Annexure - Chronology of Major Policy Announcements April 2001 - July 2002 (Part 2 of 2)

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Annexure - Chronology of Major Policy Announcements April 2001 - July 2002 (Part 2 of 2)


Date of Announce- ment			POLICY ANNOUNCEMENTS

			IV. CAPITAL MARKET POLICIES

			(i) Securities and Exchange Board of India (SEBI)
2001
April	20	•	The SEBI decided to revise the format for unaudited half-yearly results for the mutual funds. These results are to be published before the expiry of one month from the close of each half-year as against two months period provided earlier. These results shall also be put on their websites by the mutual funds.

	27	•	The SEBI clarified that all the schemes by mutual funds shall be launched within six months from the date of the letter containing observations from SEBI on the scheme offer document. Otherwise, a fresh offer document along with filing fees shall be filed with the SEBI.

	30	•	The SEBI directed the mutual funds to disclose large unit holdings in the scheme, which are over 25 per cent of the NAV.

May	2	•	The SEBI directed the stock exchanges to amend their Listing Agreement to ensure that the companies maintain on a continuous basis, the minimum level of non-promoter holding at the level of public shareholding as required at the time of listing.

	8	•	To ensure that all personal securities transactions by employees of AMCs and Trustee Companies avoid any actual or potential conflict of interest or any abuse of an individual’s position of trust and responsibility, SEBI laid down detailed norms of investment and disclosure standards.

	22	•	The SEBI advised the stock exchanges to desist from the practice of granting conditional listing to the companies as Section 73 of the Companies Act, 1956 does not envisage any qualified conditional listing permission.

June	20	•	American Style Stock Options to be settled in cash were permitted by the SEBI following the recommendations of the Advisory Committee on Derivatives. Risk containment measures to be adopted by the derivative exchange/segment and the Clearing House/Corporation for the trading and settlement of option contracts on stocks were also laid down.

	21	•	Following the recommendations of the Advisory Committee on Derivatives (Chairman: Prof. J. R. Varma), the SEBI laid down broad parameters for adjustments for corporate actions for stock options.

		•	The SEBI announced that all deferral products, viz., ALBM/BLESS/MCFS/CNS shall cease to be available for all scrips. A period of transition up to September 3, 2001 was granted to effect the change.
		•	It was also announced that the stocks not on the compulsorily rolling settlement from July 2, 2001 will be traded under T+5 compulsorily rolling settlement with effect from January 2, 2002. In the interim period, these stocks would be traded on uniform settlement cycle (Monday to Friday) with effect from July 2, 2001 on all exchanges.
		•	With effect from July 2, 2001, the SEBI introduced the 99 per cent Value-at-Risk (VaR) based margin system for the scrips in the compulsory rolling settlement. In addition to the VaR-based margin, the stock exchanges shall continue to collect mark-to-market margin. The exchanges should at their discretion impose additional margin on scrips wherever necessary to contain the risks in the market. A system of gross margining for the entire market was also prescribed effective September 3, 2001.

June	25	•	With the introduction of the rolling settlement in 414 scrips from July 2, 2001, and the fact that all deferral products such as the ALBM/BLESS/MCFS/CNS will no longer be available, the SEBI decided to withdraw the restrictions on short sales not covered by a purchase transaction of equivalent amount.

	26	•	Restriction on Securities Lending Scheme, 1997 imposed since March 13, 2001 was withdrawn by the SEBI with effect from July 2, 2001.

	28	•	The SEBI decided to implement, effective July 2, 2001, an index-based market-wide circuit breaker system for scrips in rolling settlement mode, which will apply at three stages of the index movement either way at 10%, 15% and 20%. These circuit breakers will bring about a coordinated trading halt in all equity and equity derivative markets nationwide. The market-wide circuit breakers would be triggered by movement of either the BSE Sensex or the S&P CNX Nifty, whichever is breached earlier. In addition, there would be individual scrip-wise price bands of 20% either way for all scrips in the compulsory rolling settlement except for the scrips on which derivative products are available. In the rest of the scrips that are not in compulsory rolling settlement, the existing price bands would continue to apply.

July	17	•	The SEBI amended the SEBI (Disclosure and Investor Protection) Guidelines, 2000 to provide for: inclusion of Foreign Venture Capital Investors (FVCIs) and SIDCs as Qualified Institutional Buyers (QIBs) to participate in book-building route; no lock-in period for the pre-issue share capital of an unlisted company held by VCFs and FVCIs; removal of the restriction of a minimum issue size of Rs.25 crore in case of an IPO through book building; and, the option to allocate the unsubscribed portion of the fixed price portion in a book building issue to any category or lapse altogether.

