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Tuesday 20 May 2014

IMPORTANT NOTES FOR NON-IMMIGRANT VISA APPLICANTS

Have You applied for a non-immigrant US visa.
But you need to wait for a certain period before you are granted an appointment for your visa interview.
Waiting can be an agonising process, especially if you need to reach the US by a certain date. Here are some tips and information that will help you receive your visa on time:
Recent developments
In the last couple of year, the waiting period before the visa interview appointment has gone up due to various reasons:
~ The biometrics system has been introduced - ie., every applicant must be digitally photographed and their fingerprints taken. This additional layer adds to the processing requirements and increases the workload for visa officers.
~ The overall demand for US visas in India has gone up.
~ There is no corresponding increase in the number of staff at American consulate, which further delays the process.
US embassies/ consulates the world over, are struggling hard to overcome this problem. US Secretary of State Condoleezza Rice has recently announced they are exploring ways to use cutting-edge technology to transform traditional visa application methods. Later this year, they will begin testing how digital videoconferencing technology could rapidly expedite the issuing of visas.
Let us hope this happens fast and is implemented quickly; it will give great relief to future visa applicants. In the mean time, however, let's understand the system that is currently in place.
Check visa interview period before applying
Before applying for your visa, visithttp://travel.state.gov/visa/temp/wait/tempvisitors_wait.php to check how long you would need to wait.
The exact time frame is determined by the Visa Application Centre (online, if you apply on the Web site, or in person, if you visit the VAC); the VAC is managed by the Visa Facilitation Services, an agency established for this purpose. 
This web site gives city-wise information on how long (in days) you will have to wait for your interview. Just type in your location, ie., Mumbai, Chennai, New Delhi, etc, and you will know exactly how much time you need to wait when applying for your Visitor Visa, Student Visa and other non-immigrant visas.
Accordingly, you can decide when to apply to make sure you reach the US on time.
Here is a table of waiting time in number of days to get appointments for the most popular non-immigrant visas B1-B2 (Visitor for Business or Pleasure) and F-1 (Student Visa) at four US Consulates in India, as of February 4, 2006.  
Location
B1/B-2 
F-1 (Students)


Mumbai

121

10

Kolkata  

87

14

Chennai      

123

113

New Delhi

74

74

In other words, if you apply now (February 2006) for a visitor visa, you will get an appointment for a visa interview any time after July 9, 2006, onwards in Mumbai and from June 15, 2006 in Chennai. 
For student visas, the appointments commence from May 6, 2006, in Mumbai and from June 15, 2006, in Chennai.

Compare these figures with select US consulates in major world cities from where large numbers of visitors travel to the US:
Location
B1/B-2
 
F-1 (Students)
Hong Kong 
1
1
London   
1
1
Manila       
7
1
Melbourne          
21
21
Mexico City 
116
16
Montreal
26
26
Ottawa
31
31
Shanghai
14
1
Tijuana
12
5
Tokyo
2
2
Toronto
58
Same day
Vancouver
30
3

Unfortunately for India, the waiting time is the longest compared to any other cities across the world including Pakistan, Nepal and Bangladesh.

Ever since personal interview and fingerprinting for all non-immigrant visa applicants was introduced, the waiting queue at the US consulates disappeared but the electronic queue has tremendously increased.
Quick tips for visa application
~ You must apply for your visa at the VAC, the agency formed for this purpose.
You could either apply online by visiting http://www.vfs-usa.co.in/ or visit to a VAC close to your area of residence; the addresses are listed on the VFS web site.
Read all the rules carefully before applying.
~ The waiting period depends on the city of application and category of visa applied for. 
~ Sometimes, it so happens that dates are unavailable. In such circumstances, you must constantly keep in touch with VFS and request them to give you an earlier date than what you have got in case a cancellation takes place. 
~ Remember, no influence or contact works to get an early appointment in normal course. No one can help in this matter; you have to wait for your turn.
~ Be alert by constantly visiting www.vfs-usa.co.in, which may have new information about changing policies and procedures with regard to visa processing. 
~ Even if they sound very busy or formal, do not be afraid to ask questions and seek clarifications from the counter staff at the Visa Application Centre. 
You must feel satisfied with the answers you get. However, be sparing with your choice of questions, as unnecessary questions could irritate them and result in non-cooperation.
~ There is a facility for taking passport size photographs and a photocopier machine at the VAC, in case there is an error in your photograph and you need to take a fresh one.
Likewise, if some documents required to be submitted and you do not have photocopies, you can get them done at this centre too.
~ When you go for your interview, the Visa Application Center charges additional fees for snacks and drinks. This is optional and NOT compulsory.  
~ Make sure you carry all your documents for your interview. In case, all your documentation is not in order etc, you may need to seek another visa appointment.
Unless the consulate official calls you again to the consulate for another meeting, you cannot go directly to the consulate. For most meetings or second appointment with the consulate, you have to approach Visa Application Center. 
What constitutes an 'emergency'
There are circumstances when your visit can be classified as an 'emergency', in which case the VFS has discretionary powers to give an earlier appointment. 
Travel for the purpose of attending weddings, assisting pregnant daughters, or attending graduation ceremonies do not qualify for emergency appointments.
However, if you have an unforeseen travel need as per one of the criteria listed below, you may qualify for an out-of-turn emergency appointment slot:
~ To obtain emergency medical care, or to accompany a relative or employer for emergency medical care. 
~ To attend the funeral of an immediate family member (mother, father, brother, sister, child, grandparent or grandchild).
~ To attend to an urgent business matter where the travel requirement could not be predicted in advance.
~ Students or exchange visitors who are within 90 days of their start date of a valid programme and who have not been refused a visa within the last six months. 
~ H and L (both temporary work visas in the US visa) renewals for applicants who are already working in the US and are returning to their jobs. Both require a petition to be filed by employer in the US. 
The H visa is for specialty occupation ie a certain specialty required by an employer in the US and someone who fits the profile is unavailable in the US. This visa is subject to an annual quota of 65,000 per US fiscal year (October 1 to September 30).

