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Friday, October 29, 2010

Opening of Bank Accounts for Salaried employees - RBI Notification

The Reserve Bank of India has issued a notification on 26th October, 2010 where it has given clarification on the documents to be received by the Banks while opening the accounts of the salaried employees. In order to curb the misuse and to fraught with risks, it has clarified that Banks should rely on certifications issued only from reputed corporates or entities and should be aware of the competent authority designated by the concerned employer for issuing such certificates. Further in addition to the Employer’s certificate, Banks should insist on at least any one of the valid documents as provided in the Prevention of Money Laundering Rules i.e. PAN copy, Passport copy, Voter ID etc. or Utility bills for KYC purposes for opening the accounts of the salaried employees.

Tuesday, October 26, 2010

Whistle Blower

WhistleBlower

A whistleblower is a person who raises a concern about wrongdoing occurring in an organization or body of people. Usually this person would be from that same organization. The revealed misconduct may be classified in many ways; for example, a violation of a law, rule, regulation and/or a direct threat to public interest, such as fraud, health/safety violations, and corruption. Whistleblowers may make their allegations internally (for example, to other people within the accused organization) or externally (to regulators, law enforcement agencies, to the media or to groups concerned with the issues).

Origins of term

The term whistleblower derives from the practice of English police officers, who would blow their whistles when they noticed the commission of a crime. The whistle would alert other law enforcement officers and the general public of danger

Definition

Most whistleblowers are internal whistleblowers, who report misconduct on a fellow employee or superior within their company. One of the most interesting questions with respect to internal whistleblowers is why and under what circumstances people will either act on the spot to stop illegal and otherwise unacceptable behavior or report it. There is some reason to believe that people are more likely to take action with respect to unacceptable behavior, within an organization, if there are complaint systems that offer not just options dictated by the planning and control organization, but a choice of options for individuals, including an option that offers near absolute confidentiality.

External whistleblowers, however, report misconduct on outside persons or entities. In these cases, depending on the information's severity and nature, whistleblowers may report the misconduct to lawyers, the media, law enforcement or watchdog agencies, or other local, state, or federal agencies. In some cases, external whistle blowing is encouraged by offering monetary reward Whistleblowers are commonly seen as selfless martyrs (witness) for public interest and organizational accountability; others view them as a 'tattle tale' or "snitches" (slang), solely pursuing personal glory and fame.

It is probable that many people do not even consider blowing the whistle, not only because of fear of retaliation, but also because of fear of losing their relationships at work and outside work Because the majority of cases are very low-profile and receive little or no media attention and because whistleblowers who do report significant misconduct are usually put in some form of danger or persecution, the idea of seeking fame and glory may be less commonly believed

Whistle Blowers in India

Four years ago, India was rocked by the murder of Satyendra Dubey, a government engineer who exposed corruption in the national highway building program. Two years later, Shanmughan Manjunath, a manager at a state-owned oil company, laid bare a scheme to sell impure gasoline. His body was found riddled with bullets in the back seat of his car. Is this what honest person should get in India After all, Satyendra Dubey may not have died in vain. His death was neither the first, nor will be the last that vested interests will perpetrate, but Dubey’s death uniquely galvanized nation-wide protest. That he was an alumnus of IIT mattered. IIT-ians across the world demanded action. Now at last, India has taken the first tentative step towards a full-fledged law to protect whistleblowers.

There is no occasion to celebrate any political sagacity or remorse that might have caused this development. It did not. The government --one with those around the world-- had to be dragged every inch of the way by angry public opinion. The Supreme Court did considerable prodding. The Hon’ble Court was acting on two public interest litigations seeking a permanent mechanism to protect whistleblowers. 
Finally on April 21, the Ministry of Personnel issued a notification granting immunity to all employees of the government except those in armed and intelligence services. For the moment, the protector of whistleblowers will be the statutory office of the Central Vigilance Commissioner. He is vested with the responsibility of protecting the identity of informants, follow-up on information received, investigate if thought fit, and initiate criminal proceedings if required. Once the on-going general elections are over, the new government is expected to apply its mind in framing a bill to supersede the current notification.  A robust law is however, some years away. India is about to join an elite club of just four democracies [USA, UK, Australia and New Zealand] which have whistleblower protection. These democracies have not had these laws in place for too long. The US had its law in place only in 1989 and the other countries have followed after that.

