Financial Inclusion Fund (FIF) RBI Notification

As you may be aware, the Financial Inclusion Fund (FIF) and Financial Inclusion Technology Fund (FITF) was constituted in the year 2007-08 for a period of five years with a corpus of Rs. 500 crore each to be contributed by Government of India (GOI), RBI and NABARD in the ratio of 40:40:20. The guidelines for these two funds were framed by GOI. In April 2012, RBI decided to fund FIF by transferring the interest differential in excess of 0.5% on RIDF and STCRC deposits on account of shortfall in priority sector lending.

2. Keeping in view the various developments over the years, GOI has merged the FIF and FITF to form a single Financial Inclusion Fund. The Reserve Bank of India has finalised the new scope of activities and guidelines for utilisation of the new FIF in consultation with GOI. The new FIF will be administered by the reconstituted Advisory Board constituted by GOI and will be maintained by NABARD.

3. A copy of the revised guidleines of the new Financial Inclusion Fund is enclosed for your information.

Yours faithfully,

(Suma Varma)
Principal Chief General Manager

Encl: As above

Corporate Social Responsibility under Company Act 2013.

Corporate Social Responsibility

– Introduced in Company Act 2013.

Application of CSR:

If any of the following conditions are satisfied CSR will be applicable:
1. Company having Net worth of Rs.500 Cr or more.
2. Turnover of Rs.1000 Cr or more.
3. Net profit of Rs.5 Cr or more during any financial year.

The company covered under CSR shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. The same should be disclosed in Board Reports.

Work of CSR Committee:

The Corporate Social Responsibility Committee shall formulate and recommend to the Board a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII of the Companies Act, 2013.

Recommend the amount of expenditure to be incurred on the activities referred to above and monitor the Corporate Social Responsibility Policy of the company from time-to-time.

Compliance:

The Board of every company shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. (The company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility.)

Provided further that if the company fails to spend such amount, the Board shall, in its report made specify the reasons for not spending the amount.

Average net profit shall be calculated in accordance with the provisions of section 198 of the Companies Act, 2013.

Recognition and measurement principles:-

Whether provision should be created for amount spent short in accordance with the Companies Act, 2013?

The Board of every company shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy, provided that the company shall give preference to the local area and areas around it where it operates, for spending the amount earmarked for Corporate Social Responsibility, provided further that if the company fails to spend such amount, the Board shall, in its report made specify the reasons for not spending the amount. [Relevant extracts of Section 135 of the Companies Act, 2013]

One of the questions which arises here is whether the company is required to create provision in the financial statements for the amount spent less as per the above requirements [i.e., less than 2% of the average profits].

Considering the above provisions, it is clear that the intention of the law is not to create the provision for the amount spent less as per the requirements of section 135 of the Companies Act, 2013, instead it requires that if the company fails to spend such amount, the Board shall in its report made specify the reasons for not spending the amount.

However, as per the general accounting principles if CSR activity has been taken up and liability has been incurred then provision should be created for the activities completed and should be recognized in the financial statements.

Whether the company can carry forward excess amount spent in accordance with Companies Act, 2013?

As per section 135 of the Companies Act, 2013, the Board of every company shall ensure that the company spends, in every financial year, at least two per cent of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. Accordingly, two percent is the minimum amount required to be spent and, hence, any extra amount spent is not allowed to be carried forward.

CSR Expenses

A company may discharge CSR obligations:-

– By contributing to the fund [As highlighted in Schedule VII of the Companies Act, 2013]
– Via registered trust or registered society under section 8 of the Companies Act, 2013
– Spend the amount on its own as prescribed under CSR Rules, 2014

One of the questions which arises here is whether contribution to the fund should be recognized as expense in the financial statements? As per the accounting principles, contribution to the fund should be treated as an expense in the financial statements. Further, in case CSR obligation is discharged via registered trust or registered society then the same should also be treated as an expense in the financial statements.

However, in case the CSR amount is spent on its own in accordance with CSR Rules, 2014 then the company should assess whether the amount spent meets the definition of asset in accordance with accounting framework? If the amount spent does not meet the definition of asset then such amount should be expensed off in the financial statements.

When goods manufactured or services rendered by the company are transferred as CSR expenditures

It may happen that the company has transferred, as a part of the CSR expenditure, goods manufactured by it or services rendered by it. Following principles should be followed in such cases:-

Transfer of goods manufactured by company

Transfer of goods manufactured by company for CSR activity should be treated as CSR expense when the control of the goods is transferred by the company. The cost of such goods should be measured in accordance with AS 2. Any indirect taxes paid should also form part of the CSR expenditure.

Services rendered by the company

Services rendered by the company for CSR activity should also be treated as CSR expense when services are rendered. Services rendered should be measured at cost. Any indirect taxes paid should also form part of the CSR expenditure.

Receipt of grant for carrying out CSR expenditure

Certain companies may receive grant to meet the CSR expenditure. In case grant is received and used by the company for carrying out CSR expenditure then cost of CSR expenditure should be measured at net of grant received.

Treatment of surplus arising from CSR projects or programs

The CSR Policy of the company shall specify that the surplus arising out of the CSR projects or programs or activities shall not form part of the business profit of a company. [Rule 6(2) of the CSR Rules, 2014]

One of the questions which arises here is whether surplus arising from CSR projects/ programs should be treated as income in the financial statements? Surplus ordinarily shall mean that income is more than the expenditure. In accordance with the accounting principles of AS 5 and framework for preparation and presentation of financial statements, the surplus should be considered as an income and should be included in the statement of profit and loss. Since such surplus is not a business profit a corresponding liability should be immediately recognized in the balance sheet by recognizing a charge in the statement of profit and loss.

Further, such surplus should not be considered for the computation of 2% of the average profits of the company.

Presentation and Disclosures:-

Following are the presentation and disclosure requirements in respect of CSR expenditure:-

– Schedule III of the Companies Act, 2013 requires that the amount of expenditure incurred on CSR activities shall be disclosed by way of note to statement of profit and loss.

– Disclosure of expenditure as a separate line item in the statement of profit and loss is recommended.
– Note should include the breakup of various heads of expenses included in CSR expenditure.
– Note should provide the gross amount spent, amount spent (disclosing expenditure incurred on construction/ acquisition of asset or expenditure incurred on other purposes bifurcating cash paid and yet to be paid).
– Details of related party transactions (such as contribution to a trust, etc.), if any.
– Details of provisions made, if any

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+919990694230

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Annual filling Cheklist for ROC 2014- 2015 From CS GAURAV

LISTOFFORMSFORANNUALFILLINGTOROC

1)ADT-1(AppointmentofAuditors)

2)AOC-4(BalanceSheetandProfit&LossAccount)

3)MGT-7(AnnualReturn)

CHECKLISTFORADT-1

1)AUDITORSDETAIL

a)Nameoftheauditororauditor’sfirm

b)Income-taxpermanentaccountnumberofauditororauditor’sfirmc)Auditor’sfirm’sregistrationnumber

d)AuditorAddress

e)E-mailIDoftheauditororAuditorfirmf)DateofAGM

2)ATTACHMENT

a)CTCOFResolutiononletterheadofthecompany

b)Appointmentletterofauditoronletterheadofthecompany

c)ConsentforAppointmentasAuditorandCertificateofEligibilityonletterheadoftheFirm.

3)DueDate

a)15DaysfromthedateAGM

CHECKLISTFORAOC-4(DueDatewithin30daysoftheAGM)

1)INFORMATION

a)DateofBoardofDirectors’meetinginwhichfinancialstatementsandBoards’reportandfinancialstatementsbytheauditorsareapproved

b)Detailsrelatedtoprincipalproductsorservicesofthecompany(Totalnumberofproduct/servicescategory)

2ATTACHMENT

a)BALANCESHEET

b)PROFIT&LOSSACCOUNT

c)DIRECTORREPORTd)AUDITORREPORTe)NOTICEOFAGM

3)FollowingDetailsareRequiredforDirectorReport:

a)Financialsummaryorhighlights/PerformanceoftheCompany

b) Dividend

c) Reserves

d)BriefdescriptionoftheCompany’sworkingduringtheyear/StateofCompany’saffaire)Changeinthenatureofbusiness,ifany

f)Materialchangesandcommitments,ifany,affectingthefinancialpositionofthe

company

g)Detailsofsignificantandmaterialorderspassedbytheregulatorsorcourtsortribunals

h)Detailsinrespectofadequacyofinternalfinancialcontrolswithreferencetothe

FinancialStatements.(ApplicabletoListedCompany)

i)DetailsofSubsidiary/JointVentures/AssociateCompanies

j).Performanceandfinancialpositionofeachofthesubsidiaries,associatesandjointventurecompaniesincludedintheconsolidatedfinancialstatement.

k)Deposits

l)StatutoryAuditorsm)Auditors’Report

n)ShareCapital

o)Extractoftheannualreturn

p)Thedetailsofconservationofenergy,technologyabsorption,foreignexchangeearningsandoutgo

q)CorporateSocialResponsibility

r)Directors:

s)ChangesinDirectorsandKeyManagerialPersonnel

t)DeclarationbyanIndependentDirector(s)andre-appointment,ifanyu)FormalAnnualEvaluation

v)NumberofmeetingsoftheBoardofDirectorsw)AuditCommittee

x)Detailsofestablishmentofvigilmechanismfordirectorsandemployeesy)NominationandRemunerationCommittee

z)Particularsofloans,guaranteesorinvestmentsundersection186

aa)Particularsofcontractsorarrangementswithrelatedparties:

bb)ManagerialRemuneration:

cc)SecretarialAuditReport

dd)CorporateGovernanceCertificateee)Riskmanagementpolicy

ff)Directors’ResponsibilityStatement

4)FollowingDetailsareRequiredforNoticeofAGM:

a)DateofAGM

b)DetailofAppointmentofDirector&resignationofdirectorsduringthefinancialyear

c)NameoftheproposedAuditor/AuditorFirm.

CHECKLISTOFMGT-7(Duedatewithin60daysofAGM)

1)INFORMATION

a)PANofthecompany

b)PRINCIPALBUSINESSACTIVITIESOFTHECOMPANY

c)PARTICULARSOFHOLDING,SUBSIDIARY,JOINTVENTURESANDASSOCIATECOMPANIES

d)NUMBEROFPROMOTERS,MEMBERS,DEBENTUREHOLDERS

2)ATTACHMENTS

a)listofshareholders,debentureholders

b)ApprovalletterforextensionofAGM,ifany

c)CopyofMGT-8(paid-upsharecapitaloftencrorerupeesormoreorturnoveroffiftycrorerupeesormore)

3)FollowingDetailareRequiredforannualReturn:

a)PRINCIPALBUSINESSACTIVITIESOFTHECOMPANY

b)PARTICULARSOFHOLDING,SUBSIDIARYANDASSOCIATECOMPANIES

c)SHAREHOLDINGPATTERN

d)INDEBTEDNESS

e)REMUNERATIONOFDIRECTORSANDKEYMANAGERIALPERSONNEL

f)PENALTIES/PUNISHMENT/COMPOUNDINGOFOFFENCES

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Govt Directs speedy Foreign Investment reforms on all levels (Make in india)

FDI policy to be simplified, FIPB to meet twice a month for faster nod
India is rolling out the red carpet for overseas investors with sweeping foreign investment policy reform and quicker approvals while Prime Minister Narendra Modi’s monthly review of projects is ensuring that delays are getting resolved quickly . In his first interview after taking over as economic affairs secretary, Shaktikanta Das told ET that the Foreign Investment Promotion Board (FIPB) will now meet twice a month to speed up approvals, signaling the clear intent of the government to push ahead with reforms on a wide range of issues.The foreign direct investment (FDI) policy is being reviewed to make it simple and put the maximum possible sectors on the automatic route, obviating the need for government approval.
The government is also responding to the Reserve Bank of India’s call for quicker transmission of monetary policy.Das said small savings rates could be reset more frequently as opposed to yearly adjustments to align them to market rates more quickly to reduce their distortive effect. Besides this, the Cabinet note on the monetary policy committee would be moved soon for consideration by the government.
Das said Finance Minister Arun Jaitley was keeping tabs on disinvestment–the government has set itself a record . 69,500 crore from this in the ` current year–to see that it yields maximum revenue.
SPEEDY CLEARANCE
The FIPB currently meets an average of once every month and the entire approval process can take more than three months even for investments of a few crores of rupees. Timeconsuming procedures were among the issues that global CEOs brought up with Modi during his recent trip to the US.
“At present, there are too many conditionalities and the (FDI) document itself needs to be simplified. Sectoral caps need to be revised and the process of approval should be automatic unless there are security concerns or in sensitive sectors,“ Das said. The current policy has sectors in which no investment is allowed while others are open to levels such as 26%, 49%, 74% and 100%, depending on how sensitive they are. The policy document, which is more than 120 pages long, has a number of conditions for every sector.
PM PUSH
Das said the PRAGATI (pro-active governance and timely implementation) video conference–which the PM holds on every fourth Wednesday of the month with all government of India secretaries and state chief secretaries–has had tremendous impact on ground in terms of getting things moving, addressing criticism that the administration’s execution was weak.
“A number of projects get listed, there may be many loose ends but when they come for the meeting most of the issues would have got sorted out…And, if any issues remain, timelines are fixed,“ Das said. All implementing departments are keen to speed up resolution and avoid delays, given that the monitoring takes place at the highest level.
He expects the economy to grow at least 7.5% in the current fiscal, better than the 7.4% that the RBI has projected in its latest monetary policy, when it cut the policy rate by a deeper-thanexpected 50 basis points or half a percentage point.
“The RBI decision on rate cut and quick move by banks to transmit the cut will have impact on the overall economy, particularly in sectors such as housing, automobiles, consumer goods,“ Das said. “It will lead to generation of additional demand and aid growth.“
RBI governor Raghuram Rajan had called for quicker transmission of rate cuts by banks, which in turn said they were constrained from doing so because of better rates on small savings programmes.
As part of the small savings review, the rates could be set more frequently, Das said. Small savings schemes pay nearly 1.5 percentage points more than bank deposits of similar maturity.Currently, small savings rates are reset annually and pegged to government securities.
Das said vulnerable sections would however be protected.“Certain aspects will have to be kept in mind like senior citizens and small savers. Their interest has to be duly factored in,“ Das said. The bureaucrat charged with the overseeing the economy rejected the observation of some rating agencies and multilateral lenders such as the Asian Development Bank that reforms hadn’t gained momentum.
LAND BILL, GST
He said the land bill amendment may not have got parliamentary approval but states were independently passing laws instead, pointing to Tamil Nadu as a good example. s “The point is that states have t got over the problem in their own way through the legislative process. The fact that the land bill could not be passed cannot be termed as a stalled reform because the ultimate objective is being achieved,“ Das said, adding that land availability for industry was not a concern.
The goods and services tax (GST), scheduled to be rolled out on April 1 next year, remains a priority for the government. “GST is very much on the table and the government is determined and committed to take it forward and the parallel administrative action is going on. The drafting of bills is going on,“ he said.
Das said the government’s accelerated spending to revive the economy was not a cause for concern and it was committed to fiscal discipline.
“The fiscal deficit roadmap is sacrosanct and it will be observed. The rest is a question of management of numbers, which will be done,“ he said in response to worries that the `onerank, one-pension’ initiative for servicemen and the pay commission award could derail government finances.
He said indirect tax collections are looking robust and should exceed the budgeted figure. On concerns about slow pace of disinvestment, he said government is looking to get the most value out of its stakes.
“At this point of time, I would say we are working on a strategy to maximize the amount of disinvestment. The finance minister has reviewed internally with all concerned,“ Das said.

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+919990694230

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Board Report and Director report Format

DIRECTORS’ REPORT

To,
The Members,

Your Directors have pleasure in presenting their Annual Report on the business and operations of the Company and the accounts for the Financial Year ended March 31, ______.

Financial summary or highlights/Performance of the Company.

The Summary of the Financial Statements of the Company is as:-
(in Rs.)

Summary of Financial Result Amount as on 2014-2015 Amount as on 2013-14
Income
Expenses
Profit/(Loss) before depreciation
Less: Depreciation
Profit after depreciation
Provision for Tax
Provision for Deferred Tax Asset/(Liability)
Profit/(Loss) After Dep. & Tax
Dividend

In the month of ________________, the Company declared an Interim Dividend of Rs______ per share. Your Directors are pleased to recommend a final dividend of Rs_______ per share aggregating to Rs______ per share (both inclusive interim and final) for the current financial year. The dividend if approved and declared in the forthcoming Annual General meeting would result a total Dividend outflow of Rs______ and Dividend Distribution Tax of Rs______ aggregating a total outflow of Rs______
OR
Your Directors are pleased to recommend a dividend of Rs______ per share aggregating to Rs______ per share for the current financial year. The dividend if approved and declared in the forthcoming Annual General meeting would result a Dividend outflow of Rs______ and dividend Distribution Tax of Rs______aggregating a total outflow of Rs__________
OR
Directors have not recommended any dividend on Equity Shares due to conservation of Profits/due to loss incurred by the Company /due to insufficient profit for the period under review.

