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THE GAZETTE OF INDIA EXTRAORDINARY

[PART II—SKC. 1(I)]

RESERVE BANK OF INDIA

(Exchange Control Department)

(Central Office)

NOTIFICATION

Mumbai, the 2nd March, 2001

No. FEMA. 40/2001 -RB

Foreign Exchange Management (Transfer or Issue of any Foreign Security)

(Amendment) Regulations, 2001

G. S. R. 157(E).—!n exercise of the powers conferred by clause (a) of sub-section (3) of

Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in partial

modification of its Notification No. FEMA 19/RB-2000 dated May 3, 2000, the Reserve Bank of

India makes the following Regulations to amend the Foreign Exchange Management (Transfer or

Issue of any Foreign Security) Regulations, 2000, as amended from time to time, namely :—

(a)

These Regulations may be called the Foreign Exchange Management

(Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2001.

(b)

They shall come into force with immediate effect.

In the Foreign Exchange Management (Transfer or Issue of any Foreign Security)

Regulations, 2000,

(A) in Regulation 6,

(a) in sub-regulation (2),

i) for clause (i), the following clause shall be substituted, namely -

"The total financial commitment of the Indian Party in Joint

Ventures/Wholly Owned Subsidiaries shall not exceed US$50 million

or its equivalent in any one financial year, except investment in Nepal,

Bhutan and Pakistan,

Provided that in respect of commitment in Joint Ventures/Wholly

Owned Subsidiaries in Myanmar and SAARC countries (other than

Nepal, Bhutan and Pakistan), the ceiling shall be increased by US$25

million or its equivalent in any one financial year, in respect of such

commitment;"

ii) for clause (ii), the following clause shall be substituted, namely:-

"In respect of direct investment in Nepal or Bhutan, in Indian rupees the

total financial commitment shall not exceed Indian Rupees 350 crores in

any one financial year;"

iii) clause (iv) shall be deleted

(b) in sub-regulation (3),

for clause (iii), the following clause shall be substituted, namely:-

" (iii) utilisation of the amount raised by issue of ADRs/GDRs by the

Indian Party;"

(B) in Regulation 8,

i) for sub-regulation (1), the following sub-regulation shall be substituted,

namely: -

" (1) An Indian Party may acquire shares of a foreign company, engaged

in the same core activity, in exchange of ADRs/GDRs issued to the latter

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 thereunder from time to time by

the Central Government;

Provide^ that

(a)

the Indian Party has already made an ADR and/or GDR issue and

that such ADRs/GDRs are currently listed on any stock exchange outside

India;

(b)

such investment by the Indian Party does not exceed the higher of

the following amounts, namely: -

(i)

amount equivalent of US$ 100 mn, or

(ij)

amount equivalent to 10 times the export earnings of the Indian

Party during the preceding financial year as reflected in its audited

balance-sheet, inclusive of all investments made under Regulations in

Part I, including under (i) of this clause, in the same financial year,

(c)

the ADR and/or GDR issue for the purpose of acquisition is

backed by underlying fresh equity shares issued by the Indian Party;

(d)

the total holding in the Indian Party by persons resident outside

India in the expanded capital base, after the new ADR and/or GDR issue, does

not exceed the sectoral cap prescribed under the relevant regulations for such

investment;

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC. 3(i)1

(e)

the valuation of the shares of the foreign company is made, -

(A) as per the recommendations of the Investment Banker if the

shares are not listed on any stock exchange; or

(B) based on the current market capitalization of the foreign

company arrived at on the basis of monthly average price on

any stock exchange abroad for the three months preceding the

month in which the acquisition is committed and over and

above, the premium, if any, as recommended by the Investment

Banker in its due diligence report in other cases "

(C)

after Regulation 9, the following Regulation shall be inserted, namely:-

" 9A Block allocation by Reserve Bank

(1) Reserve Bank may, on application made to it, approve, subject to such

terms and conditions as considered necessary, a block allocation of

foreign exchange to an Indian Party which has exhausted the limit

available to it under sub-regulaVoi (2) of Regulation 6.

(2) For considering the application made under sub-regulation (1), the

Reserve Bank may take into account the factors mentioned in sub-

regulation (3) of Regulation 9."

(D)in Regulation 12, in sub-regulation (3), for the words "Regulation 10", the words

"Regulation 11" shall be substituted.

(E) after Part I, the following Part shall be inserted, namely: -

"Part IA

Investments abroad by a firm in India

17A Investments abroad by a firm in India

(1) A firm in India registered under the Indian Partnership Act, 1932, may apply

to the Reserve Bank for permission to invest abroad to the extent and in the manner

specified in Part I

(2) Reserve Bank may, after taking into account the factors specified in sub

regulation (3) of Regulation 9, grant permission subject to such terms and conditions as

are considered necessary.

