Foreign currency-rupee option contracts permitted to hedge eligible exchange exposures under the same terms as forward contracts.
The amendment authorises persons resident in India, and specific non-resident categories (Foreign Institutional Investors, Non-Resident Indians, and persons outside India with Foreign Direct Investment in India), to enter into foreign currency-rupee option contracts with authorised dealers to hedge exchange risk in respect of transactions permitted under the Act, on the same terms and conditions applicable to forward contracts, and gives the regulation retrospective effect from July 7, 2003 with a non-adverse-effect clarification.

Foreign borrowing eligibility expanded; permitted entities may borrow in foreign exchange subject to annual caps.
Amendments clarify that companies registered under the Companies Act, excluding financial intermediaries, and specified non government micro finance organisations are eligible to borrow in foreign exchange; the Reserve Bank may designate other eligible entities. Annual borrowing caps are set separately for eligible companies under the Automatic Route and for micro finance NGOs, with borrowings measured by the financial year. Permitted end uses are broadened to include other eligible purposes as specified by the Reserve Bank. The amendment is deemed effective from April 25, 2005, and is enacted pursuant to the Reserve Bank's powers under the Foreign Exchange Management Act.

Advisory Board constitution under section 8: one-year term; supersedes earlier notifications and takes effect in December.
The Central Government constitutes an Advisory Board under section 8 of the Conservation of Foreign Exchange & Prevention of Smuggling Activities Act, 1974 for a period of one year, superseding specified earlier notifications while preserving prior actions; the Board is composed of a chairman and two members and the notification specifies its commencement date.

Simultaneous cross-market offerings: ADR/GDRs priced at or above domestic issue exempt from certain domestic pricing requirements, subject to SEBI approval.
Insertion of 5(4)(cc) exempts companies conducting a domestic equity offering together with a simultaneous or immediately following ADR/GDR offering-where ADRs/GDRs are priced at or above the domestic issue price-from the specified domestic pricing requirements at (ca)(i) and (ii); such issuers must obtain SEBI approval, which will determine the percentages to be offered domestically and in the ADR/GDR market.

Designated currencies: deposit acceptance limited to regulator designated currencies and to term deposit form specified by regulator.
Deposits may be accepted only in currencies designated by the Reserve Bank from time to time, and such accounts may be opened only as term deposits with maturities specified by the Reserve Bank from time to time; the amendment to Schedule 2 takes effect from July 26, 2005, with a clarification that retrospective effect will not adversely affect any person.

Exemption from listing and pricing requirements for issuers taking effective steps, subject to completion by a prescribed deadline.
The amendment creates time limited exemptions for GDR and FCCB issuers who had taken verifiable effective steps before the cut off: unlisted companies are exempted from prior or simultaneous listing provided they complete the issue by the completion deadline; listed companies issuing GDRs or FCCBs are exempted from the domestic pricing guidelines if they complete issuance by the same deadline. "Effective steps" are defined as filing the offering circular, obtaining overseas exchange approval, paying listing fees, or securing RBI approval for issue related expenses; private placements without an offering circular do not qualify.

Permissible external exposure limit increased relative to net worth; retrospective effect clarified, no adverse impact on persons.
Amendment raises the permissible exposure ceiling for transfers or issues of foreign securities by substituting a higher cap tied to an entity's net worth in the operative provision and its explanatory text, expanding permitted foreign security exposure; the change is issued by the central banking authority with retrospective commencement and a clarification that no person will be adversely affected.

Prohibited transactions clarified: Schedules amended to label prohibited and approval-required current account transactions under FEMA.
Central Government amended the Foreign Exchange Management (Current Account Transactions) Rules, 2000 by substituting the bracketed references in Schedule I and Schedule II with explicit labels: Schedule I now reads "Transactions which are Prohibited (see rule 3)" and Schedule II now reads "Transactions which require prior approval of the Central Government (see Rule 4)"; the amendment is titled the 2005 Amendment Rules and comes into force upon publication in the Official Gazette.

Amendment to foreign exchange adjudication rules adds a statutory appeal timeline and removes a 'brief' drafting term.
Amendment to the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 omits the word "brief" from rule 4(9) and adds the phrase "within one hundred and eighty days from the date of such appeal" to the end of rule 6(4), thereby introducing a statutory timeline for the action specified in that sub rule; the amendment takes effect on publication in the Official Gazette.

Regulatory amendment under FEMA removes specified provisos in securities transfer regulations, effective on Gazette publication.
Amendments to the Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000 omit specified provisos and preceding commas in Regulation 5: the proviso in sub regulation (2); the provisos and preceding commas in clauses (i) and (ii) of sub regulation (3); and the proviso in sub regulation (5). The notification is made under the Reserve Bank of India's powers under the Foreign Exchange Management Act and commences on publication in the Official Gazette.

