RBI issues guidelines under FEMA regulations

The Reserve Bank of India has come out with regulations under Foreign Exchange Management (FEMA) to provide stimulation to Indian companies for international listing exchanges.

The Regulations are provided through two public notifications. The first set of regulations deals with the mode of payment and reporting of non-debt instruments. “The proceeds of purchase or subscription of equity shares of an Indian company listed on an International Exchange shall either be remitted to a bank account in India or deposited in a foreign currency account of the Indian company,” the notification said.

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Further, the sale proceeds (net of taxes) of the equity shares may be remitted outside India or may be credited to the bank account of the permissible holder. Moreover, reporting about transactions in foreign exchange will be done by the investee Indian company through an authorized dealer. In case an FPI invests in the stock exchange, the authentic dealer will report to the RBI.

The second set of regulations is related to foreign currency accounts by a person residing in India. In case, the fund has been raised through External Commercial Borrowings (ECB), American Depository Receipts (ADRs), Global Depository Receipts (GDRs), or through direct listing of equity shares of companies incorporated in India on International Exchanges but yet to be utilized or repatriated, then it will be held in foreign currency accounts with a bank outside India.

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These regulations are said to be in line with the Finance Ministry’s action in January this year when it notified the ‘Direct Listing of Equity Shares of Companies Incorporated in India on International Exchanges Scheme.’

 Last July, Finance Minister Nirmala Sitharaman announced that Indian companies will soon be allowed to directly list their shares overseas. Currently, overseas listings by domestically-listed entities are carried out through ADRs and GDRs.

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