K Ashok Vardhan Shetty has written a fine review [in the Hindu] of the role whistleblowers have played in improving transparency in governments. He suggests that Daniel Ellsberg of the USA would easily be the patron saint of modern day whistleblowers. In 1971, Ellsberg released the so-called Pentagon Papers that blew the cover of successive US governments that went about creating the mess called the Vietnam War. Ellsberg was a war veteran and later as an analyst at Rand Corporation had access to sensitive, classified documents. Stung by his conscience Ellsberg leaked these to the public.

Legal protection
Legal protection for whistle blowing varies from country to country. In the United Kingdom, the Public Interest Disclosure Act 1998 provides a framework of legal protection for individuals who disclose information so as to expose malpractice and matters of similar concern. In the vernacular, it protects whistleblowers from victimization and dismissal.

The scene in the US
In the US, the $591 million Enron fraud and the $3.8 billion WorldCom case spurred the administration to pass the Sarbanes-Oxley Act, 2002, which provided legal protection to whistleblowers in public companies. Under the Act, retaliation against a corporate whistleblower can invite a jail term of up to 10 years, and a fired employee can be reinstated and receive arrears of salary along with interest and damages.

Whistle-blower policy in India

While the government still has to bring out a comprehensive whistle-blower policy, the Securities and Exchange Board of India (SEBI), the market regulator, included guidelines for companies in an amendment to Clause 49 of the listing agreement in August 2003. Under the guidelines:
• An employee wanting to report a fraud or malpractice in his organization has direct access to his company’s audit committee and can approach it without seeking the consent of his superiors
• The company will send a circular or other correspondence to all its employees informing them that they enjoy this right; it will also protect them from harassment such as termination of services or otherwise discriminate against them
• The company will confirm that it has adhered to the above practice in its annual report, in the Board report on Corporate Governance

Why it lacks teeth

These guidelines were implemented on the recommendations of the SEBI Committee on Corporate Governance chaired by N.R. Narayana Murthy.  The guidelines have since been made non-mandatory following reservations on the part of several companies, which cited that the policy could be used to report a number of frivolous cases. There was also the argument that the insertion did not deal adequately with what constituted evidence and what didn’t.  So today, you have a Clause 49 that simply calls on companies to merely “establish a mechanism” to enable employees to report misconduct. However, there are a number of companies have indeed evolved a whistle blower policy. In some cases, the reporter of misconduct even includes other stakeholders, such as vendors and customers.



Thursday, October 14, 2010

The Industrial (Standing Order) Act, 1946

Applicability:

The Act will apply to every industrial establishment wherein 100 or more workmen are employed or were employed on any day of the preceding 12 months.

Industrial establishment means –
i.      Industrial establishment defined under the Payment of Wages Act, 1936
ii.    Factory defined under the Factories Act, 1948
iii.   Railway defined under the Indian Railways Act, 1890
iv.   Establishment of contractor who employs workmen for fulfilling contract with the owner of the industrial establishment.

Workman has meaning assigned to it under section 2(s) of the Industrial Dispute Act, Thus it includes skilled, unskilled, manual or clerical work but does not include employees engaged in managerial, administrative or supervisory capacity.


Submission and approval of draft Standing Order:

The employer should submit to the certifying officer, 5 copies of draft Standing Order proposed to be adopted by him within 6 months from the date of applicability of the Act. On receipt of draft, the certifying officer will forward one copy to trade union or workmen (in case there is no trade union) and hear their objections. After that he will certify the Standing Order or direct the employer to make necessary modification. The Certified Standing Order should be displayed in English and local language at the notice board or near the entrance of the establishment. Standing Orders once approved will be binding on both employer and employee. Till the approval of the draft Standing Order, Model Standing Order prescribed under the Act will automatically apply to the establishments.


Date of operation of Standing Order:

The Standing Order shall come into operation –
i.          On the expiry of 30 days from the date on which authenticated copies are sent or
ii.        In case appeal against the order is preferred, on expiry of 7 days from the date on which copies of the order of the appellate authority are sent.


Payment of Subsistence Allowance:

Where any workman is suspended by the employer pending investigation or inquiry into the complaint or charges of misconduct against him, the employer shall pay the subsistence allowance to such workman at 50% of his wages for first 90 days and 70% of wages for remaining period till the completion of disciplinary proceedings. In case of any dispute regarding the payment of subsistence allowances, parties may refer the dispute to labour court constituted under the Industrial Dispute Act, 1947. The dicision of the labour court shall be final and binding on both the parties.


