Miscellaneous NEWS for NRIs...
FEMA
relaxes forex limits, promises transparency
RBI
okays Re loans to Indian cos from NRIs, PIOs
Millennium deposits mobilise $5.5 b
FCNR(B) deposits' tenure may be raised
to 5 years
HDFC's
service for Gulf NRIs
NRI
identification proposal accepted
FEMA
effective from June 1
RBI to launch new, improved
FEMA soon
ICICI Bank launches
web products for NRIs
Forbes
500 honours Indian enterprise in US
Govt sets up NRI group on IT
RBI eases investment
norms for NRIs, OCBs
RBI nod for issue of shares to NRIs
HDFC cuts interest
rates for NRIs to 20-year low
Repatriate of profits
without RBI approval allowed
Global Trust Bank
launches Internet banking
ICICI Bank nets
large NRI deposits
NRI inflows lag at $13m
in Apr-Aug despite incentives
Conditions to be removed to facilitate more NRI Investment in
Health Sector
Investments by Non-residents of Indian Nationality / Origin in
Urban Development and Housing
Guidelines for Foreign Equity Participation in Private banks modified
RBI notifies
40% FII investment limit
Templeton Funds for NRIs
Sharp fall in Kerala NRE
deposits growth
FEMA
relaxes forex limits, promises transparency
Our Bureau MUMBAI,
UNDER the Foreign Exchange Management Act,
1999, (FEMA), which replaced the Foreign Exchange Regulation Act,
1999, (FERA), with effect from June 1, 2000, certain prescribed
limits for availing of foreign exchange have been substantially
enhanced. Issuing ``simple and transparent rules'' under FEMA,
the RBI has said that the new law is more transparent in its application.
The object of FERA was to conserve the natural resources, while
the object of FEMA is to facilitate external trade and payments,
and to promote orderly maintenance of the foreign exchange markets
in India, an RBI release said.
Residents now going abroad for business purposes or for participating
in conferences or seminars will not need the RBI's permission
to avail themselves of foreign exchange up to $25,000 per trip
irrespective of the period of stay. Basic travel quota has been
increased from $3,000 to $5,000 per calendar year.
The rules for foreign investment in India and Indian investment
abroad are also comprehensive, transparent and permit Indian companies
engaged in certain specified sectors to acquire shares of foreign
companies engaged in similar activities by share swap, or exchange
through issue of ADRs/GDRs, up to certain specified limits.
FEMA has laid down the areas where specific permission of the
RBI or the Government of India is required. In cases where no
such permission is required, a person can remit funds and acquire
assets and incur liability in accordance with the specific provisions
laid down in the Act or notifications issued by the RBI or the
Government under the Act, without seeking the approval of either.
The application of the new Act can be seen from broadly from two
angles _ capital account transactions and current account transactions.
Capital account transactions relate to movement of capital _ transactions
in property and investments and lending and borrowing money can
be regarded as such transactions. All transactions that do not
fall in capital account category are current account transactions.
These are permitted freely subject to the following few restrictions.
Certain current account transactions would require RBI permission
if they exceed a certain ceiling. A few current account transactions
need appropriate Government permission irrespective of the amount.
There are seven types of current account transactions which are
totally prohibited, and no transaction can therefore be undertaken
relating to them. These include transactions relating to lotteries,
football pools, banned magazines and a few others.
Some of the ceilings pertaining to miscellaneous remittances which
would require RBI permission are: basic travel quota limit, which
has been revised to $5,000 from $3,000.The revised limit on gifts
is $5,000 ($1,000), donations $5,000 ($1,000), employment $5,000
($2,500) and emigration $5,000 ($3,000). FEMA gives full freedom
to a person resident in India who was earlier resident outside
India, to hold or own or transfer any foreign security or immovable
property situated outside India and acquired while residing there.
Similar freedom has also been given to a resident who inherits
such security or immovable property from a person resident outside
India. A person outside India is now permitted to hold shares,
securities and properties acquired when he was a resident in India.
The exchange drawn can also be used for purposes other than for
which it is drawn, provided drawal of exchange is permitted. Exchange
Earners' Foreign Currency (EEFC) and Residents' Foreign Exchange
(RFC) account holders may avail of these for payment of all permissible
current account transactions. FEMA is a civil law, unlike FERA.
Contravention under FEMA will be dealt through civil procedures.
Unlike in FERA, the burden of proof will be on the enforcement
agency and not on the implicated. FEMA describes an elaborate
redressal machinery for total justice and fairness to the implicated
while deciding on the question of contravention. The RBI has,
however, clarified that any offence under the old Act will be
taken cognisance of by a court within two years from repeal of
FERA and would be dealt with under the provisions of the old Act.
RBI okays Re loans to Indian cos from NRIs, PIOs
MUMBAI
THE RESERVE Bank of India has allowed Indian companies to borrow
in rupees from NRIs or a person of Indian origin resident outside
the country or overseas corporate bodies, by way of investment
in non-convertible debentures (NCDs), under the newly-enacted
Foreign Exchange Management Act (Fema) 2000.