	18	•	SEBI decided that every investor should have a unique ID, for which brokers and sub brokers shall collect and maintain in their back office the Permanent Account Number (PAN) allotted by Income Tax Department or other identification numbers, in case PAN is not allotted. The stock exchanges shall be required to maintain a database of client details submitted by brokers. Furthermore, the brokers shall maintain and preserve, for a period of seven years, a mapping of client IDs used at the time of order entry in the trading system, with those unique client IDs along with client name, address and other particulars given in the Know Your Client form.

Aug.	14	•	The SEBI allowed the mutual fund schemes to invest in the listed or unlisted securities or units of venture capital funds, within the specified overall ceilings.

	20	•	To ensure smooth settlement, the SEBI decided that, whenever there is a scheduled bank holiday on a trading day, settlement for two trading days would be conducted on a single day.

	31	•	The SEBI amended Clause 41 of the Listing Agreement and the companies were required to furnish segment-wise revenues, results and capital employed along with the quarterly unaudited financial results with effect from the quarters ending on or after September 30, 2001 (later extended to December 2001) as per the prescribed format.
		•	Amendments to Clause 32 of the Listing Agreement were effected for mandatory publication of Consolidated Financial Statements in the annual report in addition to the individual financial statements and audit of the same by the statutory auditors besides compliance with the accounting standard on "Related Party Disclosures" in the annual reports. A new clause was added to the Listing Agreement as Clause 50 to provide that companies shall mandatorily comply with all the accounting standards issued by ICAI from time to time.

Sep.	27	•	SEBI issued norms for speedy redressal of grievances pertaining to a) pending transfer of shares, b) dealing with objection memos in future and c) duplicate share certificates. The norms would be applicable in respect of all companies/organisations whose shares are listed on any of the stock exchanges and are in physical form.

Nov.	2	•	Following the recommendations of the Advisory Committee on Derivatives (Chairman: Prof. J. R. Varma), the SEBI permitted trading in cash settled Stock Futures on 31 stocks on which option contracts have been introduced on BSE and NSE. The SEBI also laid down the risk containment measures whereby a portfolio based margining approach is to be adopted taking an integrated view of the risk involved in the portfolio of each individual client comprising of his positions in all derivative contracts.

Dec.	20	•	The SEBI proposed Model Rules to be followed by the stock exchanges in phases. These have been divided into four parts covering rules, which, inter alia, include, a) already implemented by the stock exchanges, b) to be introduced by the stock exchanges, c) those which have to await corporatisation/demutualisation of the stock exchanges, and d) those related to the basic legal structure of the stock exchanges and may require legislative amendments, etc.

2002
Jan.	2	•	The stock exchanges were advised to incorporate the amendments related to buy back of shares in the Listing Agreement with immediate effect. The amendments require the companies to give prior notice of at least 7 days to the stock exchanges about the Board meetings at which the proposal for buy back of securities is to be considered and to disclose the decision on buy back within 15 minutes of the closure of the Board meeting.

Jan.	30	•	With a view to derive benefits of increased efficiency, the SEBI decided to shorten the rolling settlement cycle from T+5 to T+3. The stock exchanges were advised to make the necessary arrangements/modifications in their systems accordingly. The compulsory rolling settlement on T+3 basis commenced on April 1, 2002.

Feb.	12	•	Following the circular dated February 4, 2002 by the Reserve Bank permitting FIIs to trade in all the exchange traded derivative contracts, the SEBI announced the position limits to be followed by the FIIs and their sub-accounts. The SEBI also laid down norms for the derivative segment of the exchanges and their Clearing House/Clearing Corporation to implement the procedure for the monitoring of FIIs and the sub-account’s position limits and the norms for computation of such position limits.

	20	•	In line with the recommendations of Group on Insider Trading (Chairman: Kumar Mangalam Birla), the SEBI notified changes in the SEBI (Insider Trading) Regulations, 1992, and inserted a new Chapter (IV) outlining policy on disclosures and internal procedure for prevention of insider trading. Various entities relating to the capital market would have to frame a code of internal procedures and conduct as near to the model code specified in the regulations. The norms specify disclosure standards and trading restrictions on directors/officers and designated employees of the company; appointment of a compliance officer; and, limited access to confidential and price sensitive information.

		•	Following representations from AMFI, the SEBI notified the Mutual Funds (Amendment) Regulations, 2002, whereby the Requirement of publishing of scheme-wise annual report or abridged annual report in the newspapers by the mutual funds was waived. However, the mutual funds shall continue to send the annual report or abridged annual report to the unit holders. Further, all mutual funds were advised to display the scheme-wise annual reports on their websites to be linked with AMFI website so that the investors and analysts can access the annual reports of all mutual funds at one place.

