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Master Direction - External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers (Updated as on June 9, 2017)

FEMA - 5/2015-16 - Dated:- 1-1-2016 - RBI/FED/2015-16/15 FED Master Direction No.5/2015-16 January 1, 2016 (Updated as on June 9, 2017) (Updated as on February 23, 2017) (Updated as on November 15, 2016) (Updated as on October 20, 2016) (Updated as on September 19, 2016) (Updated as on June 30, 2016) (Updated as on May 11, 2016) (Updated as on April 13, 2016) (Updated as on March 30, 2016) To All Authorised Dealer Category - I banks and Authorised Banks Madam / Dear Sir, Master Direction - Exter .....

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e Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000, notified vide Notification No. FEMA 3/2000-RB dated May 3, 2000; ii. Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004, notified vide Notification No. FEMA 120/2004-RB dated July 07, 2004; and iii. Foreign Exchange Management (Guarantees) Regulations, 2000, notified vide Notification No. FEMA 8/2000-RB dated May 03, 2000. These Regulations are amended from time to time to incorporat .....

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sued in respect of aforesaid borrowing transactions have been compiled in this Master Direction. The document also contains the terms and conditions related to borrowing and lending in foreign currency by authorised dealer and by persons other than authorised dealer. The list of underlying notifications/circulars which form the basis of this Master Direction is furnished in the Appendix. Reporting instructions can be found in Master Direction on reporting (Master Direction No. 18 dated January 0 .....

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rcial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by Authorised Dealers and Persons other than Authorised Dealers Index Para. No. PART I 2 Framework for raising loans through External Commercial Borrowings 2.1 External Commercial Borrowings (ECB) 2.2 Forms of ECB 2.3 Available routes of raising ECB 2.4 Parameters for ECBs 2.4.1 Maturity prescription 2.4.2 Eligible Borrowers 2.4.3 Recognised Lenders 2.4.4 Cost of borrowings 2.4.5 Permitted end-uses 2.4.6 Individual limits .....

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abroad 2.9.2 Parking of ECB proceeds domestically 2.10 Conversion of ECB into equity 2.10.1 Exchange rate for conversion of ECB dues into equity 2.11 Procedure of raising ECB 2.12 Reporting Requirements 2.12.1 Loan Registration Number (LRN) 2.12.2 Changes in terms and conditions of ECB 2.12.3 Reporting of actual transactions 2.12.4 Reporting on account of conversion of ECB into equity 2.13 Foreign Currency Convertible Bonds (FCCBs) 2.14 Foreign Currency Exchangeable Bonds (FCEBs) 2.15 Refinanci .....

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y airlines companies 2.22.1.2 ECB facility for consistent foreign exchange earners under the USD 10 billion Scheme 2.22.1.3 ECB facility for low cost affordable housing projects 2.23 2ECB facility for Startups 2.23.1 Eligibility 2.23.2 Maturity 2.23.3 Recognised lenders 2.23.4 Form of borrowing 2.23.5 Currency of borrowing 2.23.6 Amount 2.23.7 All-in-cost 2.23.8 End uses 2.23.9 Conversion into equity 2.23.10 Security 2.23.11 Corporate and personal guarantee 2.23.12 Hedging 2.23.13 Conversion rat .....

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t II 4 Routing of funds raised abroad to India Part III 5 Raising of loans as Trade Credit 5.1 Trade Credit 5.2 Routes and Amount of Trade Credit 5.2.1 Automatic Route 5.2.2 Approval Route 5.3 Maturity prescription 5.4 Cost of raising Trade Credit 5.5 Guarantee for Trade Credit 5.6 Reporting requirements 5.6.1 Monthly reporting 5.6.2 Quarterly reporting Part IV 6 Borrowing and Lending in foreign currency by an Authorised Dealer 6.1 Borrowing in foreign currency by an Authorised Dealer 6.2 Lendin .....

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in this Master Direction Acronyms AD: Authorised Dealer ADB: Asian Development Bank AFC: Asset Finance Company AIC: All-in-Cost AMP: Average Maturity Period BSE: Bombay Stock Exchange CDC: Commonwealth Development Corporation CIC: Core Investment Company COD: Commercial Operation Date DEPR: Department of Economic and Policy Research DSIM: Department of Statistics and Information Management DTA: Domestic Tariff Area ECB: External Commercial Borrowings FATF: Financial Action Task Force FCCB: Forei .....

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g LRN: Loan Registration Number MFI: Micro Finance Institution NBFC: Non-Banking Financial Company NGO: Non-Government Organisation NHB: National Housing Bank NMIZ: National Manufacturing Investment Zone NNPA: Net Non-Performing Assets NOF: Net Owned Fund NRE: Non-Resident External NRO: Non-Resident Ordinary NSE: National Stock Exchange OCB: Overseas Corporate Body ODI: Overseas Direct Investment RBI: Reserve Bank of India RoC: Registrar of Companies SEZ: Special Economic Zone SHG: Self-Help Gro .....

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s, the swap cost plus spread should be equivalent of the floating rate plus the applicable spread. 1.2 The term Close relative means a relative as defined under the Companies Act, 1956/2013: Act of 1956 Act of 2013 U/s 6: MEANING OF "RELATIVE" A person shall be deemed to be a relative of another, if, and only if, (a) they are members of a Hindu undivided family ; or (b) they are husband and wife ; or (c) the one is related to the other in the manner indicated in Schedule IA. U/s 2(77) .....

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ther's father Daughter's husband Father's mother Brother (including step-brothers) Mother's mother Sister (including step-sister) Mother's father - Son's son - Son's son's wife - Son's daughter - Son's daughter's husband - Daughter's husband - Daughter's son - Daughter's son's wife - Daughter's daughter - Daughter's daughter's husband - Brother (including step-brothers) - Brother's wife - Sister (including step-sister) - .....

