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    FEMA updates for the month of Aug 2018

    Foreign Investment in India-Reporting in Single Master Form (SMF) 

    As announced in the First Bi-monthly Monetary Policy Review dated 5th April, 2018, Reserve Bank of India (RBI) would introduce a Single Master Form (SMF) for reporting of Foreign Direct Investment (FDI) received as per Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations 2017, dated November 7, 2017and also for investment by persons resident outside India in an Investment Vehicle. 

    In this regard, prior to the implementation of the SMF, entities who are in receipt of/ Outstanding FDI need to upload the prescribed details, on or before 20/07/2018, in the “Entity Master” on Foreign Investment Reporting and Management System (FIRMS) Portal, All the entities registered up to 20/07/2018 on FIRMS Portal can add/edit details in Entity Master till 15th August 2018. 

    Further, a module containing 9 reports would be made available with effect from 1st August 2018. With the implementation of SMF, the reporting of FDI, which is presently a two-step procedure viz., Advance Remittance Form (ARF) and Foreign Currency-Gross Provisional Return (FC-GPR) would be merged into a single revised FC-GPR. The SMF would also make us available reporting of indirect foreign investment through Form-DI, reporting of inflows in investment vehicles through Form-InVi and reporting in FC-TRS, LLP-I, LLP-II, ESOP, DRR, and CN. The SMF would be an online form and draft format of SMF has been released. The finalized structure of SMF and operational instructions thereof would be made available in the Master Direction on Reporting under FEMA, 1999. 

    Indian entities which have not complied with the requirement of registering on FIRMS Portal will not be able to receive foreign investment (including indirect foreign investment) further and will be held as non-compliant under FEMA, 1999 and regulations made thereunder. 

    For more details, refer to Notification No.RBI/2017-18/194, A.P. (DIR Series) Circular No. 30 dated 7th June 2018 and User Manual for Entity Master-FIRMS dated 27th June 2018. 

    External Commercial Borrowings (ECB) - Monthly reporting through ECB-2 Return 

    It has been decided by RBI to capture the details of the hedges for ECBs through a simplified format of Monthly ECB-2 Return. Accordingly, Part E of the Return is modified so as to include only standard information on hedged/unhedged ECB exposure. Details of hedging in Part E.1 of the Return and foreign exchange earnings and expenditure in Part E.2 of the Return should be furnished in additive format. 

    Revised monthly reporting format of ECB-2 Return is applicable from month-end of June 2018. It is also clarified that any lapse at the time of reporting this return and / or failure to adhere to the timeline of its submission (within 7 working days from the end of the month) and / or any lapse at the time of reporting through Form-83 (Reporting of loan agreement details) would be treated as contravention of the provisions of FEMA,1999. 

    For more details, refer to Notification No. RBI/2017-18/193, A.P. (DIR Series) Circular No. 29 dated 7th June 2018. 

    Liberalised Remittance Scheme (LRS) - Harmonisation of Data and Definitions

    It has been decided that furnishing of Permanent Account Number (PAN), which was previously not mandatory while putting through permissible current account transactions of up to USD 25,000 shall now be mandatory for making all remittances under LRS. 

    Further, in the context of remittances allowed under LRS for maintenance of close relatives, it has been decided to align the definition of ‘relative’ with the definition is given in Companies Act, 2013 instead of Companies Act, 1956 and Master Direction on LRS is being updated simultaneously to reflect the above changes. 

    For more details, refer to Notification No. RBI/2017-18/204, A.P. (DIR Series) Circular No. 32 dated 19th June 2018.