		•	SEBI modified certain guidelines for valuation of securities related to traded securities, thinly traded securities, risk- free benchmark, mark-up/mark- down yield, benchmark yield for valuation, valuation of Government securities, etc.

March	26	•	To provide the investors an objective analysis of the performance of the mutual funds’ schemes in comparison with the rise or fall in the markets, the SEBI decided to include disclosure of performance of benchmark indices in case of equity-oriented schemes (extended to debt-oriented and balanced fund schemes on April 15, 2002) in the format for half-yearly results. In case of sector or industry specific schemes, mutual funds may select any sectoral indices published by stock exchanges and other reputed agencies.

	30	•	In pursuance with the proposals in the Union Budget 2002-03, the SEBI allowed the mutual funds to invest in foreign debt securities in the countries with fully convertible currencies and with highest rating (foreign currency credit rating) by accredited/registered credit rating agencies. They were also allowed to invest in government securities where the countries are AAA rated.

May	9	•	To bring uniformity in calculation of NAVs of mutual fund schemes, the SEBI issued guidelines for valuation of unlisted equity shares.

	10	•	SEBI amended the Clause 41 of the Listing Agreement to require that the companies which opt to publish audited results for the entire year within 3 months (instead of publishing un-audited results for the last quarter within 30 days) to publish annual audited results in a specified format. Companies would also be required to disclose audit qualifications in the unaudited/audited financial results along with their impact on the profit or loss together with explanations and the date by which these are expected to be removed.

	15	•	SEBI laid down the procedure relating to writing off securities held by FIIs or their sub-Accounts.

June	19	•	SEBI clarified that the service charge of five per cent on the management fees of asset management companies imposed in the Union Budget 2002-03 can be charged to the schemes as an item of general expenditure without imposing an additional burden on unit holders.

	20	•	SEBI prescribed all mutual funds to enter into transactions relating to Government securities only in dematerialised form.

		•	SEBI advised mutual funds that the non-performing or illiquid assets at the time of maturity/closure of schemes but realised within two years after the winding up of the scheme, should be distributed to the old investors if the amount is substantial. In case the amount is not substantial or it is realised after two years, it may be transferred to the Investor Education Fund maintained by each mutual fund.
		•	SEBI clarified that the SEBI (Insider Trading) (Amendment) Regulations, 2002 should be followed strictly by the trustee companies, asset management companies and their employees and directors.

		•	SEBI advised the stock exchanges to amend the listing agreement to require the companies to furnish specified information on the Electronic Data Information Filing and Retrieval (EDIFAR) website maintained by the SEBI.

	26	•	SEBI clarified that the investors who have dealt with the member broker through the registered sub-broker are also clients of member broker. Thus in case of the default of the member broker, the clients of the registered sub-brokers would also be eligible for the claims against the defaulting member broker for compensation from the Investor Protection Fund (IPF)/Customer Protection Fund (CPF).

			(ii) Reserve Bank of India

2001
Sept.	20	•	In consultation with the Government of India, the Reserve Bank permitted Indian companies to increase the FII investment limit up to the sectoral cap/statutory ceiling, as applicable.

Oct.	22	•	Banks and FIs would be permitted to make fresh investments and hold bonds and debentures, privately placed or otherwise, only in dematerialised form with effect from October 31, 2001.

			(iii) Government of India

2001
April	26	•	A Joint Parliamentary Committee (Chairman: Shri Prakash Mani Tripathi) with 30 members from both houses of the Parliament was constituted to look in to the irregularities in securities market, role of different institutions and entities, identify the sources of misuse and recommend measures for improvements, etc.

May	10	•	The Companies (Passing of Resolution by Postal Ballot) Rules, 2001 were issued. The rules define postal ballot to include voting by postal or electronic mode instead of voting personally in a general meeting of the company. The rules would be applied to all listed companies in case of resolutions as listed in the notification.

	25	•	The Government amended the Companies (Acceptance of Deposits) Rules, 1975 to reduce the ceiling on rate of interest on fixed deposits collected by companies from 15 per cent to 14 per cent.

July	2	•	The Department of Company Affairs (DCA) clarified that investor complaints relating to deposits in the banking companies and NBFCs are dealt with by the Reserve Bank and those relating to non-banking non-financial companies (listed) by the SEBI. The complaints in respect of non-banking non-financial companies (unlisted) are dealt with by DCA.