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-RB dated May 03, 2000. 1.4 The term Designated Authorized Dealer Category I Bank is the bank branch which is designated by the ECB borrower for meeting the reporting requirements including obtention of the Loan Registration Number (LRN) from RBI, exercising the delegated powers under these guidelines and monitoring of ECB transactions. 1.5 The term Foreign Currency Convertible Bonds (FCCBs) refers to foreign currency denominated instruments which are issued in accordance with the Issue of Forei .....

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ect equity holder with minimum indirect equity holding of 51%, and (c) group company with common overseas parent. 1.8 The term Infrastructure Sector has the same meaning as given in the Harmonised Master List of Infrastructure sub-sectors approved by Government of India vide Notification F. No. 13/06/2009-INF dated March 27, 2012 as amended / updated from time to time. 4For the purpose of ECB, Exploration, Mining and Refinery sectors which are not included in the Harmonised list of infrastructur .....

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currency accounts by a person resident in India) Regulations, 2000. 1.11 The term Indian entity means a company or a body corporate or a firm in India. 1.12 The term Joint Venture abroad means a foreign concern formed, registered or incorporated in a foreign country in accordance with the laws and regulations of that country and in which investment has been made by an Indian entity. 1.13 The term Wholly owned subsidiary abroad means a foreign concern formed, registered or incorporated in a forei .....

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totality and not on a standalone basis. The framework for raising loans through ECB (herein after referred to as the ECB Framework) comprises the following three tracks: Track I : Medium term foreign currency denominated ECB with minimum average maturity of 3/5 years. Track II : Long term foreign currency denominated ECB with minimum average maturity of 10 years. Track III : Indian Rupee (INR) denominated ECB with minimum average maturity of 3/5 years. 2.2 Forms of ECB: The ECB Framework enable .....

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applicable in respect of the investment in Non-convertible Debentures (NCDs) in India made by Registered Foreign Portfolio Investors (RFPIs). 2.3 Available routes for raising ECB: Under the ECB framework, ECBs can be raised either under the automatic route or under the approval route. For the automatic route, the cases are examined by the Authorised Dealer Category-I (AD Category-I) banks. Under the approval route, the prospective borrowers are required to send their requests to the RBI through .....

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ing sub-paragraphs. 2.4.1 Minimum Average Maturity Period: The minimum average maturities for the three tracks are set out as under: Track I Track II Track III i. 3 years for ECB upto USD 50 million or its equivalent. ii. 5 years for ECB beyond USD 50 million or its equivalent. iii. 65 years for eligible borrowers under para 2.4.2.vi, irrespective of the amount of borrowing. iv. 75 years for Foreign Currency Convertible Bonds (FCCBs)/ Foreign Currency Exchangeable Bonds (FCEBs) irrespective of t .....

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al Economic Zones (SEZs). v. Export Import Bank of India (Exim Bank) (only under the approval route). vi. 8Companies in infrastructure sector, Non-Banking Financial Companies -Infrastructure Finance Companies (NBFC-IFCs), NBFCs-Asset Finance Companies (NBFC-AFCs), Holding Companies and Core Investment Companies (CICs). i. All entities listed under Track I. 9Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (INVITs) coming under the regulatory framework of the Securities .....

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(NGOs) which are engaged in micro finance activities1. Companies engaged in miscellaneous services viz. research and development (R&D), training (other than educational institutes), companies supporting infrastructure, companies providing logistics services. Developers of Special Economic Zones (SEZs)/ National Manufacturing and Investment Zones (NMIZs). Notes: 1. Entities engaged in micro-finance activities to be eligible to raise ECB: (i) should have a satisfactory borrowing relationship .....

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r partially) financial institutions. Export credit agencies. Suppliers of equipment. Foreign equity holders. Overseas long term investors such as: Prudentially regulated financial entities; Pension funds; Insurance companies; Sovereign Wealth Funds; Financial institutions located in International Financial Services Centres in India Overseas branches / subsidiaries of Indian banks2 All entities listed under Track I but for overseas branches / subsidiaries of Indian banks. All entities listed unde .....

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ancing of existing ECBs. 3. Overseas Organizations proposing to lend ECB would have to furnish to the authorised dealer bank of the borrower a certificate of due diligence from an overseas bank, which, in turn, is subject to regulation of host-country regulators and such host country adheres to the Financial Action Task Force (FATF) guidelines on anti-money laundering (AML)/ combating the financing of terrorism (CFT). The certificate of due diligence should comprise the following: (i) that the l .....

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f account and income tax return, which the overseas lender may furnish, need to be certified and forwarded by the overseas bank. Individual lenders from countries which do not adhere to FATF guidelines on AML / CFT are not eligible to extend ECB. 2.4.4 All-in-Cost (AIC): The all-in-cost requirements for the three tracks will be as under: Track I Track II Track III The all-in-cost ceiling is prescribed through a spread over the benchmark as under: For ECB with minimum average maturity period of 3 .....

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conditions will be as given under Track I. The all-in-cost should be in line with the market conditions. 2.4.5 End-use prescriptions: The end-use prescriptions for ECB raised under the three tracks are given in the following table: Track I Track II Track III ECB proceeds can be utilised for capital expenditure in the form of: Import of capital goods including payment towards import of services, technical know-how and license fees, provided the same are part of these capital goods; Local sourcing .....

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is not reduced. SIDBI can raise ECB only for the purpose of on-lending to the borrowers in the Micro, Small and Medium Enterprises (MSME sector), where MSME sector is as defined under the MSME Development Act, 2006, as amended from time to time5. Units of SEZs can raise ECB only for their own requirements5. Shipping and airlines companies can raise ECB only for import of vessels and aircrafts respectively5. ECB proceeds can be used for general corporate purpose (including working capital) provid .....

