REPORTING OF FOREIGN INVESTMENT TO RBI

Every Indian Company who receives FDI (Foreign Direct Investment) must report such FDI inflow to order bank of India. Therefore, this is often my try and clarify the procedure regarding report of FDI to RBI.

INWARD REMITTANCE AND FIRC

1. Receipt of foreign currency through VOSTRO ACCOUNT in company checking account (In USD) from overseas investor.
2. Upon receipt of amount, Bank would enkindle purpose of Remittance, kindly inform the aim to bank ‘TOWARD SHARE CAPITAL.’
3. Bank wills Issue FIRC, Check the aim and amount on the FIRC.

KNOW YOUR CUSTOMER PROCESS

1. Request the investors to get KYC from their bankers within the attached format and send it to Indian Bank.
2. supported this overseas bank KYC, the Company’s bank will issue KYC for the overseas investor.

RBI Relaxes KYC Norms, Video-KYC to Be Counted as Full KYC for brand spanking new Accounts

• Reserve Bank of India (RBI) made an unscheduled announcement to deal with financial concerns associated with the second wave of Covid-19
• RBI has decided to rationalize certain components of the extant KYC norms
• Video KYC has been extended to a wider range of companies and use cases to ease customer pain points
• The bank Of India (RBI) relaxed rules for Know Your Customer (KYC) mandates, in light of the disruption unleashed by the second Covid-19 wave.
• RBI governor Shaktikanta Das announced measures to expand the scope of video KYC for little and medium businesses among other new categories of consumers.
• The RBI also allowed the utilization of video KYC banking entities to convert limited accounts to finish KYC-compliant accounts. Besides this, the financial organization announced variety of digital channels to assist customers update KYC details.
• These measures are implemented considering that individuals are finding it increasingly challenging to go to bank branches physically for completing KYC.

KEP POINTS OF THE ANNOUCEMENT

1. Allowing video KYC for patrons who are small businesses and legal entities
2. Video KYC and Digi locker channels to finish pending periodic KYC of shoppers
3. Conversion of limited KYC accounts to full KYC accounts
4. Extension of pending KYC deadline to December 31st, 2021.

Read our article ; foreign-direct-investment

VIDEO KYC FOR SMALL BUSINESSES

• In the month of January 2020, RBI enabled the use of video-based customer identification process in respect of individual customer onboarding by regulated entities of RBI i.e., customer onboarding by banks.
• With the announcement today, RBI has extended this scope for tiny businesses, legal entity owners, chartered accountancy firms and proprietorship firms.
• “Taking forward the initiatives of the banking company for enhancing customer convenience, it’s been decided to rationalize certain components of the extant KYC norms.
• These include extending the scope of video KYC referred to as V-CIP (video-based customer identification process) for brand new categories of shoppers in the form of proprietorship firms, authorized signatories as well as beneficial owners of legal entities incorporated in India.
• The move will improve financial inclusion by allowing fintech companies and banks to use video KYC norms to rapidly onboard and offer financial services to businesses.

KYC VIA DIGILOCKER

• The RBI governor also announced measures to ease customer concerns around pending KYC. Earlier, customers had to physically submit self-attested documents with proof of identity and address for the mandatory KYC to banks.
• RBI has now allowed the utilization of digital channels for this process, through documents issued through Digi Locker.