	20	•	The Government notified that companies in the IT, telecom, media and entertainment sectors would be allowed to tap the market with a minimum offering of 10 per cent of their equity. All public issues through this route would have to satisfy the criterion of minimum Rs.100 crore issue size, follow book-building route with allocation of 60 per cent to Qualified Institutional Buyers (QIBs) and maintain a minimum floating stock post-listing on a continuous basis.

	25	•	The Government reconstituted the Disinvestment Commission under the chairmanship of Dr. R.H. Patil. The Commission will have a two-year term and advise the Government on the disinvestment of PSUs.
2002
Feb.	28	•	The Government announced that the FII portfolio investments will not be subject to the sectoral limits applicable for FDI except in specified sectors.

		•	The distribution tax of 10 per cent on companies and mutual funds on the dividends or income distributed by them was abolished. Such income will henceforth be taxed in the hands of the recipients at the rates applicable to them and will be subject to tax deduction at source at the rate of 10 per cent. The income received during the financial year 2002-03 by unit holders of equity-oriented funds will be taxed at 10 per cent as at present.

June	19	•	The Income Tax (Eighth Amendment) Rules, 2002 reduced the threshold for quoting PAN for the sale and purchase of securities from Rs.10 lakh to Rs.1 lakh.

			V. EXTERNAL SECTOR POLICIES
			(i) Trade Policy

2001
June	22	•	To speed up the approval process, the Government constituted a single Board of Approval for Export Processing Zones (EPZs)/Special Economic Zones (SEZs)/EOUs towards procedural simplification.

July	4	•	The Directorate General of Foreign Trade (DGFT) issued a notification stating that export of raw cotton would be allowed freely.

Jan.	30	•	The Medium Term Export Strategy (MTES) for the five-year period 2002-2007 was announced. Major features of the MTES, which takes into account the international developments and the complexities arising in the New World Trade Order under the WTO, are as follows:
			On the basis of the principle of real comparative advantage, 220 commodities at the 4-digit level identified as potential products for export focus. Based on five major criteria, 25 focus markets identified, the major markets being the USA, the EU and Japan. For the identified key sectors, sector-wise strategies advocated in consultation with Export Promotion Councils/ Commodity Boards and other export related bodies. Task setting at the commodity level and at the market level suggested with respect to all strategies. 15 key macro policy issues identified for attaining overall export competitiveness; these relate to FDI and exchange rate mechanism, tariff issues, procedural issues (export related tax rebates, transaction costs) and infrastructure issues. The key areas identified for action comprise policies for increasing price competitiveness; an effective and responsive trade defence mechanism to provide protection against unfair trade practices; WTO compatible export credit strategies and policies by providing non-actionable subsidies and supporting agriculture sector; effective tax rebate schemes and reduction in transaction costs through automation, EDI system, digital signatures, upgradation of export infrastructure; flexibility in labour policy by re-examining the role of the Government in the labour markets; enhancing export responsibility of State Governments; developing SSI export industry by a well-formulated package support; continuation of the policy related to SEZs with added features and expansion of Market Assistance Programmes. A need for forging Strategic Free Trade Agreements and giving a regional focus to other areas like Africa. A need to capitalise the opportunities in the services sector.

Feb.	28	•	The Union Budget 2002-03 announced the following changes relating to Custom Duty and Foreign Trade:
			Peak rate of customs duty reduced from 35 per cent to 30 per cent. Customs duty increased on tea and coffee from 70 per cent to 100 per cent; on spices, natural rubber and poppy seeds from 35 per cent to 70 per cent; and, on pulses from 5 per cent to 10 per cent. Duty rate of 30 per cent would apply to such non-edible oils that contain 20 per cent or more of free fatty acid. Extent of exemption under Indo-Sri Lanka Free Trade Agreement extended from 50 per cent to 90 per cent for specified goods. The customs duty on imported liquors reduced from 210 per cent to the bound rate of 182 per cent in accordance with India’s WTO commitments. The rates of CVD applicable to liquors and wines rationalised to 75 per cent for value up to US $ 25 per case and 50 per cent for others. Customs duty on specified items of reeling, twisting, weaving and processing machinery for silk textile industry reduced from 25 per cent to 10 per cent.

March	5	•	The DGFT made the following announcements:
			Quantitative Restrictions (QRs) on exports of wheat and wheat products, grain and flour of barley, maize, bajra, ragi and jowar, and butter removed. The packaging restriction of 5 kg. for export of pulses removed. The conditions of registration of contract with APEDA (Agriculture and Processed Food Products Export Development Authority) for export of non-basmati rice removed. Continuation of QRs on export of onions on enhanced quota up to 7 lakh tonnes per annum (2 lakh tonnes from kharif and 5 lakh tonnes from rabi crop). Creation of a system to monitor the export of commodities freed for exports.