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s; On-lending by Exim Bank. 1. The ECB proceeds can be used for all purposes excluding the following: Real estate activities Investing in capital market Using the proceeds for equity investment domestically; On-lending to other entities with any of the above objectives; Purchase of land 132. NBFCs can use ECB proceeds only for: On-lending for any activities, including infrastructure sector as permitted by the concerned regulatory department of RBI; providing hypothecated loans to domestic entiti .....

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ng. 4. For other eligible entities under this track, the ECB proceeds can be used for all purposes excluding the following: Real estate activities Investing in capital market Using the proceeds for equity investment domestically; On-lending to other entities with any of the above objectives; Purchase of land Notes: 5. The respective conditions will be applicable for all three tracks. 2.4.6 Individual Limits: The individual limits refer to the amount of ECB which can be raised in a financial year .....

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alent for companies in software development sector; c. Up to USD 100 million or equivalent for entities engaged in micro finance activities; and d. Up to USD 500 million or equivalent for remaining entities.ii. ECB proposals beyond aforesaid limits will come under the approval route. For computation of individual limits under Track III, exchange rate prevailing on the date of agreement should be taken into account. iii. In case the ECB is raised from direct equity holder, aforesaid individual EC .....

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lent. Notes 6. For the purpose of ECB liability: equity ratio, the paid-up capital, free reserves (including the share premium received in foreign currency) as per the latest audited balance sheet can be reckoned for calculating the equity of the foreign equity holder. Where there are more than one foreign equity holders in the borrowing company, the portion of the share premium in foreign currency brought in by the lender(s) concerned shall only be considered for calculating the ratio. 2.4.7 Cu .....

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hange of currency from INR to any foreign currency is, however, not permitted. iii. Change of currency of ECB into INR can be at the exchange rate prevailing on the date of the agreement between the parties concerned for such change or at an exchange rate which is less than the rate prevailing on the date of agreement if consented to by the ECB lender. 2.5 Hedging Requirements: 16Borrowers eligible in terms of paragraph 2.4.2.vi above shall have a board approved risk management policy and shall .....

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pects on hedging: Wherever hedging has been mandated by the RBI, the following should be ensured: i. Coverage: The ECB borrower will be required to cover principal as well as coupon through financial hedges. The financial hedge for all exposures on account of ECB should start from the time of each such exposure (i.e. the day liability is created in the books of the borrower). ii. Tenor and rollover: A minimum tenor of one year of financial hedge would be required with periodic rollover duly ensu .....

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s are indexed to foreign currency will not be considered as natural hedge. 2.6 Security for raising ECB: AD Category I banks are permitted to allow creation of charge on immovable assets, movable assets, financial securities and issue of corporate and/ or personal guarantees in favour of overseas lender / security trustee, to secure the ECB to be raised / raised by the borrower, subject to satisfying themselves that: i. the underlying ECB is in compliance with the extant ECB guidelines, ii. ther .....

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ovable assets, financial securities and issue of corporate and / or personal guarantees, during the currency of the ECB with security co-terminating with underlying ECB, subject to the following: 2.6.1.1 Creation of Charge on Immovable Assets: The arrangement shall be subject to the following: i. Such security shall be subject to provisions contained in the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000. ii. The permission should not be co .....

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vable asset or otherwise, will be restricted to the outstanding claim against the ECB. Encumbered movable assets may also be taken out of the country subject to getting No Objection Certificate from domestic lender/s, if any. 2.6.1.3 Creation of Charge over Financial Securities: The arrangements may be permitted subject to the following: i. Pledge of shares of the borrowing company held by the promoters as well as in domestic associate companies of the borrower is permitted. Pledge on other fina .....

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can be used as security for ECB. The Rupee accounts of the borrower/promoter can also be in the form of escrow arrangement or debt service reserve account. iii. In case of invocation of pledge, transfer of financial securities shall be in accordance with the extant FDI/FII policy including provisions relating to sectoral cap and pricing as applicable read with the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. 2.6.1.4 Issue of C .....

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ontained in the Foreign Exchange Management (Guarantees) Regulations, 2000. iv. ECB can be credit enhanced / guaranteed / insured by overseas party/ parties only if it/ they fulfil/s the criteria of recognised lender under extant ECB guidelines. 2.7 Issuance of Guarantee, etc. by Indian banks and Financial Institutions: Issuance of guarantee, standby letter of credit, letter of undertaking or letter of comfort by Indian banks, All India Financial Institutions and NBFCs relating to ECB is not per .....

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eeds meant only for foreign currency expenditure can be parked abroad pending utilization. Till utilisation, these funds can be invested in the following liquid assets (a) deposits or Certificate of Deposit or other products offered by banks rated not less than AA (-) by Standard and Poor/ Fitch IBCA or Aa3 by Moody s; (b) Treasury bills and other monetary instruments of one year maturity having minimum rating as indicated above and (c) deposits with overseas branches/ subsidiaries of Indian ban .....

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d, into equity is permitted subject to the following conditions: i. The activity of the borrowing company is covered under the automatic route for Foreign Direct Investment (FDI) or approval from the Foreign Investment Promotion Board (FIPB), wherever applicable, for foreign equity participation has been obtained as per the extant FDI policy; ii. 19The conversion, which should be with the lender s consent and without any additional cost, will not result in breach of applicable sector cap on the .....

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rower is available or atleast information regarding conversions is exchanged with other lenders of the borrower. 2.10.1 Exchange rate for conversion of ECB dues into equity: For conversion of ECB dues into equity, the exchange rate prevailing on the date of the agreement between the parties concerned for such conversion or any lesser rate can be applied with a mutual agreement with the ECB lender. It may be noted that the fair value of the equity shares to be issued shall be worked out with refe .....

