FOREX DIGEST Monthly

BANK OF BARODA FORMIDABLE

JOURNEY FROM 1908 2011
SMALL STEPS BIG LEAP

IMPORTANT FINANCIAL
INDICATORS
As on 31.05.2011
RBI increases the Repo Rate by 50 bps to
7.25 percent and Reverse Repo Rate
by 50 bps to 6.25 percent with effect
from 03 May. 2011
SLR 24.00 percent w.e.f 18th Dec. 10
and CRR 6.00 percent w.e.f 24th Apr. 10
Bank Rate kept unchanged at 6 percent
Banks BPLR 14.25 percent w.e.f 04 Feb.
2011
Banks Base Rate revised
percent w.e.f 06 May. 2011

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to

10.00

, Issue No. XI May 2011

Long outstanding Overdue Export Bills -Action

Points/guidelines for follow up/write-off by
Authorized Branches

Analyze the portfolio of overdue export bill

and find out which are the commodities,
countries and exporters whose bills are
overdue.

Follow-up with all major exporters whose

bills are overdue since long and advise them
to pursue with their counter part otherwise
they may be caution listed by RBI.

Do not allow sending the export bills directly

to consignee of those exporters whose bills
are already overdue without prior consent of
Zonal Heads, even if sanctioning authorities
have allowed so.

Analyze whether the name of exporters

whose bills are overdue, also appearing in
overdue usance import bills. In such cases no
further bills under FIBC should be accepted
without bringing it to the notice of Zonal
Head and getting necessary guidelines.

Reminder should be sent to all the exporters

whose bills are overdue and regular follow-up
be done.

The duplicate copies of GR/SDF/PP/SOFTEX

forms should however continue to be held till
full proceeds are realized except in case of
undrawn balances.

Authorized
Branches
should
closely
monitor
realisation of export bills and in cases where bills
remain outstanding, beyond the due date for
payment or six months from the date of export, the
matter should be promptly taken up with the
concerned exporter. It should ensured that
outstanding overdue export bills are reduced
significantly and XOS statement is submitted to RBI
in time.
Branches should also to be guided by the RBI
Master circular on Goods and Services No. 06/201011 dated 1st July, 2010, point No. C.14, 21 & 22
under
which
they
have
given
clear
guidelines/procedure about follow-up/write-off of
long outstanding overdue export bills.
(BCC:WB:DFB:103/40 dt. 31.5.2011)

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FOREX DIGEST Monthly

a sub limit of USD 25 billion for investment in

listed non-convertible debentures / bonds
issued by corporates in the infrastructure
sector).

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Comprehensive Guidelines on
Forex Derivatives - Clarification

, Issue No. XI May 2011

OTC

Further, such investment by FIIs in listed nonconvertible debentures / bonds would have a
During a recent meeting of the Managing minimum lock-in period of three years.
Committee meeting of FEDAI, some members
expressed that some of their clients have
However, FIIs are allowed to trade amongst
expressed difficulty in furnishing quarterly
themselves during the lock-in period. It has
statutory auditors certificate for the quarter
also been decided by RBI to allow SEBI
ended 31st March 2011, within a month, i.e.
registered FIIs to invest in unlisted nonwithin 30th April 2011.
convertible debentures / bonds issued by
corporates in the infrastructure sector, provided
The clarification furnished by RBI is as under:
that
such
investment
is
as
per
the
For submission of quarterly certificates, 3 aforementioned terms and conditions.
months grace period may be provided, if
the quarter coincides with the fiscal year
(BCC:WB:DFB:103/32 dt. 06.05.2011)
end.
(BCC:WB:DFB:103/29 dt. 02.05.2011)

Foreign investments in India

registered FIIs in other securities

by

SEBI

The present limits for such investments is USD

15 billion for FII investment in corporate debt
with an additional limit of USD 5 billion for FII
investment in bonds with a residual maturity of
over five years, issued by Indian companies
which are in the infrastructure sector, where
infrastructure is defined in terms of the extant
guidelines on External Commercial Borrowings.
It has now been decided, to enhance the FII
investment limit in listed non-convertible
debentures / bonds, with a residual maturity of
five years and above, and issued by Indian
companies in the infrastructure sector, where
infrastructure is defined in terms of the extant
ECB guidelines, by an additional limit of USD 20
billion taking this limit from USD 5 billion to USD
25 billion (with this the total limit available to
FIIs for investment in listed non convertible
debentures / bonds would be USD 40 billion with

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Issue of Irrevocable Payment Commitment

(IPCs) to Stock Exchanges on behalf of
Mutual Funds (MFs) and Foreign Institutional
Investors (FIIs)
It has been decided to allow custodian banks to
issue Irrevocable Payment Commitments (IPCs)
in favour of the Stock Exchanges / Clearing
Corporations of the Stock Exchanges, on behalf
of their FII clients for purchase of shares under
the PIS.
Issue of IPCs should be in accordance with the
Reserve Bank regulations on banks exposure
to the capital market issued by the Reserve
Bank from time to time.
Further, branches may also comply with the
instructions issued by Department of Banking
Operations and Development (DBOD) vide
circular no. DBOD Dir. BC.46/13.03.00/201011 dated September 30, 2010.
(BCC:WB:DFB:103/31 dt. 06.05.2011)

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FOREX DIGEST Monthly

Interest Subvention on Rupee Export Credit

, Issue No. XI May 2011

Forward
cover
for
Foreign
Institutional Investors Rebooking
of cancelled contracts