Penalties and Procedures:

An employer who fails to submit draft standing order (as per section 3) or who modified his standing order otherwise than in accordance with section 10, shall be punishable with a fine which may extend to Rs.5000 and in case of continuing offence with a further fine of Rs.200 for every day after the first during which the offence continues.


Interpretation etc. of the Standing Order:

If any question arises as to the application or interpretation of the Standing Order parties may refer the same to any of the Labour court constituted under the Industrial Disputes Act, 1947. The decision of the concerned labour court shall be final and binding on both employer and workmen.


Matters to be provided in the Standing Order

1.    Classification of workmen e.g. Permanent/temporary/apprentice/probationery etc.
2.    Manner of intimating to workmen periods and hours of work, holydays, pay-days and wage rate.
3.    Shift working
4.    Attendance and late coming
5.    Conditions of, procedure in applying for, and the authority which may grant leave and holidays.
6.    Requirement to enter premises by certain gates, and liability to search.
7.    Closing and reporting of sections of industrial establishment, temporary stoppages of work and the rights liabilities of the employer and workmen arising there from.
8.    Termination of employment, and the notice thereof to be given by the employer and workmen.
9.    Suspension or dismissal for misconduct, and acts or omissions which constitute misconduct.
10. Means of redress for workmen against unfair treatment or wrongful exactions by the employer or his agents or servants.
11. Any other matters which may be prescribed.

Tuesday, October 12, 2010

Notification - Service Tax exemption for marketing of lottery tickets

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

Government of India
Ministry of Finance
(Department of Revenue)

Notification No. 50/2010 - Service Tax
            New Delhi, the 8th October, 2010

            G.S.R.   (E).- In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts persons marketing the lottery tickets (hereinafter referred to as ‘such person’), other than the distributors or selling agents appointed or authorised by the lottery organising State (hereinafter referred to as ‘such distributor or selling agent’), from the whole of service tax leviable thereon under section 66 of the Finance Act on the taxable service of marketing of lottery referred to in sub-clause (zzzzn) of clause (105) of section 65 of the Finance Act, if the optional composition scheme under sub-rule (7C) of rule 6 of Service Tax (2nd Amendment) Rules, 2010 dated 8th October 2010 is availed of by such distributor or selling agent, in respect of such lottery during the financial year:

            Provided that if such person also markets lottery tickets for distributors or selling agents who have not so opted, then nothing contained in this notification shall apply to the value of service provided to the distributors or selling agents who have not so opted.

Explanation.- For the purpose of this notification, “distributor or selling agent” shall have the meaning assigned to them in clause (c) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India in the Ministry of Home Affairs published in the Gazette of India, Part-II, Section 3, Sub-section (i) vide number G.S.R. 278(E) dated 1st April, 2010 and shall include distributor or selling agent authorised by the lottery organising State.                 

[F. No.B-1/21/2010 -TRU]

(Prashant Kumar)
Under Secretary to the Government of India

(www.servicetax.gov.in)

The Service Tax (Second Amendment) Rules, 2010

TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]
Government of India
Ministry of Finance
(Department of Revenue)

Notification No. 49/2010 - Service Tax
            New Delhi, the 8th October, 2010

            G.S.R. (E).- In exercise of the powers conferred by sub-sections (1) and (2) of section 94 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely :-
  
1.                     (1) These rules may be called the Service Tax (Second Amendment) Rules, 2010.
                        (2) They shall come into force on the date of their publication in the Official Gazette.

2.                     In the Service Tax Rules, 1994 (hereinafter referred to as the said rules), in rule 6, after sub-rule (7B), the following shall be inserted, namely:-

“(7C) The distributor or selling agent, liable to pay service tax for the taxable service of promotion, marketing, organising or in any other manner assisting in organising lottery, referred to in sub-clause (zzzzn) of clause (105) of section 65 of the said Act (hereinafter referred to as the said sub-clause), shall have the option to pay an amount at the rate specified in column (2) of the Table given below, subject to the conditions specified in the corresponding entry in column (3) of the said Table, instead of paying service tax at the rate specified in section 66 of Chapter V of the said Act:

Table
Sl. No.
Rate
Condition
(1)
(2)
(3)
1.
Rs 6000/- on every Rs 10 Lakh (or part of Rs 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw
If the lottery or lottery scheme is one where the guaranteed prize payout is more than 80%
2.
Rs 9000/- on every Rs 10 Lakh (or part of Rs 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw
If the lottery or lottery scheme is one where the guaranteed prize payout is less than 80%
           
            Provided that in case of online lottery, the aggregate face value of lottery tickets for the purpose of this sub-rule shall be taken as the aggregate value of tickets sold, and service tax shall be calculated in the manner specified in the said Table.
           