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ed Committee set up by the Reserve Bank. The Empowered Committee will have external as well as internal members and the Reserve Bank will take a final decision in the cases taking into account recommendation of the Empowered Committee. Entities desirous to raise ECB under the automatic route may approach an AD Category I bank with their proposal along with duly filled in Form 83. Formats of Form ECB and Form 83 are available at Annex I and II respectively of Part V of the Master Directions - Rep .....

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licate to the designated AD Category I bank. In turn, the AD Category I bank will forward one copy to the Director, Balance of Payments Statistics Division, Department of Statistics and Information Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai - 400 051, 22Contact numbers 022-26572513 and 022-26573612. Copies of loan agreement for raising ECB are not required to be submitted to the Reserve Bank. 2.12.2 Changes in terms and conditions of ECB: Permitted changes in ECB para .....

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. Changes, if any, in ECB parameters should also be incorporated in ECB 2 Return. Format of ECB 2 Return is available at Annex III of Part V of Master Directions - Reporting under Foreign Exchange Management Act. 2.12.4 Reporting on account of conversion of ECB into equity: In case of partial or full conversion of ECB into equity, the reporting to the RBI will be as under: i. For partial conversion, the converted portion is to be reported to the concerned Regional Office of the Foreign Exchange .....

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Return will also be in phases. 2.13 Foreign Currency Convertible Bonds (FCCBs): The issuance of FCCBs was brought under the ECB guidelines in August 2005. Issuance of FCCBs shall conform to the Foreign Direct Investment guidelines including sectoral cap. In addition to the requirements of (i) minimum maturity of 5 years, (ii) the call & put option, if any, shall not be exercisable prior to 5 years, (iii) issuance without any warrants attached, (iv) the issue related expenses not exceeding 4 .....

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imum maturity of 5 years. The bonds are exchangeable into equity share of another company, to be called the Offered Company, in any manner, either wholly, or partly or on the basis of any equity related warrants attached to debt instruments. Issuance of FCEBs shall conform to the provisions contained in Regulation 21 of the Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2000 read with Schedule IV to the Regulations which contain eligibilities in respect of t .....

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s can approve the following requests from the borrowers for changes in respect of ECBs 23except for FCCBs/FCEBs : i. Changes/Modifications in the Drawdown/Repayment Schedule: Designated AD Category I banks may approve changes / modifications (irrespective of the number of occasions) in the draw-down and repayment schedules of the ECB whether associated with change in the average maturity period or not and/ or with changes (increase/ decrease) in the all-in-cost. ii. Changes in the Currency of Bo .....

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s may allow changes in the name of the borrower company subject to production of supporting documents evidencing the change in the name from the Registrar of Companies/ appropriate authority. v. Transfer of ECB: Designated AD Category I banks may allow the cases requiring transfer of the ECB from one company to another on account of re-organisation at the borrower s level in the form of merger/ demerger/ amalgamation/ acquisition duly as per the applicable laws/ rules after satisfying themselves .....

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umbai. vii. Change in the name of Lender: Designated AD Category I banks may permit changes in the name of the lender of ECB after satisfying themselves with the bonafides of the transactions and ensuring that the ECB continues to be in compliance with applicable guidelines. viii. Prepayment of ECB: Prepayment of ECB may be allowed by AD Category I banks subject to compliance with the stipulated minimum average maturity as applicable to the contracted loan under these guidelines. ix. Cancellatio .....

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proposed end-use is permissible under the automatic route as per the extant ECB guidelines7. xi. Reduction in amount of ECB: Designated AD Category I banks may approve reduction in the amount of ECB (irrespective of the number of occasions) with or without any changes in draw-down and repayment schedules, average maturity period and all-in-cost duly ensuring compliance with the applicable ECB guidelines. xii. Change in all-in-cost of ECB: The designated AD Category I banks may approve requests .....

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ramework may also be permitted, subject to additionally ensuring that the borrower is eligible to raise ECB under the extant framework. Raising of fresh ECB to part refinance the existing ECB is also permitted subject to same conditions. 25xiv. Extension of matured but unpaid ECB : The designated AD Category I bank may allow extension of matured but unpaid ECB subject to the consent of lender, without involvement of additional cost and fulfilment of reporting requirements. 2.16.1 Additional Requ .....

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or not) shall be subject to applicable prudential guidelines issued by Department of Banking Regulation of RBI including guidelines on restructuring. ii. The changes in the terms and conditions of ECB allowed by the ADs under the powers delegated and / or changes approved by the Reserve Bank should be reported to the DSIM/RBI through revised Form 83 at the earliest, in any case not later than 7 days from the changes effected. While submitting revised Form 83 to the DSIM/RBI, the changes should .....

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of the Regulations under FEMA pending, may raise ECBs as per the applicable norms, if they are otherwise eligible, notwithstanding the pending investigations / adjudications / appeals, without prejudice to the outcome of such investigations / adjudications / appeals. The borrowing entity shall inform about pendency of such investigation / adjudication / appeal to the AD Cat-I bank / RBI as the case may be. Accordingly, in case of all applications where the borrowing entity has indicated about th .....

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providing greater transparency, information with regard to the name of the borrower, amount, purpose and maturity of ECB under both Automatic and Approval routes are put on the RBI s website, on a monthly basis, with a lag of one month to which it relates. 2.20 Compliance with the guidelines: The primary responsibility for ensuring that the borrowing is in compliance with the applicable guidelines is that of the borrower concerned. Any contravention of the applicable provisions of ECB guideline .....

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onal cost. Such approval with existing and revised repayment schedule along with the Loan Key/Loan Registration Number should be initially communicated to the Principal Chief General Manager, Foreign Exchange Department, ECB Division, Reserve Bank of India, Central Office, Mumbai within seven days of approval and subsequently in ECB 2 Return. 2.22 ECB arrangements prior to December 02, 2015: Entities raising ECB under the framework in force prior to December 02, 2015 can raise the said loans by .....

