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Foreign Investment in India

Q.15: Whether cash is a permissible mode of payment for making foreign direct investment in Indian company. +

Answer: No, refer to Para 7.13 of Master Direction-Foreign Investment in India.

FAQs on Non-Banking Financial Companies

Ceiling on deposits

15. Whether an NBFC with entitlement of accepting public deposits as per the revised Regulations and holding deposits much above the level, can still accept fresh deposits ? If so, what are the conditions ? +

All the Rated Companies have been allowed 3 years time to regularise their excess deposits by repayment or otherwise. During this period, while a company can accept fresh deposits and renew such maturing deposits subject to reducing the excess holding of public deposits by one-third at the end of every calendar year beginning December 1998. However in such a case, the company should not exceed the level of public deposits outstanding as at the close of business on January 1, 1998. The unrated and underrated NBFCs are not entitled to accept fresh deposits.

Domestic Deposits

I. Domestic Deposits

15. What are the guidelines for renewal of overdue deposits? +

All aspects concerning renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard and the customers being notified of the terms and conditions of renewal including interest rate, at the time of acceptance of deposit. The policy should be non-discretionary and non-discriminatory.

Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999

Eligible entities and requirements to submit the FLA return

Q15. If an entity issues the shares to non-resident on non-repatriable basis, whether that entity is required to submit the FLA return? +

Ans: Shares issued by reporting entities to non-resident on non-repatriable basis should not be considered as foreign investment; therefore, entities which have issued the shares to non-resident only on non-repatriable basis, is not required to submit the FLA return.

External Commercial Borrowings (ECB) and Trade Credits

F. LEVERAGE CRITERIA AND BORROWING LIMIT

15. Should the proposed ECB be added to all outstanding ECBs for the purpose of ECB liability to equity ratio? +

Yes, apart from ECB raised for refinancing where the proposed ECB amount may not be taken into account to avoid double counting.

Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024

FASTag issued by Paytm Payments Bank

15. I have a FASTag issued by Paytm Payments Bank. Can I continue to use it to pay toll after March 15, 2024? +

Yes. You can continue to use your FASTag to pay toll upto the available balance. However, no further funding or top ups will be allowed in the FASTags issued by Paytm Payments Bank after March 15, 2024. It is suggested that you procure a new FASTag issued by another bank before March 15, 2024 to avoid any inconvenience

Biennial survey on Foreign Collaboration in Indian Industry (FCS)

Some important definitions and concepts

Q15. What is Pure Technical Collaboration? +

Ans.: An Indian company is said have Pure Technical Collaboration if the company has only foreign technical collaboration and have not received any foreign direct investment.

Retail Direct Scheme

Know Your Customer (KYC) related queries

15. Who should do video KYC? +

In case your data does not exist in the CKYC database, you will have to opt for the video KYC method.

Housing Loans

15. Do you get a tax benefit on the loan? +

Yes. Resident Indians are eligible for certain tax benefits on both principal and interest components of a loan under the Income Tax Act, 1961. Under the current laws, you are entitled to an income tax rebate for interest repayment up to Rs. 1,50,000 /- per annum. Moreover, you can get added tax benefits under Section 80 C on repayment of principal amount up to Rs. 1,00,000 /- per annum.

Targeted Long Term Repo Operations (TLTROs)

FAQs pertaining to On Tap TLTRO/ reversal of TLTRO/ TLTRO 2.0 transactions

Q15: If a bank opts for repayment of funds availed under TLTRO/ TLTRO 2.0, whether the investments made by the bank by utilizing these funds will continue to be allowed for classification under held to maturity (HTM) even in excess of 25 percent of total investment permitted to be included in the HTM portfolio? +

Ans: Banks can submit their request for exercising the repayment option till October 28, 2020. On repayment of funds availed under TLTRO/ TLTRO 2.0, the associated securities shall be shifted out of the HTM category. The shifting of the TLTRO/ TLTRO 2.0 investments out of HTM shall be in addition to the shifting of investments permitted at the beginning of the accounting year and subject to adherence to the guidelines contained in the Master Circular – Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks dated July 1, 2015. These investments under TLTRO/ TLTRO 2.0 against which funds are being repaid will not be exempted from reckoning under the large exposure framework (LEF) and computation of adjusted non-food bank credit (ANBC) for the purpose of determining priority sector targets/sub-targets.

Indian Currency

B) Banknotes

8. Is it possible to have two or more banknotes with the same serial number?

Yes, it is possible to have two or more banknotes with the same serial number, but they would either have a different Inset Letter or year of printing or signature of a different Governor of RBI. An Inset Letter is an alphabet printed on the Number Panel of the banknote. There can be notes without any inset letter also.