	31	•	The salient features of the Five-Year Export and Import (Exim) Policy for 2002-2007 are as follows:
			i)		All QRs on exports removed, except for a few sensitive items which have been retained for exports through the State Trading Enterprises.
			ii)		SEZs would be eligible for the following entitlements: a) overseas Banking Units (OBUs) permitted to be set up in SEZs which, inter alia, would be exempt from CRR, SLR and give SEZ units and SEZ developers access to to international finance at international rates; b) income tax concessions would be given to units in SEZ; c) exemption from CST (Central Sales Tax) to supplies from DTA (Domestic Tariff Area) to SEZ; d) drawback/Duty Entitlement Pass Book (DEPB) to DTA suppliers; e) transactions from DTA to SEZ would be treated as exports under Income Tax Act and Customs Act; f) exemption to SEZ units from External Commercial Borrowings (ECB) restrictions, freedom to make overseas investment and carry out commodity hedging.
			iii)		DEPB rates permitted for all kinds of blended fabrics for the textile sector.
			iv)	A new programme called "Special Focus on Cottage Sector and Handicrafts" launched with a view to strengthen the small scale sector.
			v)	Units in the handicraft sector entitled to the benefit of Export House status on achieving a lower average export performance of Rs.5 crore.
			vi)	To boost the electronic hardware industry, Electronic Hardware Technology Park (EHTP) Scheme modified to enable the sector to face the zero duty regime under the Information Technology Agreement (ITA-I) of the WTO. Units in the EHTP will now be entitled to the following facilities: a) NFEP (Net Foreign Exchange Earning as a Percentage of exports) to be positive in 5 years only instead of every year; b) no other export obligation for EHTPs; c) supplies of ITA-I items having zero duty in the domestic market to be eligible for counting of export obligation.
			vii)	To further reduce transaction cost, the following procedural simplifications covering DGFT and Customs were announced: a) adoption and harmonisation of the 8-digit ITC(HS) code; b) reduction in the percentage of physical examination of export cargo to less than 10 per cent except for few sensitive destinations; c) finalisation of the application for fixation of brand rate of drawback within 15 days.
			viii)	Various duty-neutralisation instruments for exports such as DEPB and all other schemes like Advance Licences, EPCG etc. to continue along with the existing dispensation of not having any value caps.
			ix)	In regard to Gems and Jewellery sector, a) customs duty on import of rough diamonds reduced to zero percent and licensing regime for rough diamonds abolished; b) value-addition norms for export of plain jewellery reduced from 10 per cent to 7 per cent and exports of all mechanised unstudded jewellery allowed at a value- addition of only 3 per cent; c) personal carriage of jewellery allowed through Hyderabad and Jaipur airports also.
			x)	Duty free imports of trimmings and embellishments up to 3 per cent of FOB value, hitherto confined to leather garments, extended to all leather products.
April	26	•	The following modifications to the Union Budget 2002-03 were announced:
			i)	100 per cent deduction of export profits under Section 10A to all SEZ units commencing production on or after
				April 1, 2002, for a period of five years, and thereafter at 50 per cent for the next two years.
			ii)	Supplies to SEZs from DTA to be treated as physical exports instead of deemed exports for the purposes of
				duties, tariffs and central sales tax.
			iii)	Customs duty on dairy products will be at the WTO-bound rate of 40 per cent as against 30 per cent.

June	19	•	India’s Trade Policy Review was conducted by the World Trade Organisation at Geneva on June 19 and 21, 2002.

July	23	•	The Government approved setting up of 28 Agri Export Zones (AEZs) in 14 different states with a likely total investment of Rs. 780 crore.

			(ii) Foreign Exchange Market
2001
July	27	•	Authorised dealers (ADs) were advised to suitably inform the public that remittances in any form towards participation in lottery schemes are prohibited under Foreign Exchange Management Act (FEMA), 1999. These restrictions are also applicable to remittances for participation in lottery like schemes functioning under different names like money circulation scheme or remittances for the purpose of securing prize money/awards etc.

Aug.	27	•	The Reserve Bank, as a temporary measure, allowed a period of 360 days (in place of existing six months), from the date of shipment, for realisation and repatriation of full value of goods/software exported to 43 Latin American countries. The relaxation in the period of realisation is available for one year with effect from September 1, 2001.

