May 31, 2014
Requirement for obtaining prior approval of RBI in cases of acquisition/ transfer of control of NBFCs Reserve Bank of India has vide its circular DNBS (PD) CC.No.376/03.10.001/2013-14 dated May 26, 2014 notified that NBFCs both Deposit accepting and non-deposit accepting registered with RBI will requiring prior written approval of the Reserve Bank in the following cases:–
(i) any takeover or acquisition of control of an NBFC, whether by acquisition of shares or otherwise; (ii)any merger/amalgamation of an NBFC with another entity or any merger/amalgamation of an entity with an NBFC that would give the acquirer / another entity control of the NBFC; (iii)any merger/amalgamation of an NBFC with another entity or any merger/amalgamation of an entity with an NBFC which would result in acquisition/transfer of shareholding in excess of 10 percent of the paid up capital of the NBFC. (iv) Prior written approval of the Reserve Bank would also be required before approaching the Court or Tribunal under Section 391-394 of the Companies Act, 1956 or Section 230-233 of Companies Act, 2013 seeking order for mergers or amalgamations with other companies or NBFCs.Overseas Direct Investments – Limited Liability Partnership (LLP) as Indian Party Reserve Bank of India vide its circular A.P. (DIR Series) Circular No.131 dated May 19, 2014 has notified that a Limited Liability Partnership (LLP), registered under the Limited Liability Partnership Act, 2008 (6 of 2009), as an “Indian Party”, may henceforth undertake financial commitment to / on behalf of a JV / WOS abroad in terms of the extant FEMA provisions under Regulations. The AD banks shall report the financial commitment/s undertaken by an LLP in Form ODI Part I and II and also other reporting (APR, disinvestments, etc.) as per the extant reporting requirements External Commercial Borrowings (ECB) from Foreign Equity Holder - Simplification of Procedure As per the extant ECB policy, ECBs from direct foreign equity holders (FEHs) are considered both under the automatic and the approval routes, as the case may be. ECBs from indirect equity holders and group companies and ECBs from direct FEH for general corporate purpose are, however, considered under the approval route. Further, any request for change of the ECB lender in case of FEH requires RBI’s approval. Reserve Bank of India vide its circular RBI/2013-14/594 A.P. (DIR Series) Circular No.130 dated May 16, 2014 has as a measure of simplification of the existing procedure, decided to delegate powers to AD banks to approve the following cases under the automatic route:
- Proposals for raising ECB by companies belonging to manufacturing, infrastructure, hotels, hospitals and software sectors from indirect equity holders and group companies.
- Proposals for raising ECB for companies in miscellaneous services from direct / indirect equity holders and group companies. Miscellaneous services mean companies engaged in training activities (but not educational institutes), research and development activities and companies supporting infrastructure sector. Companies doing trading business, companies providing logistics services, financial services and consultancy services are, however, not covered under the facility.
- Proposals for raising ECB by companies belonging to manufacturing, infrastructure, hotels, hospitals and software sectors for general corporate purpose.ECB for general corporate purpose (which includes working capital financing) is, however, permitted only from direct equity holder.
- Proposals involving change of lender when the ECB is from FEH – direct / indirect equity holders and group company.
a. Scheme of take-out financing: Reference A.P. (DIR Series) Circular No. 04 dated July 22, 2010. b. Repayment of existing Rupee loans for companies in infrastructure sector: Reference A.P. (DIR Series) Circulars Nos. 25 and 111 dated September 23, 2011 and April 20, 2012 respectively. c. Spectrum allocation: Reference A.P. (DIR Series) Circulars Nos. 28 and 54 dated January 25, 2010 and November 26, 2012 respectively. d. Repayment of Rupee loans: Reference A.P. (DIR Series) Circulars Nos. 134, 26, 78 and 12 dated June 25, 2012, September 11, 2012, January 21, 2013 and July 15, 2013 respectively.The changes to the ECB policy will come into force with immediate effect. External Commercial Borrowings (ECB) Policy: Re-schedulement of ECB - Simplification of procedure Reserve Bank of India vide its circular RBI/2013-14/584 A.P. (DIR Series) Circular No. 128 dated May 9, 2014 has as a measure of simplification of the existing procedures, decided to delegate the power to the designated AD Category – I bank to allow re-schedulement of ECB due to changes in draw-down schedule and / or repayment schedule with the following conditions:
- Changes, if any, in all-in-cost (AIC) is only on account of the change in average maturity period (AMP) due to re-schedulement of ECB and post re-schedulement, the AIC and the AMP are in conformity with applicable guidelines. There should not be any increase in the rate of interest and no additional cost (in foreign currency / Indian Rupees) should be involved.
- The re-schedulement is allowed only once, before the maturity of the ECB.
- If the lender is an overseas branch of a domestic bank, the prudential norms applicable on account of re-schedulement should be complied with.
- The changes on account of re-schedulement should be reported to DSIM through revised Form 83.
- The ECB should be in compliance with all applicable guidelines related to eligible borrower, recognised lender, AIC, AMP, end-uses, etc.
- The borrower should not be in the default / caution list of RBI and should not be under the investigation of Directorate of Enforcement.
- to rationalise the existing procedure, in cases where the NR investor including an NRI acquires shares on the stock exchanges in terms of A.P. (DIR Series) Circular No. 38 dated September 6, 2013, the investee company would have to file form FC-TRS with the AD Category-I bank.
- In order to facilitate operational convenience, it has been decided that the AD Category-I bank may approach Regional Office concerned of Reserve Bank of India, Foreign Exchange Department to regularize the delay in submission of form FC-TRS, beyond the prescribed period of 60 days and in all other cases, form FC-TRS shall continue to be scrutinised at AD bank level as per extant practice.
- The AD banks shall continue to comply with the consolidated reporting requirement as stipulated in terms of Para 6.4 of A. P. (DIR Series) Circular No. 16 dated October 4, 2004.