new substantive requirements are added.
What is the sunset clause mentioned in the circular?
The circular is valid only until July 1, 2013, after which it will be withdrawn and replaced by an updated master circular on the same subject.
Does this circular cover investments in partnership firms?
Yes, Part II of the circular specifically addresses investment in partnership firms and proprietary concerns by non-residents, governed by FEMA 24/2000-RB.