L is an intra-company transfer, which means that a manager or an executive is being transferred from an Indian company in India to its branch, subsidiary or parent company in the US with certain conditions.

Documentation for emergency visits
Before you apply for an emergency appointment, you must ensure that you have documentary evidence to prove the urgency.
Dying person in the US
i. Letter from the US doctor and/or hospital indicating nature of health problem of the patient and life-expectancy of the patient
ii. Relationship of applicant to dying person by birth certificate or any other evidence to show the relationship like photographs or deeds.

Medical emergency
i. A patient in India has to rush to the US for immediate surgery of an ailment will need medical history record and a certificate from his doctor/hospital recommending immediate surgery
ii. A certificate from same medical authorities to show that such surgery/treatment is unavailable in India and can be accomplished in the US
iii. A letter, fax or e-mail indicating booking done at a US hospital and/or appointment with a specialist doctor in the US on a specific date and location
iv. One person can go as an escort if the patient is unable to handle himself/herself due to ill health.
Business meetings in the US
i. Evidence through letters, e-mail printouts, faxes giving information of signing of contract, business negotiation for a deal and deadlines for them involving a large sum of money
ii. Evidence to show that big loss could occur in terms of loss of business or loss of money if the applicant cannot reach the US on a given date
iii. Evidence to show that the business emergency was not anticipated and therefore travel could not be planned in advance ie the suddenness was beyond the control of the applicant
Deadline for students
i. Students can show their I-20 form (admission form from a US university) indicating the date by which he/she has to reach the university campus where admission is granted
ii. Students should also show the date on which the I-20 was received without which they cannot approach US Visa Application Center for appointment for visa interview. 
In other words, if the I-20 is received late, students cannot help it and can approach Visa Center only thereafter.
H and B visa holder coming for adjustment of status
Many students/visitors go to the US and then apply for jobs through employers and get an H visa approved. Whenever they come to India in between for visit to meet relatives and return to the US, they have to go to the concerned US Consulate in India in the area (north India, west India etc) they are visiting and get a stamping done in their passport from student visa or visitor visa to H visa.

This process also requires appointment, and applicants when they come to India, cannot wait for four months as they would lose their jobs in the US.

In such cases they have to plan booking in advance from the US and in case their individual situation is such that their existing visa is expiring and they need to get an H visa quickly, they have to send their official papers including copy of passport to the visa center and request for an emergency appointment while in the US.
Emergency visa tips
If it appears during the visa interview that you have misrepresented the reasons for travel, such facts will be noted on your case file and may adversely influence the outcome of your visa application.
Furthermore, if the consular officer determines that you do not have a genuine emergency -- as defined above -- then he/she will postpone your interview 90 days from the date you appeared under the emergency provision. For such travel, you can only request an ordinary appointment well in advance.
Guidelines for visa interviews
The interview generally lasts for one to three minutes during which you need to "market yourself". Efficient documentation and effective presentation are keys for success in any visa interview. You will succeed if you prepare well.
~ Your appearance should convey that the kind of applicant you are.  In other words, if you are student, you should look like a student.  If you are an executive, you should look like an executive.
~ Your body language should convey friendliness but also that you are serious about your mission.
Mind your manners and refrain from unnecessary body movement. 
Smile when you meet the visa officer for the first time and do not show signs of nervousness (flickering of eyes, trembling of fingers) that could act against you.  Look into the eyes of the officer while speaking.
~ Say "Good morning or good afternoon" as the case may be, when you meet first and say "Thank you" when you depart.
Demonstrate respect in your use of language even if you do not feel this is being reciprocated. 
Be focused in your replies. Answer to the point and do not unnecessarily elaborate your responses, as this may not work in your favour. 
~ You must ONLY carry a briefcase or a bag MERELY containing your documents and wallet.

Do not carry mobile phones or any other electronic instrument like calculators, iPods, walkmans etc or even items like deodorants, notebooks, make-up etc.
Possible questions for first time applicants

~ Where are you going? (for all)

~ What is the objective of your visit? (for businessmen) 
~ Which places you are going to for sightseeing (for tourists)
~ What is your specialisation? (for students)

~ Why did you chose this university? (for students)

~ Who will finance your studies? (for students)

~ What will you do on your return? (for all) 
~ What are your entrance tests score? (for students) 

~ What is the annual income of your father/mother? (for all)

~ What will you do if I do not issue a visa to you? (for all)

