RBI’s Ease of Doing Business Initiatives under FEMA

• Foreign Direct Investment (FDI)
• ||
• November 21, 2020

Foreign Exchange Management Act

Parliament of India enacted the Foreign Exchange Management Act (“FEMA”) on December 29, 1999, replacing Foreign Exchange Regulation Act (“FERA”). FEMA focused on increasing India’s foreign exchange reserves, promoting foreign payments and foreign trade.

The Reserve Bank of India (“RBI”) launched plans to promote ease of doing business, which felt a need to consolidate the regulations and rationalize them in light of the evolving business environment and changing practices in cross-border transactions pertaining to external trade and payments.

Throughout this, RBI has informed the discontinuation of returns/reports under the Foreign Exchange Management Act, 1999.

The circular is focused on improving the ease of doing business and reduce the cost of compliance. The Reserve Bank evaluated the existing forms and reports contained under FEMA 1999.

Conditions under this Circular
The attention of Authorized Persons is invited to the Master Direction-Reporting under the Foreign Exchange Management Act, 1999 dated January 01, 2016, as amended from time to time, and other reporting related instructions issued by the RBI.

The RBI decided to discontinue the following

1. Category-wise transactions where the amount exceeds USD 5000 per transaction.
2. Category-wise and transaction-wise statements wherein the amount exceed USD 25,000 per transaction.
3. Statements of purchase transactions of USD 10,000 and above are included in the franchisees’ transactions.
4. Extension of Liaison Offices (LOs).
5. Extension of Project Offices (POs).
6. Daily inflow/outflow of the foreign fund based on foreign investment by FPIs/FIIs.
7. Return on monthly data related to actual inflow/outflow of remittances on account of investments by FII/FPI in the Indian Capital Market.
8. Reporting related to inflow/outflow of remittances due to investments by Foreign Venture Capital Investor (FVCIs) and Market Value of Investments which are made by FVCIs.
9. Reporting of Inflow/Outflow details regarding Mutual Fund by Asset Management Companies.
10. Market Value of FII Investment in India is on a fortnightly basis.
11. Market Value of FII Investment in India is on a monthly basis.
12. FII holdings are as a percentage of floating stock.
13. The form DRR for issue/transfer of sponsored/unsponsored Depository Receipts.
14. ADR/GDR Movement Report-two-way fungibility.
15. Repatriation of sales proceeds of basic shares represented by FCBs/GDRs/ADRs.
16. GDR/ADR underlying shares issued, re-deposited and released monthly reporting.
17. Monitoring of disinvestments by Overseas Corporate Bodies.

The RBI has also informed, “The Master Direction-Reporting under the Foreign Exchange Management Act, 1999, dated January 01, 2016, shall be amended to reflect the above changes. AD banks could bring the contents of this circular to the notice of their constituents.

At AJSH, we assist our clients in setting up their businesses in India and ensuring they comply with all statutory requirements like accounting, bookkeeping, tax filings & assessments payroll, auditing, trademark registration, business structuring, secretarial and RBI compliances with FEMA. If you would like to know more about RBI guidelines on ease of doing business in India, kindly contact us.