Gift transfer approval required for securities by non-residents; RBI may permit transfers subject to eligibility and valuation documentation.
RBI approval is required for any security transferred by way of gift from a resident to a person resident outside India; approval is subject to conditions including donee eligibility under the Regulations' Schedules, that the gift does not exceed five percent of paid-up capital/each series of debentures/each mutual fund scheme, that applicable sectoral cap/FDI limits are not breached, donor-donee relationship as relatives under the Companies Act, and that aggregate annual gifted securities to non-residents do not exceed the rupee equivalent of the prescribed threshold. Applications must include identity, relationship, reasons and prescribed valuation certificates and company confirmation of compliance.

Foreign investment in townships permitted with full ownership subject to capitalization, development, repatriation and approval conditions.
Foreign direct investment up to full ownership is permitted in townships, housing and construction-development projects subject to minimum project area requirements, prescribed minimum capitalization for wholly owned subsidiaries and joint ventures with timely fund infusion, a specified lock-in on original investment unless earlier exit is approved by Government through FIPB, development of at least half the project within five years of statutory clearances, prohibition on sale of undeveloped plots, conformity with applicable building regulations, investor responsibility for approvals and development charges, and monitoring by the approving local authority with requirement of completion certificate before disposing serviced plots.

Repatriation rules require repatriable dues from investments in Bhutan to be realized and remitted in freely convertible currency.
The amendment revises Regulation 6(2)(i) Explanation to define total financial commitment and substitutes the remittance clause to require remittances by market purchases in freely convertible currencies, permitting Bhutan investments in freely convertible currencies or equivalent Indian Rupees and restricting Nepal investments to Indian Rupees. It adds a proviso to Regulation 15 mandating that repatriable dues from investments in Bhutan made in freely convertible currency, including disinvestment or winding up proceeds, be realised and repatriated only in freely convertible currency.

Liaison Office approvals: insurance companies with IRDA approval are exempt from Reserve Bank approval to set up liaison offices in India.
The Reserve Bank amended FEMA regulations to exempt insurance companies from obtaining Reserve Bank approval for establishing a Liaison Office in India, provided the company has obtained approval from the Insurance Regulatory and Development Authority.

Power of Attorney operations on NRE accounts limited to local payments, remittance to account holder, and investment facilitation.
Authorised dealers/banks may allow a resident Power of Attorney to operate an NRE account only for withdrawals for local payments or remittance to the account holder, and, if the account holder or a designated bank is eligible to invest in India, to facilitate such investments; the resident Power of Attorney holder is prohibited from repatriating funds outside India except to the account holder, from making gifts to residents on behalf of the account holder, and from transferring funds to another NRE account.

Employee purchase rights in foreign securities expanded to include resident employees and ADR/GDR linked stock option participation with limits.
Regulation 22(2) permits resident Indian individuals who are employees or directors of specified Indian affiliates of foreign companies, or of Indian companies with at least 51% foreign equity, to purchase equity shares offered by the foreign company, with 'indirectly' defined to include holdings via special purpose vehicles or step down subsidiaries. Regulation 24(3) permits knowledge based Indian companies to allow resident employees to acquire foreign securities under ADR/GDR linked stock option schemes, subject to securities regulator and government guidelines and to a Reserve Bank ceiling.

Liberalisation of non-resident share transfers: prior approval removed where pricing, documentation and reporting conditions are met.
The amendment permits transfers or issues of shares and convertible debentures by persons resident outside India without prior Government or Reserve Bank approval where the seller is not an erstwhile OCB and the Indian company is not engaged in financial services; such transfers must not fall under SEBI takeover rules and must comply with Reserve Bank pricing, documentation and reporting requirements, with financial services defined to include entities regulated by banking, insurance and other financial regulators.

Foreign investment caps revised: petroleum and pipeline sectors opened subject to policy; domestic airline equity is restricted.
Amendments add Natural Gas/LNG Pipelines to Schedule 1 Annexure A and expand Annexure B to permit full foreign investment in petroleum product marketing, oil exploration in small and medium fields, and petroleum product pipelines subject to existing government policy and sectoral regulations; air transport services for domestic airlines are treated differently for nonresident Indians and other foreign investors, with foreign airlines prohibited from direct or indirect equity participation.

Authorised dealer guarantees for import related external liabilities allowed under foreign trade policy, subject to Reserve Bank specified terms.
The amendment permits an Authorised Dealer to give a guarantee, Letter of Undertaking or Letter of Comfort for any debt, obligation or other liability incurred by a person resident in India and owed to a person resident outside India arising from import of goods, provided such imports are permitted under the Foreign Trade Policy and subject to terms and conditions specified by the Reserve Bank.

Payment Mechanism: exports to and imports from Myanmar permitted in freely convertible currencies or via ACU mechanism.
The amendment permits receipts for exports to Myanmar and payments for imports from Myanmar to be effected either in any freely convertible currency or through the ACU mechanism, by inserting corresponding sub regulation (1A) into the export and import provisions, and is presented as taking effect from the date directions were issued to Authorised Dealers.