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loan agreement and obtain the LRN from the Reserve Bank by this date: i. ECB facility for working capital by airlines companies; ii. ECB facility for consistent foreign exchange earners under the USD 10 billion Scheme; and iii. ECB facility for low cost affordable housing projects (low cost affordable housing projects as defined in the extant Foreign Direct Investment policy) 2.22.1 ECB facility for Carve Outs: More information about the ECB facility for carve outs listed above at 2.22 is as und .....

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e overall ECB ceiling for the entire civil aviation sector would be USD one billion and the maximum permissible ECB that can be availed by an individual airline company will be USD 300 million. ii. This limit can be utilized for working capital as well as refinancing of the outstanding working capital Rupee loan(s) availed of from the domestic banking system. iii. ECB availed for working capital/refinancing of working capital as above will not be allowed to be rolled over. iv. The foreign exchan .....

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g Rupee loans availed of for capital expenditure from the domestic banking system and/ or fresh Rupee capital expenditure subject to the following terms and conditions: i. The borrower should be consistent foreign exchange earners during the past three financial years and should not be in the default list/caution list of the Reserve Bank of India. ii. The maximum permissible ECB that can be availed of by an individual company will be limited to 75 per cent of the average annual export earnings r .....

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rnings realized during the past financial year. iii. The foreign exchange for repayment of ECB should not be accessed from Indian markets and the liability arising out of ECB should be extinguished only out of the foreign exchange earnings of the borrowing company. iv. The overall ceiling for such ECBs shall be USD10 (ten) billion and the maximum ECB that can be availed by an individual company or group, as a whole, under this scheme will be restricted to USD 3 billion. v. Within the overall cei .....

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n individual company will be limited to 75 per cent of the average annual export earnings realized during the past three financial years or 75 per cent of the assessment made about the average foreign exchange earnings potential for the next three financial years of the Indian companies from the JV/ WOS/ assets abroad as certified by Statutory Auditors/ Chartered Accountant/ Certified Public Accountant/ Category I Merchant Banker registered with SEBI/ an Investment Banker outside India registere .....

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lity for low cost affordable housing projects are as under: i. For the purpose of ECB, a low cost affordable housing project is as defined in the extant foreign direct investment policy ii. ECB proceeds shall not be utilized for acquisition of land. iii. Developers/builders registered as companies may raise ECB for low cost affordable housing projects provided they have minimum 3 years experience in undertaking residential projects, have good track record in terms of quality and delivery and the .....

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as the nodal agency for deciding a project s eligibility as a low cost affordable housing project, and on being satisfied, forward the application to the Reserve Bank for consideration under the approval route. Once NHB decides to forward an application for consideration of RBI, the prospective borrower (builder/developer) will be advised by the NHB to approach RBI for availing ECB through his Authorised Dealer in the prescribed format. iv. The ECB should be swapped into Rupees for the entire ma .....

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Fund (NOF) and the net non-performing assets (NNPA) should not exceed 2.5 % of the net advances. The maximum loan amount sanctioned to the individual buyer will be capped at INR 25 lakh subject to the condition that the cost of the individual housing unit shall not exceed INR 30 lakh. HFCs while making the applications, shall submit a certificate from NHB that the availment of ECB is for financing prospective owners of individual units for the low cost affordable housing and ensure that the inte .....

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RBI. vii. Interest rate spread to be charged by NHB may be decided by NHB taking into account cost and other relevant factors. NHB shall ensure that interest rate spread for HFCs for on-lending to prospective owners of individual units under the low cost affordable housing scheme is reasonable. viii. Developers/ builders/ HFCs/ NHB will not be permitted to raise Foreign Currency Convertible Bonds (FCCBs) under this scheme. ix. An aggregate limit of USD 1(one) billion each for the financial years .....

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erage maturity period will be 3 years. 2.23.3 Recognised lender: Lender / investor shall be a resident of a country who is either a member of Financial Action Task Force (FATF) or a member of a FATF-Style Regional Bodies; and shall not be from a country identified in the public statement of the FATF as: i. A jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or ii. A jurisdiction that has not made sufficient .....

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Currency: The borrowing should be denominated in any freely convertible currency or in Indian Rupees (INR) or a combination thereof. In case of borrowing in INR, the non-resident lender, should mobilise INR through swaps/outright sale undertaken through an AD Category-I bank in India. 2.23.6 Amount: The borrowing per Startup will be limited to USD 3 million or equivalent per financial year either in INR or any convertible foreign currency or a combination of both. 2.23.7 All-in-cost: Shall be mu .....

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rty rights), financial securities, etc. and shall comply with foreign direct investment / foreign portfolio investment / or any other norms applicable for foreign lenders / entities holding such securities. 2.23.11 Corporate and personal guarantee: Issuance of corporate or personal guarantee is allowed. Guarantee issued by a non-resident(s) is allowed only if such parties qualify as lender under paragraph 2.23.3 above. Exclusion: Issuance of guarantee, standby letter of credit, letter of underta .....

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eign currency, whether having natural hedge or not, are exposed to currency risk due to exchange rate movements and hence are advised to ensure that they have an appropriate risk management policy to manage potential risk arising out of ECBs. 2.23.13 Conversion rate: In case of borrowing in INR, the foreign currency - INR conversion will be at the market rate as on the date of agreement. 2.23.14 Other Provisions: Other provisions like parking of ECB proceeds, reporting arrangements, powers deleg .....