Sept.	24	•	It was decided, as a temporary measure, to allow manufacturer exporters of products like pharmaceuticals, agro- chemicals, cement and iron and steel, etc., having export contracts of Rs.100 crores and above, in value terms in one year, a period of 365 days from the date of shipment for the realisation and repatriation of full value of the exports of products specified. The relaxation in the period of realisation will be available for exports to be made on or after 1^st October 2001, for a period of one year, subject to review.

Oct.	13	•	Settlement of claims in foreign currency in respect of general insurance policies in foreign currency, issued with the approval of the Reserve Bank, was permitted subject to specified conditions.

	25	•	In terms of FEMA provisions, designated officials of Ministry of Information Technology, Government of India at the Software Technology Parks of India (STPIs) or at Free Trade Zones (FTZs) or EPZs or SEZs were authorised to certify exports declared on SOFTEX forms by the units located in STPIs/EPZs/SEZs. In terms of the Exim Policy, designated officials of STPIs/SEZs may also certify the SOFTEX Forms in respect of EOUs which are registered with them. Accordingly, EOU software exporters may approach the designated officials of STPIs/EPZs/SEZs where they are registered for certification of software exports on SOFTEX Forms.

Nov.	1	•	At present, all trade transactions between a person resident in India and a person resident in Nepal are settled in rupees. It was decided that in case of export of goods to Nepal, where an importer resident in Nepal has been permitted by the Nepal Rashtra Bank to make payment in free foreign exchange, such payments shall be routed through the ACU mechanism.

	13	•	The ceiling of US $ 500 or its equivalent on foreign exchange in the form of foreign currency notes and coins allowed to travellers proceeding to countries other than Iraq, Libya, Islamic Republic of Iran, Russian Federation and other Commonwealth of Independent States was enhanced to US $ 2,000 or its equivalent without prior permission from the Reserve Bank, out of the overall foreign exchange released to them.

	23	•	It was decided that henceforth ADs and FFMCs need not make any endorsement on the passports of the travellers availing of foreign exchange for tourism and private purposes. On the basis of a declaration given by the traveller regarding the amount of foreign exchange availed of during a calendar year, ADs/FFMCs have been permitted to release exchange for tourism and private purposes. Travellers can, however, seek endorsement on their passports of foreign exchange released, at their option, if they consider it necessary for their record.

	29	•	It was decided that henceforth overseas corporate bodies (OCBs) shall not be permitted to invest under the Portfolio Investment Scheme (PIS) in India. The OCBs that have already made investments under the PIS are allowed to continue to hold such shares/convertible debentures till such time these are sold on the stock exchange. However, OCBs will continue to enjoy the facilities of opening and maintaining non-resident accounts as hitherto. OCBs would also continue to be eligible for making FDI under the existing guidelines.

Dec.	15	•	It was clarified that the concession in price of shares being offered under Employees Stock Option Scheme (ESOP) may be borne by the foreign company issuing the shares or by its Indian branch/office/subsidiary or the company in India in which the foreign equity holding is not less than 51 per cent.
		•	With the introduction of FEMA, 1999 certain prescribed returns no longer relevant, viz. CIR, SPG, SPM and DBS, were discontinued. Moreover, persons resident in India need not submit Annual Returns in respect of all types of foreign assets held by them either in terms of general permission or specific permission of the Reserve Bank. However, wherever the Reserve Bank has granted specific permission for acquisition of assets as well as sale thereof and submission of the Return has been prescribed as one of the conditions of approval, the applicants are required to furnish full details of the foreign assets as prescribed in the permission.
2002
Jan.	28	•	ADs were permitted to extend the period of realisation beyond six months without any reference to the Reserve Bank after obtaining an application from the exporter, where invoice value does not exceed US $ 1,00,000, subject to the following conditions: i) the AD is satisfied that the exporter has not been able to realise export proceeds for reasons beyond his control; ii) the exporter submits a declaration that he will realise the export proceeds during the extended period; iii) the extension can be granted up to a period of 3 months at a time. While considering the extension beyond one year from the date of export, the total export outstandings should not be more than 10 per cent of the average of export realisations during the preceding three financial years; iv) the ceiling of US $ 1,00,000 would not apply where the exporter has filed suits against the importer abroad. In such cases, extension can be granted up to six months at a time, irrespective of the amount involved; v) all other cases including those where the export invoices are under investigation will require approval from the Reserve Bank.

Feb.	13	•	The Operative Guidelines for the limited two-way fungibility under the "Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993" as approved by the Government of India were issued for guidance of Authorised Persons and their constituents.