            Provided further that the distributor or selling agent shall exercise such option within a period of one month of the beginning of each financial year and such option shall not be withdrawn during the remaining part of the financial year.

            Provided also that the distributor or selling agent shall exercise such option for financial year 2010-11, within a period of one month of the publication of this sub-rule in the Official Gazette or, in the case of new service provider, within one month of providing of service under the said sub-clause and such option shall not be withdrawn during the remaining part of that financial year.

Explanation.- For the purpose of this sub-rule-

(i)               distributor or selling agent” shall have the meaning assigned to them in clause (c) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India in the Ministry of Home Affairs published in the Gazette of India, Part-II, Section 3, Sub-section (i) vide number G.S.R. 278(E) dated 1st April, 2010 and shall include distributor or selling agent authorised by the lottery organising State.
(ii)               “draw” shall have the meaning assigned to it in clause (d) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India in the Ministry of Home Affairs published in the Gazette of India, Part-II, Section 3, Sub-section (i) vide number G.S.R. 278(E) dated 1st April, 2010.
(iii)              “online lottery” shall have the meaning assigned to it in clause (e) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India in the Ministry of Home Affairs published in the Gazette of India, Part-II, Section 3, Sub-section (i) vide number G.S.R. 278(E) dated 1st April, 2010.
(iv)              “organising state” shall have the meaning assigned to it in clause (f) of the rule 2 of the Lottery (Regulation) Rules, 2010 notified by the Government of India in the Ministry of Home Affairs published in the Gazette of India, Part-II, Section 3, Sub-section (i) vide number G.S.R. 278(E) dated 1st April, 2010.
                          [F. No.B-1/21/2010 -TRU]

(Prashant Kumar)
Under Secretary to the Government of India


Note.- The principal rules were notified vide notification No. 2/94-Service Tax, dated the 28th June 1994 and published in the Gazette of India, Extraordinary vide number G.S.R.546 (E), dated the 28th June 1994 and were last amended vide notification No. 39/2010-Service Tax, dated the 28th June, 2010 which was published vide number G.S.R. 560 (E), dated the 28th June, 2010

(Source: www.servicetax.gov.in)

Thursday, October 7, 2010

ENVIRONMENTAL STATEMENT

Every person carrying on an industry, operation or process requiring consent under section 25 of the Water (Prevention and control of pollution) Act, 1974 or under section 21 of the Air (Prevention and control of pollution) Act, 1981 or both or authorization under the Hazardous Wastes (Management and handling) Rules, 1989 shall submit an environmental audit report for the financial year ending 31st March in Form V to the concerned state pollution control board on or before 30th September of every year.
Form V consists of various parts. Part A seeks general informations such as name and address of the owner/occupier of the industry, Industry category, year of establishment, date of last environmental statement submitted. Part B deals with water and raw material consumption. Part C deals with discharge of pollutants to the environment and reasons for variations from the standards. In Part D details of hazardous wastes (as specified under Hazardous Wastes (Management and Handling) Rules, 1989 from process as well as pollution control facilities should be filled. Part E deals with generation of solid wastes. Part F deals with characteristics of both hazardous and solid wastes and their disposal practices. Part G seeks information about the impact of pollution control measures taken on conservation on natural resources and consequently on the cost of production. Part H requires information about additional measures / investment proposal for environmental protection including abatement of pollution. In Part I industries are required to provide any other miscellaneous informations relating to environmental pollution and abatement of pollution or particulars for improving the quality of environment.

Power of Adjudication

Central Board of Excise & Customs vide circular no. 130/12/2010-ST dated 20th September 2010 confer the power of adjudication (under section 73 & 83A of the Finance Act, 1994) on Superintendent of Central Excise for cases involving service tax upto Rs. 1 Lakh in a show cause notice, except in respect of issues relating to taxability and valuation of services and cases involving extended period.