Our Corporate Office has been receiving many

queries from branches as to whether the
interest subvention has been extended for this Foreign Institutional Investors (FIIs) are
year also or not.
permitted to cancel and rebook up to two
percent of the market value of the portfolio as
It is being informed that there is no at the beginning of the financial year.
notification from RBI regarding extension
of Interest subvention to exporters, till On a review, it has been decided by Reserve
date. Hence, it is requested not to extend Bank of India vide their A.P.(Dir Series) Circular
No.67 dated 20.05.2011 to enhance the
interest subvention after 31st March 2011.
existing limit of two per cent as above to ten
(BCC:WB:DFB:103/36 dt. 18.05.2011) per cent with immediate effect. Other
operational guidelines as also terms and
FEMA, 1999 Import of rough, cut and conditions of the circular shall remain
unchanged.

polished diamonds

(BCC:WB:DFB:103/38 dt. 26.05.2011)

RBI vide their A.P.(Dir Series) Circular No.59
dated 06.05.2011 has decided that Suppliers
and Buyers credit (trade credit) including the
usance period of Letters of Credit opened for
import of rough, cut and polished diamonds
should not exceed 90 days from the date of
shipment. The revised directions will come into
force with immediate effect. Branches should
ensure that due diligence is undertaken and
Know-Your-Customer (KYC) norms and AntiMoney Laundering (AML) standards, issued by
the Reserve Bank are adhered to while
undertaking the import transactions. Further,
any large or abnormal increase in the volume of
business should be closely examined to ensure
that the transactions are bonafide and are not
intended for interest/currency arbitrage. All
other instructions relating to imports of rough,
cut and polished diamonds shall continue.
The earlier instructions issued by RBI for direct
import of gold, import of platinum / palladium /
rhodium / silver and advance remittance for
import of rough diamonds, vide various A.P.(DIR
Series) Circulars shall remain unchanged.
(BCC:WB:DFB:103/34 dt. 10.05.2011)

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Hedging IPO flows by Foreign Institutional

Investors (FIIs) under the ASBA mechanism
FIIs are allowed to hedge the currency risk on
the market value of entire investment in equity
and/or debt in India as on a particular date
using forward foreign exchange contracts with
rupee as one of the currencies and foreign
currency-INR options. On review it has been
decided by RBI that for Initial Public Offers
(IPO) related transient capital flows under the
Application Supported by Blocked Amount
(ASBA) mechanism, foreign currency-rupee
swaps may be permitted to the FIIs subject to
the following terms and conditions:
i. FIIs can undertake foreign currency- rupee
swaps only for hedging the flows relating to the
IPO under the ASBA mechanism.
ii. The amount of the swap should not exceed
the amount proposed to be invested in the IPO.
iii. The tenor of the swap should not exceed 30
days.
iv. The contracts, once cancelled, cannot be
rebooked. Rollovers under this scheme will also
not be permitted.
(BCC:WB:DFB:103/39 dt. 26.05.2011)

Inventing Methods for Igniting Minds

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FOREX DIGEST Monthly

, Issue No. XI May 2011

FAQs: Liberalised Remittance Scheme

Q. 4. What are the prohibited items under

the Scheme?

Ans. The prohibited items are:

Q.1. What is the Liberalised Remittance i) Remittance for any purpose specifically
Scheme of USD 200,000?
prohibited under Schedule-I (like purchase of
tickets/sweep
stakes,
proscribed
Ans. Under the Liberalised Remittance Scheme, lottery
all resident individuals, including minors, are magazines, etc.) or any item restricted under
allowed to freely remit up to USD 200,000 per Schedule II of FEMA;
financial year (April March) for any
ii) Remittance from India for margins or margin
permissible
current
or
capital
account
calls to overseas exchanges / overseas
transaction or a combination of both.
counterparty;
Q.2. List down a few Capital Account iii) Remittances for purchase of FCCBs issued
transactions permitted under the scheme.
by Indian companies in the overseas secondary
market;
Ans. Under the Scheme, resident individuals
can acquire and hold immovable property or iv) Remittance for trading in foreign exchange
shares or debt instruments or any other assets abroad;
outside India, without prior approval of the
Reserve Bank. Individuals can also open, v) Remittance by a resident individual for
maintain and hold foreign currency accounts setting up a company abroad;
with banks outside India for carrying out vi) Remittances directly or indirectly to Bhutan,
transactions permitted under the Scheme.
Nepal, Mauritius and Pakistan;
Q.3. Whether LRS facility is in addition to vii) Remittances directly or indirectly to
existing facilities detailed in Schedule III countries identified by the Financial Action Task
under remittances?
Force (FATF) as non co-operative countries
and territories, from time to time; and
Ans. The facility under the Scheme is in
addition to those already available for private viii) Remittances directly or indirectly to those
travel,
business
travel,
studies,
medical individuals and entities identified as posing
treatment, etc., as described in Schedule III of significant risk of committing acts of terrorism
Foreign
Exchange
Management
(Current as advised separately by the Reserve Bank to
Account Transactions) Rules, 2000. The Scheme the banks.
can also be used for these purposes.
Q.5. Are remittances under the Scheme on
However, remittances for gift and donation can gross basis or net basis (net of
not be made separately and have to be made repatriation from abroad)?
under the Scheme only. Accordingly, resident Ans. Remittance is on a gross basis.
individuals can remit towards gifts and
donations up to USD 200,000 per financial year
We solicit comments,
suggestions
and
under the Scheme.
contribution from readers for improving the
digest

Academy of Excellence

Inventing Methods for Igniting Minds

An initiative of Staff College under the aegis of

Wholesale Banking Department (Domestic Foreign Business), BCC, Mumbai