Overseas Direct Investments

Q.1. What is the significance of overseas direct investments (ODI) for the country and for the investor?
A. Joint Ventures/Wholly Owned Subsidiaries abroad promote economic co-operation between India and the host countries. They result in transfer of technology and skills, sharing the results of Research & Development, access to the global market, promotion of the brand image, generation of employment and utilization raw materials available in India and the host country, increased exports of plant and machinery and goods and services from India, foreign exchange earnings through dividend earnings, royalty, technical know-how fee, etc. Since globalization of trade is a two-way process, integration of the Indian economy with the rest of the world with all its attendant benefits is achieved through overseas investment. It is the reverse of Foreign Direct Investment (FDI) i.e. Indian direct investment abroad.
Q.2. Where are the guidelines pertaining to overseas direct investments available?
A. The guidelines have been notified by the Reserve Bank of India vide Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to time, which can be accessed at the Reserve Bank’s website http://www.rbi.org.in/scripts/Fema.aspx. A Master Circular titled ‘Master Circular on Direct Investment by Residents in Joint Venture (JV) / Wholly Owned Subsidiary (WOS) Abroad’, which is a compendium of all notifications/circulars incorporating the developments, is also available at the website http://www.rbi.org.in.
Q.3. Where can one get clarifications pertaining to the guidelines on overseas investment?
A. Please see answer to Q. 2 above. Any clarifications in respect of cases not covered by the instructions may be obtained, giving full details of the case, from the Central Office of the Reserve Bank at the following address:
The Chief General Manager
Reserve Bank of India
Foreign Exchange Department
Overseas Investment Division
Central Office
Amar Building, 5th Floor
Mumbai 400 001
or
By e-mail
Q.4. What are the general permissions available to persons (individual) resident in India for purchase / acquisition of securities abroad?
A. General permission has been granted to persons (individual) resident in India for purchase / acquisition of securities as under:
  1. Out of funds held in the RFC account;
  2. As bonus shares on existing holding of foreign currency shares;
  3. When not permanently resident in India, from the foreign currency resources outside India.
General permission is also available to sell the shares so purchased or acquired. A resident Indian can remit up to USD75,000/- per financial year under the Liberalised Remittance Scheme (LRS), for permitted current and capital account transactions including purchase of securities. The resident individual is allowed to set up/acquire JV/WOS overseas within the LRS limit with effect from August 5, 2013 in terms of FEMA Notification No. 263 subject to the terms and conditions specified therein.
Q.5. What is direct investment outside India?
A. Direct investment outside India means investments, either under the Automatic Route or the Approval Route, by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity, signifying a long-term interest in the overseas entity (setting up / acquiring a Joint Venture (JV) or a Wholly Owned Subsidiary (WOS).
This is different from portfolio investment which is stated as answers to Qs 39, 40 and 44.
Q.6. Does the definition as given in Q.5 mean that one cannot acquire an existing company either partially or wholly?
A. An eligible Indian entity is free to acquire either a partial stake (JV) or the entire stake (WOS) in an already existing entity overseas, provided the valuation is as per the laid down norms. Please also see Q No. 16.
Q.7. Can overseas direct investment be made in any activity?
A. An Indian Party can make overseas direct investment in any bonafide activity (except those that are specifically prohibited as stated in answer to Q. 9). However, for undertaking activities in the financial services sector, certain additional conditions as specified in Regulation 7 of the Notification should be adhered to. Please refer answer to Q.25.
Q.8. Who are eligible to make overseas direct investment under the Automatic Route? Who is an “Indian Party”?
A. An Indian Party is eligible to make overseas direct investment under the Automatic Route. An Indian Party is a company incorporated in India or a body created under an Act of Parliament or a partnership firm registered under the Indian Partnership Act 1932 and any other entity in India as may be notified by the Reserve Bank. When more than one such company, body or entity makes investment in the foreign entity, such combination will also form an “Indian Party”.
Q.9. What are the prohibited activities for overseas direct investment?
A. Real estate as defined in Regulation 2(p) of the Notification and banking business are the prohibited sectors for overseas direct investment.
However, Indian banks operating in India can set up JVs/WOSs abroad provided they obtain clearance under the Banking Regulation Act, 1949, from the Department of Banking Operations and Development (DBOD), CO, RBI.
An overseas entity, having direct or indirect equity participation by an Indian party, shall not offer financial products linked to Indian Rupee (e.g. non-deliverable trades involving foreign currency, rupee exchange rates, stock indices linked to Indian market, etc.) without the specific approval of the Reserve Bank. Any incidence of such product facilitation would be treated as a contravention of the extant FEMA regulations and would consequently attract action under the relevant provisions of FEMA, 1999
Q.10. What exactly is covered under the term real estate business?
A. Real estate business means buying and selling of real estate or trading in Transferable Development Rights (TDRs) but does not include development of townships, construction of residential/commercial premises, roads or bridges.
Q.11. What is the Automatic Route?
A. Under the Automatic Route, an Indian Party does not require any prior approval from the Reserve Bank for making overseas direct investments in a JV/WOS abroad. The Indian Party should approach an Authorized Dealer Category – I bank with an application in Form ODI and the prescribed enclosures / documents for effecting the remittances towards such investments. However, in case of investment in the financial services sector, prior approval is required from the regulatory authority concerned, both in India and abroad.
Q.12. What are the limits and requirements for direct investment to be made under the Automatic Route?
A. The criteria for direct investment under the Automatic Route are as under:
  1. The Indian Party can invest up to 100% of its net worth (as per the last audited Balance Sheet) in JV / WOS for any bonafide activity permitted as per the law of the host country. The ceiling of 100% of net worth will not be applicable where the investment is made out of balances held in the EEFC account of the Indian party or out of funds raised through ADRs/GDRs; Further, if the source of funding is through availing ECB, the permissible limit is 400% of the networth of the Indian Party.
