The month of April 2002 has not seen any significant changes in Foreign Exchange regulations. The RBI has made a few minor amendments which are given below :

Earlier, prior approval of the RBI was required for Insurance Companies to collect premium in foreign exchange from Indian Companies for issue of Insurance Policies.

The RBI, has now, by APDIR Circular No: 36 dated 2^nd April 2002, permitted the insurance companies to issue General Insurance Policies denominated in foreign currency and receive premium in foreign currency without prior approval of the Reserve Bank. However, this is permitted only in certain cases such as marine insurance for ships, aviation insurance for aircrafts imported from outside India & marine cum errection all-risk insurance policy in respect of projects in India with Foreign Collaboration / funded by External Commercial Borrowings.

In certain cases, if, after a bill has been negotiated or sent for collection, and the amount thereof is desired to be reduced for any reason, then, the Exporter may approach the Authorised Dealer for such reduction. The Authorised Dealer may approve such reduction, provided :

1. the reduction does not exceed 10% of invoice value, (in case of exporters fulfilling certain criteria, reduction may be permitted without any ceiling)

2. it does not relate to an export of -

1. gold or silver jewellery or articles made out of cut and polished diamonds,

2. commodities subject to floor price stipulations,

1. the exporter is not on the exporters’ caution list of Reserve Bank, and

2. the exporter is advised to surrender proportionate export incentives availed of, if any.

The RBI, has now, vide APDIR Circular No: 38 dated 12^th April 2002, now permitted Authorised Dealers to to permit reduction upto 10% in invoice value of export bills also in respect of export of gold/silver jewellery or articles made out of cut and polished diamonds.

The RBI has issued two Master Circulars :

1. Circular Dated April 4^th 2002, relating to Investment outside India in Joint Venture / Wholly Owned Subsidiaries , and,

2. Circular Dated April 11^th 2002, relating to Export of Goods & Services.

These Circulars seek to serve as a compendium on the abovementioned subjects and incorporate all the circulars and notifications issued by the RBI on the said topics till 1^st July 2001. Hence, all circulars & notifications issued by the RBI after 1^st July 2001, need to be incorporated into the said Master Circulars to update the same.

A Foreign Company holds shares in a private limited Indian Company. Now, the Foreign Company proposes to transfer a portion of the shares to X – a Foreign National. Is any approval required for the same ?

FEMA Notification No: 20 on Transfer or Issue of Security by a Non-Resident deals with the query raised.

Under Para 9 of the said regulations – a Person resident outside India (not being a NRI or an OCB), may transfer the shares of an Indian Company to any person resident outside India.

However, if the proposed transferee has any previous technical collaboration or a venture in India with a similar company, then, prior approval of the Government of India is required for the transfer.

In the present case, the holder of the shares is not a NRI or an OCB. Also, if the proposed transferee does not have any such tie up with any other company in India, then, there is no approval required for such a transfer.

Hence, the Foreign Company is permitted to transfer the shares to the Foreign National by following the procedures prescribed under the Companies Act, 1956 for the same.

An intimation to the RBI on the transfer is normally given in such cases.