CONVERSION OF LIMITED KYC TO FULL KYC ACCOUNTS

• In what’s likely to be an enormous boost to payments banks, the RBI has also allowed the conversion of ‘limited KYC’ accounts opened on the idea of Aadhaar-based e-KYC to ‘fully KYC-compliant’ accounts.
• Basically, e-KYC accounts are going to be treated as full KYC accounts, and cannot require in-person KYC procedure.
• According to the older rules, customers who opened bank or payment bank accounts through Aadhaar-based e-KYC were termed as ‘limited KYC’ accounts that had limited access to banking services like savings limit and credit.
• Such customers were required to finish their KYC process head-to-head, but now these accounts can now be converted to full KYC compliant accounts through video KYC.
• Considering Covid-related restrictions across the country, RBI has extended the timeline for pending customer KYCs till day, 2021. No punitive restrictions on operations shall be imposed on such customers, it said.
• In light of the health crisis facing the country, the fintech startup ecosystem has also welcomed these initiatives.
• Aadhaar based e-KYC authentication shall now be considered as valid way for KYC. The central KYC push will make it easy for lenders to verify customers at the lending point and further strengthen the general lending ecosystem,”
• Fintech companies are going to be able to ensure better digital experience for patrons in need through these measures, added Patel.

The video KYC rules had already made access to financial services much easier for people and consumers, but with the expansion of the video KYC scope, the largest benefit is the greater financial inclusion, particularly among SMEs.

While the move has coincided with lockdowns in most major economic centers which are metros, it’ll benefit customers and SMEs in Tier 2/3 markets equally.

It’s also an enormous boost to the payments bank industry, which already received an effort within the arm last month with the new RBI monetary policy.

REPORTING OF INWARD REMITTANCE TO RBI

1. Within 30 days from the receipt of Inward remittance, the corporate needs to inform RBI through Company’s Bank (AD Category I Bank) by submitting Annex 6 together with copy of KYC & FIRC / Debit Certificate.
2. The Company’s banker (AD Category I bank) will certify Annex 6 after due verification and forward it to RBI
3. Upon receipt of intimation in Annex 6, RBI will allot and communicate the Unique positive identification (UIN) for every such inward remittance or FCNR / NRE / NRO account debit.

ALLOTMENT OF SHARES & FILING OF FC-GPR

1. Within 180 days from the receipt of the cash from overseas or, the corporate must allot shares to the overseas investors (Share price should be over the value as arrived under Discounted income method)
2. In case, any amount of fund remains excess after allotment, such sum should be remitted back to the overseas investor within 180 days from the date of receipt.
3. The entity shall prepare the Form FC-GPR
4. Get a SEBI registered Merchant Banker / accountant certificate for the share valuation (indicating the style of arriving at the value of the shares issued to the persons resident outside India)
5. Get a corporation Secretary certificate for the compliance within the format laid out in the shape FC-GPR
6. File Form FC-GPR with RBI through Company’s Bank (AD Category I Bank) within 30 days from the date of allotment.
7. Attachments required to file with Form FC-GPR,

• • Report obtains from accountant including Certificate.
  • Company Secretary Certificate
  • UIN copy of all inward remittances that shares are allotted. If UIN is applied for and yet to be received from RBI, attach copy of the UIN application filed with RBI through AD Category I bank
  • Copy of FIRC’s received for all inward remittances that shares are allotted
  • Copy of PAS-3 filed with ROC as a symptom of allotment
  • The Company’s AD Category I bank, is required to certify the Form FC-GPR, after undertaking due verification and the same shall be forward to RBI

8. RBI after due verification of FC-GPR will allot a FC-GPR identification number and communicate to the corporate.

This FC-GPR number is final approval of RBI for the Foreign investment. For any future repatriation of share sale proceeds, the FC-GPR number to be quoted.
IMP NOTE: Please note that everyone the Compliance associated with RBI is now through electronic mode only. Create your account of E-Biz, Fill the shape and send textual matter to AD, after verify the shape, AD will be forwarded to RBI.
Once the shape forwarded to RBI, RBI will give application number for all future correspondence or to trace the status of transaction.