  2. The Indian Party is not on the Reserve Bank’s exporters' caution list / list of defaulters to the banking system published/ circulated by the Credit Information Bureau of India Ltd. (CIBIL) /RBI or any other credit information company as approved by the Reserve Bank or under investigation by the Directorate of Enforcement or any investigative agency or regulatory authority; and
  3. The Indian Party routes all the transactions relating to the investment in a JV/WOS through only one branch of an authorised dealer to be designated by the Indian Party.
Q.13. What is the procedure to be followed by an Indian party to make direct investment in a JV/WOS under the Automatic Route?
A. The Indian Party intending to make a direct investment under the automatic route is required to fill up form ODI duly supported by the documents listed therein, i.e., certified copy of the Board Resolution, Statutory Auditors certificate and Valuation report (in case of acquisition of an existing company) as per the valuation norms listed in answer to Q.16 and approach an Authorized Dealer (designated Authorized Dealer) for making the investment/remittance.
Q.14. Where does one find the Form ODI?
A. Form ODI is available as an Annex to the ‘Master Circular on Direct Investment by Residents in Joint Venture (JV) / Wholly Owned Subsidiary (WOS) Abroad’ dated July 2, 2013’ available on the RBI website.
With effect from March 2, 2010, Authorized Dealers Category – I banks have to file Part I (Sections A to D), II and III of form ODI on-line in the Overseas Investment Application with the Reserve Bank for allotment of UIN, reporting of subsequent remittances, filing of APRs, etc. AD Category –I banks would continue to receive the ODI forms in physical form from the Indian Party.
Q.15. What is ‘financial commitment’?
A. Financial commitment means the amount of direct investments outside India by an Indian Party -
  1. by way of contribution to equity shares of the JV / WOS abroad
  2. as loans to its the JV / WOS abroad
  3. 100% of the amount of corporate guarantee issued on behalf of its overseas JV/WOS and
  4. 50% of the amount of performance guarantee issued on behalf of its overseas JV/WOS.
  5. bank guarantee/standby letter of credit issued by a resident bank on behalf of an overseas JV / WOS of the Indian party, which is backed by a counter guarantee / collateral by the Indian party
  6. Creation of charge (pledge / mortgage / hypothecation) on the movable / immovable property or other financial assets of the Indian party / its group companies
(Note: The amount and period of the guarantee should be specified upfront).
Q.16. What are the valuation norms referred to in Q. 6 and Q. 13?
A. In case of partial / full acquisition of an existing foreign company where the investment is more than USD five million, share valuation of the company has to be done by a Category I Merchant Banker registered with the Securities and Exchange Board of India (SEBI) or an Investment Banker/ Merchant Banker outside India registered with the appropriate regulatory authority in the host country and in all other cases by a Chartered Accountant/ Certified Public Accountant.
However, in the case of investment by acquisition of shares where the consideration is to be paid fully or partly by issue of the Indian Party’s shares (swap of shares), irrespective of the amount, the valuation will have to be done by a Category I Merchant Banker registered with SEBI or an Investment Banker/ Merchant Banker outside India registered with the appropriate regulatory authority in the host country.
In case of additional overseas direct investments by the Indian promoter to it’s WOS which is made at premium or discount, the concept of valuation as indicated above shall be applicable.
Q.17. Can one freely creates a pledge/mortgage/hypothecation/charge on immovable/moveable property or other financial assets of Indian party/group companies in favour of a non- resident entity?
A. Prior permission of the Reserve Bank is required for creating such a charge on immovable/moveable property or other financial assets of the Indian parent / group companies.
Q.18. Are overseas investments freely allowed in all the countries and are there any restrictions regarding the currency of investment?
A. Investment in Pakistan is allowed under the approval route. Investments in Nepal can be only in Indian Rupees. Investments in Bhutan are allowed in Indian Rupees and in freely convertible currencies.
Q.19. What is the concept of a ‘designated Authorised Dealer’? Can there be more than one ‘designated Authorised Dealer’ for the same JV/WOS in case the JV/WOS has more than one Indian promoter?
A. The Indian party is to route all transactions in respect of a particular overseas JV/WOS only through one branch of an Authorized Dealer. This branch would be the ‘designated Authorised Dealer’ in respect of that JV/WOS and all transactions and communications relating to the investment in that particular JV/WOS are to be reported only through this ‘designated’ branch of an Authorized Dealer. In case the JV/WOS is being set up abroad by two or more Indian promoters, then all Indian promoters collectively called the Indian party, would be required to route all transactions in respect of that JV/WOS only through one ‘designated Authorised Dealer’.In case the Indian Party wants to switch over to another AD, an application by way of a letter may be made to the Reserve Bank after obtaining an NOC from the existing Authorized Dealer.
Q.20. What if one Indian promoter has more than one JV in either the same country or in different countries?
A. The Indian promoters are free to designate different branches of the same Authorised Dealer or branches of other Authorised Dealers for their separate JVs/WOSs. The only requirement is that regardless of the number of promoters, one JV/WOS will have only one ‘designated Authorised Dealer’ to route all its transactions.
Q.21. Is prior registration with the Reserve Bank necessary for direct investments under the Automatic Route?
A. No prior registration with the Reserve Bank is necessary for making direct investments under the automatic route. After the report of the first remittance / investment in Form ODI is received by the Reserve Bank, a Unique Identification Number (UIN) for that particular JV/WOS will be issued for the purpose of taking on record the overseas direct investment with the objective of maintaining a database for monitoring the outflows/inflows in respect of the overseas entities. Subsequent investments in the same project can be made only after allotment of the UIN.
Q.22. Does the allotment of UIN by the Reserve Bank for direct investments under the automatic route constitute an approval from the Reserve Bank?
A. No. The allotment of UIN does not constitute an approval from the Reserve Bank for the investment made/to be made in the JV/WOS. The issue of UIN only signifies taking on record of the investment for maintaining the database. The onus of complying with the provisions of FEMA regulations rests with the AD bank and / or the Indian party.
Further, with effect from June 01, 2012 an auto generated e-mail, giving the details of UIN allotted to the JV / WOS under the automatic route, shall be treated as confirmation of allotment of UIN, and no separate letter shall be issued by the Reserve Bank to the Indian party and AD Category - I bank confirming the allotment of UIN.
