S. No.

Query

Clarification

1.

Whether an Indian Party (IP) can make fresh financial commitments in a JV/WOS already set-up/ acquired on or before August 14, 2013 [i.e. date of issue of A.P. (DIR Series) Circular No. 23]?

An IP can make fresh financial commitments in the existing JV / WOS (including for the purpose of setting up of/acquiring step down subsidiaries outside India) only up to the revised limit of 100%, under the automatic route. Any financial commitment beyond the 100% cap shall require prior approval of the Reserve Bank under the approval route for ODI.

2.

What happens if the fresh financial commitments, which are up to the earlier limit of 400%, have been committed on or before August 14, 2013 by the Indian Party?  Would such cases attract the provisions of the present circular?

In case of an already contracted/committed financial commitment for an existing JV/WOS, the earlier limit of 400%, under the automatic route, would apply. The onus of ensuring the veracity/authenticity of the contract/commitment before permitting remittances will lie with the designated AD bank. Such cases should be immediately reported post facto to RBI by the AD banks.

3.

For setting up or acquiring a new JV / WOS, for which contract / agreement has been put in place on or before August 14, 2013, whether the new directions of 100% shall be applicable or the existing 400%?

In this case also the dispensation given in 2 above would apply i.e. applicability of automatic route upto 400% of net worth and post facto reporting of such cases to RBI immediately by the AD banks.

4.

What will be the status of an application, for financial commitment in a JV / WOS, which are already forwarded to the AD / RBI, on or before August 14, 2013, under the automatic route / approval route of 400%?

All applications received by the Reserve Bank or/and an AD bank on or before August 14, 2013 would be examined and dealt with by the Reserve Bank or/and an AD bank under the earlier guidelines only, i.e., guidelines prior to August 14, 2013.

5.

How will the 100% limit be calculated for new JV/WOS? Will the earlier investments made by the Indian Party be also reckoned towards this 100% or not? 

Yes, it will be reckoned, subject to the answers/clarifications given in this Annex.

6.

Whether an Indian Party, making fresh financial commitment in an existing overseas JV / WOS of another Indian Party (either by way of transfer of existing stake or by way of fresh contribution), shall qualify for 100% limit?

Yes. This would be treated as fresh financial commitment by the new Indian Party and it would have to be within the revised limit of 100%, under the automatic route.

7.

In para 3 of the Circular, term ‘Government of India’ has been prescribed. Keeping in view that all the proposals of ODI by Navratna PSUs / OVL / OIL are not approved by the GoI, whether all the proposals need to be approved by the GoI for being eligible under the automatic route without any limit?

The term ‘Government of India’ may be considered to read as the `Competent Authority’. ‘Competent Authority’, depending on the amount involved, would be (1) Board of Directors of the respective PSU, (2) Empowered Committee of the Secretaries (ECS); and (3) Cabinet Committee on Economic Affairs (CCEA) as laid down in paragraph 2 of A.P. (DIR Series) Circular No. 59 dated May 18, 2007.