	19	•	It was clarified that the general permission to Indian parties, subject to specified guidelines, to make direct investment in Joint Venture (JV) or Wholly Owned Subsidiary (WOS) outside India did not include investment proposals which envisage setting up a holding company or a Special Purpose Vehicle abroad, which would in turn set up one or more step down subsidiaries as operating units. Such overseas investment proposals through a two-tier structure would require prior approval of the Reserve Bank.

		•	It was clarified that the restriction on Indian parties included in the Reserve Bank’s Caution List as not being eligible to make overseas investments under the automatic route was also applicable to Indian parties which were defaulters to the banking system in India and whose names appeared in the Defaulters List published/circulated by the Reserve Bank.

March	1	•	ADs were permitted to allow remittance of payment of lease rentals, opening of letter of credit towards security deposit etc. in respect of import of aircraft/aircraft engine/helicopter on operating lease basis after verifying that necessary approval from the appropriate authorities had been obtained. It was clarified that financial lease transaction i.e. lease transaction containing option to purchase the asset at the end of the lease period would continue to require prior approval from the Reserve Bank.

		•	Indian corporates, with proven track record, were permitted to contribute funds from their foreign exchange earnings for setting up chairs in educational institutions abroad, and for such other purposes.

		•	Export oriented units and other exporters are permitted to credit up to 70 per cent and 50 per cent of their foreign exchange earnings to their Exchange Earners’ Foreign Currency (EEFC) accounts, respectively. To enable the corporates to take advantage of lower interest rates and prepay the ECBs, the corporates were permitted, on a case by case basis, to credit higher than above percentages of export proceeds to their EEFC account.

	2	•	Limit for Indian direct investment outside India under automatic route was raised from US $ 50 million in a financial year to US $ 100 million. Furthermore, such Indian investors were permitted to buy foreign exchange up to 50 per cent of their net worth as on the date of last audited balance sheet as against the existing limit of 25 per cent.

	4	•	With a view to providing full convertibility of deposit schemes for non-resident Indians, it was decided to discontinue non-resident non-repatriable (NRNR) account and non-resident special rupee (NRSR) account schemes with effect from April 1, 2002. Banks were advised not to accept any fresh deposits or open any fresh account by way of renewal or otherwise under these two schemes with effect from that date. It was clarified that the NRNR account holders had the option to directly credit the maturity proceeds to NRE account but not to FCNR(B) account. The proceeds of NRNR deposits can be credited to NRE account only on maturity and in case of premature withdrawal the proceeds shall be credited only to Non-Resident Ordinary Rupee (NRO) Account.

	11	•	Corporates were allowed to issue foreign currency convertible bonds (FCCBs) up to US $ 50 million, in any one financial year, under the automatic route i.e., without the approval from the Government or the Reserve Bank.

	26	•	It was decided to permit residents to take/export goods for exhibition and sale outside India without the prior approval of the Reserve Bank, subject to certain conditions. Unsold exhibit items may be sold outside the exhibition/trade fair in the same country or in a third country. Such sales at discounted value are also permissible. Gift of unsold goods up to the value of US $ 5,000 per exporter per exhibition/trade fair is also permitted.

April	1	•	Exporters with proven track record who have been certified as ‘Status Holder’ in terms of EXIM policy were permitted: i) to credit up to 100 per cent of their eligible receipts of foreign exchange to their EEFC Account; ii) to despatch the export documents direct to the consignees outside India subject to the conditions that the export proceeds are repatriated through the AD named in the GR form and the duplicate copy of the GR form is submitted to the AD for monitoring purposes, by the exporters within 21 days from the date of shipment of export; iii) to realise and repatriate the full value of export proceeds within a period of twelve months from the date of shipment in respect of shipments made on or after April 1, 2002.

	2	•	Insurance companies registered with IRDA were permitted to issue general insurance policies denominated in foreign currency and receive premium in foreign currency without prior approval of the Reserve Bank in the following type of cases: i) marine insurance policies in respect of vessels (a) owned by foreign shipping companies but managed by Indian companies as technical operators for the vessels and (b) mortgaged to foreign financiers/bank as per the loan agreement and assignment of the same in favour of the foreign financiers/bank; ii) aviation insurance for aircrafts imported from outside India on lease/ hire basis for the purpose of air taxi operations; iii) marine-cum-erection all risks insurance policies to Indian companies in connection with a project to be set up in India with collaboration of foreign companies for supply of the equipment; iv) and, marine-cum-erection all risks policies favouring Indian companies for execution of projects in India being financed by ECB or awarded to local companies under global tender requiring insurance in foreign currency. Furthermore, ADs have been advised to allow remittance towards the settlement of claims in the above cases subject to compliance of certain conditions.