Q.23. What is the Approval route? What is the procedure to be followed for investment proposed to be made under the Approval Route?
A. Proposals not covered by the conditions under the automatic route require the prior approval of the Reserve Bank for which a specific application in form ODI with the documents prescribed therein is required to be made through the Authorized Dealer Category – I banks. Some of the proposals which require prior approval are:
i) Overseas Investments in the energy and natural resources sector exceeding 100% of the net worth of the Indian companies as on the date of the last audited balance sheet;
ii) ii) Investments in Overseas Unincorporated entities in the oil sector by resident corporates exceeding 100% of their net worth as on the date of the last audited balance sheet, provided the proposal has been approved by the competent authority and is duly supported by a certified copy of the Board Resolution approving such investment. However, Navaratna Public Sector Undertakings, ONGC Videsh Ltd and Oil India Ltd are allowed to invest in overseas unincorporated / incorporated entities in oil sector (i.e. for exploration and drilling for oil and natural gas, etc.), which are duly approved by the Government of India, without any limits, under the automatic route;
iii) Overseas Investments by proprietorship concerns and unregistered partnership firms satisfying certain eligibility criteria;
iv) Investments by Registered Trusts / Societies (satisfying certain eligibility criteria) engaged in the manufacturing / educational / hospital sector in the same sector in a JV / WOS outside India;
Applications in Form ODI- Part I may be forwarded through the designated Authorized Dealer Category – I bank to:
The Chief General Manager
Reserve Bank of India
Foreign Exchange Department
Overseas Investment Division
Central Office
Amar Building, 5th Floor
Mumbai 400 001.
Q.24. What are the parameters for considering proposals under the approval route?
A. Requests under the approval route are considered by taking into account, inter alia, the prima facie viability of the JV / WOS outside India, likely contribution to external trade and other benefits that may accrue to India through such investment, financial position and business track record of the Indian party and the foreign entity, experience and expertise of the Indian party in the same or related line of activity of the JV / WOS outside India, etc.
Q.25. a) Can any Indian company make investment in a JV/WOS abroad in the financial services sector?
A. Only an Indian company engaged in financial services sector activities can make investment in a JV/WOS abroad in the financial services sector, provided it fulfills the following additional conditions:
  1. has earned net profit during the preceding three financial years from the financial services activities;
  2. is registered with the appropriate regulatory authority in India for conducting financial services activities;
  3. has obtained approval for undertaking such activities from the regulatory authorities concerned both in India and abroad before venturing into such financial activity;
  4. has fulfilled the prudential norms relating to capital adequacy as prescribed by the regulatory authority concerned in India; and
Any additional investment by an existing JV / WOS or its step down subsidiary in the financial services sector is also required to comply with the above conditions.
b) Can an Indian company in the financial services sector make investment in a JV/WOS abroad in the non-financial services sector?
A. Regulated entities engaged in financial services sector activities in India making investment in non-financial services activities overseas are also required to comply with the additional conditions mentioned in Q. 25 (a) above.
c) Can an Indian company set up JV / WOS for trading in Overseas Commodities Exchanges?
A. Trading in Commodities Exchanges overseas and setting up of JV / WOS for trading in Overseas Commodities Exchanges will be reckoned as financial services activity and will require clearance from the Forward Markets Commission (FMC). The FMC has put in place guidelines for allowing FMC registered members of Commodity Exchanges to undertake commodity related activities abroad. Indian entities desirous of setting up of JV / WOS overseas for trading in overseas commodities exchanges may, therefore, approach the FMC for regulatory clearance.
Q.26. What are the permissible sources for funding overseas direct investment?
A. Funding for overseas direct investment can be made by one or more of the following sources:
  1. Drawal of foreign exchange from an AD bank in India.
  2. Swap of shares (refers to the acquisition of the shares of an overseas entity by way of exchange of the shares of the Indian entity).
  3. Capitalization of exports and other dues and entitlements.
  4. Proceeds of External Commercial Borrowings / Foreign Currency Convertible Bonds.
  5. In exchange of ADRs / GDRs issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and the guidelines issued by Government of India in the matter.
  6. Balances held in Exchange Earners Foreign Currency account of the Indian Party maintained with an Authorized Dealer.
  7. Proceeds of foreign currency funds raised through ADR / GDR issues.
In respect of (6) and (7) above, the ceiling of 100 per cent of the net worth does not apply.Further, if the source of funding is through availing ECB, the permissible limit is 400% of the networth of the Indian Party.
Q.27. Can an Indian Party utilise the net worth of its Indian subsidiary / holding company for investing in a JV/WOS abroad?
A. For the purpose of reckoning net worth of an Indian party, the net worth of it’s holding company (which holds at least 51% direct stake in the Indian Party) or its subsidiary company (in which the Indian party holds at least 51% direct stake) may be taken into account to the extent not availed of by the holding company or the subsidiary independently and has furnished a letter of disclaimer in favour of the Indian Party. However, this facility is not available to partnership firms. Also the partnership firm’s net worth cannot be taken into account by an incorporated entity.
Q.28. Can an Indian Party capitalise the proceeds of the exports to its overseas JV / WOS?
A. Yes, an Indian Party is permitted to capitalise the payments due from the foreign entity towards exports, fees, royalties or any other dues from the foreign entity for supply of technical know-how, consultancy, managerial and other services within the ceilings applicable.
Capitalisation of export proceeds remaining unrealised beyond the prescribed period of realisation will require the prior approval of the Reserve Bank.
Indian software exporters are permitted to receive 25 % of the value of their exports to an overseas software start-up company in the form of shares without entering into Joint venture Agreements, with the prior approval of the Reserve Bank.
Q.29. Can an Indian Party extend loan or guarantee to an overseas entity without any equity participation in that entity?