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a Financial Action Task Force (FATF) compliant financial centres. The bonds can be either placed privately or listed on exchanges as per host country regulations. 3.2 Available route28 of borrowing: 29Any proposal of borrowing by eligible Indian entities for issuance of these bonds will be examined at Foreign Exchange Department, Central Office, Mumbai and such request should be forwarded through AD bank only.30 31Issuance of Rupee denominated bonds overseas will be within the aggregate limit o .....

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ar should be 5 years.33. The call and put option, if any, shall not be exercisable prior to completion of minimum maturity. 3.3.2 Eligible borrowers: Any corporate or body corporate is eligible to issue such bonds. REITs and INVITs coming under the regulatory framework of the SEBI are also eligible. 3.3.2.1 Indian banks as eligible borrowers: 34Indian banks will also be eligible to issue Rupee denominated bonds overseas by way of the following instruments, subject to conforming to the provisions .....

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Tier 2 capital; and ii. Long term Rupee Denominated Bonds overseas for financing infrastructure and affordable housing. 3.3.3 Recognised Investors: 35The Rupee denominated bonds can only be issued in a country and can only be subscribed by a resident of a country: i. that is a member of Financial Action Task Force (FATF) or a member of a FATF-Style Regional Body; and ii. whose securities market regulator is a signatory to the International Organization of Securities Commission's (IOSCO s) M .....

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ss in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies. 36Further, Multilateral and Regional Financial Institutions where India is a member country will also be considered as recognised investors. 37However, related party within the meaning as given in Ind-AS 24 cannot subscribe or invest in or purchase such bonds.Indian banks, 38subject to applicable prudential norms, can act as arranger and underwriter .....

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an be used for all purposes except i. Real estate activities other than development of integrated township / affordable housing projects; ii. Investing in capital market and using the proceeds for equity investment domestically; iii. Activities prohibited as per the foreign direct investment guidelines; iv. On-lending to other entities for any of the above purposes; and v. Purchase of Landfor the following: 3.3.6 Exchange Rate for conversion: The exchange rate for foreign currency - Rupee conver .....

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orrowing by financial institutions under the Framework shall be subject to the leverage ratio prescribed, if any, by the sectoral regulator as per the prudential norms. 423.3.9 Reporting: AD Category - I banks should report to the Foreign Exchange Department, External Commercial Borrowings Division, Central Office, Shahid Bhagat Singh Road, Fort, Mumbai - 400 001, the figures of actual drawdown(s) / repayment(s) by their constituent borrowers quoting the related loan registration number. Such re .....

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. will be applicable for borrowing under the Framework of issuance of Rupee denominated bonds overseas. 45Borrowers issuing Rupee denominated bonds overseas should incorporate clause in the agreement / offer document so as to enable them to obtain the list of primary bond holders and provide the same to the regulatory authorities in India as and when required. The agreement / offer document should also state that the bonds can only be sold / transferred / offered as security overseas subject to .....

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overseas holding / associate / subsidiary / group companies of Indian companies with support of the Indian companies or their ADs as mentioned at (i) above cannot be used in India unless it conforms to the general or specific permission granted under the relevant Regulations. iii. Indian companies or their ADs using or establishing structures which contravene the above shall render themselves liable for penal action as prescribed under FEMA. PART III 5. Raising of loans as Trade Credit 5.1 Trad .....

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Imports should be as permissible under the extant Foreign Trade Policy of the Director General of Foreign Trade (DGFT). 5.2 Routes and Amount of Trade Credit: The available routes of raising Trade Credit are mentioned below: 5.2.1 Automatic Route: ADs are permitted to approve trade credit for import of non-capital and capital goods up to USD 20 million or equivalent per import transaction. 5.2.2 Approval Route: The proposals involving trade credit for import of non-capital and capital goods beyo .....

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(six) months. No roll-over/extension will be permitted beyond the permissible period. 5.4 Cost of raising Trade Credit: The all-in-cost ceiling for raising Trade Credit is 350 basis points over 6 months LIBOR (for the respective currency of credit or applicable benchmark). The all-in-cost include arranger fee, upfront fee, management fee, handling/ processing charges, out of pocket and legal expenses, if any. 5.5 Guarantee for Trade Credit: AD Category I banks are permitted to issue guarantee/ L .....

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iod should be co-terminus with the period of credit. Further, issuance of guarantees will be subject to prudential guidelines issued by the RBI from time to time. 5.6 Reporting requirements: Trade Credit transactions are subject to the following reporting requirements: 5.6.1 Monthly reporting: AD Category I banks are required to furnish details of approvals, drawal, utilisation, and repayment of Trade Credit approved by all its branches, in a consolidated statement, during a month, in form TC to .....

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lso required to furnish data on issuance of guarantees / Letters of Undertaking / Letter of Comfort by all its branches, in a consolidated statement, at quarterly intervals to the Foreign Exchange Department, External Commercial Borrowings Division, Reserve Bank of India, Central Office, 11th floor, Fort, Mumbai - 400 001 (and in MS-Excel file through email) so as to reach the Department not later than 10th of the following month. Format of this statement is available at Annex V of Part V of Mas .....

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amount of borrowing by all branches of authorised dealer from all permitted sources shall be upto hundred percent of the unimpaired Tier I capital of the authorised dealer or such other limit as decided by the RBI from time to time, or US$ 10 million, whichever is more. iii. A branch outside India of an authorised dealer may borrow in the normal course of its banking business outside India, subject to the directions or guidelines issued RBI from time to time, and the Regulatory Authority of the .....

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lend in foreign currency in the circumstances and subject to the conditions mentioned below: i. The loans may be extended by a branch outside India of an authorised dealer in the normal course of its banking business outside India; ii. The loans may be extended by an authorised dealer to its constituents in India for meeting their foreign exchange requirements or for their rupee working capital requirements or capital expenditure iii. Credit facilities may be extended to a wholly owned subsidia .....