KEY POINTS OF FOREIGN CURRENCY – TRANSFER OF SHARES

1. No fee for filing of form FC-TRS, if filed within 60 days from the date of receipt/date of payment of the number of considerations otherwise the RBI/ AD Bank may impose the penalty for late filling by way recently Submission fee (LSF).
2. The onus of filing form FC-TRS lies with the transferor/transferee, whosoever is residing in India.
3. The transferor/transferee filing the shape has to register itself with RBI-Firms portal before filing it.
4. it’s mandatory to connect the consent letter of both buyer and seller with form FC-TRS.
5. The valuation of shares, required to be transferred, shall me made as per FDI norms.
6. Sectoral Limits applicable on the corporate must be taken care of before transferring shares.

REGISTRATION ON RBI-FIRMS PORTAL

Following 2 registrations are required on RBI FIRMS portal before you’ll file the form:

• The Indian entities (Companies, LLPs or startup) which have received the foreign investment within the past are required to register them by filing this way.
• The window to enter the data within the EMF was initially opened from 28/06/2018 to 20/07/2018 but the RBI again reopened the window from 01/09/2018, for those Indian entities, which were unable to upload their details under the EMF by submitting the explanation for delay together with authority letter (prescribed by RBI).
  For new Companies, LLPs or startup which are founded after 30.07.2018, the EMF window is often open for them with none delay letter.
• After getting the Entity user registration, the entity required to urge the business user registration yet. For this, you would like to go to on https://firms.rbi.org.in/firms/ and choose Registration Form for Business User and fill the required details and fix the authorization letter.

Please note that this registration also can be availed by a private within the case where a resident individual is required to report.

TRANSFER OF SECURITIES

The following steps are required to be followed, in respect of successful registration of transfer of securities from Resident to Non-Resident –

• Receipt of consideration from non-resident.
• Obtain FIRC (Foreign Inward Remittance certificate) and KYC (Know your customer) of person residing outside India from AD Category-I bank.
• Submitting Security transfer deed and other documents required with the corporate.
• Company registers the transfer.
• File FC-TRS on FIRMS RBI Portal together with the attachments. (As mentioned below in Annexure 1)
• Approval of FC-TRS by RBI.

ANNEXURE 1

Following documents shall be attached while filling e-form FC-TRS:

1. Consent letter for transfer/receipt of consideration duly signed by the client and therefore the seller.
2. The shareholding pattern of the investee company (“the company, whose securities are transferring from one person to another”) before and after the acquisition of securities by someone resident outside India.
3. Certificate indicating fair value of securities from a controller.
4. Declaration from the customer to the effect that he’s eligible to amass shares/compulsorily and mandatorily convertible preference shares/debentures under FDI policy.
5. Declaration from the non-resident transferee as per the format provided by the RBI in their SMF- user manual.
6. Requests letter from the transferee/transferor to register the transfer of securities in favor of investee Company.
7. Board Resolution passed by the Investee Company, specifying the approval and acknowledgment to the securities transfer.
8. Securities Transfer Deed in form SH 4.
9. Security contract, if any.
10. FIRC/KYC received from the AD Bank of transferor/transferee.

VALUATION ASPECTS UNDER TRANSFER OF SECURITIES

• The transfer is required to be made at a price, which is at or above fair value, as determined on the basis arm’s length pricing.
• The minimum price shall be the fair value as determined by the accountant.
• If the fair value, so determined, is under the face value of the securities of the Investee Company, then in this case the transfer shall be done at or above the face value per security.

AMOUNT OF LSF PRESCRIBED BY RBI FOR DELAY REPORTING

AMOUNT TO BE REPORTED (RS)	LATE SUBMISSION FEE AS PROVIDED IN % OF THE AMOUNT TO BE REPORTED	MAXIMUM CAP OF LSF
UP TO 10 MILLION	0.05 %	RS.1 MILLION OR 300% OF THE AMOUNT INVOLVED, WHICHEVER IS LOWER
MORE THAN 10 MILLION	0.15 %	RS.10 MILLION OR 300% OF THE AMOUNT INVOLVED, WHICHEVER IS LOWER
* THE % OF LSF SHALL BE LEVIED AT DOUBLED RATE FOR EVERY TWELVE MONTHS.

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