A. i) No. Loan and guarantee can be extended to an overseas entity only if there is already existing equity participation by way of direct investment, within the overall ceiling of 100% of the Indian party's net worth as on the date of the last audited balance sheet.
However, based on the business requirement of the Indian Party and legal requirement of the host country in which JV/WOS is located, proposals from the Indian party for undertaking financial commitment without equity contribution in JV / WOS may be considered by the Reserve Bank under the approval route
In case, however, the overseas entity is a first level step down operating subsidiary of the Indian party, guarantee may be issued by the Indian party on behalf of such step down operating subsidiary provided such guarantee is reckoned for the purpose of computing the financial commitment of the Indian party.
In case, the overseas entity is a second or subsequent level step down operating subsidiary of the Indian party, guarantee may be issued by the Indian party on behalf of such step down operating subsidiary with prior approval of the Reserve Bank provided such Indian party holds indirect stake of not less than 51% in the step down operating subsidiary and guarantee is reckoned for the purpose of computing the financial commitment of the Indian party.
ii) Navaratna Public Sector Undertakings, ONGC Videsh Ltd and Oil India are allowed to invest in overseas unincorporated/incorporated entities in oil sector (i.e. for exploration and drilling for oil and natural gas, etc.), which are duly approved by the Government of India, without any limits, under the automatic route.
iii) Eligible Indian companies are allowed to participate in a consortium with other international operators to construct and maintain submarine cable systems on co-ownership basis under the automatic route.
Q.30. How are Compulsorily Convertible Preference Shares (CCPS)  to be treated  for the purpose of Overseas Direct Investment?
A. With effect from March 28, 2012, Compulsorily Convertible Preference Shares (CCPS) are treated at par with equity shares and the Indian party is allowed to undertake financial commitment based on the exposure to JV by way of CCPS.
Q.31. What is the requirement for direct investment in an overseas concern by way of share swap?
A. Direct investment outside India in a JV/WOS by way of share swap arrangement can be made under the automatic route provided the valuation norms prescribed i.e. valuation of the shares is done by a Category I Merchant Banker registered with the SEBI or an Investment Banker outside India registered with the appropriate Regulatory Authority in the host country are satisfied, and the shares are duly issued / transferred in the name of the Indian investing company. Investors may also please note that all share swap transactions require the prior approval of the Foreign Investment Promotion Board (FIPB) for the inward leg of the investment.
Q.32. What are the permitted activities that partnership firms can undertake through overseas direct investment route?
A. Partnership firms registered under the Indian Partnership Act, 1932 can make overseas direct investments subject to the same terms and conditions as applicable to corporate entities.
Q.33. Can the partners hold shares of the overseas concerns for and on behalf of the firm?
A. Individual partners can hold shares for and on behalf of the firm in an overseas JV/WOS, where the entire funding for the investments has been done by the firm provided the host country regulations or operational requirements warrant such holding.
Q.34. Are there any restrictions for setting up of a second generation company? Can such step down subsidiaries be set up under the Automatic Route?
A. There are no restrictions on entities having JVs/WOSs abroad setting up second generation operating companies (step-down subsidiaries) within the overall limits applicable for investments under the Automatic Route. However, companies wishing to set up step-down operating subsidiaries to undertake financial sector activities will have to comply with the additional requirements for direct investment in the financial services sector as indicated in Q 25 (a).
Q.35. Can an Indian Party have a JV/WOS through a Special Purpose Vehicle (SPV) under the Automatic Route?
A. Yes. Direct investment through the medium of a SPV is permitted under the Automatic Route, for the sole purpose of investment in JV/WOS overseas.
Q.36. Can an Indian Party directly fund such step- down subsidiaries?
A. Where the JV/WOS has been established through a SPV, all funding to the operating subsidiary should be routed through the SPV only. However, in the case of guarantees to be given to the first level step down operating subsidiary of the SPV, these can be given directly by the Indian Party provided such exposures are within the permissible financial commitment of the Indian Party.
Q.37. Can the shares of a JV/WOS abroad be pledged for the purpose of financial assistance?
A. The shares of a JV/WOS can be pledged by an Indian Party as a security for availing fund based or non-fund based facility for itself or for the JV/WOS, from an authorised dealer/ public financial institution in India or from an overseas lender, provided the overseas lender is regulated and supervised as a bank and the total financial commitments of the Indian entity remain within the limit stipulated by the Reserve Bank for overseas investment from time to time.
Q.38. What are the obligations of the Indian party, which has made direct investment outside India?
A. An Indian Party will have to comply with the following: -
  1. receive share certificates or any other documentary evidence of investment in the foreign entity as an evidence of investment and submit the same to the designated AD within 6 months;
  2. repatriate to India, all dues receivable from the foreign entity, like dividend, royalty, technical fees etc.;
  3. submit to the Reserve Bank through the designated Authorized Dealer, every year, an Annual Performance Report in Part III of Form ODI in respect of each JV or WOS outside India set up or acquired by the Indian party;
  4. report the details of the decisions taken by a JV/WOS regarding diversification of its activities /setting up of step down subsidiaries/alteration in its share holding pattern within 30 days of the approval of those decisions by the competent authority concerned of such JV/WOS in terms of the local laws of the host country. These are also to be included in the relevant Annual Performance Report; and
  5. in case of disinvestment, sale proceeds of shares/securities shall be repatriated to India immediately on receipt thereof and in any case not later than 90 days from the date of sale of the shares /securities and documentary evidence to this effect shall be submitted to the Reserve Bank through the designated Authorised Dealer.
Q.39. Is it mandatory to furnish Annual Performance Reports (APR) of the overseas JV/WOS based on its audited financial statements?
A.Where the law of the host country does not mandatorily require auditing of the books of accounts of JV / WOS, the Annual Performance Report (APR) may be submitted by the Indian party based on the un-audited annual accounts of the JV / WOS provided:
