These FAQs attempt to put in place the common queries that users have on the subject in an easy to understand language. However, for conducting a transaction, the Foreign Exchange Management Act, 1999 (FEMA) and the Regulations made or directions issued thereunder may be referred to. The relevant principal regulations are the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 dated November 7, 2017 as amended from time to time (hereinafter referred to as FEMA 20 (R)). The modalities as to how the foreign exchange business has to be conducted by the Authorised Persons with their customers/ constituents with a view to implementing the regulations framed is laid down in Master Direction on Foreign investment in India.

Annual return on Foreign Liabilities and Assets (FLA) has been notified under FEMA 1999 (A.P. (DIR Series) Circular No. 45 dated March 15, 2011) and it is required to be submitted by all the India-resident companies/ LLPs / Others [(include SEBI registered Alternative Investment Funds (AIFs), Partnership Firms, Public Private Partnerships (PPP)] (hereafter referred as ‘entities’) which have received FDI and/ or made overseas investment in any of the previous year(s), including the current year.

The Reserve Bank participates in the Co-ordinated Direct Investment Survey (CDIS) and Co-ordinated Portfolio Investment Survey (CPIS) conducted by the International Monetary Fund (IMF). Here, consolidated information collected from FLA return related to foreign financial liabilities and assets position as at end-March of the previous financial year (FY) and end-March of the latest FY of these entities are reported. This information is also used in the compilation of India’s Balance of Payments (BoP) and International Investment Position (IIP).

FAQs on Non-Banking Financial Companies

FOREWORD

The Reserve Bank of India is entrusted with the responsibility of regulating and supervising the Non-Banking Financial Companies by virtue of powers vested in Chapter III B of the Reserve Bank of India Act, 1934. The regulatory and supervisory objective, is to:

1. ensure healthy growth of the financial companies;
2. ensure that these companies function as a part of the financial system within the policy framework, in such a manner that their existence and functioning do not lead to systemic aberrations; and that
3. the quality of surveillance and supervision exercised by the Bank over the NBFCs is sustained by keeping pace with the developments that take place in this sector of the financial system.

In view of the significant growth registered by the NBFC segment during the last decade, the powers of the Bank were enhanced by amending the provisions of the Act during 1997 to facilitate regulation and supervision by RBI covering several aspects of the activities of the NBFCs. Following the amendments to Chapter IIIB of the Act, the Bank has since introduced a new regulatory framework effective January 31, 1998 which directs the focus of the regulatory-cum-supervisory attention primarily on the NBFCs which accept deposits from the public.

The changes introduced in the regulatory framework are comprehensive and broadbased and it has been felt necessary to explain the rationale underlying these changes and provide clarification on certain operational matters for the benefit of the NBFCs, members of public, rating agencies, audit profession, the different Associations of the NBFCs etc. To meet this need, this booklet in the form of questions and answers, is being brought out by the RBI (Department of Non-Banking Supervision) with the hope that it will provide better understanding of the new regulatory framework.

(V.S.N. Murty)
Chief General Manager

RESERVE BANK OF INDIA,
DEPARTMENT OF NON-BANKING SUPERVISION,
CENTRAL OFFICE,
MUMBAI

FEBRUARY 16, 1998

Remittances are an important source of family and national income and also are one of the largest sources of external financing. Beneficiaries in India can receive cross-border inward remittances through banking and postal channels. Banks have general permission to enter into a partnership with other banks for conducting remittance business. The International Financial System (IFS) platform of Universal Post Union (UPU) is generally used for the postal channel. Besides, there are two more channels for receiving inward remittances, viz. Rupee Drawing Arrangement (RDA) and Money Transfer Service Scheme (MTSS) which are the most common arrangements under which the remittances are received into the country. These FAQs are mainly relating to the common queries relating to RDA and MTSS and may be referred to for general guidance. The Authorised Persons and their constituents may refer to respective circulars/ notifications for detailed information, if so needed.

The Coordinated Portfolio Investment Survey (CPIS) is a voluntary data collection exercise conducted under the auspices of the International Monetary Fund (IMF). The purpose of the CPIS is to improve the quality of portfolio investment statistics in the international investment position (IIP)—that is, holdings of portfolio investment assets in the form of equity and investment fund shares, long-term debt securities, and short-term debt securities — and the availability of these statistics by counterpart economies. Therefore, the CPIS supports the objective of developing from-whom-to-whom cross-border data and contributes to a better understanding of financial interconnectedness.

India began participating in annual CPIS of the IMF since 2004. Thereafter, as per IMF’s recommendation under G-20 Data Gaps Initiative (DGI), India moved to semi-annual reporting of CPIS in 2014, as per India’s commitment under Special Data Dissemination Standards (SDDS). The Reserve Bank of India submits the CPIS data to IMF on behalf of India.