Reserves

The Board proposes to carry forward Rs.__________/- to the reserves account maintained by the Company

Brief description of the Company’s working during the year/State of Company’s affair

Review of operations was conducted during the financial year which was found satisfactory by the management of the company. The Board discussed the matter and framed new strategies to expand the business of the company in the near future.
Further your Directors wish to present the details of Business operations done during the year under review:
a. Production and Profitability
b. Sales
c. Marketing and Market environment
d. Future Prospects including constraints affecting due to Government policies

Change in the nature of business, if any

There are no material changes in the nature of business of the company during the financial year under scrutiny.
Material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report

There are no material changes affecting the financial position of the business of the company during the financial year under scrutiny.
OR
The following material changes and commitment occurred during the year under review affecting the financial position of the Company.
Deposits
The details of deposits accepted/renewed during the year under review are furnished hereunder:
a) Amount accepted during the year
b) Amount remained unpaid or unclaimed as at the end of the year
c) Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved:-
i) at the beginning of the year
ii) maximum during the year
iii) at the end of the year
OR
No deposit has been accepted by the Company during the financial year under scrutiny.

Statutory Auditors
M/s ________________________, Chartered Accountants, Auditors of the Company being eligible offers themselves for re-appointment till the conclusion of the next Annual General Meeting, subject to approval by shareholders in the Annual General Meeting of the Company. Their continuance of appointment are to be confirmed and approved in the ensuing Annual General Meeting. The Company has received a certificate from the above Auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

Auditors’ Report

The explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report shall be given.

Extract of the annual return

The extracts of Annual Return in Form MGT -9 pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 is furnished and is annexed to this Report.

Conservation of energy, technology absorption and foreign exchange earnings and outgo

The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are as follows:

Conservation of energy:

The company is using its self Resources except Electricity from the BSES

(B) Technology absorption

The company is using its own Knowledge & Technology & there is no Technology absorption from outside.
(C) Foreign exchange earnings and Outgo:

The Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo during the year in terms of actual outflows is as:
(Rs. In lacs)

Particulars 2014-15 2013-14
Foreign Exchange Earning
Foreign Exchange outgo

OR
The provisions of Section 134(m) of the Companies Act, 2013 do not apply to our Company. There was no foreign exchange inflow or Outflow during the year under review.
OR
The provisions of Section 134(m) of the Companies Act, 2013 do not apply to our Company. The total Foreign Exchange Inflow was Rs. ______________ and Outflow was Rs. ______________ during the year under review.

Directors:

Changes in Directors and Key Managerial Personnel
There being no change in the composition of Directors & Key Managerial Personnel during the financial year under scrutiny.
OR
Mr________________ and Mr_______________ retire at this Annual General Meeting and being eligible offer themselves for re election.

Number of meetings of the Board of Directors

There being ___________ meetings of Board of Directors being convened under the financial year complying with the requirement of Section 173 of the Companies Act 2013.

Particulars of loans, guarantees or investments under section186
The particulars of Loans, guarantees or investments made under Section 186 are furnished in Annexure …..and is attached to this report.
OR
There being no loan, guarantees or investments, provided by the Company under section186 of the Companies Act 2013 during the financial year under scrutiny.

Particulars of contracts or arrangements with related parties:
The particulars of Contracts or Arrangements made with related parties made pursuant to Section 186 are furnished in Form AOC -2 as Annexure….. and is attached to this report.
OR
There was no contract or arrangements made with related parties as defined under Section 188 of the Companies Act, 2013 during the year under review.

Risk management policy
The Company has adopted the following measures concerning the development and implementation of a Risk Management Policy after identifying the following elements of risks which in the opinion of the Board may threaten the very existence of the Company itself.
a.
b.
c.
OR
The Company does not have any Risk Management Policy as the elements of risk threatening the Company’s existence is very minimal.
OR
The management of the Company has framed the risk management policy for the Company including identification of the elements of risk. Further there is no material risk which in the opinion of the Board might threaten the existence of the company.
Transfer of Unclaimed Dividend to Investor Eduction and Protection Fund
In terms of Section 125 of the Companies Act, 2013, any unclaimed or unpaid Dividend relating to the financial year________is due for remittance on ___________ to the Investor Eduction and Protection Fund established by the Central Government.
OR
Since there was no unpaid/unclaimed Dividend declared and paid last year, the provisions of Section 125 of the Companies Act, 2013 do not apply.
OR
The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there was no dividend declared and paid last year.
Details of Policies developed and implemented by the Company on its Corporate Social Responsibility Initiatives
The Company has not developed and implemented any Corporate Social Responsibility initiatives as the said provisions are not applicable.
OR
The Company has developed and implemented the following Corporate Social Responsibility initiatives as per Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 shall be made. during the year under review. The Annual Report on Company’s CSR activities of the Company is furnished in Annexure ____. and attached to this report.
OR
The Company has made the relevant provisions for CSR activities in the Books of Accounts and has deposited the money in a separate Bank Account. The Company shall find out ways and means to spend the same in the coming months and shall submit the relevant report in the ensuing year. The Company could not spend the money before finalising this report as the time was too short to identify suitable projects for spending the same
Company’s Policy relating to directors appointment, payment of remuneration and discharge of their duties
The provisions of Section 178(1) relating to constitution of Nomination and Remuneration Committee are not applicable to the Company and hence the Company has not devised any policy relating to appointment of Directors, payment of Managerial remuneration, Directors qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013.
OR
The Company’s Policy relating to appointment of Directors, payment of Managerial remuneration, Directors’ qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013 is furnished in Annexure ___ and is attached to this report
Declaration of Independent Directors
The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules.
OR
The provisions of Section 149 pertaining to the appointment of Independent Directors do not apply to our Company.
Disclosure of Composition of Audit Committee and providing Vigil Mechanism
The provisions of Section 177 of the Companies Act, 2013 read with Rule 6 and 7 of the Companies (Meetings of the Board and its Powers) Rules, 2013 is not applicable to the Company.
OR
The Audit Committee consists of the following members
a.
b.
c.

The above composition of the Audit Committee consists of independent Directors viz., Mr________________ and Mr______________ who form the majority.
The Company has established a vigil mechanism and overseas through the committee, the genuine concerns expressed by the employees and other Directors. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the chairman of the Audit Committee on reporting issues concerning the interests of co employees and the Company.
23. Share Capital
Issue of equity shares with differential rights
The Company has issued _________ shares of Rs. _____ each for a total consideration of Rs. _________ with differential rights under rule 4 (4) of Companies (Share Capital and Debentures) Rules, 2014. Detail of which is annexed to this Report as Annexure _____.
Buy Back of Securities
The Company has bought back ____________ equity shares of Rs____ each for a total consideration of Rs____________ in accordance with the provisions of Section 68 of the Companies Act, 2013 read with Rule 17 of the Companies (Share Capital and Debentures) Rules, 2014. The said buy back of shares constituted ____% of the total paid up Capital and free reserves.
OR
The Company has not bought back any of its securities during the year under review.
Issue of Sweat equity shares
The Company has issued _________ Equity of Shares of Rs _____ each as Sweat Equity in accordance with the provisions of Section 54 of the Companies Act, 2013 read with Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014
OR
The Company has not issued any Sweat Equity Shares during the year under review.
Issue of Bonus Shares
The Company has issued _________ shares of Rs_______ as Bonus Shares to the existing shareholders of the Company in the proportion of _________ share for every____ shares held in accordance with the provisions of Section 63 of the Companies Act, 2013 read with Rule 14 of the Companies(Share Capital and Debentures), Rules 2014.
OR
No Bonus Shares were issued during the year under review.
Issue of Employees Stock Option Plan
The Company had issued _________Equity Shares of Rs.10/- aggregating to Rs_________ under the Employees Stock Option Plan during the year under review.
OR
The Company has not provided any Stock Option Scheme to the employees.
Directors’ Responsibility Statement

The Directors’ Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act 2013, shall state that—

The company in the preparation of the annual accounts has followed the applicable accounting standards along with proper explanation relating to material departures.
The directors of the company had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period.
The directors of the company had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.
the directors had prepared the annual accounts on a going concern basis;
the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Acknowledgements

An acknowledgement to all with whose help, cooperation and hard work the Company is able to achieve the results.

FOR ABC PRIVATE LIMITED
DIRECTOR DIRECTOR
DIN: DIN:
Place:
Date:

ANNEXURE-____
FORM NO. MGT 9
EXTRACT OF ANNUAL RETURN

As on financial year ended on 31.03.20XX

Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) of the Company (Management & Administration) Rules, 2014.

REGISTRATION & OTHER DETAILS:
CIN
Registration Date
Name of the Company
Category/Sub-category of the Company
Address of the Registered office & contact details
Whether listed company
Name, Address & contact details of the Registrar & Transfer Agent, if any.
PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY (All the business activities contributing 10 % or more of the total turnover of the company shall be stated)
S. No. Name and Description of main products / services NIC Code of the Product/service

% to total turnover of the company
1
2
3
PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES [No. of Companies for which information is being filled]

S. N0 NAME AND ADDRESS OF THE COMPANY CIN/GLN HOLDING/ SUBSIDIARY / ASSOCIATE % OF SHARES HELD APPLICABLE SECTION
1
2
VI. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity)
Category-wise Share Holding
Category of Shareholders No. of Shares held at the beginning of the year[As on 31-March-2014] No. of Shares held at the end of the year[As on 31-March-2015] % Change
during
the year
Demat Physical Total % of Total Shares Demat Physical Total % of Total Shares
A. Promoter
(1) Indian
a) Individual/ HUF
b) Central Govt
c) State Govt(s)
d) Bodies Corp.
e) Banks / FI
f) Any other
Total shareholding of Promoter (A)

B. Public Shareholding
1. Institutions
a) Mutual Funds
b) Banks / FI
c) Central Govt
d) State Govt(s)
e) Venture Capital Funds
f) Insurance Companies
g) FIIs
h) Foreign Venture Capital Funds
i) Others (specify)
Sub-total (B)(1):-

2. Non-Institutions
a) Bodies Corp.

i) Indian

ii) Overseas

b) Individuals

i) Individual shareholders holding nominal share capital upto Rs. 1 lakh
ii) Individual shareholders holding nominal share capital in excess of Rs 1 lakh
c) Others (specify)
Non Resident Indians
Overseas Corporate Bodies
Foreign Nationals
Clearing Members
Trusts
Foreign Bodies – D R
Sub-total (B)(2):-
Total Public Shareholding (B)=(B)(1)+ (B)(2)
C. Shares held by Custodian for GDRs & ADRs
Grand Total (A+B+C)
B) Shareholding of Promoter-
SNo Shareholder’s Name Shareholding at the beginning of the year Shareholding at the end of the year % change in shareholding during the year
No. of Shares % of total Shares of the company % of Shares Pledged / encumbered to total shares No. of Shares % of total Shares of the company % of Shares Pledged / encumbered to total shares
1
2
C) Change in Promoters’ Shareholding (please specify, if there is no change) – NO CHANGE
S.No Particulars Shareholding at the beginning of the year Cumulative Shareholding during the year
No. of shares % of total
shares of the
company No. of shares % of total
shares of the
company
At the beginning of the year
Date wise Increase / Decrease in Promoters Shareholding during the year specifying the reasons for increase / decrease (e.g. allotment /transfer / bonus/ sweat equity etc.):
At the end of the year

D) Shareholding Pattern of top ten Shareholders:
(Other than Directors, Promoters and Holders of GDRs and ADRs):
SN For Each of the Top 10
Shareholders Shareholding at the beginning
of the year Cumulative Shareholding during the
year
No. of shares % of total
shares of the
company No. of shares % of total
shares of the
company
At the beginning of the year
Date wise Increase / Decrease in Promoters Shareholding during the year specifying the reasons for increase /decrease (e.g. allotment / transfer / bonus/ sweat equity etc):
At the end of the year
E) Shareholding of Directors and Key Managerial Personnel:

SN Shareholding of each Directors and each Key Managerial Personnel Shareholding at the beginning
of the year Cumulative Shareholding during the
year
No. of shares % of total
shares of the
company No. of shares % of total
shares of the
company
At the beginning of the year
Date wise Increase / Decrease in Promoters Shareholding during the year specifying the reasons for increase /decrease (e.g. allotment / transfer / bonus/ sweat equity etc.):
At the end of the year
V) INDEBTEDNESS -Indebtedness of the Company including interest outstanding/accrued but not due for payment.
Secured Loans excluding deposits Unsecured Loans Deposits Total Indebtedness
Indebtedness at the beginning of the financial year
i) Principal Amount
ii) Interest due but not paid
iii) Interest accrued but not due
Total (i+ii+iii)
Change in Indebtedness during the financial year
* Addition
* Reduction
Net Change
Indebtedness at the end of the financial year
i) Principal Amount
ii) Interest due but not paid
iii) Interest accrued but not due
Total (i+ii+iii)

VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL-

A. Remuneration to Managing Director, Whole-time Directors and/or Manager: –

SN. Particulars of Remuneration Name of MD/WTD/ Manager Total Amount

1 Gross salary
(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961
(b) Value of perquisites u/s 17(2) Income-tax Act, 1961
(c) Profits in lieu of salary under section 17(3) Income- tax Act, 1961
2 Stock Option
3 Sweat Equity
4 Commission
– as % of profit
– others, specify…

5 Others, please specify

Total (A)

Ceiling as per the Act

B. Remuneration to other directors

SN. Particulars of Remuneration Name of Directors Total Amount

1 Independent Directors
Fee for attending board committee meetings
Commission
Others, please specify
Total (1)
2 Other Non-Executive Directors
Fee for attending board committee meetings
Commission
Others, please specify
Total (2)
Total (B)=(1+2)
Total Managerial
Remuneration
Overall Ceiling as per the Act

C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD

SN Particulars of Remuneration Key Managerial Personnel
CEO CS CFO Total
1 Gross salary
(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961
(b) Value of perquisites u/s 17(2) Income-tax Act, 1961
(c) Profits in lieu of salary under section 17(3) Income-tax Act, 1961
2 Stock Option
3 Sweat Equity
4 Commission
– as % of profit
others, specify…
5 Others, please specify
Total
VII. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:

Type Section of the Companies Act Brief
Description Details of Penalty / Punishment/ Compounding fees imposed Authority
[RD / NCLT/ COURT] Appeal made,
if any (give Details)
A. COMPANY
Penalty
Punishment
Compounding
B. DIRECTORS
Penalty
Punishment
Compounding
C. OTHER OFFICERS IN DEFAULT
Penalty
Punishment
Compounding

FOR ABC PRIVATE LIMITED

DIRECTOR DIRECTOR
DIN: DIN:

Place:
Date:

ANNEXURE-____
Form No. AOC-2
(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014)

Form for disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto

Details of contracts or arrangements or transactions not at Arm’s length basis.
S. No. Particulars
Details
a)        Name (s) of the related party & nature of relationship

b)       Nature of contracts/arrangements/transaction

c)        Duration of the contracts/arrangements/transaction

d)       Salient terms of the contracts or arrangements or transaction including the value, if any

e)        Justification for entering into such contracts or arrangements or transactions’

f)         Date of approval by the Board
g)        Amount paid as advances, if any

h)       Date on which the special resolution was passed in General meeting as required under first proviso to section 188
Details of contracts or arrangements or transactions at Arm’s length basis.
S. No. Particulars
Details
a)        Name (s) of the related party & nature of relationship

b)       Nature of contracts/arrangements/transaction

c)        Duration of the contracts/arrangements/transaction

d)       Salient terms of the contracts or arrangements or transaction including the value, if any

e)        Date of approval by the Board

f)         Amount paid as advances, if any

FOR ABC PRIVATE LIMITED
DIRECTOR                  DIRECTOR

DIN NO                           DIN N0

 