All you wanted to know about NBFCs

B. Entities Regulated by RBI and applicable regulations

15. What are the regulations prescribed by the Reserve Bank for NBFCs?

As part of regulatory framework prescribed by the Reserve Bank for NBFCs, the Reserve Bank prescribes prudential regulations viz., capital adequacy/ leverage, provisioning, corporate governance framework, etc.; conduct of business regulations viz., KYC/ AML regulations, fair practices code, etc.; and other miscellaneous regulations to ensure that NBFCs are financially sound and follow transparency in their operations. The regulations for NBFCs are contained in various master directions and notifications/ circulars issued from time to time, and are available on the website of the Reserve Bank (www.rbi.org.in) under ‘notifications’.

Core Investment Companies

B. Registration and related matters:

15. If a company is a CIC but does not exactly meet the criteria specified, does the company need to register as an NBFC?

Ans: A holding company not meeting the criteria for a CIC laid down in para 2 of Master Direction DoR(NBFC).PD.003/03.10.119/2016-17 dated August 25, 2016 would require to register as an NBFC. However, if such company wishes to register as CIC/ be exempted as CIC, it will have to apply to RBI with an action plan achievable within the specific period to reorganize its business as CIC. If it is not able to do so, it would need to comply with NBFC requirements and prudential norms.

Coordinated Portfolio Investment Survey – India

Some important definitions and concepts

Q16. What to report in equity securities?

Ans: Equity consists of all instruments and records that acknowledge claims on the residual value of a corporation or quasi-corporation, after the claims of all creditors have been met. Equity may be split into listed shares, unlisted shares, and other equity. Both listed and unlisted shares are equity securities. Equity securities are commonly called shares or stocks. Other equity is equity that is not in the form of securities.

Foreign Investment in India

Q.16: Are the investments and profits earned in India repatriable ? +

Answer: All foreign investments are repatriable (net of applicable taxes) except in cases where the investment is made or held on non-repatriation basis.

FAQs on Non-Banking Financial Companies

Ceiling on deposits

16. Whether a company not complying with the prudential norms can raise public deposits ? +

A. A company not complying with prudential norms cannot accept public deposits.

Annual Return on Foreign Liabilities and Assets (FLA) under FEMA 1999

Eligible entities and requirements to submit the FLA return

Q16. Is it required to submit any financial statements like balance sheet or P&L accounts (audited/ unaudited) along with the FLA return? +

Ans: No, balance sheet or profit and loss (P&L) accounts are not required to be submitted along with the FLA return.

External Commercial Borrowings (ECB) and Trade Credits

F. LEVERAGE CRITERIA AND BORROWING LIMIT

16. Does the equity in “ECB liability to Equity ratio” include non-convertible preference capital? +

No.

Government Securities Market in India – A Primer

16. How do the G-Sec transactions settle? +

Primary Market

16.1 Once the allotment process in the primary auction is finalized, the successful participants are advised of the consideration amounts that they need to pay to the Government on settlement day. The settlement cycle for auctions of all kind of G-Secs i.e. dated securities, T-Bills, CMBs or SDLs, is T+1, i.e. funds and securities are settled on next working day from the conclusion of the trade. On the settlement date, the fund accounts of the participants are debited by their respective consideration amounts and their securities accounts (SGL accounts) are credited with the amount of securities allotted to them.

Secondary Market

16.2 The transactions relating to G-Secs are settled through the member’s securities / current accounts maintained with the RBI. The securities and funds are settled on a net basis i.e. Delivery versus Payment System-III (DvP-III). CCIL guarantees settlement of trades on the settlement date by becoming a central counter-party (CCP) to every trade through the process of novation, i.e., it becomes seller to the buyer and buyer to the seller. 16.3 All outright secondary market transactions in G-Secs are settled on a T+1 basis. However, in case of repo transactions in G-Secs, the market participants have the choice of settling the first leg on either T+0 basis or T+1 basis as per their requirement. RBI vide FMRD.DIRD.05/14.03.007/2017-18 dated November 16, 2017 had permitted FPIs to settle OTC secondary market transactions in Government Securities either on T+1 or on T+2 basis and in such cases, It may be ensured that all trades are reported on the trade date itself.

Business restrictions imposed on Paytm Payments Bank Limited vide Press Releases dated January 31 and February 16, 2024

FASTag issued by Paytm Payments Bank

16. I have a FASTag issued by Paytm Payments Bank. Can I recharge the balance after March 15, 2024? +

No. After March 15, 2024 you will not be able to top-up or recharge your FASTag issued by Paytm Payments Bank. It is suggested that you procure a new FASTag issued by another bank before March 15, 2024 to avoid any inconvenience.