The current month, May 2002 has seen some action from the RBI. Some amendments have been made relating to Banks and Corporates. Certain important FEMA Notifications have also been issued during this month.

• Banks are now permitted to invest undeployed funds lying in FCNR (B) accounts in overseas markets in long term fixed income securities subject to certain restrictions.

• Banks can now avail of loans / overdrafts from their Head Office / overseas branches / correspondents upto 25% of their unimpaired Tier I Capital or US $ 10 Million, whichever is higher.

• Banks which have provided guarantees to Corporates availing ECBs may have a liability if the Corporates default in the same. Accordingly, Banks are now permitted, with the approval of the Reserve Bank of India, to crystalise their foreign exchange liability in rupees.

• As per the Current Account Rules issued by the Government of India, prior approval of the RBI is required for remittance of foreign exchange for advertisement on foreign television by a person whose export earnings are less than Rs.10 lakhs during each of the preceding two years, unless the payment is made from their EEFC account.

• The RBI has now clarified that even persons who are eligible to make such remittances without the RBI approval, are required to obtain a certificate from a Chartered Accountant certifying that,

1. The person satisfies the criteria of having export earning of more than Rs. 10 lakhs during each of the preceding two years, and,

2. The advertisement for which foreign exchange is being remitted will be broadcast by the foreign television company in foreign countries and not in India alone.

• NRIs who receive current income in India are permitted to credit the same to their NRO Account and the said amounts are permitted to be repatriated outside India.

• This rule has been further relaxed vide APDIR Circular No: 45 dated May 14^th 2002, wherein the RBI has permitted the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.

• Vide APDIR Circular No: 47 dated May 17, 2002, Units located in Special Economic Zones (SEZs) are permitted to remit premium in foreign exchange to any Insurer abroad, provided the premium is paid by the Units out of their foreign exchange balances. Other persons resident in India are prohibited from such transactions.

• Vide FEMA Notification No: 49/2002, Units located in Special Economic Zone (SEZ) are permitted to make investments in Joint Ventures / Subsidiaries abroad, from out of their balances in their EEFC Account without any limit.

• Indian Companies at the time of making overseas investments, are now required to get a valuation certificate of the company outside India, before making the investment.

• This is required whether the Investment is proposed to be made under the Automatic Route or with the RBI approval.

• Proprietry Concerns in India have now been permitted to invest outside India with the prior approval of the RBI, vide FEMA Notification No: 48/2002.

• Proprietry Concerns in India can now apply to the RBI in Form ODA seeking general permission for 1 year to make such investments.

• Such investment can only be by way of acquisition of shares of a Foreign Company in lieu of the fees for professional services rendered to the Foreign Company by the Proprietry Concern, provided that :

1. Value of shares accepted from each company outside India shall not exceed 50% of the fees receivable by the Indian Party from that Company, and,

2. The Indian Party’s shareholding in any one company outside India shall not exceed 10% of the paid up capital of the company outside India.

• Foreign Investment in a Firm or Proprietry Concern in India engaged in print media is prohibited vide FEMA Notification No: 50/2002.

• Vide FEMA Notification No: 51/2002, Inward remittance received by Companies from outside India, "for meeting specific obligations of the company", cannot be credited to the EEFC Account of the Company. Earlier, this restriction applied only to amounts received which were pursuant to any undertaking given to the RBI, or in the nature of foreign currency loan, or in the nature of investments.