The revised limits are as follows:

Sr. No.
Central Excise Officer
Amount of service tax or CENVAT credit specified in a notice for the purpose of adjudication under Section 73 & 83A
1.
Superintendent of Central Excise 
Not exceeding Rs. one lakh (excluding the cases relating to taxability of services or valuation of services and cases involving extended period of limitation.)
2.
Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise
Not exceeding Rs. five lakhs (except cases where Superintendents are empowered to adjudicate.)
3.
Joint Commissioner of Central Excise
Above Rs. five lakhs but not exceeding Rs. fifty lakhs
4.
Additional Commissioner of Central Excise
Above Rs. twenty lakhs but not exceeding Rs. fifty lakhs
5.
Commissioner of Central Excise
Without limit.

Wednesday, October 6, 2010

ECB refers to commercial loans in the form of  --
Ø  Bank loan,
Ø  supplier credit,
Ø  Buyer credit or
Ø  scrutinizes instruments (including non-convertible, partial convertible or optional convertible preference shares)

availed from non-resident lenders with a minimum average maturity of 3 years.

FCCB means a bond issued by the Indian company, denominated in foreign currency, principal & interest payable in foreign currency, issued in accordance with FCCB & ordinary shares (through depository receipt mechanism) scheme,1993 & subscribed by non-resident in foreign currency & convertible to shares, wholly/partly on the basis of any equity warrants attached to debt instruments.


AUTOMATIC ROUTE:

Recognized Lenders
1.       International banks
2.       International capital markets
3.       Multinational financial institutions
4.       Export credit agencies
5.       Supplier of equipments
6.       Foreign collaborators
7.       Foreign equity holders

In case of foreign equity holders, following criteria should be satisfied:

Ø  For ECB upto USD 5 million – minimum 25% paid up capital should be held directly by lender
Ø  Above USD 5 million – in addition to 25% shareholding, debt-equity ratio should not exceed 4:1 (i.e. proposed ECB should not exceed 4 times of equity holdings).

Overseas organizations proposing to lend shall submit Due diligence certificate to AD Bank of borrower.

Amount & Maturity:

Maximum ECB allowed is USD 500 million or equivalent in a financial year except in hotol, hospital & software sector, where only USD 100 million is allowed.

ECB up to USD 20 million or its equivalent in a financial year with minimum average maturity of 3 years
ECB above USD 20 million to USD 500 million or its equivalent in a financial year with minimum average maturity of 5 years.

All-in cost ceilings
Include interest rate, other fees & expenses in foreign currency. Following are the ceilings:
Av.maturity period
All-in cost ceilings over 6 months LIBOR*
3-5 years
300 basis point
Above 5 years
500 basis point

*  for the respective currency of borrowing or applicable benchmark.


End use:

Ø  Investment – import of capital goods, new project, expansion/modernization of existing project
Ø  Overseas investment in JV/WOS abroad
Ø  Spectrum allocation

End-use not permitted for:

Ø  On-lending or investment in capital market or acquiring an Indian company
Ø  Real estate sector
Ø  Working capital requirement
Ø  Guarantees
Ø  Repayment existing rupee loan
Ø  General corporate purpose

Parking of ECB proceeds:

Borrowers are permitted to park the ECB proceeds either abroad or to remit to India, pending utilization for permissible end uses. ECB proceeds parked outside India can be invested by way of :

Ø  Deposit or other products offered by the Banks
Ø  Treasure bill or other monetary instruments having one year maturity
Ø  Deposit with overseas branch/subsidiaries of Indian banks

Prepayment:

Prepayment is allowed up to USD 500 million without RBI approval subject to fulfillment of minimum average maturity.

Re-financing of existing ECB:

The existing ECB can be re-financed by raising fresh ECB subject to the condition that new ECB is raised at lower all-in cost and outstanding maturity of the original ECB is maintained.

Procedure:

1.       Loan Agreement
2.       Obtaining Loan Registration Number
Ø  Form 83 in duplicate, certified by CA/CA to the AD Bank
3.       Drawing the ECB (after obtaining LRN)
4.       Filing ECB -2 every month within 7 working days after the closure of the month.


APPROVAL ROUTE:

Banks, NBFCs, Financial Institutions, FCCB by housing finance companies, Corporates violated ECB rules, cases falling outside automatic route will be covered by approval route.