17B Investments by partnership firm without prior approval of Reserve Bank

(1) A partnership firm registered under the Indian Partnership Act, 1932 which is

engaged in providing professional services specified in the Schedule, may make

investment in foreign concerns engaged in similar activity, by way of remittance from

India and/or capitalization of fees/other entitlements due to it from such foreign concerns

Provided that:-

a. such investments do not exceed US$ 1 (one) million or its equivalent

in one financial year,

b. the investing firm is a member of the respective All India professional

organization/body; and

a report containing (i) name, full address, registration and membership

particulars of the investing firm, (ii) full details of investment abroad,

(iii) date and amount of remittance/amount of capitalization of

fees/other entitlements due to the investing firm, (iv) name and address

of the foreign

concern together with

its line of activity,

(v)identification number , if already allotted by the Reserve Bank, is

submitted to the Reserve Bank through the authroised dealer within 30

days of making such investments."

(F) in Regulation 19, in sub-regulation (2); in the proviso, for clause (b), the following clause

shall be substituted, namely: -

* b) the consideration for purchase does not exceed US$ 20,000 or

its equivalent, in any one calendar year."

(G) for Schedule I, the following Schedule shall be substituted, namely:-

&£6 <siLfetTr*±

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC, 3(i)1

"Schedule

(See Regulation 17B^

List of professional services provided by

Registered partnership firms eligible for investment

Abroad without prior approval of the Reserve Bank

1. Chartered Accountancy

2. Legal practice and related services

3. Information Technology and Entertainment Software related

services

4. Medical and healthcare services"

[F. No. 1/23/EC/20001

D. P. SARDA, Executive Director

THE GA/bTIE OF INDIA EXTRAORDINARY

[PM<TII—SEC 3(01

NOTIFICATION

Mumbai, the 2nd March, 2001

No. FEMA. 41/2001 -RB

G. S. R. 158(E).—In exercise of the powers conferred by clause (b) of sub-section (3)

of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), and

in partial modification of its Notification No FEMA 20/2000-RB dated 3rd May, 2000, the

Reserve Bank of India makes the following amendment in the Foreign Exchange Management

(Transfer or Issue of Security by a person resident out side India) Regulations, 2000, as amended

from time to time, namely:- -

(1) These Regulations may be called the Foreign Exchange

Management (Transfer or Issue of Security by a Person Resident

outside India) (Amendment) Regulations, 2001.

(2) They shall come into force with immediate effect.

In the Foreign Exchange Management (Transfer or Issue of

Security by a Person Resident outside India) Regulations, 2000,

(i) in Schedule 1, after paragraph 4, the following paragraphs

shall be added, namely *

" 4A. A registered broker in India may purchase shares

of an Indian Company on behalf of a person resident

outside India, for the purpose of converting the shares so

purchased into ADRs/GDRs,

Provided that

the shares are purchased on a recognized stock

exchange;

ti)

the Indian company has issued ADRs/GDRs;

iii)

the shares are purchased with the permission of

Custodian of the ADRs/GDRs of the concerned

?i-.dian company and are deposited with the

Custodian;

iv)

the number of shares so purchased shall not exceed

ADRs/GDRs converted into underlying shares and

shall be subject to sectoral caps as applicable;

the non-resident investor, broker, Custodian and

the overseas depository comply with the provisions

of the Scheme for Issue of Foreign Currency

Convertible Bonds and Ordinary Shares (Through

Depository Receipt Mechanism) Scheme, 1993

and guidelines issued thereunder by the Central

Government from time to time.

(4B) i) An Indian company may sponsor an issue of

ADRs/GDRs with an overseas depository against shares

held by its shareholders at a price to be determined by the

Lead Manager.

ii) The proceeds of the issue shall be repatriated to

India within a period of one month.

iii) The sponsoring company shall comply with the

provisions of the Scheme for Issue of Foreign Currency

Convertible Bonds and Ordinary Shares (Through

Depository Receipt Mechanism) Scheme, 1993 and

guidelines issued thereunder by the Central Government

from time to time;

THE GAZETTE OF INDIA: EXTRAORDINARY

[PART II—SEC. 3(i)l

iv)

the sponsoring company shall furnish full details

of such issue in a form specified in Annexure C to

the Foreign

Investment

Division,

Exchange

Control Department, Reserve Bank of India,

Central Office, Mumbai within 30 days from the

date of closure of the issue."

ii) in Schedule 2, in paragraph 1, in sub paragraph (4), in the proviso,

for the figure and words "40 per cent", the figure and words "49 per

cent", shall be substituted.

[F.No. 1/23/EC/2000]

D. P. SARD A, Executive Director

Printed by the Manager, Govt. of India Press, Ring Road, Mayapun, New Delhi-l 10064

and Publi«hed by the Controller of Publications, Delhi-l 10054 —2001