Mumbai: To provide operational flexibility to Indian entities making overseas direct investments, the Reserve Bank of India has liberalised regulations pertaining to foreign currency accounts (FCA).
Indian entities can open, hold and maintain FCAs abroad to smoothen the process of making overseas direct investments, subject to certain conditions, the RBI said in a notification.
Eligibility conditions
A company incorporated in India or a body created under an Act of Parliament or a partnership firm or RBI-notified entities are defined as Indian entities.
The conditions stipulated by the RBI for opening a foreign currency account include: Indian entities should be eligible for making overseas direct investments under the Foreign Exchange Management Act (FEMA); host country regulations should stipulate that the investments into the country are required to be routed through a designated account.
Remittances sent to the FCA by the Indian entity should be utilised only for making overseas direct investment into the joint venture or the wholly-owned subsidiary abroad.
Any amount received into the foreign currency account by way of dividends and / or other entitlements from the subsidiary shall be repatriated to India within 30 days from the date of credit.
Auditor's certificate
The Indian entity is required to submit the details of debits and credits in the foreign currency account on a yearly basis to the designated bank. Further, it should furnish a certificate from the statutory auditors, certifying that the FCA was maintained as per the host country laws and the extant FEMA regulations.
The RBI has said that the FCA should be closed immediately or within 30 days from the date of disinvestment from the joint venture or the wholly-owned subsidiary, or cessation thereof.
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