Recognized Lenders
1.       International banks
2.       International capital markets
3.       Multinational financial institutions
4.       Export credit agencies
5.       Supplier of equipments
6.       Foreign collaborators
7.       Foreign equity holders

For Foreign equity holders, minimum shareholding of 25% and debt-equity ratio should not exceed 4:1 (i.e. proposed ECB should not exceed 4 times of equity holdings).

Amount & Maturity:

Additional amount of USD 250 million is allowed during the financial year in addition to USD 500 million.

All-in cost ceilings
Include interest rate, other fees & expenses in foreign currency. Following are the ceilings:
Av.maturity period
All-in cost ceilings over 6 months LIBOR*
3-5 years
300 basis point
Above 5 years
500 basis point

*  for the respective currency of borrowing or applicable benchmark.


End use:

Ø  Investment – import of capital goods, new project, expansion/modernization of existing project
Ø  Overseas investment in JV/WOS abroad
Ø  Spectrum allocation subject fulfillment of certain conditions

End-use not permitted for:

Ø  On-lending or investment in capital market or acquiring an Indian company
Ø  Real estate sector
Ø  Working capital requirement
Ø  Guarantees
Ø  Repayment existing rupee loan
Ø  General corporate purpose

Parking of ECB proceeds:

Borrowers are permitted to park the ECB proceeds either abroad or to remit to India, pending utilization for permissible end uses. ECB proceeds parked outside India can be invested by way of :

Ø  Deposit or other products offered by the Banks
Ø  Treasure bill or other monetary instruments having one year maturity
Ø  Deposit with overseas branch/subsidiaries of Indian banks

Prepayment:

Prepayment is allowed up to USD 500 million without RBI approval subject to fulfillment of minimum average maturity. Prepayment in excess of USD 500 million will be considered by RBI under approval route.

Re-financing of existing ECB:

The existing ECB can be re-financed by raising fresh ECB subject to the condition that new ECB is raised at lower all-in cost and outstanding maturity of the original ECB is maintained.


Foreign Currency Exchangeable Bonds (FCEB):

FCEB means bonds
Ø  expressed in foreign currency,
Ø  principal & interest is payable in foreign currency
Ø  subscribed by a person resident outside India
Ø  Exchangeable to equity shares of another company called as offered company, wholly/partly on the basis of equity warrants attached to the debt instruments.

Eligible issuer:

The issuer company should belong to the promoter company of the offered company and should hold the equity being offered at the time of issuance of FCEB.

Note: Offered company shall be listed company and engaged in the sector eligible for receiving FDI and eligible to issue/avail FCCB/ECB.

End-use of FCEB proceeds:

1.       Investment in JV/WOS abroad
2.       Investment in promoter group company

Note: Promoter group companies receiving the investment may utilize the same in accordance with end-use prescribed by ECB guidelines. However investment in capital market or real estate in India is prohibited.

All-in- cost: As per ECB policy

Pricing of FCEB:

At the time of issuance of FCEB the exchange price of offered equity shares shall not be less that higher of the following two –

Ø  The average of the weekly high and low of the closing prices of the shares of the offered company on the stock exchange during 6 months preceding the relevant date;
Ø  The average of the weekly high and low of the closing prices of the shares of the offered company on the stock exchange during 2 weeks preceding the relevant date

Average Maturity:

Minimum maturity shall be 5 years. The exchange option can be exercised at time before redemption. However cash settlement is not permissible.  



Trade Credit for import into India:

Supplier Credit
Credit for import into India extended by overseas suppier.

Buyer’s credit:
Loans for payment of import into India arranged by the importer from a bank or financial institution outside India for maturity of less than 3 years.

Note: Supplier’s credit & Buyer’s credit for 3 years & above come under the category of ECB.

Amount & Maturity:

AD banks are permitted to approve trade credits for imports into India upto USD 20 million per import transaction for imports permissible under Foreign Trade Policy of the DGFT with the maturity period up to one year (from the date of shipment).
For import of capital goods (specified by DGFT) trade credit upto USD 20 million per transaction with the maturity period of more than one year but less than 3 years is permitted.

All-in-cost ceiling
Ø  200 basis points
Ø  It includes arranger fee, upfront fee, management fee, handling / processing charges, out of pocket, legal expenses etc.

Guarantee

Ø  AD banks are permitted to issue LC/Guarantees/Letter of undertakings/Letter of comport in favour of overseas supplier, banks & financial institution up to USD 20 million per transaction up to one year for import of non-capital transactions.
Ø  Up to 3 years for import of capital transactions.