  1. The Statutory Auditors of the Indian party certifies that ‘The un-audited annual accounts of the JV / WOS reflect the true and fair picture of the affairs of the JV / WOS’ and
  2. That the un-audited annual accounts of the JV / WOS has been adopted and ratified by the Board of the Indian party.
Q.40. What are the penalties for non-submission of Annual Performance Reports (APRs)?
A. Delayed submission/ non-submission of APRs entail penal measures, as prescribed under FEMA 1999, against the defaulting Indian Party.
Q.41. Can a resident individual in India acquire/sell foreign securities without prior approval of the Reserve Bank?
A. Please see answer to Q.4 also.
Resident individuals can acquire/sell foreign securities without prior approval in the following cases: -
  1. as a gift from a person resident outside India;
  2. by way of ESOPs issued by a company incorporated outside India under Cashless Employees Stock Option Scheme which does not involve any remittance from India;
  3. by way of ESOPs issued to an employee or a director of Indian office or branch of a foreign company or of a subsidiary in India of a foreign company or of an Indian company irrespective of the percentage of the direct or indirect equity stake in the Indian company;
  4. as inheritance from a person whether resident in or outside India;
  5. by purchase of foreign securities out of funds held in the Resident Foreign Currency Account maintained in accordance with the Foreign Exchange Management (Foreign Currency Account) Regulations, 2000; and
  6. by way of bonus/rights shares on the foreign securities already held by them.
Q.42. Can Indian corporates invest overseas other than by way of direct investment?
A. Yes. Listed Indian companies can invest up to 50 % of their net worth as on the date of the last audited Balance Sheet in overseas companies, listed on a recognized stock exchange, or in the rated debt securities issued by such companies.
Q.43. Can a resident individual acquire shares of a foreign company in his capacity as Director?
A. Yes, Reserve Bank has given General Permission to a resident individual to acquire foreign securities to the extent of the minimum number of qualification shares required to be held for holding the post of Director. Accordingly, resident individuals are permitted to remit funds under general permission for acquiring qualification shares for holding the post of a Director in the overseas company to the extent prescribed as per the law of the host country where the company is located and the limit of remittance for acquiring such qualification shares shall be within the overall ceiling prescribed for the resident individuals under the Liberalized Remittance Scheme (LRS) in force at the time of acquisition.
Q.44. Can resident individuals acquire shares from a foreign entity in lieu of the professional services rendered by them or in lieu of Director’s remuneration under General Permission?
A. Resident individuals are allowed under General Permission to acquire shares of a foreign entity in part / full consideration of professional services rendered to the foreign company or in lieu of Director’s remuneration. The limit of acquiring such shares in terms of value shall be within the overall ceiling prescribed for the resident individuals under the Liberalized Remittance Scheme (LRS) in force at the time of acquisition.
Q.45. Can a resident individual subscribe to the rights issue of shares held by him?
A. Yes, a resident individual may acquire foreign securities by way of rights shares issued by a company incorporated outside India provided the existing shares were held in accordance with the provisions of FEMA.
Q.46. Are there any relaxations for individual employees/Directors of an Indian company engaged in the field of software for acquisition of shares in their JV/WOS abroad?
A. General permission is available for the individual employees/Directors of an Indian promoter company engaged in the field of software for acquisition of shares of a JV/WOS abroad provided:
  1. the consideration for purchase does not exceed the ceiling as stipulated by RBI from time to time. the shares acquired by all the employees/directors do not exceed 5% of the paid-up capital of the Joint Venture or Wholly Owned Subsidiary outside India; and
  2. after allotment of such shares, the percentage of shares held by the Indian promoter company, together with shares allotted to its employees is not less than the percentage of shares held by the Indian promoter company prior to such allotment.
Resident employees of Indian companies in the knowledge based sectors including working directors may purchase foreign securities under the ADR/GDR linked stock option scheme provided that the consideration for purchase does not exceed the ceiling as stipulated by RBI from time to time.
Q.47. What are the avenues available to Indian Mutual Funds for investment abroad?
A. Indian Mutual Funds registered with SEBI are permitted to invest within the overall cap of USD 7 billion in:
a) ADRs / GDRs of the Indian and foreign companies;
b) equity of overseas companies listed on recognized overseas stock exchanges; initial and follow on public offerings for listing at recognized overseas stock exchanges;
c) foreign debt securities- short term as well as long term with rating not below investment grade - in the countries with fully convertible currencies;
d) money market investments not below investment grade; repos where the counter party is not below investment grade;
e) government securities where countries are not rated below investment grade;
f) derivatives traded on recognized stock exchanges overseas only for hedging and portfolio balancing with underlying as securities;
g) short term deposits with banks overseas where the issuer is rated not below investment grade; and
h) units / securities issued by overseas Mutual Funds or Unit Trusts registered with overseas regulators.
Q.48. What are the investment opportunities for Domestic Venture Capital Funds?
A. Domestic Venture Capital Funds registered with SEBI may invest in equity and equity linked instruments of off-shore VCFs subject to an overall limit of USD 500 million.
Q.49. Is investment in agriculture permitted?
A. Resident corporates and partnership firms registered under the Indian Partnership Act, 1932 may undertake agricultural operations including purchase of land incidental to such activity either directly or through their overseas offices, provided:
  1. the Indian party is otherwise eligible to invest under Regulation 6 of the Notification ibid and such investment is within the overall specified limits, and
  2. for the purpose of such investment by acquisition of land overseas the valuation of land is certified by a certified valuer registered with the appropriate valuation authority in the host country.
Q.50. Can an Indian party issue performance guarantee in favour of overseas JV/WOS?
A. Yes. Indian party is permitted to issue performance guarantee and only 50 per cent of the amount of the performance guarantees will be reckoned for the purpose of computing financial commitment to its JV/WOS overseas which should be within 100 per cent of the net worth of the Indian Party. Further, the time specified for the completion of the contract will be the validity period of the related performance guarantee. In cases where invocation of the performance guarantee breach the ceiling for the financial exposure of 100 per cent of the net worth of the Indian Party, the Indian Party is required to seek prior approval of the Reserve Bank before remitting funds from India, on account of such invocation.