Acquisition and Transfer of Immovable Property in India by a person resident outside India

https://femaindiaservices.wordpress.com/2015/04/27/fema-services/

Acquisition of immovable property in India by persons resident outside India (foreign national) is regulated in terms of section 6 (3) (i) of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in the Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time. Section 2 (v) and Section 2 of FEMA, 1999 defines `person resident in India’ and a `person resident outside India’, respectively. Person resident outside India is categorized as Non- Resident Indian (NRI) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. The Reserve Bank does not determine the residential status. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority. A person resident in India who is not a citizen of India is also covered by the relevant Notifications. 2. In terms of the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India. 3. The regulations under Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time, permit a NRI or a PIO to acquire immovable property in India, other than agricultural land or, plantation property or farm house. Further, foreign companies who have been permitted to open a Branch or Project Office in India are also allowed to acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. Such dispensation is however not available to entities which are permitted to open liaison offices in India. 4. The restrictions on acquiring immovable property in India by a person resident outside India would not apply where the immovable property is proposed to be acquired by way of a lease for a period not exceeding 5 years or where a person is deemed to be resident in India. In order to be deemed to be a person resident in India, from FEMA angle, the person would need to comply with the provisions of Section 2(v) of FEMA 1999. The Press Release dated February 1, 2009 issued by Government of India in this regard is enclosed as Annex. Note: Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire or transfer immovable property in India, (other than on lease not exceeding five years) without the prior permission of the Reserve Bank. 5. NRIs/ PIOs are allowed to repatriate an amount up to USD one million, per financial year (April-March), out of the balances held in the Non-Resident (Ordinary) Rupee (NRO) account, subject to compliance with applicable tax requirements. This amount includes sale proceeds of assets acquired by way of inheritance or settlement. 6. The FAQs cover the following topics : A. Acquisition of Immovable Property in India by a person resident outside India, i.e., by a NRI / PIO / foreign national of non-Indian origin by way of purchase / gift / inheritance. B. Transfer of immovable property in India by a person resident outside India by way of i) sale ii) gift iii) mortgage C. Mode of payment for purchase of immovable property in India. D. Repatriation of sale proceeds of residential / commercial property, in India, outside India acquired by NRI / PIO by way of i) purchased ii) gift iii) inheritance E. Provisions for Foreign Embassies / Diplomats / Consulates General F. Other Aspects. A. Acquisition of Immovable Property in India through purchase / gift/ inheritance Q.1. Who can purchase immovable property in India ? Ans. Under the general permission available, the following categories can purchase immovable property in India: i) Non-Resident Indian (NRI)1[1][1][1] ii) Person of Indian Origin (PIO)2[2][2] The general permission, however, covers only purchase of residential and commercial property and is not available for purchase of agricultural land / plantation property / farm house in India. Q.2. Can NRI/PIO acquire agricultural land/ plantation property / farm house in India? Ans. No. Q.3. Are any documents required to be filed with the Reserve Bank after the purchase? Ans. No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents/reports with the Reserve Bank. Q.4. How many residential / commercial properties can NRI / PIO purchase under the general permission? Ans. There are no restrictions on the number of residential / commercial properties that can be purchased. Q.5. Can a foreign national of non-Indian origin be a second holder to immovable property purchased by NRI / PIO? Ans. No. Q.6. Can a foreign national of non-Indian origin resident outside India purchase immovable property in India? Ans. No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India. However, he / she can acquire or transfer immovable property in India, on lease, not exceeding five years. In such cases, there is no requirement of taking any permission of /or reporting to the Reserve Bank. Q.7. Can a foreign national who is a person resident in India purchase immovable property in India? Ans. Yes, a foreign national who is a ‘person resident in India’ within the meaning of Section 2(v) of FEMA, 1999 can purchaseimmovable property in India, but the person concerned would have to obtain the approvals and fulfil the requirements, if any, prescribed by other authorities, such as, the State Government concerned, etc. The onus to prove his/her residential status is on the individual as per the extant FEMA provisions, if required by any authority. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank. Q.8. Can the branch / liaison office of a foreign company purchase immovable property in India? Ans. A foreign company which has established a Branch Office or other place of business in India, in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through the proper banking channels. A declaration in form IPI should be filed with the Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for the purpose of borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of the Reserve Bank. Further, acquisition of immovable property by entities incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan and who have set up Branch Offices in India and would require prior approval of the Reserve Bank. However, if the foreign company has established a Liaison Office in India, it cannot acquire immovable property. In such cases, Liaison Offices can acquire property by way of lease not exceeding 5 years. Q.9. Can a NRI/PIO acquire immovable property in India by way of gift? Cana foreign national acquire immovable property in India by way of gift? Ans. (a) Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from i) a person resident in India; or ii) an NRI; or iii) a PIO. However, the property can only be commercial or residential in nature. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift. (b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift. Q.10. Can a non-resident inherit immovable property in India? Ans. Yes, a person resident outside India i.e. i) an NRI; ii) a PIO; and iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India. Q.11. From whom can a non-resident person inherit immovable property? Ans. A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from (a) a person resident in India (b) a person resident outside India However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange law in force or FEMA regulations, applicable at the time of acquisition of the property. B. Transfer of immovable property in India (i) Transfer by way of sale Q.12. Can an NRI/ PIO/foreign national sell his residential / commercial property? Ans. (a) NRI can sell property in India to i) a person resident in India; or ii) an NRI; or iii) a PIO. (b) PIO can sell property in India to i) a person resident in India; or ii) an NRI; or iii) a PIO – with the prior approval of the Reserve Bank (c) Foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of the Reserve Bank to i) a person resident in India ii) an NRI iii) a PIO Q.13. Can a non-resident owning / holding an agricultural land / a plantation property / a farm house in India sell the said property? Ans. (a) NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India. (b) Foreign national of non-Indian origin resident outside India would need prior approval of the Reserve Bank to sell agricultural land/plantation property/ farm house in India. (ii) Transfer by way of gift Q.14. Can a non-resident gift his residential / commercial property? Ans. Yes. (a) NRI / PIO may gift residential / commercial property to – (i) person resident in India or (ii) an NRI or (iii) PIO. (b) A foreign national of non-Indian origin requires the prior approval of the Reserve Bank for gifting the residential / commercial property. Q.15. Can an NRI / PIO / foreign national holding an agricultural land / a plantation property / a farm house in India, gift the same? Ans. (a) NRI / PIO can gift an agricultural land / a plantation property / a farm house in India only to a person resident in India who is a citizen of India. (b) A foreign national of non-Indian origin would require the prior approval of the Reserve Bank to gift an agricultural land / a plantation property / a farm house in India. (iii) Transfer through mortgage Q.16. Can residential / commercial property be mortgaged by NRI/ PIO? Ans. i) NRI / PIO can mortgage a residential / commercial property to: (a) an Authorised Dealer / the housing finance institution in India without the approval of Reserve Bank (b) a bank abroad, with the prior approval of the Reserve Bank. ii) A foreign national of non-Indian origin can mortgage a residential / commercial property only with prior approval of the Reserve Bank. iii) A foreign company which has established a Branch Office or other place of business in accordance with FERA/FEMA regulations has general permission to mortgage the property with an Authorised Dealer in India. C. Mode of payment for purchase of immovable property in India. Q.17. How can an NRI / PIO make payment for purchase of residential / commercial property in India? Ans. Payment can be made by NRI / PIO out of: (a) funds remitted to India through normal banking channels or (b) funds held in NRE / FCNR (B) / NRO account maintained in India No payment can be made either by traveller’s cheque or by foreign currency notes or by other mode except those specifically mentioned above. Q.18 Is repatriation of application money for booking of flat / payment made to the builder by NRI/ PIO allowed when the flat or plot is not allotted or the booking / contract is cancelled? Ans. The Authorised Dealers can allow NRIs / PIOs to credit refund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings/ deals for purchase of residential, commercial property, together with interest, if any, net of income tax payable thereon, to NRE/FCNR account, provided, the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the Authorised Dealer is satisfied about the genuineness of the transaction. Q.19. Can NRI / PIO avail of loan from an authorised dealer for acquiring flat / house in India for his own residential use against the security of funds held in his NRE Fixed Deposit account / FCNR (B) account? How the loan can be repaid? Ans. Yes, such loans are permitted subject to the terms and conditions laid down in Schedules 1 and 2 to the Notification No. FEMA 5/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time. Banks cannot grant fresh loans or renew existing loans in excess of Rs. 100 lakhs against NRE and FCNR (B) deposits, either to the depositors or to third parties. The banks should also not undertake artificial slicing of the loan amount to circumvent the ceiling of Rs. 100 lakh. Such loans can be repaid in the following manner: (a) by way of inward remittance through normal banking channel or (b) by debit to the NRE / FCNR (B) / NRO account of the NRI/ PIO or (c) out of rental income from such property (d) by the borrower’s close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower’s loan account. Q.20. Can NRI / PIO, avail of housing loan in Rupees from an Authorised Dealer or a Housing Finance Institution in India approved by the National Housing Bank for purchase of residential accommodation or for the purpose of repairs / renovation / improvement of residential accommodation ? How can such loan be repaid? Ans. Yes, NRI/PIO can avail of housing loan in Rupees from an Authorised Dealer or a Housing Finance Institution subject to certain terms and conditions laid down in Regulation 8 of Notification No. FEMA 4/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Borrowing and lending in rupees) Regulations, 2000, as amended from time to time. Authorised Dealers/ Housing Finance Institutions can also lend to the NRIs/ PIOs for the purpose of repairs/renovation/ improvement of residential accommodation owned by them in India. Such a loan can be repaid (a) by way of inward remittance through normal banking channel or (b) by debit to the NRE / FCNR (B) / NRO account of the NRI / PIO or (c) out of rental income from such property; or (d) by the borrower’s close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower’s loan account. Q.21. Can NRI/PIO avail of housing loan in Rupees from his employer in India? Ans. Yes, subject to certain terms and conditions given in Regulation 8A of Notification No. FEMA 4/2000-RB dated May 3, 2000 and A.P. (DIR Series) Circular No.27 dated October 10, 2003, i.e., (i) The loan shall be granted only for personal purposes including purchase of housing property in India; (ii) The loan shall be granted in accordance with the lender’s Staff Welfare Scheme/Staff Housing Loan Scheme and subject to other terms and conditions applicable to its staff resident in India; (iii) The lender shall ensure that the loan amount is not used for the purposes specified in sub-clauses (i) to (iv) of clause (1) and in clause (2) of Regulation 6 of Notification No.FEMA.4/2000-RB dated May 3, 2000. (iv) The lender shall credit the loan amount to the borrower’s NRO account in India or shall ensure credit to such account by specific indication on the payment instrument; (v) The loan agreement shall specify that the repayment of loan shall be by way of remittance from outside India or by debit to NRE/NRO/FCNR Account of the borrower and the lender shall not accept repayment by any other means. D. Repatriation of sale proceeds of residential / commercial property purchased by NRI / PIO Q.22. Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India? Ans. (a) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely: (i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations; (ii) the amount to be repatriated does not exceed: · the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or · the amount paid out of funds held in Foreign Currency Non-Resident Account, or · the foreign currency equivalent (as on the date of payment) of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and (iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties. For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency. (b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account. NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance. Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank. (c) A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act 3[3][3], or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section. Q.23. Can an NRI/PIO repatriate the proceeds in case the sale proceeds were deposited in the NRO account? Ans. Please refer to the answer at Q.22 above. NRI/PIO may repatriate up to USD one million per financial year (April-March) from their NRO account which would also include the sale proceeds of immovable property. There is no lock in period for sale of immovable property and repatriation of sale proceeds outside India. Q.24. If a Rupee loan was taken by the NRI/ PIO from an Authorised Dealer or a Housing Finance Institution for purchase of residential property can the NRI / PIO repatriate the sale proceeds of such property? Ans. Yes, Authorised Dealers have been authorised to allow repatriation of sale proceeds of residential accommodation purchased by NRIs/ PIOs out of funds raised by them by way of loans from the authorised dealers/ housing finance institutions to the extent such loan/s repaid by them are out of the foreign inward remittances received through normal banking channel or by debit to their NRE/FCNR accounts. The balance amount, if any, can be credited to their NRO account and the NRI/PIO may repatriate up to USD one million per financial year (April-March) subject to payment of applicable taxes from their NRO account balances which would also include the sale proceeds of the immovable property. Q.25. If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale of such property? Ans. The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes. Q.26. If the immovable property was received as inheritance by the NRI/PIO can he repatriate the sale proceeds? Ans. Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India subject to the following conditions: (i) The amount should not exceed USD one million, per financial year (ii) This is subject to production of documentary evidence in support of acquisition / inheritance of assets and an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.4/2009 dated June 29, 2009 (iii) In cases of deed of settlement made by either of his parents or a close relative (as defined in section 6 of the Companies Act, 1956) and the settlement taking effect on the death of the settler (iv) the original deed of settlement and a tax clearance / No Objection Certificate from the Income-Tax Authority should be produced for the remittance (v) Where the remittance as above is made in more than one installment, the remittance of all such installments shall be made through the same Authorised Dealer (vi) In case of a foreign national, sale proceeds can be repatriated if the property is inherited from a person resident outside India with the prior approval of the Reserve Bank. The foreign national has to approach the Reserve Bank with documentary evidence in support of inheritance of the immovable property and the undertaking and the C.A. Certificate mentioned above. The general permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran and he has to seek specific approval of the Reserve Bank. As FEMA, 1999 specifically permits transactions only in Indian Rupees with citizens of Nepal and Bhutan. Therefore, the question of repatriation of the sale proceeds in foreign exchange to Nepal and Bhutan would not arise. E. Provisions for Foreign Embassies / Diplomats / Consulates General Q.27. Can Foreign Embassies / Diplomats / Consulates General purchase / sell immovable property in India? Ans. In terms of Regulation 5A of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2000, Foreign Embassies/ Diplomats/ Consulates General, may purchase/ sell immovable property (other than agricultural land/ plantation property/ farm house) in India provided – (i) Clearance from the Government of India, Ministry of External Affairs has been obtained for such purchase/sale; and (ii) The consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through the normal banking channels. F. Other Aspects Q.28. Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds? Ans. Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for. Q.29. Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI/PIO? In which account can the sale proceeds of such immovable property be credited? Ans. Yes, a person who had bought the residential / commercial property / agricultural land/ plantation property / farm house in India when he was a resident, continue to hold the immovable property without the approval of the Reserve Bank even after becoming an NRI/PIO. The sale proceeds may be credited to NRO account of the NRI /PIO. Q.30. Can the sale proceeds of the immovable property referred to in Q.No. 29 be remitted abroad ? Ans. Yes, From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes. Q.31. Can foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of the Reserve Bank continue to hold the same? Can they transfer such property? Ans. Yes, they may continue to hold the immovable property under holding license obtained from the Reserve Bank. However, they can transfer the property only with the prior approval of the Reserve Bank. Q.32. Is a resident in India governed by the provisions of the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2000? Ans. A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000, as amended from time to time, i.e. she/he would require prior approval of the Reserve Bank for acquisition and transfer of immovable property in India even though she/he is resident in India. Such requests are considered by the Reserve Bank in consultation with the Government in India. The citizens of countries other than those listed above can be PIOs who are covered under the general permission (please refer to Q.No.1). The provisions relating to foreign national of non-Indian origin are covered in detail in Q Nos. 6 and 7. Note: The relevant regulations covering the transactions in immovable property have been notified vide RBI Notification No. FEMA 21/2000-RB dated May 3, 2000 and this basic notification has been subsequently amended by the notifications detailed below: i) Notification No.FEMA 64/2002-RB dated June 29, 2002; ii) Notification No.FEMA 65/2002-RB dated June 29, 2002; iii) Notification No.FEMA 93/2003-RB dated June 9, 2003; iv) Notification No. FEMA 146/2006-RB dated February 10, 2006 read with A.P.(DIR Series) Circular No. 5 dated 16.8.2006; and v) Notification No. FEMA 200/2009-RB dated October 5, 2009 All the above notifications and A.P. (DIR Series) Circulars are available on the RBI website: www.fema.rbi.org.in. The Master Circular on Acquisition and Transfer of Immovable Property in India by NRIs/PIOs/Foreign Nationals of Non-Indian Origin is also available on the website under the link “www.rbi.org.in ® Sitemap ® Master Circulars”.