	12	•	ADs were permitted to consider requests for reduction up to 10 per cent in invoice value of export bills in respect of export of gold/silver jewellery or articles made out of cut and polished diamonds also.

	29	•	To provide greater freedom and flexibility to banks in their fund management, permission was granted to banks to crystallise their foreign exchange liability in rupees, in select cases, where circumstances so warrant, keeping in view the status of the account of the borrower who had raised ECBs. ADs desirous of crystallising their foreign exchange liability, arising out of guarantees provided for ECBs raised by corporates in India, into rupees have been advised to apply to Exchange Control Department, giving all the required details in the matter.

May	14	•	ADs were advised to obtain, before making any remittances for advertisement on foreign television, a certificate from a Chartered Accountant certifying that the applicant satisfies the criteria of having export earning of more than Rs.10 lakhs during each of the preceding two years and the advertisement for which foreign exchange is being remitted will be broadcast by foreign television company in foreign countries and not in India alone.
		•	ADs were permitted to allow repatriation of current income like rent, dividend, pension, interest of NRIs who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.

	17	•	At present, a person resident in India has been prohibited from taking any general or life insurance policy issued by an insurer outside India. It was decided, in consultation with Government of India, to exempt units located in SEZs from the purview of the above stipulations for the purpose of taking out general insurance policies. Accordingly, Ads are free to allow remittances towards premium for general insurance policies taken by units located in SEZs from insurers outside India provided the premium is paid by the units out of their foreign exchange balances.

June	4	•	The Reserve Bank reiterated instructions about the prohibition on remittance in any form towards participation in lottery schemes or lottery like schemes, functioning under different names like money circulation scheme, or remittances for the purpose of securing prize money/awards under FEMA, 1999. The prohibition on such payments includes payment not only by a resident by use of cash/draft/credit card/debit card etc. but also payments made by non-residents on behalf of residents. As such any person resident in India effecting/remitting such payment directly/ indirectly would make himself/herself liable to be proceeded against the contravention of the FEMA.

	24	•	To further streamline the procedure for reporting overseas direct investments in JV/WOS, the requirement of forwarding of ‘Form ODA’ alongwith the prescribed documents to the Reserve Bank for investments made under the automatic route by Indian parties was dispensed with. The report on remittances required to be submitted by ADs was also revised. All remittances/guarantees issued/ capitalisation of exports etc., under the automatic route as well as under the Reserve Bank approval, are henceforth required to be reported in the revised form ODR. However, no change in the procedures relating to the receipt/scrutiny of the form ODA submitted by the Indian parties to the AD has been made.

	27	•	On the use of international credit cards, it was clarified that : i) these can be used on internet for any purpose for which exchange can be purchased from an AD in India; ii) these cannot be used on internet or otherwise for purchase of prohibited items, like lottery tickets, banned or proscribed magazines, participation in sweepstakes, payment for call- back services etc., since no drawal of foreign exchange is permitted for such items/activities, and, iii) there is no aggregate monetary ceiling separately prescribed for use of International Credit Cards through internet. Furthermore, debit Cards and ATM Cards can be used for any purpose for which foreign exchange can be purchased from an AD in India.
		•	ADs were permitted to receive payment for exports made out of India by debit to the credit card of an importer, where the reimbursement from the card issuing bank/organisation will be received in foreign exchange.

	29	•	ADs were permitted to allow remittances for the purpose of normal business operations of the office (trading/non- trading)/branch or representative outside India of Indian entities subject to the following terms and conditions:

			i)		The overseas office (trading/ non-trading)/branch/ representative should not (a) create any financial liabilities contingent or otherwise for Head Office in India (b) invest surplus funds abroad without prior approval of the Reserve Bank. Any funds rendered surplus should be repatriated to India.

			ii)		The overseas office/branch of software exporter company/firm, may repatriate to India 100 per cent of the contract value of each ‘off-site’ contract as also at least 30 per cent of the contract value of each ‘on-site’ contract and may utilise the balance amount (70 per cent) of the contract value of ‘on-site’ contracts for contract related expenses including office/branch expenses abroad. A duly audited yearly statement showing receipts under ‘off-site’ and ‘on-site’ contracts undertaken by the overseas office, expenses and repatriation thereon may be sent to the AD.
			iii)		The details of bank account opened in the overseas country should be promptly reported to AD.

		•	Indian entities were permitted to open, hold and maintain in the name of its office/branch set up outside India, a foreign currency account with a bank outside India by making remittance for the purpose of normal business operations of the said office/branch or representative, subject to specified conditions.