Overseas Direct Investments -RBI liberalises

RBI/2011-12/481 A. P. (DIR Series) Circular No.101  April 02, 2012
Overseas Direct Investments
As per the provisions of FEMA, an Indian party  is required to obtain prior permission of the Reserve Bank to open, hold  and maintain Foreign Currency Account in a foreign country for the purpose of overseas direct investments in that country, in case the regulation of the host country requires that the investment in the country is to be made through a particular account to be opened with the commercial bank of the country
To provide operational flexibility to the Indian party, R B I decided to liberalise the regulations
An Indian party will now be allowed to open, hold and maintain Foreign Currency Account (FCA) abroad for the purpose of overseas direct investments subject to the following terms and conditions:
1.	The Indian party is eligible for overseas direct investments in terms of Regulation 6 (Regulation 7, if applicable) of Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time
2.	The host country Regulations stipulate that the investments into the country is required to be routed through a designated account.
3.	FCA shall be opened, held and maintained as per the regulation of the host Country
4.	The remittances sent to the FCA by the Indian party should be utilized only for making overseas direct investment into the JV / WOS abroad.
5.	Any amount received in the account by way of dividend and / or other entitlements from the subsidiary shall be repatriated to India within 30 days from the date of credit.
6.	The Indian party should submit the details of debits and credits in the FCA  on yearly basis to the designated AD  bank with a certificate from the  Statutory Auditors of the Indian  party certifying that the FCA was  maintained as per the host country laws and the extant FEMA regulations /  provisions as applicable.
7.	The FCA so opened shall be closed immediately or within 30 days from the date of disinvestment from JV / WOS or cessation thereof.
Circular is available in the R B I website