Overseas Investment: Liberalisation - FEMA - 042

Overseas Investment: Liberalisation RBI/2005/463 A.P.(DIR Series) Circular No. 42 May 12, 2005 To All Banks Authorised to Deal in Foreign Exchange Madam/Sirs, Overseas Investment: Liberalisation Attention of authorised dealer (AD) banks is invited to Regulation 6 of the Notification No.FEMA.120/RB-2004 dated July 7, 2004 in terms of which an Indian entity is permitted to invest upto 100 per cent of their net worth in overseas Joint Ventures and/or Wholly Owned Subsidiaries (JV/WOS) in any bonafide business activity under automatic route. 2. With a view to promoting Indian investment abroad and to enable Indian companies to reap the benefits of globalisation, it has been decided to raise the above ceiling from the present 100 per cent of the net worth to 200 per cent of the net worth of the investing company. Accordingly, under the automatic route for overseas investment, eligible Indian entities are now permitted to invest in overseas in JV/WOS upto 200 per cent of their net worth. All other provisions of the Notification mentioned above applicable to such investment shall remain unchanged. It is further clarified that the ceiling is not applicable to the investments made out of balances held in EEFC accounts and out of the proceeds of ADR / GDR issue, as hitherto. 3. AD banks may, accordingly, allow remittances under automatic route upto 200 per cent of the net worth as on the date of the last audited balance sheet of the investing companies, after considering the proposals received in form ODA. 4. Necessary amendments to the Foreign Exchange Management (Transfer or Issue of any foreign security) Regulations, 2004 are being issued separately. 5. AD banks may bring the contents of this Circular to the notice of their constituents and customers concerned. 6. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999), and is without prejudice to permission / approvals, if any, required under any other law. Yours faithfully, (Vinay Baijal ) General Manager-in-Charge RBI /2005/459 IDMD.PDRS./4783/10.02.01/2004-05 May 11, 2005 All RBI Regulated Entities Dear Sirs Government Securities Transactions - T+1 Settlement Please refer to paragraph 74 of the Annual Policy Statement for the year 2005-06 dated April 28, 2005 wherein it was proposed that the settlement system for transactions in Government Securities would be standardised to T+1 basis. 2. The Technical Advisory Committee (TAC) on Money, Government Securities and Forex Markets had earlier discussed and advised migration to a uniform system of T+1 settlement for all outright secondary market transactions in Government Securities. Standardising the settlement period to T+1 would provide participants more processing time for transactions and hence will help better funds management as well as risk management. 3. Accordingly, it has now been decided to adopt a standardised settlement on T+1 basis of all outright secondary market transactions in Government Securities effective May 24, 2005. 4. In the case of repo transactions in Government Securities, however, market participants will have the choice of settling the first leg on either T+0 basis or T+1 basis, as per their requirements. Yours faithfully (B. Mahapatra) Chief General Manager-in-Charge