Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) - 202/2009-RB - Foreign Exchange Management

Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India ) (Amendment) Regulations, 2009 MINISTRY OF FINANCE (Department of Economic Affairs) (F.M. SECTION) RESERVE BANK OF INDIA (Foreign Exchange Department) (CENTRAL OFFICE) NOTIFICATION Mumbai, the 10th November, 2009 No. FEMA 202/2009-RB G.S.R. 851(E) - In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) , the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 ( Notification No. FEMA 20/2000-RB dated 3rd May, 2000 ), namely :- 1. Short Title and Commencement — (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Amendment) Regulations, 2009. (ii) Save as otherwise provided in these Regulations, the provisions of these Regulations shall be deemed to have come into force with effect from the dates specified hereunder. 2. Amendment - In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000 , ( Notification No. FEMA 20/2000-RB dated 3rd May, 2000 ) (hereinafter referred to as the Principal Regulations'), a new Regulation 12 shall be inserted and shall be deemed to have been inserted with effect from 11th day of July, 2008, namely: - "12 Pledge of shares of company incorporated in India— (i) Any person being a promoter of a company registered in India (borrowing company), which has raised external commercial borrowing, may pledge the shares of the borrowing company or that of its associate resident companies for the purpose of securing the external commercial borrowing (ECB) raised by the borrowing company: Provided that no person shall pledge any such share unless no-objection has been obtained from a bank which is an authorised dealer. (ii) A bank which is an authorised dealer may grant 'no objection' for pledge of shares under clause (i) after satisfying itself of the following: (a) the underlying ECB is strictly in compliance with the extant ECB guidelines, (b) the loan agreement has been signed by the lender and the borrower, (c) there exists a security clause in the Loan Agreement requiring the borrower to create charge on financial securities, and (d) the borrower has obtained Loan Registration Number (LRN) from the Reserve Bank (Amendment) Rules, 2009. Provided, that the 'no objection' may be granted by a bank which is an authorised dealer subject to the following conditions. Namely:- (a) the period of such pledge shall be co-terminus with the maturity of the underlying external commercial borrowing: (b) in case of invocation of pledge, transfer shall be in accordance with the extent FDI policy and directions issued Reserve Bank; (c) the Statutory Auditor has certified that the borrowing company will utilize/has utilised the proceeds of the external commercial borrowing for the permitted end-uses only." 3. Amendment of Schedule 5 .- In Schedule 5 of the Principal Regulations in paragraph 1, the existing provisos (i) and (ii) shall be deleted and provisos (iii) and (iv) shall be renumbered as (i) and (ii), respectively and shall be deemed to have been deleted and renumbered with effect from the 17th day of October, 2008. [F.No.1/23/EM/2000-Vol. IV] SALIM GANGADHARAN, Chief General Manager-in-Charge Foot Note : - (i) The Principal Regulations were published in the Official Gazette vide No. G.S.R. 406(E), dated May 8, 2000 in Part II Section 3, Sub-section (i) and subsequently amended as under:- No. G.S.R.158(E), dated 02-03-2001 No. G.S.R.175(E), dated 13-03-2001 No. G.S.R. 182(E), dated 14-03-2001 No. G.S.R. 4(E), dated 02-01-2002 No. G.S.R. 574(E), dated 19-08-2002 No. G.S.R. 223(E), dated 18-03-2003 No. G.S.R. 225(E), dated 18-03-2003 No. G.S.R. 558(E), dated 22-07-2003 No. G.S.R. 835(E), dated 23-10-2003 No. G.S.R. 899(E), dated 22-11-2003 No. G.S.R. 12(E), dated 07-01-2004 No. G.S.R. 278(E), dated 23-04-2004 No. G.S.R. 454(E), dated 16-07-2004 No. G.S.R. 625(E) dated 21-09-2004 No. G.S.R. 799(E), dated 08-12-2004 No. G.S.R. 201(E), dated 01-04-2005 No. G.S.R. 202(E), dated 01-04-2005 No. G.S.R. 504(E), dated 25-07-2005 No. G.S.R. 505(E) dated 25-07-2005 No. G.S.R. 513(E), dated 29-07-2005 No. G.S.R. 738(E), dated 22-12-2005 No. G.S.R. 29(E), dated 19-01-2006 No. G.S.R. 413(E), dated 11-07-2006 No G.S.R. 712(E), dated 14-11-2007 No. G.S.R. 713(E), dated 14-11-2007 No. G.S.R. 737(E), dated 29-11-2007 No. G.S.R. 575(E), dated 05-08-2008 No. G.S.R 896(E), dated 30-12-2008 (ii) It is clarified that no person will be adversely affected as a result of retrospective effect being given to these Regulations.