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Exchange Earner’s Foreign Currency (EEFC) Account

Exchange Earner’s Foreign Currency (EEFC) Account

(Updated as on 09.10.2012) Q 1. What is an EEFC Account and what are its benefits? Ans. Exchange Earners’ Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer i.e. a bank dealing in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimizing the transaction costs. Q 2. Who can open an EEFC account? Ans. All categories of foreign exchange earners, such as individuals, companies, etc. who are resident in India, may open EEFC accounts. Q 3. What are the different types of EEFC accounts? Can interest be paid on these accounts? Ans. An EEFC account can be held only in the form of a current account. No interest is payable on EEFC accounts. Q 4. How much of one’s foreign exchange earnings can be credited into an EEFC account? Ans. 100% foreign exchange earnings can be credited to the EEFC account subject to the condition that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. (A. P. (DIR. Series) Circular No. 12, dated July 31, 2012). Q 5. Whether EEFC Account can be opened by Special Economic Zone (SEZ) Units? Ans. No, SEZ Units cannot open EEFC Accounts. However, a unit located in a Special Economic Zone can open a Foreign Currency Account with an authorised dealer in India subject to certain conditions. SEZ Developers can open EEFC Accounts. Q 6. Is there any Cheque facility available? Ans. Yes; Cheque facility is available for operation of the EEFC account. Q 7. What are the permissible credits into this account? Ans. i) Inward remittance through normal banking channels, other than remittances received on account of foreign currency loan or investment received from abroad or received for meeting specific obligations by the account holder; ii) Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such units or to a unit in Domestic Tariff Area; iii) Payments received in foreign exchange by a unit in the Domestic Tariff Area for supply of goods to a unit in the Special Economic Zone (SEZ); iv) Payment received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade. (Counter trade is an arrangement involving adjustment of value of goods imported into India against value of goods exported from India in terms of the Reserve Bank guidelines); v) Advance remittance received by an exporter towards export of goods or services; vi) Payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. Dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorised dealer in India; vii) Professional earnings including directors fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity; viii) Re-credit of unutilised foreign currency earlier withdrawn from the account; ix) Amount representing repayment by the account holder’s importer customer, of loan/advances granted, to the exporter holding such account; and x) The disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/GDRs under the Sponsored ADR/GDR Scheme approved by the Foreign Investment Promotion Board of the Government of India. Q 8. Can foreign exchange earnings received through an international credit card be credited to the EEFC account? Ans. Yes, foreign exchange earnings received through an international credit card for which reimbursement has been made in foreign exchange may be regarded as a remittance through normal banking channel and the same can be credited to the EEFC account. Q 9. What are the permissible debits into this account? Ans. i) Payment outside India towards a permissible current account transaction [in accordance to the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000] and permissible capital account transaction [in accordance to the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000]. ii) Payment in foreign exchange towards cost of goods purchased from a 100 percent Export Oriented Unit or a Unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park iii) payment of customs duty in accordance with the provisions of the Foreign Trade Policy of the Central Government for the time being in force. iv) Trade related loans/advances, extended by an exporter holding such account to his importer customer outside India, subject to compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000. v) Payment in foreign exchange to a person resident in India for supply of goods/services including payments for airfare and hotel expenditure. Q 10. Is there any restriction on withdrawal in rupees of funds held in an EEFC account ? Ans. No, there is no restriction on withdrawal in Rupees of funds held in an EEFC account. However, the amount withdrawn in Rupees shall not be eligible for conversion into foreign currency and for re-credit to the account. Q 11. Are there any restrictions on accessing the forex market by the EEFC account holder ? Ans. EEFC account holders are permitted to access the forex market for purchasing foreign exchange only after utilizing fully the available balances in the EEFC accounts . Accordingly ADs are required to obtain a declaration, while selling foreign exchange to their constituents. Q. 12. Whether the EEFC balances can be covered against exchange risk? Ans. Yes, the EEFC account balances can be hedged. The balances in the account sold forward by the account holders has to remain earmarked for delivery. However, the contracts can be rolled over. Q. 13. Whether EEFC Account is permitted to be held jointly with a resident close relative? Ans. Resident individuals have been permitted to include resident close relative (s) as defined in the Companies Act, 1956 as a joint holder (s) in this EEFC bank Account. However, they shall not be eligible to operate the account during the life time of the resident account holder (A. P. (DIR. Series) Circular No. 15, dated September 15, 2011).

Facilities for Non Resident Indians (NRIs) and Persons of Indian Origin (PIOs)

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NRI Advises 

(Updated up to September 19, 2014) In terms of the Foreign Exchange Management Act (FEMA), 1999 a person resident outside India means a person who is not resident in India. What are the different types of accounts which can be maintained by an NRI1/PIO2 in India? If a person is NRI or PIO, she/ he can, without the permission from the Reserve Bank, open, hold and maintain the different types of accounts given below with an Authorised Dealer in India, i.e. a bank authorised to deal in foreign exchange. NRO Savings accounts can also be maintained with the Post Offices in India. Types of accounts which can be maintained by an NRI / PIO in India A. Non-Resident Ordinary Rupee Account (NRO Account) Any person resident outside India may open NRO account with an authorised dealer or an authorised bank for the purpose of putting through bona fide transaction in rupees. Opening of accounts by individual/ entities of Pakistan and entities of Bangladesh require prior approval of Reserve Bank of India. NRO accounts may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts. ● Savings Account – Normally maintained for crediting legitimate dues /earnings / income such as dividends, interest etc. Banks are free to determine the interest rates. ● Term Deposits – Banks are free to determine the interest rates. Interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits. ● Account should be denominated in Indian Rupees. ● Permissible credits to NRO account are transfers from rupee accounts of non-resident banks, remittances received in permitted currency from outside India through normal banking channels, permitted currency tendered by account holder during his temporary visit to India, legitimate dues in India of the account holder like current income like rent, dividend, pension, interest, etc., sale proceeds of assets including immovable property acquired out of rupee/ foreign currency funds or by way of legacy/ inheritance. ● Eligible debits such as all local payments in rupees including payments for investments as specified by the Reserve Bank and remittance outside India of current income like rent, dividend, pension, interest, etc., net of applicable taxes, of the account holder. ● NRI/PIO may remit from the balances held in NRO account an amount not exceeding USD one million per financial year, subject to payment of applicable taxes. ● The limit of USD 1 million per financial year includes sale proceeds of immovable properties held by NRIs/ PIOs. ● Other than current income and the limit of USD 1 Mn per financial year applicable to NRIs/PIOs, balances in NRO accounts cannot be repatriated without the prior approval of RBI. ● The accounts may be held jointly with residents and / or with non-resident Indian. ● The NRO account holder may opt for nomination facility. ● NRO (current/savings) account can also be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. The details of this facility are given in the FAQs on “Accounts opened by Foreign Nationals and Foreign Tourists” available on the RBI website. ● Loans to non-resident account holders and to third parties may be granted in Rupees by Authorized Dealer / bank against the security of fixed deposits subject to certain terms and conditions. B. Non-Resident (External) Rupee Account (NRE Account) ● NRE account may be in the form of savings, current, recurring or fixed deposit accounts (with maturity of minimum one year). Such accounts can be opened only by the NRI (as defined under Regulation 2(vi) of Notification No. FEMA 5/2000-RB dated May 3, 2000) himself and not through the holder of the power of attorney. ● NRIs may be permitted to open NRE account with their resident close relatives (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor ‘basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with the extant instructions during the life time of the NRI/PIO account holder. ● Account will be maintained in Indian Rupees. ● Balances held in the NRE account are freely repatriable. ● Accrued interest income and balances held in NRE accounts are exempt from Income tax and Wealth tax, respectively. ● Authorised dealers/authorised banks may at their discretion/commercial judgement allow for a period of not more than two weeks, overdrawings in NRE savings bank accounts, up to a limit of Rs.50,000 subject to the condition that such overdrawings together with the interest payable thereon are cleared/repaid within a period of two weeks, out of inward remittances through normal banking channels or by transfer of funds from other NRE/FCNR accounts. ● Savings – Banks are free to determine the interest rates. ● Term deposits – Banks are free to determine the interest rates of term deposits of maturity of one year and above. Interest rates offered by banks on NRE deposits cannot be higher than those offered by them on comparable domestic rupee deposits. ● Permissible credits to NRE account are inward remittance to India in permitted currency, proceeds of account payee cheques, demand drafts / bankers’ cheques, issued against encashment of foreign currency, where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category-I / Category-II, transfers from other NRE / FCNR accounts, sale proceeds of FDI investments, interest accruing on the funds held in such accounts, interest on Government securities/dividends on units of mutual funds purchased by debit to the NRE/FCNR(B) account of the holder, certain types of refunds, etc. ● Eligible debits are local disbursements, transfer to other NRE / FCNR accounts of person eligible to open such accounts, remittance outside India, investments in shares / securities/commercial paper of an Indian company, etc. ● Loans can be extended against security of funds held in NRE Account either to the depositors or third parties without any ceiling subject to usual margin requirements. ● Such accounts can be operated through power of attorney in favour of residents for the limited purpose of withdrawal of local payments or remittances through normal banking channels to the account holder himself. C. Foreign Currency Non Resident (Bank) Account – FCNR (B) Account ● NRIs are eligible to open and maintain these accounts. ● FCNR (B) accounts are only in the form of term deposits of 1 to 5 years ● All debits / credits permissible in respect of NRE accounts, including credit of sale proceeds of FDI investments, are permissible in FCNR (B) accounts also. ● Account can be held in any freely convertible currency. ● Loans can be extended against security of funds held in FCNR (B) deposit either to the depositors or third parties without any ceiling subject to usual margin requirements. ● The interest rates are stipulated by the Department of Banking Operations and Development, Reserve Bank of India. With effect from March 1, 2014, in respect of FCNR (B) deposits of maturities, 1 year to less than 3 years, interest shall be paid within the ceiling rate of LIBOR/ SWAP rates plus 200 basis points for the respective currency/ corresponding maturity. For FCNR(B) deposits with maturity of 3-5 years interest shall be paid within the ceiling rate of LIBOR/ SWAP rates plus 300 basis points. On floating rate deposits, interest shall be paid within the ceiling of SWAP rates for the respective currency/ maturity plus 200 bps/ 300 bps, as the case may be. For floating rate deposits, the interest reset period shall be six months. ● When an account holder becomes a person resident in India, deposits may be allowed to continue till maturity at the contracted rate of interest, if so desired by him. ● Terms and conditions as applicable to NRE accounts in respect of joint accounts, repatriation of funds, opening account during temporary visit, operation by power of attorney, loans/overdrafts against security of funds held in accounts, shall apply mutatis mutandis to FCNR (B). NRI can open joint account with a resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on former or survivor basis. The resident close relative will be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder. Is the permission of the Reserve Bank required for opening the various accounts, mentioned above, by Bangladesh / Pakistan individuals/entities? Opening of accounts by individuals/entities of Pakistan and entities of Bangladesh nationality requires prior approval of the Reserve Bank.. All such requests may be referred to the General Manager, Foreign Exchange Department, Central Office Cell, Reserve Bank of India, 6 Sansad Marg, New Delhi – 110 001. However, individuals of Bangladesh nationality are permitted to open NRO accounts without the prior approval of Reserve Bank of India, subject to conditions. Can an individual resident Indian borrow money from his close relatives outside India? Yes, an individual resident Indian can borrow a sum not exceeding USD 250,000 or its equivalent from his close relatives3 staying outside India, subject to the conditions that: the minimum maturity period of the loan is one year; the loan is free of interest; and the amount of loan is received by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR(B) account of the NRI. Can an individual resident lend money to his close relative NRI / PIO? Yes, an individual resident can lend money by way of crossed cheque /electronic transfer within the overall limit prescribed under the Liberalised Remittance Scheme, to meet the borrower’s personal or business requirements in India, subject to conditions. The loan should be interest free and have a maturity of minimum one year and cannot be remitted outside India. Can an individual resident repay loans of close relative NRIs to banks in India? Yes, where an authorised dealer in India has granted loan to a non-resident Indian such loans may also be repaid by resident close relative (relative as defined in Section 6 of the Companies Act, 1956), of the Non-Resident Indian by crediting the borrower’s loan account through the bank account of such relative. What are the other facilities available to NRIs/PIO? A. Investment facilities for NRIs NRI may, without limit, purchase on repatriation basis: ● Government dated securities / Treasury bills ● Units of domestic mutual funds; ● Bonds issued by a public sector undertaking (PSU) in India. ● Non-convertible debentures of a company incorporated in India. ● Perpetual debt instruments and debt capital instruments issued by banks in India. ● Shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids. ● Shares and convertible debentures of Indian companies under the FDI scheme (including automatic route & FIPB), subject to the terms and conditions specified in Schedule 1 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time. ● Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedule 3 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time. NRI may, without limit, purchase on non-repatriation basis : ● Government dated securities / Treasury bills ● Units of domestic mutual funds ● Units of Money Market Mutual Funds ● National Plan/Savings Certificates ● Non-convertible debentures of a company incorporated in India ● Shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme, subject to the terms and conditions specified in Schedules 3 and 4 to the FEMA Notification No. 20/2000- RB dated May 3, 2000, as amended from time to time. ● Exchange traded derivative contracts approved by the SEBI, from time to time, out of INR funds held in India on non-­repatriable basis, subject to the limits prescribed by the SEBI. Note : NRIs are not permitted to invest in small savings or Public Provident Fund (PPF). B. Investment in Immovable Property ● NRI5 / PIO4 may acquire/transfer immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and / or non-repatriable funds. ● Foreign national of non Indian origin resident outside India shall not acquire/transfer any immovable property in India other than on lease not exceeding five years, without prior approval of Reserve Bank of India. ● The payment of purchase price, if any, should be made out of (i) funds received in India through normal banking channels by way of inward remittance from any place outside India or (ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank. Note : No payment of purchase price for acquisition of immovable property shall be made either by traveller’s cheque or by foreign currency notes or by other mode other than those specifically permitted as above. ● NRI may acquire any immovable property in India other than agricultural land / farm house plantation property, by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India ● NRI may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India ● An NRI may transfer any immovable property in India to a person resident in India. ● NRI may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India. In respect of such investments, NRIs are eligible to repatriate: ● The sale proceeds of immovable property in India if the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account. ● The amount to be repatriated should not exceed the amount paid for the property in foreign exchange received through normal banking channel or by debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account. ● In the event of sale of immovable property, other than agricultural land / farm house / plantation property in India, by a person resident outside India who is a citizen of India / PIO, the repatriation of sale proceeds is restricted to not more than two residential properties subject to certain conditions. ● If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million per financial year out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance. ● Refund of (a) application / earnest money / purchase consideration made by house-building agencies/seller on account of non-allotment of flats / plots and (b) cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of NRE/FCNR (B) account/inward remittances. Repayment of Housing Loan of NRI / PIOs by close relatives of the borrower in India Housing Loan in rupees availed of by NRIs/ PIOs from ADs / Housing Financial Institutions in India can be repaid by the close relatives in India of the borrower. C. Facilities to returning NRIs/PIOs ● Returning NRIs/PIOs may continue to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India, if such currency, security or property was acquired, held or owned when resident outside India ● The income and sale proceeds of assets held abroad need not be repatriated. Foreign Currency Account ● A person resident in India who has gone abroad for studies or who is on a visit to a foreign country may open, hold and maintain a Foreign Currency Account with a bank outside India during his stay outside India, provided that on his return to India, the balance in the account is repatriated to India. However, short visits to India by the student who has gone abroad for studies, before completion of his studies, shall not be treated as his return to India. ● A person resident in India who has gone out of India to participate in an exhibition/trade fair outside India may open, hold and maintain a Foreign Currency Account with a bank outside India for crediting the sale proceeds of goods on display in the exhibition/trade fair. However, the balance in the account should be repatriated to India through normal banking channels within a period of one month from the date of closure of the exhibition/trade fair. Resident Foreign Currency Account ● A person resident in India may open, hold and maintain with an authorised dealer in India a Resident Foreign Currency (RFC) Account. ● Proceeds of assets held outside India at the time of return can be credited to RFC account. ● The funds in RFC accounts are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form outside India. ● RFC accounts can be maintained in the form of current or savings or term deposit accounts, where the account holder is an individual and in the form of current or term deposits in all other cases.RFC accounts are permitted to be held jointly with a resident close relative(s) as defined in the Companies Act, 1956 as joint holder (s) in their RFC bank account on ‘former or survivor basis’. However, such resident Indian close relative, now being made eligible to become joint account holder shall not be eligible to operate the account during the life time of the resident account holder. General facilities Can Exchange Earners Foreign Currency (EEFC) accounts be held jointly with a -resident Indian? Yes, EEFC account of a resident individual can be held jointly with a resident close relative on a ‘former or survivor’ basis. However, such resident Indian close relative will not be eligible to operate the account during the life time of the resident account holder. Can a resident individual holding a savings bank account include non-resident close relative as a joint account holder? Yes, individuals resident in India are permitted to include non-resident close relative(s) as a joint holder(s) in their resident bank accounts on ‘either or survivor’ basis subject to conditions. Can a resident individual gift shares/securities/convertible debentures etc to NRI close relative? Yes, a resident individual is permitted to gift shares/securities/convertible debentures etc to NRI close relative up to USD 50,000 per financial year subject to certain conditions. Can a resident individual give rupee gifts to his visiting NRI/PIO close relatives? Yes, a resident individual can give rupee gifts to his visiting NRI/PIO close relatives by way of crossed cheque/electronic transfer within the overall limit prescribed under Liberalised Remittance Scheme for the resident individual and the gifted amount should be credited to the beneficiary’s NRO account. What types of services can be provided by a resident individual to his / her non-resident close relatives? A resident may make payment in rupees towards meeting expenses on account of boarding, lodging and services related thereto or travel to and from and within India of a person resident outside India who is on a visit to India. Further, where the medical expenses in respect of NRI close relative are paid by a resident individual, such a payment being in the nature of a resident to resident transaction may also be covered under the term “services”. 1 A Non Resident Indian (NRI) is a person resident outside India, who is a citizen of India or is a person of Indian origin. 2 A Person of Indian Origin (PIO) for this purpose is defined in Regulation 2 of FEMA Notification ibid as a citizen of any country other than Bangladesh or Pakistan, if (a) he at any time held Indian passport; or (b) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b). 3 ‘Close relative’ means relative as defined in Section 6 of the Companies Act, 1956. 4 ‘A Person of Indian Origin’ means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held an Indian Passport or (ii) who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). 5 For the purpose of acquisition and transfer of immovable property in India an NRI refers to an Indian Citizen resident outside India (Notification No. FEMA 21/2000_RB dated May 3, 2000, as amended from time to time)

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How to register company in India?