In case of invocation of a performance guarantee, which had been issued before August 14, 2013, the limit of 400% shall be applicable and remittance on account of such invocation over & above 400% of the net worth of the Indian party shall require prior approval of the Reserve Bank.
Q.51. Can an Indian party issue corporate guarantee on behalf of its second generation subsidiary abroad?
A. Indian party is permitted to issue corporate guarantee on behalf of second generation or subsequent level step down operating subsidiaries and such requests are considered under the Approval Route, provided the Indian Party indirectly holds 51 per cent or more stake in the overseas subsidiary for which such guarantee is intended to be issued.
Q.52. Can individual indirect promoters of the Indian Party issue personal guarantee to an overseas lender on behalf of the JV/WOS under general permission?
A. With effect from March 28, 2012, issuance of personal guarantee by the promoters of the Indian Party as presently allowed under the General Permission has also been extended to the indirect resident individual promoters of the Indian Party with same stipulations as in the case of personal guarantee by the direct promoters
Q.53. (a) What are the different modes of disinvestments from the JV / WOS abroad
A. Disinvestment by the Indian party from its JV / WOS abroad may be by way of transfer / sale of equity shares to a non-resident / resident or by way of liquidation / merger / amalgamation of the JV / WOS abroad.
(b) Can an Indian Party disinvest in case where write off is not involved?
A. Yes. The Indian Party can disinvest in cases where write off is not involved without prior approval from Reserve Bank subject to the following:
  1. the sale is to be effected through a stock exchange where the shares of the overseas JV/ WOS are listed;
  2. if the shares are not listed on the stock exchange and the shares are disinvested by a private arrangement, the share price is not less than the value certified by a Chartered Accountant / Certified Public Accountant as the fair value of the shares based on the latest audited financial statements of the JV / WOS;
  3. the Indian Party does not have any outstanding dues by way of dividend, technical know-how fees, royalty, consultancy, commission or other entitlements and / or export proceeds from the JV or WOS;
  4. the overseas concern has been in operation for at least one full year and the Annual Performance Report together with the audited accounts for that year has been submitted to the Reserve Bank; and
  5. the Indian party is not under investigation by CBI / DoE/ SEBI / IRDA or any other regulatory authority in India.
(c) In case of disinvestment of stake in overseas JV/WOS, can an Indian party disinvest with write off of part of investment?
A. Indian Party may disinvest without prior approval of the Reserve Bank, in the under noted cases, where the amount repatriated on disinvestment is less than the amount of the original investment:
i) in cases where the JV / WOS is listed in the overseas stock exchange;
ii) in cases where the Indian Party is listed on a stock exchange in India and has a net worth of not less than Rs.100 crore;
iii) where the Indian Party is an unlisted company and the investment in the overseas JV / WOS does not exceed USD 10 million and
iv) where the Indian Party is a listed company with net worth of less than Rs.100 crore but investment in an overseas JV/WOS does not exceed USD 10 million.
(d) Are there any pre-conditions/compliances subject to which such write off at the time of disinvestment is permitted ?
A. Yes. Please refer to part B of Q 49.
Q.54. Whether restructuring of the balance sheet of the JV / WOS abroad involving write-off of capital and receivables is allowed
A. Indian company which has set up WOS abroad or has at least 51% stake in an overseas JV may write off capital (equity / preference shares) or other receivables (such as loans, royalty, technical knowhow fees and management fees in respect of the JV /WOS) even while such JV / WOS continue to function subject to the following:
(i) Listed Indian companies are permitted to write off capital and other receivables up to 25% of the equity investment in the JV /WOS under the Automatic Route; and
(ii) Unlisted companies are permitted to write off capital and other receivables up to 25% of the equity investment in the JV /WOS with prior approval of the Reserve Bank.
The write-off / restructuring have to be reported to the Reserve Bank through the designated AD bank within 30 days of write-off / restructuring. The write-off / restructuring is subject to the condition that the Indian Party should submit the following documents for scrutiny along with the applications to the designated AD Category – I bank under the Automatic as well as the Approval Routes:
a) A certified copy of the balance sheet showing the loss in the overseas WOS/JV set up by the Indian Party; and
b) Projections for the next five years indicating benefit accruing to the Indian company consequent to such write off / restructuring.
Q.55. Can an Indian Party open/maintain an account in Foreign currency abroad?
A. With effect from April 2, 2012, an Indian party is allowed to open, hold and maintain Foreign Currency Account (FCA) abroad for the purpose of overseas direct investments wherever the host country regulation stipulate the same subject to certain terms and conditions.
Q. 56 Can open ended corporate guarantees be extended by an India party on behalf of its overseas subsidiary?
Ans: As per A.P. (DIR Series) Circular No. 29 March 27, 2006 no guarantee can be open ended.
Q. 57 Can a loan given to an overseas venture be converted into equity?  If yes what are the reporting requirements?
Ans: Yes, a loan can be converted into equity and reported to RBI by a letter.
Q.58.   Whether equity exposures can be converted into loan or other forms of funded exposure like preference capital, debentures, etc.?
A. In terms of the extant provisions under Regulation 16(2) of the Notification No. FEMA.120/RB-2004 dated July 07, 2004, as amended from time to time, the disinvestment proceeds are to be repatriated to India within the prescribed time limit. Therefore, conversion of equity based exposure into loan or other form of funded exposures like preference capital, debenture, etc., without repatriating the disinvestment proceeds to India, shall require prior approval of RBI.
Q.59.   How the preference shares, other than the compulsorily convertible preference shares (CCPS), are to be treated for the purpose of ODI?
A. All types of preference shares, other than CCPS, are to be treated as loan extended by the Indian party to its JV / WOS abroad and compliance to the provisions inter alia under Regulation 6(4) of the Notification No. FEMA.120/RB-2004 dated July 07, 2004, as amended from time to time, is to be ensured. The AD banks shall report funded exposure like preference capital, debentures, notes, bonds, etc. under the head ‘Loan’ in Form ODI Part II.