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h outside India against the security of funds held in NRE/FCNR (B) deposit accounts in accordance with the Foreign Exchange Management (Deposit) Regulations, 2000; vi. Loans may be extended by an authorised dealer to another authorised dealer. vii. Loans and credit facilities extended by an authorised dealer or its branch outside India will be subject to compliance with prudential norms, interest rate directives and guidelines, if any, issued by RBI from time to time. PART V 7. Borrowing and Len .....

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ide India, for execution outside India of a turnkey project or civil construction contract or in connection with exports on deferred payment terms, provided the terms and conditions stipulated by the authority which has granted the approval to the project or contract or export is in accordance with the Foreign Exchange Management (Export of Goods and Services) Regulations, 2000. ii. For imports: An importer in India may, for import of goods into India, avail of foreign currency credit for a peri .....

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eceived by inward remittance in free foreign exchange through normal banking channels or by debit to the NRE/FCNR account of the non-resident lender. 7.2 Lending in foreign currency by persons other than an authorised dealer: The circumstances and the conditions regarding lending in foreign currency by persons other than an authorised dealer are mentioned below: i. Lending to WOS / JV: An Indian entity may lend to its wholly owned subsidiary or joint venture abroad constituted in accordance with .....

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institutions with the approval of the Central Government for the purpose of onward lending. iii. Lending by Indian companies to their employees: Indian companies in India may grant loans to the employees of their branches outside India for personal purposes provided that the loan shall be granted for personal purposes in accordance with the lender s Staff Welfare Scheme/Loan Rules and other terms and conditions as applicable to its staff resident in India and abroad. PART VI 8. Structured Oblig .....

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nteed by a non-resident (non resident group entity in case of derivative contracts), there is no transaction involving foreign exchange until the guarantee is invoked and the non-resident guarantor is required to meet the liability under the guarantee. The arrangements shall be with the following terms: i. The non-resident guarantor may discharge the liability by i) payment out of rupee balances held in India or ii) by remitting the funds to India or iii) by debit to his FCNR(B)/NRE account main .....

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lable to a resident, being a principal debtor to make payment to a person resident outside India, who has met the liability under a guarantee. iv. In cases where the liability is met by the non-resident out of funds remitted to India or by debit to his FCNR(B)/ NRE account, the repayment may be made by credit to the FCNR(B)/ NRE/ NRO account of the guarantor provided, the amount remitted/credited shall not exceed the rupee equivalent of the amount paid by the non-resident guarantor against the i .....

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e facility of credit enhancement by eligible non-resident entities (viz. Multilateral financial institutions (such as, IFC, ADB, etc.) / regional financial institutions and Government owned (either wholly or partially) financial institutions, direct/ indirect equity holder) to domestic debt raised through issue of capital market instruments, such as Rupee denominated bonds and debentures, is available to all borrowers eligible to raise ECB under automatic route subject to the following condition .....

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epaid in foreign currency to the eligible non-resident entity, the all-in-cost ceilings, as applicable to the relevant maturity period of the Trade Credit/ ECB, as per the extant guidelines, is applicable to the novated loan. v. In case of default and if the loan is serviced in Indian Rupees, the applicable rate of interest would be the coupon of the bonds or 250 bps over the prevailing secondary market yield of 5 years Government of India Security, as on the date of novation, whichever is highe .....

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oans. APPENDIX List of notifications/ circulars which have been consolidated in this Master Direction Sl. No. Notification Date 1 FEMA.3/2000-RB May 03, 2000 2 FEMA.60/2002-RB April 29, 2002 3 FEMA.75/2002-RB November 01, 2002 4 FEMA.80/2003-RB January 08, 2003 5 FEMA.82/2003-RB January 10, 2003 6 FEMA.112/2004-RB March 06, 2004 7 FEMA.126/2004-RB December 13, 2004 8 FEMA.127/2005-RB January 5, 2005 9 FEMA 142/2005-RB December 6, 2005 10 FEMA 157/2007-RB August 30, 2007 11 FEMA.182/2009-RB Janua .....

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-RB January 20, 2005 26 FEMA.206/2012-RB June 01, 2010 27 FEMA.251/2012-RB December 06, 2012 28 FEMA.269/2013-RB March 11, 2013 29 FEMA.120/2004-RB July 07, 2004 30 FEMA.188/2009-RB February 03, 2009 31 FEMA.231/2012-RB May 30, 2012 32 FEMA.359/2015-RB December 02, 2015 Sr. No. Circular Date 1 A.D. (MA) 11 May 16, 2000 2 A.P.(DIR Series) Circular No.41 April 29, 2002 3 A.P.(DIR Series) Circular No.29 October 18, 2003 4 A.P.(DIR Series) Circular No.60 January 31, 2004 5 A.P.(DIR Series) Circular .....

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r No.17 December 4, 2006 16 A.P.(DIR Series) Circular No.44 April 30, 2007 17 A.P.(DIR Series) Circular No.60 May 21, 2007 18 A.P.(DIR Series) Circular No.04 August 7, 2007 19 A.P.(DIR Series) Circular No.10 September 26, 2007 20 A.P.(DIR Series) Circular No.42 May 28, 2008 21 A.P.(DIR Series) Circular No.43 May 29, 2008 22 A.P.(DIR Series) Circular No.46 June 2, 2008 23 A.P.(DIR Series) Circular No.1 July 11, 2008 24 A.P.(DIR Series) Circular No.16 September 22, 2008 25 A.P.(DIR Series) Circula .....