How to register company in India?facts to be considered

1) What are the type of companies that I can register in India?
One Person Company (OPC) – It is a form of company with only one member.The process of starting up an OPC is same as that of a general private limited company. It is a hybrid structure that infuses the benefits of a sole proprietorship business with a company form of business. For more details on One Person Company, please click FAQs on One Person Company
Private Limited Company- A separate legal entity with perpetual succession. With a minimum capital requirement of Rs. 1,00,000, and at least two directors/subscribers, it is the easiest form of company to register and maintain.
Public Limited Company- Minimum capital requirement is Rs. 5,00,000 and at least three directors. A public limited company can start its operations only after obtaining a Certificate of Commencement from the Registrar in addition to Certificate of Incorporation.
Company Limited by Guarantee – A major difference of this form of company with other forms  is that it does not have a share capital or any shareholders. Incidentally, the company is governed by its members, and the extent of their liability is defined by the Memorandum of Association.
Non-profit Organizations (Generally known as Sec.8 Companies) – In India, popularly called Non-Profit organizations, come in three flavors, namely Trusts, Societies, Section 8 companies.

2) What is a One Person Company (OPC)?
A One Person Company (OPC) is a hybrid structure, wherein it combines most of the benefits of a sole proprietorship and a company form of business. It has only one person as a member who will act in the capacity of a director as well as a shareholder. Section 2(62) defines One Person Company as a company which has only one person as a member.  For more details on One Person Company, please click FAQs on One Person Company

3) What will be the form of One Person Company?
One Person Company will be formed as a “Private Limited Company”. It can be formed as company limited by share capital or limited by guarantee or unlimited company. The words “One Person Company” will have to be mentioned in brackets below the name of such company, wherever its name is printed, engraved or affixed.

4) What is the minimum authorized capital for starting up a One Person Company?
The process of starting an  One Person Company is the same as that of a general private limited company. Hence, the minimum paid-up and subscribed capital of the One Person Company would be   Rs. 1, 00,000.

5) What is the minimum number of directors and shareholders to form a One Person Company?
An One Person Company can be started with one director and shareholder only.

6) Who is a nominee in a One Person Company?
A nominee is a person who in the event of death or disability of the subscriber of the One Person Company shall assume his position. Memorandum of Association of an One Person Company will mandatorily prescribe the name of the person.

7) Can I appoint my wife as my nominee for  my One Person Company?
Yes. Anyone can be appointed as a nominee, provided he or she holds a correct PAN in his or her name.

8) How many One Person Companies can I form?
One individual can form only one One Person Company.

9) Can a foreign national form an One Person Company?
No. Only an Indian citizen and resident can form an One Person Company.

10) Who is considered as resident for the purpose of forming an One Person Company or being appointed as a nominee?
For the purposes of this rule, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding one calendar year.

11) In how many One Person Companies can a person become a nominee?
A person can become a nominee in not more than 1 One Person Company.

12) What are the advantages that I will get if I incorporate a company in India?
Liability of the subscribers (the directors and shareholders) is limited to the amount of money they have paid for shares, thus Stakeholders are not typically liable for corporate debts and liabilities.
Extra capital can be raised by selling shares either privately or in the market. Members can leave or join without any restriction.
The death, bankruptcy or withdrawal of capital by one member does not affect the company’s ability to trade.
The disposal of the whole or part of the business is easily arranged.
Enjoys high credibility as the books of accounts and other documents are available for public vigilance.
ESOPs sweat equity and other incentives can be issued, which help attract and attain best of talents.
Overall transparency at various levels.
Separate Legal Entity from its owners. A company can sue or be sued on its own name.
Broader capital base than proprietorship firms. Usually attracts venture capitalists, angels and merchant bankers.

13) I wish to register a company in India. Which type of company will be best suited for me?
The choice of the entity depends on the circumstances of the case.
Private Limited Company has lesser legal compliances.
It is relatively less cumbersome to incorporate, organize and operate a Private Limited Company as it has been exempted from many regulations and restrictions to which public limited company is subjected to.
There is no requirement of raising finance through public issue in case of Private Limited Company.
A Private Company can commence its business immediately after its incorporation, whereas a Public Limited Company cannot start its business until a Certificate of commencement of business is issued to it.
If limited capital is available, scale of operation is relatively low and ownership is intended to be held by limited people, then Private limited company is the best choice.

14) What is Authorized Capital ?
The authorized capital of a company is the maximum amount of share capital that the company is authorized by its constitutional documents to issue to shareholders. It can be altered from time to time.

15) What should be the minimum authorized capital for registering my company?
If you wish to register a private limited company, then the minimum authorized capital will be Rs. 1, 00,000 and in case of a public company it will be Rs.5, 00,000.

16)What is the tax structure of an One Person Company?
An OPC is taxed at the corporate tax rate of 30%.

17) What is Paid-Up Capital for registering my company?
Paid-Up Capital is the  amount that has been received by shareholders who have completely paid for their purchased shares. This would not include any shares that have been bid on, but not yet purchased.

18) Which city is best for registering company in India?
It will depend upon the nature of business you intend to pursue. However, after registering over hundreds of companies, it is our practical advice to keep note of few of many factors before registering your company in any city:
The local registrations that will be required to be obtained for the company after its registration.
Nature of your business and the demographic advantage that the city is expected to provide.

19) Is it possible for two foreign nationals to register a company in India?
Yes, an Indian company can be incorporated with one or more foreign nationals as Directors. However, in private company wherein there are 2 directors and both of them are foreign nationals, one of them has to be a resident in India for a period of at least 182 days in the calendar year(as per Companies Act 2013). Also, wherein both the directors are foreign nationals, then disclosure has to be made whether 100 % FDI is allowed in the desired sector or not. However, foreign nationals cannot form an OPC in India.

20) Can I, as an individual register a company solely on individual basis?
As per Companies Act, 2013, you can. The new Act provides for the concept of One Person Company, wherein an individual can start a company on individual basis.

21) How to know if the desired name for the proposed company is available or not?
Before fixing on any name, one should always avail the public search of existing company/LLP name along with trademark search. More unique the name more is the chances of their quick reservation.

22) What is a DIN Number?
DIN Number is a unique identification number allotted to the directors by the Government. For obtaining a DIN number, application is made to the Government in Form DIR-3 with requisite documents. The prescribed Government fees for obtaining one DIN are Rs.500.

23) I already have a DIN number allotted to me. Do I need to obtain another one for the new company I wish to register?
No, DIN is a one-time formality.

24) I already have a DIN and I wish to update my address in my DIN records.
The name, address, e-mail ID, phone number, residential status, all can be updated by making an application in Form DIR-6, along with requisite documents and declaration. There are no prescribed Government fees for the purpose.

25) Is DIN and PAN connected?
Yes, the basic personal details, namely the name of the applicant, father’s name of the applicant and his/her Date of Birth are verified by the DIN authorities from the PAN database.

26) Does Shareholders have to be directors as well?
There is no such compulsion as to the point that shareholders have to be directors as well. There can be a separate group of persons acting as directors and a separate group of persons acting as shareholders. Directors are the hands and brains of a company where as shareholders are the owners of the company.

27) Can an existing company be director and shareholder in another company that is to be incorporated?
An existing company can be a shareholder in another company that is to be incorporated. For this purpose, a clear distinction has to be made as to whether the existing company is acting as a holding company or not. Also, the company will have to nominate a natural person to act as its representative. However, it cannot be a director in the same.

28) What is the minimum qualification to act as a director in a private limited company?
There is no such prescribed qualification.

29) What is DSC?
DSC is Digital Signature Certificate. DSC is required for at least one director for the purpose of Company Registration of a private company. It is required to file the forms electronically with the department.

30) Can DSC be obtained by an NRI acting as a director?
Yes, DSC can be obtained by NRI acting as a director.

31) Can the directors use their residential address as the registered office of the company?
For registered office address of the proposed company, directors can use their own residential address or their relative’s address or any address for which they can furnish valid documents as proof consisting of a No Objection Certificate from the respective owner.

32) What is the duration of getting a private limited company registered?
The time limit to get a company registered is twenty-twenty five days provided all the valid documents are provided and uploaded with the department.

33) When can a Bank Account for the company be opened?
Bank Account for the company can be opened after receipt of the Certificate of Incorporation and generation of PAN Acknowledgement.

34) What is the validity of a name once reserved?
A name once reserved by filing Form INC-1 is valid for a period of sixty (60) days from the date of the letter of correspondence. However, RoC has the power to revoke the granted name at any time, after giving due notice to be heard.

35) Difference between rejection and resubmission.
When a particular form comes for resubmission, then the same can be submitted again vide the same SRN number. Its like chances that are given by the ROC to rectify the documents that are submitted without any additional Government fees. However, if the Forms get rejected then fresh filings for the same has to be done.

36) Can a person residing in Kerala incorporate a company in Bangalore?
Yes. He can, provided he can furnish satisfactory documents as registered office address proof.

37) Can same address be used as registered office address proof for two different companies?
Yes, it can be used but only after obtaining No Objection Certificate from the owner.

38)  What is the process to validate the documents for foreign nationals?
All the documents provided by foreign nationals, ranging from DIN declaration to subscriber’s sheets of the MOA and AOA either needs to be notarized by  a notary public and subsequently apostilled OR notarized by  a notary public and stamped by the Indian Consul of their respective countries.

39) Mr. X, a director of a said company had used his residential property as registered office address. Will the property be treated as company’s property?
No. A company has a separate legal entity from its owners.  Mere use of the owner’s property does not make establish ownership. Hence, the property will remain Mr.X’s.

40) A company has a registered office in Bangalore. However, the directors wish to conduct the business from Kerala. Do they need to change their registered office?
No. There is no such compulsion. A company might have its registered office in one particular state and any number of corporate offices all over the country.

41) Can a subsidiary of a foreign company be incorporated in India?
Yes. However, decision has to be made regarding the percentage of shares held by the holding company (foreign company) and the sector in which it is to be established since 100 % FDI is allowed only in selective sectors as of now.

42) What are the additional requirements in case of subsidiary of a foreign company to be incorporated in India?
Apart from the usual notary and apostillation requirements, two Board Resolutions will have to be filed with the concerned ROC while filing Form INC-1 and Form INC-7,  stating the resolutions that are held by the holding company with respect to its intention of forming a subsidiary company and stating the number of shares to be held by it, respectively. The same has to be notarized and apostilled.

43) Shall a separate ID be created for the proposed company?
Its not a mandate. However, it is always advisable to formulate a separate ID for the company for the purpose of maintaining integrity and future confidentiality.

44) Is just rent agreement considered a valid address proof for company registration?
No. For company registration, utility bill or tax receipt is mandatory.

45) What is Memorandum of Association (MOA)?
MOA is the fundamental incorporation document. It defines the name and address of the registered office of the company. It also defines the main objects for which the company is formed. The activities of the company are bound by MOA and is likely to attract penalties if goes ultra-vires.

46) What is Articles of Association (AOA)?
AOA is more of an internal document for the company. It defines the matters relating to conducting the business of the company, procedure and limitations of altering the structure of the company.

47) How do I register my MOA and AOA with the Government?
MOA and AOA are registered with the Government at the time of incorporating the company. An application is made through e-form 1, in which the MOA and AOA are attached and applied for approval. The requisite stamp-duty is to be paid depending on the state-wise Stamping Rules and authorized capital of the company.

48) What are the forms that are filed to register a company?
Application form for availability or change of a name                                                                                     e- Form INC-1
Application or declaration for incorporation of a company   (other than OPC)                                    e- Form INC-7
Application or declaration for incorporation of a company (OPC)                                                             e-Form  INC-2
Notice of situation or change of situation of registered office                                                                       e-Form INC – 22

49) I wish to register my Company as an educational institute for non-profit organizations. What are the additional requirements for that?
In this case, a license has to be obtained in Form 24A to operate as a non-profit making organization. The said license is to be obtained after name approval of the company and before filing the incorporation forms as stated above.

50) I registered my company in Pune. However, in order to shift my operations, I wish to change my registered office to Bangalore. What is the process to do so?
It is a case of change in the jurisdiction of the RoC office. In case, company wants to shift the registered office from one state to another state, it needs to file following forms to give effect to such change. These forms are:
1) Form MGT-14 for filing of special resolution with the RoC.
2) File petition with CLB and intimate ROC in Form 61
3) Form 21 (Notice of the court or the company law board order)
4) Form INC-22 ( Notice of situation or change of situation of registered office)

51) My company has been inoperative since it was registered. There has been no income and no expenses altogether. Do I still need to file the compliance forms with the department every year? Also, what are the compliance requirements for a company?
Yes. Although there have been no operations, the company has to still file the statement of accounts with the department every year. A company which has not filed its annual return for three consecutive years are considered in the strike off list of the department. Although the new Act has brought in the provisions enabling the company to operate as dormant, the said provisions are not yet applicable.

52) I wish to incorporate an IT company with three foreign nationals and two Indian nationals. I want to safeguard my interests in the company with respect to equity. What can I do?
The best option is to formulate and implement a shareholding agreement with vesting and cliff period clause.

53) Is Bank statement a valid address proof for obtaining DIN?
A latest bank statement duly attested by bank manager is considered as a valid address proof.

54) What are the documents required for filing Form INC-7?
Following are the documents required for filing Form 1:
Memorandum of Association (MOA)
Articles of Association (AOA)
Declaration from Promoters for Non-Acceptance of Deposits.
Declaration by a Practicing Professional that all the compliances pertaining to the Companies Act, 2013 has been complied with.
Declaration by the way of affidavits from the subscribers to the MOA & AOA.
Consent to Act as Directors.
Any other optional attachment case-specific.

55) What is the difference between incorporating a company in India and incorporating abroad?
In India, it does not matter in which city you are incorporating a company. Your company will be registered under the Central Government. There is one law and uniform applicability of its provisions nationwide.  Unlike in foreign countries like US, wherein registration process and formalities are guided by state laws.

56) Which address will be used while applying for the tax numbers of the company- the branch office or registered office?
The PAN and TAN numbers are to be applied using the registered office address proof while the address of the office from where the centralized billing is done is to be used for VAT and TIN numbers.

57) I have already trade-marked the name “Abode” for my company. But Registrar of Companies has rejected the name and asked us to file new names. I want “Abode” as my brand name.What should I do?
Legal name of the entity and trademark registration are two different things. You may avail the registration for your private limited company with a different legal name and subsequently use the  trade-mark on the desired name under the incorporated company with the different legal name.

58) What is my liability if I am appointed as a director in the registered company?
A director is the hand and brain of a company. A directors bears liability towards the company and third-parties. A director is answerable for breach of warranty and acts for his co-directors.

59) What are the things one should keep in mind while obtaining name for registering a company?
There are a lot of things  that one should keep in mind before obtaining name for registering a company. The most important being “the choice of an unique name”. To explain this, the name should not be too identical to any existing Company Name or a registered trade-mark.

60) Which documents are considered as a valid address proof for registered office of a Company which is an owned property?
Tax Receipt.
Electric Bill (duly attested by professional).
Telephone Bill (only BSNL/MTNL or such nationalized telecom company).
Possession Letter.
Registered Property Ownership Deed.
Sale Deed.

61) Which documents are considered as a valid address proof for registered office of a Company which is an rented property?
Tax Receipt.
Electric Bill (duly attested by professional).
No Objection Certificate from Owner.
_
62) Can I attach my bank statement as an address proof for the registered office my Company?
You can only provide a bank statement which is of a nationalized bank, like SBI, after getting it attested by the bank manager.

63) I am an Australian citizen, but resident in India. I want to apply for my DIN without my Australian address. I only have an Overseas Citizen of India (OCI) card. What will be my status while filing for DIN?
An OCI Card is equivalent to citizenship in India. Hence, if you do not want your Australian address to be put while applying in DIN, you can apply as a citizen of India, by virtue of the OCI Card.

64) Who allots DIN?
Central Government (Office of Regional Director (Northern Region), Ministry of Corporate Affairs) will allot the DIN.

65) What are the additional requirements for DIN of a foreign national?
All documents (including photo) shall be certified by the Indian Embassy or a notary in the respective country of the individual.

66) What is the validity of a DIN ? Do we need to renew it?
DIN Number is a one time formality. It has a life-time validity. There is no requirement to renew it.

67) Whether Provisional DIN can be used for e-filing?
No.  Only an approved DIN can be used for e-filing.

68) Can I introduce my wife as the second director of my Company?
Yes.  You can introduce your wife or any other family member as the second director.

69) I reside inDelhi. Can I opt for your services?
Definitely. The entire process of incorporation is managed electronically. Moreover, as per our service terms, complete confidentiality is assured with respect to the documents sent electronically.

70) We applied for the name availability of a company. The spelling has been mis-spelled and the mis-spelled name is approved. Is there any way to change it since we do not want to continue with the wrong name?
You can apply for the name freshly along with an application to the concerned ROC, stating the grounds for applying for the fresh name. You can also provide the copy of the Letter of Correspondence of Name Approval along with the application. Alternatively, you can incorporate the company with the mis-spelled name and then apply for a change of the name of the company.

71) Can an  OCI Card holder be appointed as a director in a company? Can salary be paid to him?
Yes, an OCI Card holder can be appointed as a director in a company. Salary can also be paid to him and the salary will be taxable in India.

72) What should  be the minimum number of employees with which I should register my company?
There is no restriction on minimum number of employees. A company can be incorporated even with zero employee.

73) I wish to register a company in pharmaceuticals. Is there any additional requirement for that?
You may need a license under the Food and Drug Administration Act.

74) Can I register a company with software development, real estate and sales and marketing as the main objects?
The main objects of the company has to be absolute and not varied. Hence, you cannot register your company with all the above activities as main objects as they are not related to each other.

75) I want to start a company with a specific word in its name. In future, I want to start more companies under the group, containing the same common words. Am I allowed to do so?
Yes. In case the future companies are not subsidiaries of the mother company, you will need a No Objection Certificate for incorporating the new companies.

76) I am trying to check the availability of name for my company. But when I am entering the name, a blank box appears which says “undefined”. What am I doing wrong?
You are not doing any thing wrong. After entering the desired name, if the message displays “no records found”, then it means that the name is available. In case it is showing “undefined”, then it is due to some technical errors on the website. Please try again after some time.

77) I have applied for the DIN of a company. Is my personal details accessible to the public? I do not want to share my personal contact numbers and e-mail IDs with the general public at large.
The personal details, namely the contact number and e-mail IDs that are entered in the DIN Form are only for the record purpose of the DIN department. They are not available for general display. The general public can only access the information related to your name, father’s name, date of birth, address and DIN number.

78) What is CIN Number? Where can I find it?
CIN number means Corporate Identification Number. It is like the identity number of the company. You can find it in the Certificate of incorporation of the company.

79) In what form should I send you all the documents for registering a company? Do I need to send you the hard-copies of the documents via courier?
Just like the MCA, all our services are managed electronically. Hence, you can attach the document as a PDF, GIF, JPG, BMP, PNG or TIF. Moreover, you do not need to send us any hard copies.

80)Am I registering my company under new act or old act?
You are registering your company in transition between the new Act and the old Act. This is owing to the fact that the new Act is not wholly implemented yet. 98 sections of the Act has been notified by the Department.

81) Is there a minimum and maximum age for being Director of a Company?
There is no maximum age for being a director in a company. However, the minimum age is 18 years.

82) Why should I get my logo trademarked?
For the simple reason of protecting it. Once you trademark your logo, no one else will be able to use it. It also provides for other benefits in the form of creation of brand equity and identity.

Foreign Investment in India latest circular guidelines

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1 INDEX PART –

  Foreign Investments in India – Schematic RepresentationSection 

I: Foreign Direct Investment

1. Foreign Direct Investment in India

2. Entry routes for investments in India

3. Eligibility for investment in India

4. Type of instruments

5. Pricing guidelines

6. Mode of payment

7. Foreign investment limits, prohibited sectors and investment n MSEs

8. Modes of investment under Foreign Direct Investment Scheme 8.A Issuance of fresh shares by the company 8.B Acquisition by way of transfer of existing shares by person resident outside India 8.C Issue of Rights /Bonus shares 8.D Issue of shares under Employees Stock Option Scheme (ESOPs) 8.E Conversion of ECB / Lumpsum Fee / Royalty / Import of capital goods by SEZs in to Equity / Import payables / Pre incorporation expenses 8.F Issue of eligible securities by Indian Companies under Depository Receipts Scheme, 2014 (DR Scheme 2014).

8.G FDI through issue / transfer of ‘participating interest / right’ in oil fields to a NR

9. Foreign currency account and escrow account 27

10. Acquisition of shares under scheme of merger / amalgamation

11. Remittance of sale proceeds 28

12. Remittance on winding up/liquidation of companies

13. Pledge

14. Guidelines for the calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies

15. Issue of Non convertible/ redeemable bonus preference shares or debentures

16. Foreign Direct Investment in Limited Liability Partnership (LLP) 41 Section – II: Foreign investments under Portfolio Investment Scheme (PIS) 1. Entities 42 2. Investment in listed Indian companies 43 3. Accounts with AD Category – I banks 45 4. Exchange Traded Derivative Contracts 46 5. Collateral for FIIs 46 6. Short Selling of FIIs 47 7. Private placement with FIIs 48 8. Transfer of shares acquired under PIS 48 9. Monitoring of Investment position by RBI and AD banks 48 10. Prior intimation to Reserve Bank of India 49 11. Caution List 49 12. Ban List 49 13. Issue of irrevocable payment commitment (IPCs) to stock exchanges on behalf of FIIs 50 14. Investments by Qualified Foreign investors (QFIs) in listed equity shares 50 15. Foreign Portfolio Investment Scheme 53 2 Section – III: Foreign Venture Capital Investments 1. Investments by Foreign Venture Capital Investor 56 Section – IV : Other Foreign Investments 1. Purchase of other securities by NRIS 58 2. Indian Depository Receipts (IDRs) 59 3. Purchase of other securities by RFPIs/FIIs , QFIs and long term investors 60 4. Investment by Multilateral Development Banks (MDBs) 62 5. Foreign investment in Tier I and Tier II instruments issued by banks in India 62 6. Qualified foreign investors (QFIs) investment in the units of domestic mutual funds 63 7. Infrastructure Debt Fund. 64 8. Purchase of other securities by QFIs 65 Section – V: Reporting guidelines for Foreign Investments in India as per Section I and II 1. Reporting of FDI for fresh issuance of shares 67 2. Reporting of FDI for transfer of shares 69 3. Reporting of conversion of ECB into equity 71 4. Reporting of ESOPs for allotment of equity shares 71 5. Reporting of DR issues 72 6. Reporting of FII investments under PIS 72 7. Reporting of NRI investments under PIS 72 8. Reporting of foreign investment by way of issue / transfer of ‘participating interest/right’ in oil fields 73 3 PART II Investment in Partnership Firm / Proprietary Concern 1. Investment in partnership firm / proprietary concern 74 2. Investments with repatriation benefits 74 3. Investment by non-residents other than NRIs/PIO 74 4. Restrictions 75 Annexures Page No. Annex A – Salient features of Portfolio Investment Scheme (PIS) for investments by a Non Resident Indian (NRI) 76 Annex B n- Scheme for Acquisition/ Transfer by a person resident outside India of capital contribution or profit share of Limited Liability Partnerships (LLPs) 80 Annex – 1 Sector-Specific Policy For Foreign Investment 84 Annex – 2 Sectors prohibited for FDI 118 Annex – 3 Terms And Conditions for Transfer Of Shares / Convertible Debentures, By Way Of Sale 119 Annex – 4 Documents to be submitted by a person resident in India for transfer of shares to a person resident outside India by way of gift 123 Annex – 5 Definition Of “Relative” As Given in Section 6 Of Companies Act, 2013 124 Annex – 6 report by the Indian company receiving amount of consideration for issue of shares / convertible debentures under the FDI scheme – advance remittance form 125 Annex – 7 – Know Your Customer (KYC) Form in Respect Of The Non-Resident Investor 127 Annex – 8 – FC- GPR 128 Annex – 9-I – FC-TRS 137 Annex – 9-II Know Your Customer (KYC) Form in respect of the non-resident investor 143 Annex – 10 Return to be filed by an Indian Company who has arranged issue of GDR/ADR 145 Annex-11 Form FOREIGN DIRECT INVESTMENT LLP(I) 148 Annex-12 Form FOREIGN DIRECT INVESTMENT LLP(II) 154 Annex-13 Form ESOP 159 Annex-14 Appendix of A.P. DIR and Notifications 164 4 Part – I Foreign Investments in India—Schematic Representation: Foreign Investments Foreign Direct Investments Foreign Portfolio Investments Investments on non-repatriable basis Other investments (G-Sec, NCDs, etc) Foreign Venture Capital Investments Automatic Route Govt. Route SEBI regd. FVCIs NRIs/ PIO VCF, IVCUs FIIs/ RFPIs, NRIs, PIO,QFIs Long term Investors NRIs, PIO Persons Resident outside India FIIs/ QFIs /RFPIs Company LLP 5 Section – I: Foreign Direct Investment 1. Foreign Direct Investment in India Foreign Direct Investment (FDI) in India is : – undertaken in accordance with the FDI Policy which is formulated and announced by the Government of India. The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India issues a “Consolidated FDI Policy Circular ” on an yearly basis on March 31 of each year (since 2010) elaborating the policy and the process in respect of FDI in India. The latest “Consolidated FDI Policy Circular” dated April 17, 2014 is available in the public domain and can be downloaded from the website of Ministry of Commerce and Industry, Department of Industrial Policy and Promotion – http://dipp.nic.in/English/Policies/FDI_Circular_2014.pdf governed by the provisions of the Foreign Exchange Management Act (FEMA), 1999. FEMA Regulations which prescribe amongst other things the mode of investments i.e. issue or acquisition of shares / convertible debentures and preference shares, manner of receipt of funds, pricing guidelines and reporting of the investments to the Reserve Bank. The Reserve Bank has issued Notification No. FEMA 20/2000- RB dated May 3, 2000 which contains the Regulations in this regard. This Notification has been amended from time to time. 2. Entry routes for investments in India Under the Foreign Direct Investments (FDI) Scheme, investments can be made in shares, mandatorily and fully convertible debentures and mandatorily and fully convertible preference shares1 of an Indian company by non-residents through two routes: o Automatic Route: Under the Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment. o Government Route: Under the Government Route, the foreign investor or the Indian company should obtain prior approval of the Government of India(Foreign Investment Promotion Board (FIPB), Department of Economic Affairs (DEA), 1 “Shares” mentioned in this Master Circular means equity shares, “preference shares” means fully and mandatorily convertible preference shares and “convertible debentures” means fully and mandatorily convertible debentures [cf. A. P. (DIR Series) Circular Nos. 73 & 74 dated June 8, 2007]

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Guidelines for Issue of Certificates of Deposit from RBI

 

fema consultations on certificate of deposits

Master Circular – Guidelines for Issue of Certificates of Deposit

With a view to further widening the range of money market instruments and giving investors greater flexibility in deployment of their short-term surplus funds, Certificates of Deposit (CDs) were introduced in India in 1989. Guidelines for issue of CDs are presently governed by various directives issued by the Reserve Bank of India, as amended from time to time.

2. A Master Circular incorporating all the existing guidelines / instructions / directives on the subject has been prepared for reference of the market participants and others concerned. It may be noted that this Master Circular consolidates and updates all the instructions / guidelines contained in the circulars listed in the Appendix as far as they relate to guidelines for issue of CDs. This Master Circular has also been placed on RBI website at http://www.mastercirculars.rbi.org.in.

Yours faithfully

(R. Subramanian)
Chief General Manager

Encl.: As above

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Table of Content
Sl. No.	Topic
1	Introduction
2	Eligibility
3	Aggregate Amount
4	Minimum Size of Issue and Denominations
5	Investors
6	Maturity
7	Discount/Coupon Rate
8	Reserve Requirements
9	Transferability
10	Trades in CDs
11	Settlement
12	Loans / Buy-backs
13	Format of CDs
14	Security Aspect
15	Payment of Certificate
16	Issue of Duplicate Certificates
17	Accounting
18	Standardised Market Practices and Documentation
19	Reporting
Annexes
I. Format of CDs
II. Definitions
Appendix: List of Circulars Consolidated

1. Introduction

Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialised form or as a Usance Promissory Note against funds deposited at a bank or other eligible financial institution for a specified time period. Guidelines for issue of CDs are presently governed by various directives / guidelines issued by the Reserve Bank of India (RBI), as amended from time to time. The guidelines for issue of CDs, incorporating all the amendments issued till date, are given below for ready reference.

2. Eligibility

CDs can be issued by (i) scheduled commercial banks {excluding Regional Rural Banks and Local Area Banks}; and (ii) select All-India Financial Institutions (FIs) that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI.

3. Aggregate Amount

3.1 Banks have the freedom to issue CDs depending on their funding requirements.

3.2 An FI can issue CDs within the overall umbrella limit prescribed in the Master Circular on Resource Raising Norms for FIs, issued by Department of Banking Regulation, Reserve Bank of India and updated from time-to-time.

4. Minimum Size of Issue and Denominations

Minimum amount of a CD should be Rs.1 lakh, i.e., the minimum deposit that could be accepted from a single subscriber should not be less than Rs.1 lakh, and in multiples of Rs. 1 lakh thereafter.

5. Investors

CDs can be issued to individuals, corporations, companies (including banks and PDs), trusts, funds, associations, etc. Non-Resident Indians (NRIs) may also subscribe to CDs, but only on non-repatriable basis, which should be clearly stated on the Certificate. Such CDs cannot be endorsed to another NRI in the secondary market.

6. Maturity

6.1 The maturity period of CDs issued by banks should not be less than 7 days and not more than one year, from the date of issue.

6.2 FIs can issue CDs for a period not less than 1 year and not exceeding 3 years from the date of issue.

7. Discount / Coupon Rate

CDs may be issued at a discount on face value. Banks / FIs are also allowed to issue CDs on floating rate basis provided the methodology of compiling the floating rate is objective, transparent and market-based. The issuing bank / FI is free to determine the discount / coupon rate. The interest rate on floating rate CDs would have to be reset periodically in accordance with a pre-determined formula that indicates the spread over a transparent benchmark. The investor should be clearly informed of the same.

8. Reserve Requirements

Banks have to maintain appropriate reserve requirements, i.e., cash reserve ratio (CRR) and statutory liquidity ratio (SLR), on the issue price of the CDs.

9. Transferability

CDs in physical form are freely transferable by endorsement and delivery. CDs in demat form can be transferred as per the procedure applicable to other demat securities. There is no lock-in period for the CDs.

10. Trades in CDs

All OTC trades in CDs shall be reported within 15 minutes of the trade on the reporting platform of Clearcorp Dealing Systems (India) Ltd. (CDSIL).

11. Settlement

All OTC trades in CDs shall necessarily be cleared and settled under DVP I mechanism through the authorised clearing houses {National Securities Clearing Corporation Limited (NSCCL), Indian Clearing Corporation Limited (ICCL) and MCX Stock Exchange Clearing Corporation Limited (CCL)} of the stock exchanges.

12. Loans / Buy-backs

Banks / FIs cannot grant loans against CDs. Furthermore, they cannot buy-back their own CDs before maturity. However, the RBI may relax these restrictions for temporary periods through a separate notification.

13. Format of CDs

Banks / FIs should issue CDs only in dematerialised form. However, according to the Depositories Act, 1996, investors have the option to seek certificate in physical form. Accordingly, if an investor insists on physical certificate, the bank / FI may inform the Chief General Manager, Financial Markets Regulation Department, Reserve Bank of India, Central Office, Fort, Mumbai – 400 001 about such instances separately. Further, issuance of CDs will attract stamp duty. A format (Annex I) is enclosed for adoption by banks / FIs. There will be no grace period for repayment of CDs. If the maturity date happens to be a holiday, the issuing bank/FI should make payment on the immediate preceding working day. Banks / FIs, therefore, should fix the period of deposit in such a manner that the maturity date does not coincide with a holiday to avoid loss of discount / interest rate.

14. Security Aspect

Since CDs in physical form are freely transferable by endorsement and delivery, it will be necessary for banks/FIs to see that the certificates are printed on good quality security paper and necessary precautions are taken to guard against tampering with the document. They should be signed by two or more authorised signatories.

15. Payment of Certificate

15.1 Since CDs are transferable, the physical certificates may be presented for payment by the last holder. The question of liability on account of any defect in the chain of endorsements may arise. It is, therefore, desirable that banks take necessary precautions and make payment only by a crossed cheque. Those who deal in these CDs may also be suitably cautioned.

15.2 The holders of dematted CDs will approach their respective depository participants (DPs) and give transfer / delivery instructions to transfer the security represented by the specific International Securities Identification Number (ISIN) to the ‘CD Redemption Account’ maintained by the issuer. The holders should also communicate to the issuer by a letter / fax enclosing the copy of the delivery instruction they had given to their respective DP and intimate the place at which the payment is requested to facilitate prompt payment. Upon receipt of the demat credit of CDs in the “CD Redemption Account”, the issuer, on maturity date, would arrange to repay to holders / transferors by way of Banker’s cheque / high value cheque, etc.

16. Issue of Duplicate Certificates

16.1 In case of loss of physical certificates, duplicate certificates can be issued after compliance with the following:

1. Notice is required to be given in at least one local newspaper;

2. Lapse of a reasonable period (say 15 days) from the date of the notice in the newspaper; and

3. Execution of an indemnity bond by the investor to the satisfaction of the issuer of CDs.

16.2 The duplicate certificate should be issued only in physical form. No fresh stamping is required as a duplicate certificate is issued against the original lost CD. The duplicate CD should clearly state that the CD is a Duplicate one stating the original value date, due date, and the date of issue (as “Duplicate issued on ________”).

17. Accounting

Banks / FIs may account the issue price under the Head “CDs issued” and show it under deposits. Accounting entries towards discount will be made as in the case of “Cash Certificates”. Banks / FIs should maintain a register of CDs issued with complete particulars.

18. Standardised Market Practices and Documentation

Fixed Income Money Market and Derivatives Association of India (FIMMDA) may prescribe, in consultation with the RBI, for operational flexibility and smooth functioning of the CD market, any standardised procedure and documentation that are to be followed by the participants, in consonance with the international best practices. Banks / FIs may refer to the detailed guidelines issued by FIMMDA in this regard on June 20, 2002 and as amended from time to time (http://fimmda.org).