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es) Circular No.19 December 9, 2009 36 A.P.(DIR Series) Circular No.28 January 25, 2010 37 A.P.(DIR Series) Circular No.33 February 9, 2010 38 A.P.(DIR Series) Circular No.38 March 2, 2010 39 A.P.(DIR Series) Circular No.39 March 2, 2010 40 A.P.(DIR Series) Circular No.40 March 2, 2010 41 A.P.(DIR Series) Circular No.44 March 29, 2010 42 A.P.(DIR Series) Circular No.51 May 12, 2010 43 A.P.(DIR Series) Circular No.04 July 22, 2010 44 A.P.(DIR Series) Circular No.08 August 12, 2010 45 A.P.(DIR Ser .....

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November 23, 2011 55 A.P.(DIR Series) Circular No.52 November 23, 2011 56 A.P.(DIR Series) Circular No.59 December 19, 2011 57 A.P.(DIR Series) Circular No.64 January 05, 2012 58 A.P.(DIR Series) Circular No.69 January 25, 2012 59 A.P.(DIR Series) Circular No.70 January 25, 2012 60 A.P.(DIR Series) Circular No.75 February 07, 2012 61 A.P.(DIR Series) Circular No.85 February 29, 2012 62 A.P.(DIR Series) Circular No.99 March 30, 2012 63 A.P.(DIR Series) Circular No.100 March 30, 2012 64 A.P.(DIR S .....

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A.P.(DIR Series) Circular No.28 September 11, 2012 75 A.P.(DIR Series) Circular No.39 October 9, 2012 76 A.P.(DIR Series) Circular No.40 October 9, 2012 77 A.P.(DIR Series) Circular No.48 November 6, 2012 78 A.P.(DIR Series) Circular No.54 November 26, 2012 79 A.P.(DIR Series) Circular No.58 December 14, 2012 80 A.P.(DIR Series) Circular No.59 December 14, 2012 81 A.P.(DIR Series) Circular No.60 December 14, 2012 81 A.P.(DIR Series) Circular No.61 December 17, 2012 83 A.P.(DIR Series) Circular N .....

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ar No.119 June 26, 2013 94 A.P.(DIR Series) Circular No.120 June 26, 2013 95 A.P.(DIR Series) Circular No.6 July 8, 2013 96 A.P.(DIR Series) Circular No.9 July 11, 2013 97 A.P.(DIR Series) Circular No.10 July 11, 2013 98 A.P.(DIR Series) Circular No.11 July 11, 2013 99 A.P.(DIR Series) Circular No.12 July 15, 2013 100 A.P.(DIR Series) Circular No.31 September 04, 2013 101 A.P.(DIR Series) Circular No.48 September 18, 2013 102 A.P.(DIR Series) Circular No. 53 September 24, 2013 103 A.P.(DIR Serie .....

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No.121 April 10, 2014 113 A.P.(DIR Series) Circular No.122 April 10, 2014 114 A.P.(DIR Series) Circular No.128 May 09, 2014 115 A.P.(DIR Series) Circular No.129 May 09, 2014 116 A.P.(DIR Series) Circular No.130 May 16, 2014 117 A.P.(DIR Series) Circular No.16 July 28, 2014 118 A.P.(DIR Series) Circular No.17 July 28, 2014 119 A.P.(DIR Series) Circular No.21 August 27, 2014 120 A.P.(DIR Series) Circular No.25 September 03, 2014 121 A.P.(DIR Series) Circular No.39 November 21, 2014 122 A.P.(DIR S .....

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March 30, 2016 132 A.P.(DIR Series) Circular No.60 April 13, 2016 133 A.P.(DIR Series) Circular No.80 June 30, 2016 134 A.P.(DIR Series) Circular No.10 October 20, 2016 135 A.P.(DIR Series) Circular No.13 October 27, 2016 136 A.P.(DIR Series) Circular No.14 November 03, 2016 137 A.P.(DIR Series) Circular No.15 November 07, 2016 138 A.P.(DIR Series) Circular No. 31 February 16, 2017 139 A.P.(DIR Series) Circular No. 47 June 7, 2017 1 Inserted vide AP (DIR Series) Circular No.15 dated November 07 .....

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d to/made part of Track I vide A.P. (DIR Series) Circular No 56 dated March 30, 2016. Consequently, under Track II, points (ii) companies in infrastructure sector, (iii) holding companies and (iv) Core Investment Companies (CICs) stand deleted. 10 Inserted vide A.P.(DIR Series) Circular No 56 dated March 30, 2016 11 Inserted vide A.P.(DIR Series) Circular No. 56 dated March 30, 2016 12 Inserted vide A.P.(DIR Series) Circular No. 56 dated March 30, 2016 13 Shifted to/made part of track I vide A.P .....

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e A.P.(DIR Series) Circular No. 15 dated November 7, 2016 18 Inserted vide A.P. (DIR Series) Circular No. 10 dated October 20, 2016 19Modified vide AP (DIR Series) Circular No.10 dated October 20, 2016 prior to modification it read as The foreign equity holding after such conversion of debt into equity is within the applicable sectoral cap 20 Point iv.v and vi Inserted vide A. P. (DIR Series) Circular No. 10 dated October 20, 2016 21Modified vide AP (DIR Series) Circular No.80 dated June 30,2016 .....

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Notification: Exemptions on supply of services under UTGST Act

Notification: Rates for supply of services under UTGST Act

Notification: Exemptions on supply of services under IGST Act

Notification: Rates for supply of services under IGST Act

Notification: List of Exempted supply of services under the CGST Act

Notification: Rates for supply of services under CGST Act

Highlight: Acceptance of deposits by companies from its members - conditions relaxed in case of Specified IFSC Public company and a private company - Rule 3 amended

Notification: Rate of exchange of conversion of the foreign currency with effect from 8th September, 2017

News: Tax Payers Advised To Confirm Identities Of Income Tax Search Authorities

Notification: Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items 2012

Notification: The Customs and Central Excise Duties Drawback Rules, 2017

Circular: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg.



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