19. Reporting

19.1 Banks should include the amount of CDs in the fortnightly return under Section 42 of the RBI Act, 1934 and also separately indicate the amount so included by way of a footnote in the return.

19.2 Further, banks / FIs should report the data on issuance of CDs on the web-based module under the Online Returns Filing System (ORFS) within 10 days from the end of the fortnight to which it pertains.

---

Annex I 
(See para 13)

Format of Negotiable Certificate of Deposit (CD)

Name of the Bank / Institution

No.

Rs. ___________
Dated ___________

NEGOTIABLE CERTIFICATE OF DEPOSIT

___________ months / days after the date hereof, ___________ ___________, at ___________ ___________, hereby promise to pay to ______________________ or order the sum of Rupees ___________ ___________ only, upon presentation and surrender of this instrument at the said place, for deposit received.

For ___________ ___________ Date of maturity ___________ without days of grace.

Instructions	Endorsement	Date
	1.
	2.
	3.
	4.
	.
	.

---

Annex II

Definitions

In these guidelines, unless the context otherwise requires:

1. “Bank” or “Banking company” means a banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949) or a “corresponding new bank”, “State Bank of India” or “subsidiary bank” as defined in clause (da), clause (nc) and clause (nd) respectively thereof and includes a “co-operative bank” as defined in clause (cci) of Section 5 read with Section 56 of that Act.

2. “Scheduled bank” means a bank included in the Second Schedule of the Reserve Bank of India Act, 1934.

3. “All-India Financial Institutions (FIs)” mean those financial institutions which have been permitted specifically by the Reserve Bank of India to raise resources by way of Term Money, Term Deposits, Certificates of Deposit, Commercial Paper and Inter-Corporate Deposits, where applicable, within the umbrella limit fixed by RBI.

4. “Corporate” or “Company” means a company as defined in Section 45 I (aa) of the Reserve Bank of India Act, 1934 but does not include a company which is being wound up under any law for the time being in force.

5. “Non-banking company” means a company other than banking company.

6. “Non-banking financial company” means a company as defined in Section 45 I (f) of the Reserve Bank of India Act, 1934.

7. Words and expressions used but not defined herein and defined in the Reserve Bank of India Act, 1934 (2 of 1934) shall have the same meaning as assigned to them in the Act.

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Non-resident Indians (NRIs) can invest in National Pension System (NPS)

Non-resident Indians (NRIs) can invest in National Pension System (NPS) to get a social security cover, pension regulator Pension Fund Regulatory and Development Authority’s (PFRDA)

RBI has communicated it to PFRDA that NRIs are now eligible to make such investments, however, the government will come out with a clarification on the Foreign Exchange Management Act (FEMA) guidelines shortly, to facilitate non-resident Indians to invest in National Pension System (NPS),

“There was some ambiguity about whether to add NPS as eligible investment by NRI. So, we took up the matter with RBI and very recently they have given this clarification that NPS like insurance and mutual fund could also be eligible investment for NRIs,”

“…the government will shortly be coming out with clarification to that effect in the FEMA guidelines”

Highlighting the importance of NPS scheme for Non-Resident Indians (NRIs), he said such residents especially living in the Middle-East don’t have any mandatory social security benefit.

This window would provide NRIs an opportunity to save money for their old age, he said adding that they would also enjoy the tax break as prescribed.

The Pension Fund Regulatory and Development Authority (PFRDA) is in talks with lenders such as SBI, HDFC Bank, Canara Bank, Indian Bank and several other south India-based banks to tap potential NRIs.

“We have started talking to bankers about attracting NRIs to enroll for NPS scheme. We see NRIs as a very attractive market for NPS. We would like to push for NPS for the NRIs,”

The move will also help to increase the subscriber base and expand the pension corpus in the private sector.

The current corpus under the National Pension System is Rs 91,000 crore.

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Micro small and medium enterprises Lending under RBI

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SECTION – I

1 Micro, Small & Medium Enterprises Development (MSMED) Act, 2006

The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 on June 16, 2006 which was notified on October 2, 2006. With the enactment of MSMED Act 2006, the paradigm shift that has taken place is the inclusion of the services sector in the definition of Micro, Small & Medium enterprises, apart from extending the scope to medium enterprises. The MSMED Act, 2006 has modified the definition of micro, small and medium enterprises engaged in manufacturing or production and providing or rendering of services. The Reserve Bank has notified the changes to all scheduled commercial banks. Further, the definition, as per the Act, has been adopted for purposes of bank credit vide RBI circular ref. RPCD.PLNFS. BC.No.63/06.02.31/ 2006-07 dated April 4, 2007.

1.1 Definition of Micro, Small and Medium Enterprises

(a) Manufacturing Enterprises i.e. Enterprises engaged in the manufacture or production, processing or preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh;

(ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and

(iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

In case of the above enterprises, investment in plant and machinery is the original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No.S.O. 1722(E) dated October 5, 2006 (Annex I).

(b) Service Enterprises i.e. Enterprises engaged in providing or rendering of services and whose investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) as specified below:

(i) A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh;

(ii) A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore; and

(iii) A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.

Section – II

2 Priority Sector Guidelines for MSME sector

In terms of circular FIDD.CO.Plan.BC.54/04.09.01/2014-15 dated April 23, 2015 on ‘Priority Sector Lending – Targets and Classification’, bank loans to Micro, Small and Medium Enterprises, for both Manufacturing and Service sectors are eligible to be classified under the Priority Sector as per the following norms:

2.1 Manufacturing Enterprises

The Micro, Small and Medium Enterprises engaged in the manufacture or production of goods to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951 and as notified by the Government from time to time. The Manufacturing Enterprises are defined in terms of investment in plant and machinery.

2.2 Service Enterprises

Bank loans up to Rs.5 crore per borrower / unit to Micro and Small Enterprises and Rs.10 crore to Medium Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006.

2.3 Khadi and Village Industries Sector (KVI)

All loans to units in the KVI sector will be eligible for classification under the sub-target of 7 percent / 7.5 percent prescribed for Micro Enterprises under priority sector.

2.4 Bank loans to food and agro processing units will form part of agriculture.

2.5 Other Finance to MSMEs

(i) Loans to entities involved in assisting the decentralized sector in the supply of inputs to and marketing of outputs of artisans, village and cottage industries.

(ii) Loans to co-operatives of producers in the decentralized sector viz. artisans, village and cottage industries.

(iii) Loans sanctioned by banks to MFIs for on-lending to MSME sector as per the conditions specified in the extant Master Circular on ‘Priority Sector Lending – Targets and Classification’.

(iv) Credit outstanding under General Credit Cards (including Artisan Credit Card, Laghu Udyami Card, Swarojgar Credit Card, and Weaver’s Card etc. in existence and catering to the non-farm entrepreneurial credit needs of individuals).

(v) Outstanding deposits with SIDBI on account of priority sector shortfall.

2.6 To ensure that MSMEs do not remain small and medium units merely to remain eligible for priority sector status, the MSME units will continue to enjoy the priority sector lending status up to three years after they grow out of the MSME category concerned.

2.7 Considering that the MSMED Act, 2006 does not provide for any sub-categorization within the definition of micro enterprises and that the sub-target for lending to micro enterprises has been fixed, the current sub-categorization within the definition of micro enterprises in the existing guidelines is dispensed with.

2.8 Since the MSMED Act, 2006 does not provide for clubbing of investments of different enterprises set up by same person / company for the purpose of classification as Micro, Small and Medium enterprises, the Gazette Notification No. S.O.2 (E) dated January 1, 1993 on clubbing of investments of two or more enterprises under the same ownership for the purpose of classification of industrial undertakings as SSI has been rescinded vide GOI Notification No. S.O. 563 (E) dated February 27, 2009.

SECTION – III

3 Targets / sub-targets for lending to Micro, Small and Medium Enterprises (MSME) sector by Domestic Commercial Banks and Foreign Banks operating in India

3.1 Advances to Micro, Small and Medium Enterprises (MSME) sector shall be reckoned in computing achievement under the overall Priority Sector target of 40 percent of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher, as per the extant guidelines on priority sector lending.

3.2 Domestic Commercial Banks are required to achieve a sub-target of 7.5 percent of ANBC or Credit Equivalent Amount of Off-Balance Sheet Exposure, whichever is higher, for lending to Micro Enterprises in a phased manner i.e. 7 per cent by March 2016 and 7.5 per cent by March 2017. The sub-target for Micro Enterprises for foreign banks with 20 branches operating in India and above would be made applicable post 2018 after a review in 2017. However, this sub-target for lending to Micro Enterprises is not applicable to foreign banks with less than 20 branches operating in India.

3.3 Bank loans above Rs.5 crore per borrower / unit to Micro and Small Enterprises and Rs.10 crore to Medium Enterprises engaged in providing or rendering of services and defined in terms of investment in equipment under MSMED Act, 2006, shall not be reckoned in computing achievement under the overall Priority Sector targets as above. However, bank loans above Rs.5 crore per borrower / unit to Micro and Small Enterprises would be taken into account while assessing the performance of the banks with regard to their achievement of targets prescribed by the Prime Minister’s Task Force on MSMEs for lending to MSE sector.

3.4 In terms of the recommendations of the Prime Minister’s Task Force on MSMEs, banks are advised to achieve:

(i) 20 per cent year-on-year growth in credit to micro and small enterprises,
(ii) 10 per cent annual growth in the number of micro enterprise accounts and
(ii) 60% of total lending to MSE sector as on preceding March 31st to Micro enterprises

Foriegn investment in India

SECTION – IV

4 Common guidelines / instructions for lending to MSME sector

4.1 Issue of Acknowledgement of Loan Applications to MSME borrowers

Banks have been advised to mandatorily acknowledge all loan applications, submitted manually or online, by their MSME borrowers and ensure that a running serial number is recorded on the application form as well as on the acknowledgement receipt. Banks are further encouraged to start Central Registration of loan applications. The same technology may be used for online submission of loan applications as also for online tracking of loan applications.

4.2 Collateral

Banks are mandated not to accept collateral security in the case of loans up to Rs.10 lakh extended to units in the MSE sector. Banks are also advised to extend collateral-free loans up to Rs. 10 lakh to all units financed under the Prime Minister Employment Generation Programme (PMEGP) administered by KVIC.

Banks may, on the basis of good track record and financial position of the MSE units, increase the limit to dispense with the collateral requirement for loans up to Rs.25 lakh (with the approval of the appropriate authority).

Banks are advised to strongly encourage their branch level functionaries to avail of the Credit Guarantee Scheme cover, including making performance in this regard a criterion in the evaluation of their field staff.

4.3 Composite loan

A composite loan limit of Rs.1 crore can be sanctioned by banks to enable the MSE entrepreneurs to avail of their working capital and term loan requirement through Single Window.

4.4 Specialised MSME branches

Public sector banks have been advised to open at least one specialised branch in each district. Further, banks have been permitted to categorise their general banking branches having 60% or more of their advances to MSME sector as specialized MSME branches in order to encourage them to open more specialised MSME branches for providing better service to this sector as a whole. As per the policy package announced by the Government of India for stepping up credit to MSME sector, the public sector banks will ensure specialized MSME branches in identified clusters/centres with preponderance of small enterprises to enable the entrepreneurs to have easy access to the bank credit and to equip bank personnel to develop requisite expertise. The existing specialised SSI branches, if any, may also be redesignated as MSME branches. Though their core competence will be utilized for extending finance and other services to MSME sector, they will have operational flexibility to extend finance/render other services to other sectors/borrowers.

4.5 Delayed Payment

Under the Amendment Act, 1998 of Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings, penal provisions have been incorporated to take care of delayed payments to MSME units. After the enactment of the Micro, Small and Medium Enterprises Development (MSMED), Act 2006, the existing provisions of the Interest on Delayed Payment Act, 1998 to Small Scale and Ancillary Industrial Undertakings, have been strengthened as under:

(i) The buyer has to make payment to the supplier on or before the date agreed upon between him and the supplier in writing or, in case of no agreement, before the appointed day. The period agreed upon between the supplier and the buyer shall not exceed forty five days from the date of acceptance or the day of deemed acceptance.

(ii) In case the buyer fails to make payment of the amount to the supplier, he shall be liable to pay compound interest with monthly rests to the supplier on the amount from the appointed day or, on the date agreed on, at three times of the Bank Rate notified by Reserve Bank.

(iii) For any goods supplied or services rendered by the supplier, the buyer shall be liable to pay the interest as advised at (ii) above.

(iv) In case of dispute with regard to any amount due, a reference shall be made to the Micro and Small Enterprises Facilitation Council, constituted by the respective State Government.

Further, banks have been advised to fix sub-limits within the overall working capital limits to the large borrowers specifically for meeting the payment obligation in respect of purchases from MSMEs.

4.6 Revised Guidelines for Rehabilitation of Sick Micro and Small Enterprises

In view of the recommendations of Working Group on rehabilitation of potentially viable sick units (Chairman: Dr. K. C. Chakrabarty), regarding changing the definition of sickness and the procedure for assessing the viability of sick MSE units, a Committee was set up by the Ministry of MSME to look into the issue. Based on the recommendation of the Committee, revised guidelines for rehabilitation of sick units in the MSE sector have been issued vide our circularRPCD.CO.MSME & NFS.BC.40/06.02.31/2012-2013 dated November 1, 2012.

The objective of the revised guidelines is to hasten the process of identification of a unit as sick, early detection of incipient sickness, and to lay down a procedure to be adopted by banks before declaring a unit as unviable.

As per the new guidelines, a Micro or Small Enterprise (as defined in the MSMED Act 2006) may be said to have become Sick, if (a) any of the borrowal account of the enterprise remains NPA for three months or more OR (b) there is erosion in the net worth due to accumulated losses to the extent of 50% of its net worth during the previous accounting year.

The revised guidelines also provide the procedures to be adopted by the banks before declaring any unit as unviable. Banks have been advised that the decision on viability of the unit should be taken at the earliest but not later than 3 months of becoming sick under any circumstances and the rehabilitation package should be fully implemented within six months from the date the unit is declared as ‘potentially viable’ / ‘viable’.

4.7 Micro and Small Enterprises Sector – The imperative of Financial Literacy and consultancy support

Keeping in view the high extent of financial exclusion in the MSME sector, it is imperative for banks that the excluded units are brought within the fold of the formal banking sector. The lack of financial literacy, operational skills, including accounting and finance, business planning etc. represent formidable challenge for MSE borrowers underscoring the need for facilitation by banks in these critical financial areas. Moreover, MSE enterprises are further handicapped in this regard by absence of scale and size. To effectively and decisively address these handicaps, Scheduled commercial banks have been advised vide our circularRPCD.MSME & NFS.BC.No.20/06.02.31/2012-13 dated August 1, 2012 that the banks could either separately set up special cells at their branches, or vertically integrate this function in the Financial Literacy Centres (FLCs) set up by them, as per their comparative advantage. The bank staff should also be trained through customised training programs to meet the specific needs of the sector.

4.8 Structured Mechanism for monitoring the credit growth to the MSE sector

In view of the concerns emerging from the deceleration in credit growth to the MSE sector, an Indian Banking Association (IBA)-led Sub-Committee (Chairman: Shri K.R. Kamath) was set up to suggest a structured mechanism to be put in place by banks to monitor the entire gamut of credit related issues pertaining to the sector. Based on the recommendations of the Committee, banks have been advised to:

• strengthen their existing systems of monitoring credit growth to the sector and put in place a system-driven comprehensive performance management information system (MIS) at every supervisory level (branch, region, zone, head office) which should be critically evaluated on a regular basis;

• put in place a system of e-tracking of MSE loan applications and monitor the loan application disposal process in banks, giving branch-wise, region-wise, zone-wise and State-wise positions. The position in this regard is to be displayed by banks on their websites; and

• monitor timely rehabilitation of sick MSE units. The progress in rehabilitation of sick MSE units is to be made available on the website of banks.

Detailed guidelines have been issued to the scheduled commercial banks vide our circular RPCD. MSME&NFS.BC.No. 74/06.02.31/2012-13 dated May 9, 2013.

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4.9 Revised General Credit Card (GCC) Scheme

In order to enhance the coverage of GCC Scheme to ensure greater credit linkage for all productive activities within the overall Priority Sector guidelines and to capture all credit extended by banks to individuals for non-farm entrepreneurial activity, the GCC guidelines have been revised on December 2, 2013.

4.10 State Level Inter Institutional Committee (SLIIC)

In order to deal with the problems of co-ordination for rehabilitation of sick micro and small units, State Level Inter-Institutional Committees were set up in the States. However, the matter of continuation or otherwise, of the SLIIC Forum has been left to the individual States / Union Territory. The meetings of these Committees are convened by Regional Offices of RBI and presided over by the Secretary, Industry of the concerned State Government. It provides a useful forum for adequate interfacing between the State Government Officials and State Level Institutions on the one side and the term lending institutions and banks on the other. It closely monitors timely sanction of working capital to units which have been provided term loans by SFCs, implementation of special schemes such as Margin Money Scheme of State Government and reviews general problems faced by industries and sickness in MSE sector based on the data furnished by banks. Among others, the representatives of the local state level MSE associations are invited to the meetings of SLIIC which are held quarterly. A sub-committee of SLIIC looks into the problems of individual sick MSE unit and submits its recommendations to the forum of SLIIC for consideration.

4.11 Empowered Committee on MSMEs

As part of the announcement made by the Union Finance Minister, at the Regional Offices of Reserve Bank of India, Empowered Committees on MSMEs have been constituted under the Chairmanship of the Regional Directors with the representatives of SLBC Convenor, senior level officers from two banks having predominant share in MSME financing in the state, representative of SIDBI Regional Office, the Director of Industries of the State Government, one or two senior level representatives from the MSME Associations in the state, and a senior level officer from SFC/SIDC as members. The Committee will meet periodically and review the progress in MSME financing as also rehabilitation of sick Micro, Small and Medium units. It will also coordinate with other banks/financial institutions and the state government in removing bottlenecks, if any, to ensure smooth flow of credit to the sector. The committees may decide the need to have similar committees at cluster/district levels.

4.12 Debt Restructuring Mechanism for MSMEs

(i) Prudential Guidelines on SME Debt Restructuring by banks have been advised to all commercial banks by Department of Banking Operations & Development vide circular DBOD.No.BP.BC.No. 37/21.04.132/2008-09 dated August 27, 2008 read with circular DBOD.BP.BC.No.99/21.04.132/2012-13 dated May 30, 2013 and DBOD Mail Box clarification dated June 6, 2013 and March 30, 2015 and the subsequent guidelines on Restructuring of Advances by banks issued from time to time.

(ii) In the light of the recommendations of the Working Group on Rehabilitation of Sick MSEs (Chairman: Dr. K.C. Chakrabarty), all commercial banks were advised vide our circular ref. RPCD. SME &NFS.BC.No. 102/06.04.01/2008-09 dated May 4, 2009 to:

(a) put in place loan policies governing extension of credit facilities, Restructuring/Rehabilitation policy for revival of potentially viable sick units/enterprises and non- discretionary One Time Settlement scheme for recovery of non-performing loans for the MSE sector, with the approval of the Board of Directors and

(b) implement recommendations with regard to timely and adequate flow of credit to the MSE sector.

(iii) Banks have been advised to give wide publicity to the One Time settlement scheme implemented by them, by placing it on the bank’s website and through other possible modes of dissemination. They may allow reasonable time to the borrowers to submit the application and also make payment of the dues in order to extend the benefits of the scheme to eligible borrowers.

4.13 Cluster Approach

All SLBC Convenor banks have been advised to incorporate in their Annual Credit Plans, the credit requirement in the clusters identified by the Ministry of Micro, Small and Medium Enterprises, Government of India.

(i) As per Ganguly Committee recommendations (September 4, 2004), banks have been advised that a full-service approach to cater to the diverse needs of the SSI sector (now MSE sector) may be achieved through extending banking services to recognized MSE clusters by adopting a 4-C approach namely, Customer focus, Cost control, Cross sell and Contain risk. A cluster based approach to lending may be more beneficial:

(a) in dealing with well-defined and recognized groups;
(b) availability of appropriate information for risk assessment and
(c) monitoring by the lending institutions.

Clusters may be identified based on factors such as trade record, competitiveness and growth prospects and/or other cluster specific data.

(ii) As per announcement made by the Governor in paragraph 157 of the Annual Policy Statement 2007-08, all SLBC Convenor banks have been advised vide letter RPCD.PLNFS.No. 10416/06.02.31/2006-07 dated May 8, 2007 to review their institutional arrangements for delivering credit to the MSME sector, especially in 388 clusters identified by United Nations Industrial Development Organisation (UNIDO) spread over 21 states in various parts of the country. A list of SME clusters as identified by UNIDO has been furnished in Annex II.

(iii) The Ministry of Micro, Small and Medium Enterprises has approved a list of clusters under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and Micro and Small Enterprises Cluster Development Programme (MSE-CDP) located in 121 Minority Concentration Districts. Accordingly, appropriate measures have been taken to improve the credit flow to the identified clusters of micro and small entrepreneurs from the Minority Communities residing in the minority concentrated districts of the country.

(iv) In terms of recommendations of the Prime Minister’s Task Force on MSMEs banks should open more MSE focused branch offices at different MSE clusters which can also act as CounsellingCentres for MSEs. Each lead bank of a district may adopt at least one MSE cluster.

4.14 Scheme of Small Enterprises Financial Centres (SEFCs):

As per announcement made by the Governor in the Annual Policy Statement 2005-06, a scheme for strategic alliance between branches of banks and SIDBI located in clusters, named as “Small Enterprises Financial Centres” has been formulated in consultation with the then Ministry of SSI and Banking Division, Ministry of Finance, Government of India, SIDBI, IBA and select banks and circulated to all scheduled commercial banks on May 20, 2005 for implementation. SIDBI has so far executed MoU with 15 banks (Bank of India, UCO Bank, YES Bank, Bank of Baroda, Oriental Bank of Commerce, Punjab National Bank, Dena Bank, Andhra Bank, Indian Bank, Corporation Bank, IDBI Bank, Indian Overseas Bank, Union Bank of India, State Bank of India and Federal Bank). List of MSME clusters covered by existing SIDBI branches is furnished in Annex III.

4.15 Credit Linked Capital Subsidy Scheme (CLSS)

Government of India, Ministry of Micro, Small and Medium Enterprises has conveyed their approval for continuation of the Credit Linked Capital Subsidy Scheme (CLSS) for Technology Upgradation of Micro and Small Enterprises from X Plan to XI Plan (2007-12) subject to the following terms and conditions:

(i) Ceiling on the loan under the scheme is Rs.1 crore.

(ii) The rate of subsidy is 15% for all units of micro and small enterprises up to loan ceiling at Sr. No. (i) above.

(iii) Calculation of admissible subsidy will be done with reference to the purchase price of plant and machinery instead of term loan disbursed to the beneficiary unit.

(iv) SIDBI and NABARD will continue to be implementing agencies of the scheme.

4.16 Banking Codes and Standard Board of India (BCSBI)

The Banking Codes and Standard Board of India (BCSBI) has formulated a Code of Bank’s Commitment to Micro and Small Enterprises. This is a voluntary Code, which sets minimum standards of banking practices for banks to follow when they are dealing with Micro and Small Enterprises (MSEs) as defined in the Micro Small and Medium Enterprises Development (MSMED) Act, 2006. It provides protection to MSE and explains how banks are expected to deal with MSE for their day to-day operations and in times of financial difficulty.

The Code does not replace or supersede regulatory or supervisory instructions issued by the Reserve Bank of India (RBI) and banks will comply with such instructions /directions issued by the RBI from time to time.

4.16.1 Objectives of the BCSBI Code

The Code has been developed to:

(a) Give a positive thrust to the MSE sector by providing easy access to efficient banking services.

(b) Promote good and fair banking practices by setting minimum standards in dealing with MSE.

(c) Increase transparency so that a better understanding of what can reasonably expected of the services.

(d) Improve understanding of business through effective communication.

(e) Encourage market forces, through competition, to achieve higher operating standards.

(f) Promote a fair and cordial relationship between MSE and banks and also ensure timely and quick response to banking needs.

(g) Foster confidence in the banking system.

The complete text of the Code is available at the BCSBI’s website (ww.bcsbi.org.in)

Section – V

5 Committees on flow of Credit to MSE sector

5.1 Report of the High Level Committee on Credit to SSI (now MSE) (Kapur Committee)

Reserve Bank of India had appointed a one-man High Level Committee (June 30, 1998) headed by Shri S L Kapur, (IAS, Retd.), Former Secretary, Government of India, Ministry of Industry to suggest measures for improving the delivery system and simplification of procedures for credit to SSI sector. The Committee made 126 recommendations covering wide range of areas pertaining to financing of SSI sector. These recommendations were examined by the RBI and it was decided to accept 88 recommendations which include the following important recommendations:

(i) Delegation of more powers to branch managers to grant ad-hoc limits;

(ii) Simplification of application forms;

(iii) Freedom to banks to decide their own norms for assessment of credit requirements;

(iv) Opening of more specialised SSI branches;

(v) Enhancement in the limit for composite loans to Rs. 5 lakh. (since enhanced to Rs.1 crore);

(vi) Strengthening the recovery mechanism;

(vii) Banks to pay more attention to the backward states;

(viii) Special programmes for training branch managers for appraising small projects;

(ix) Banks to make customers grievance machinery more transparent and simplify the procedures for handling complaints and monitoring thereof.

A circular was issued to all scheduled commercial banks vide RPCD.No. PLNFS.BC.22/06.02.31/98-99 dated August 28, 1998 thereby advising implementation of the Kapur Committee Recommendations.

5.2 Report of the Committee to Examine the Adequacy of Institutional Credit to SSI Sector (now MSE) and Related Aspects (Nayak Committee)

The Committee was constituted by Reserve Bank of India in December 1991 under the Chairmanship of Shri P. R. Nayak, the then Deputy Governor to examine the issues confronting SSIs (now MSE) in the matter of obtaining finance. The Committee submitted its report in 1992. All the major recommendations of the Committee have been accepted and the banks have been inter-alia advised to:

(i) give preference to village industries, tiny industries and other small scale units in that order, while meeting the credit requirements of the small scale sector;

(ii) grant working capital credit limits to SSI (now MSE) units computed on the basis of minimum 20% of their estimated annual turnover whose credit limit in individual cases is upto Rs.2 crore [ since raised to Rs.5 crore ];

(iii) prepare annual credit budget on the ‘bottom-up’ basis to ensure that the legitimate requirements of SSI (now MSE) sector are met in full;

(iv) extend ‘Single Window Scheme’ of SIDBI to all districts to meet the financial requirements (both working capital and term loan) of SSIs(now MSE);

(v) ensure that there should not be any delay in sanctioning and disbursal of credit. In case of rejection/curtailment of credit limit of the loan proposal, a reference to higher authorities should be made;

(vi) not to insist on compulsory deposit as a `quid pro-quo’ for sanctioning the credit;

(vii) open specialised SSI (now MSE) bank branches or convert those branches which have a fairly large number of SSI (now MSE) borrowal accounts, into specialised SSI (now MSE) branches;

(viii) identify sick SSI (now MSE) units and take urgent action to put them on nursing programmes;

(ix) standardise loan application forms for SSI (now MSE) borrowers; and

(x) impart training to staff working at specialised branches to bring about attitudinal change in them.

A circular was issued to all scheduled commercial banks vide RPCD. PLNFS/ BC. No. 61/06.0262/ 2000-01 dated March 2, 2001 thereby advising implementation of the Nayak Committee Recommendations.

5.3 Report of the Working Group on Flow of Credit to SSI (now MSE) Sector (Ganguly Committee)

As per the announcement made by the Governor, Reserve Bank of India, in the Mid-Term Review of the Monetary and Credit Policy 2003-2004, a “Working Group on Flow of Credit to SSI sector” was constituted under the Chairmanship of Dr. A S Ganguly.

The Committee made 31 recommendations covering wide range of areas pertaining to financing of SSI sector. The recommendations pertaining to RBI and banks have been examined and RBI has accepted 8 recommendations so far and commended to banks for implementation vide circular RPCD.PLNFS.BC.28/06.02.31(WG)/ 2004-05 dated September 4, 2004 which are as under:

(i) adoption of cluster based approach for financing MSME sector;

(ii) sponsoring specific projects as well as widely publicising successful working models of NGOs by Lead Banks which service small and tiny industries and individual entrepreneurs;

(iii) sanctioning of higher working capital limits by banks operating in the North East region to SSIs (now MSE) , based on their commercial judgment due to the peculiar situation of hilly terrain and frequent floods causing hindrance in the transportation system;

(iv) exploring new instruments by banks for promoting rural industry and to improve the flow of credit to rural artisans, rural industries and rural entrepreneurs, and

(v) revision of tenure as also interest rate structure of deposits kept by foreign banks with SIDBI for their shortfall in priority sector lending.

5.4 Working Group on Rehabilitation of Sick SMEs (Chairman: Dr. K.C. Chakrabarty)

In the light of the recommendations of the Working Group on Rehabilitation of Sick MSEs (Chairman: Dr. K.C. Chakrabarty, the then CMD of Punjab National Bank), all commercial banks were advised vide our circular RPCD. SME & NFS.BC.No. 102/06.04.01/2008-09 dated May 4, 2009 to:

a) put in place loan policies governing extension of credit facilities, Restructuring/Rehabilitation policy for revival of potentially viable sick units/enterprises and non- discretionary One Time Settlement scheme for recovery of non-performing loans for the MSE sector, with the approval of the Board of Directors and

b) implement the recommendations with regard to timely and adequate flow of credit to the MSE sector as detailed in the aforesaid circular.

Banks were also advised vide above circular dated May 4, 2009 to consider implementation of the recommendations, inter alia, that lending in case of all advances upto Rs 2 crores may be done on the basis of scoring model. Banks have further been advised vide circular DBOD. Dir. BC.No. 106/13.03.00/2013-14 dated April 15, 2014 to undertake a review of their loan policy governing extension of credit facilities to the MSE sector, with a view to using Board approved credit scoring models in their evaluation of the loan proposals of MSE borrowers.

5.5 Prime Minister’s Task Force on Micro, Small and Medium Enterprises

A High Level Task Force was constituted by the Government of India (Chairman: Shri T K A Nair), in January 2010, to consider various issues raised by Micro, Small and Medium Enterprises (MSMEs).The Task Force recommended several measures having a bearing on the functioning of MSMEs, viz., credit, marketing, labour, exit policy, infrastructure/technology/skill development and taxation. The comprehensive recommendations cover measures that need immediate action as well as medium term institutional measures along with legal and regulatory structures and recommendations for North-Eastern States and Jammu & Kashmir.

Banks are urged to keep in view the recommendations made by the Task Force and take effective steps to increase the flow of credit to the MSE sector, particularly to the micro enterprises.

A circular was issued to all scheduled commercial banks vide RPCD. SME & NFS BC. No. 90/06.02.31/2009-10 dated June 29, 2010 advising implementation of the recommendations of the Prime Minister’s task Force on MSMEs.

The report of the Prime Minister’s Task Force on Micro, Small and Medium Enterprises is available on the website of Ministry of Micro, Small and Medium Enterprises
(http://msme.gov.in/WriteReadData/DocumentFile/PM_MSME_Task_Force_Jan2010.pdf)

5.6 Working Group to Review the Credit Guarantee Scheme for Micro and Small Enterprises

A Working Group was constituted by the Reserve Bank of India under the Chairmanship of Shri V.K. Sharma, Executive Director, to review the working of the Credit Guarantee Scheme (CGS)of CGTMSE and suggest measures to enhance its usage and facilitate increased flow of collateral free loans to MSEs.

The recommendations of the Working Group included, inter alia, mandatory doubling of the limit for collateral free loans to micro and small enterprises (MSEs) sector from Rs.5 lakh to Rs.10 lakh and enjoining upon the Chief Executive Officers of banks to strongly encourage the branch level functionaries to avail of the CGS cover and making performance in this regard a criterion in the evaluation of their field staff, etc. have been advised to all banks.

A circular was issued to all scheduled commercial banks vide RPCD.SME&NFS.BC.No.79/06.02.31/2009-10 dated May 6, 2010 mandating them not to accept collateral security in the case of loans upto Rs 10 lakh extended to units in the MSE sector and advising them to strongly encourage their branch level functionaries to avail of the CGS cover, including making performance in this regard a criterion in the evaluation of their field staff.

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Annex I

MINISTRY OF SMALL SCALE INDUSTRIES
NOTIFICATION
New Delhi, the 5th October, 2006

S.O. 1722(E) – In exercise of the powers conferred by sub-section (1) of 2006) herein referred to as the said Act, the Central Government specifies the following items, the cost of which shall be excluded while calculating the investment in plant and machinery in the case of the enterprises mentioned in Section 7(1)(a) of the said Act, namely:

(i) equipment such as tools, jigs, dyes, moulds and spare parts for maintenance and the cost of consumables stores;

(ii) installation of plant and machinery;

(iii) research and development equipment and pollution controlled equipment

(iv) power generation set and extra transformer installed by the enterprise as per regulations of the State Electricity Board;

(v) bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation;

(vi) procurement or installation of cables, wiring, bus bars, electrical control panels (not mounded on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures;

(vii) gas producers plants;

(viii) transportation charges ( excluding sales-tax or value added tax and excise duty) for indigenous machinery from the place of the manufacture to the site of the enterprise;

(ix) charges paid for technical know-how for erection of plant and machinery;

(x) such storage tanks which store raw material and finished produces and are not linked with the manufacturing process; and

(xi) firefighting equipment.

2. While calculating the investment in plant and machinery refer to paragraph 1, the original price thereof, irrespective of whether the plant and machinery are new or second handed, shall be taken into account provided that in the case of imported machinery, the following shall be included in calculating the value, namely;

(i) Import duty (excluding miscellaneous expenses such as transportation from the port to the site of the factory, demurrage paid at the port);

(ii) Shipping charges;

(iii) Customs clearance charges; and

(iv) Sales tax or value added tax.

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