Coming into force from June 1, the new Act, which replaces the
Foreign Exchange Regulations Act (Fera) 1973, allows companies
to borrow in rupees "on repatriation or non-repatriation basis",
subject to certain conditions, according to latest RBI notifications
on Fema. The conditions make it mandatory that NCDs must be issued
by a public offer and their period of redemption be not less than
three years, RBI said.
The NCD interest rate should not exceed the prime lending rate
State Bank of India as on the date of approval of the company
general body of its borrowing plan, plus 300 basis points (3 per
cent), it clarified. The borrowing company shall not carry on
agricultural, plantation and real estate business, trading in
transferable development rights and does not act as a nidhi/chit
fund company, the apex bank said.
The borrowing company should file a detailed report on the process
and results of the NCD issue to the nearest RBI office within
30 days of receipt of remittance for investment in NCDs and of
issue of NCDs, it added.
The RBI new rules cover various Fema-related
activities, including borrowing and lending, deposits, capital
account transactions, transfer of immovable property outside India,
export and import of currencies, all coming into effect from next
month.
Companies borrowing on repatriation basis should ensure that the
percentage of NCDs issued to NRIs and OCBs to the total paid-up
value of each series of NCDs issue should not exceed the ceiling
prescribed for issue of equity shares/convertible debentures for
foreign direct investment in India as specified by RBI.
Another condition is that amount of investment received by remittance
from outside India should be through normal banking channels or
by transfer of funds held in the investor's non-resident external
(NRE)/foreign currency non-resident (FCNR) account maintained
with an authorised dealer or bank. Companies borrowing by issue
of NCDs on non-repatriation basis should receive the investment
either by remittance from outside India through normal banking
channels or by transfer of funds held in the investor's NRE, non-resident
ordinary (NRO), FCNR, non-resident non-repatriable (NRNR) or non-resident
special rupee (NRSR) account maintained with an authorised dealer
or bank in India. Where the investment is made out of funds held
in NRSR account, the interest on such NCDs should not be repatriable
outside and the maturity proceeds and interest on such debentures
are credited only to the investor's NRSR account, the apex bank
said.
RBI also empowered an authorised dealer to permit a temporary
overdraft of Rs 5 crore in rupee accounts maintained with him
by his overseas branch or correspondent or head office outside
the country, subject to such terms and conditions specified by
it. On acquistion and transfer of immovable property outside India,
RBI has notified that a person of Indian resident can acquire
by way of gift property other than agricultural land, farm house
and plantations from an NRI or inherit the same in accordance
with provisions of the foreign exchange law applicable at that
time. He could do so also by way of purchase out of foreign exchange
held in resident foreign currency account in accordance with the
law, it said.
On restriction for acquisition and transfer of immovable property
outside India, the apex bank said no Indian resident shall acquire
or transfer any immovable property outside India without RBI's
permission. However, two categories have been exempted from the
above, ie., property held by foreign national who is a resident
of India and also that acquired by a person, resident in India
on or before July 8, 1947 and continued to be held by him with
permission from RBI.
The apex bank has prohibited acquisition or transfer of immovable
property in India by citizens of Pakistan, Nepal, Bangladesh,
Sri Lanka, China, Iran, Afghanistan and Bhutan without its prior
permission, "other than lease not exceeding five years". -
PTI
Millennium deposits mobilise $5.5 b
SBI
has raised $5.5 billion from a recently concluded overseas deposit
offer, the lead arranger said today. “The final figures have come
in.
The figure collected by the India Millennium Deposits is $5.5
billion,” a spokeswoman at SBI Capital Markets said. The deposit
offer, aimed at expatriate Indians opened on October 21 and closed
last Monday. The spokeswoman said the deposit plan received 72,000-73,000
applications.
Bankers say RBI encouraged SBI to launch the scheme to boost foreign
exchange reserves which have been falling since the rupee came
under pressure from high global oil prices and a slowdown in foreign
capital inflows. India’s foreign exchange reserves are down 9.39
per cent from a mid-April peak of $38.341 billion, largely reflecting
the central bank’s efforts to augment dollar supplies.
The SBI scheme offered deposits in three currencies — the US dollar,
euro and sterling. It offered 8.5 per cent on dollar deposits,
7.85 per cent on sterling and 6.85 per cent on deposits in euro.
The IMD was the second offering by the SBI to expatriate Indians.
In 1998, it launched the Resurgent India Bonds to shore up foreign
capital inflows after India was hit by economic sanctions following
its nuclear tests.... Reuters
IMD pushes up forex pile
THE INDIA Millennium Deposit is giving the much-needed psychological
comfort.
Thanks to inflows from the NRI deposit programme offered by the
State Bank of India, foreign exchange reserves increased after
a long time by $676 million during the fortnight ended November
10.
With SBI bringing in the money which directly goes into the country’s
forex kitty, the downward trend in forex reserves seen over the
past five weeks has been arrested. Among other things, higher
reserves could help the central bank intervene in the market if
the rupee comes under renewed pressure from oil bills. However,
banks continue to confront a sluggish market.
The latest reporting fortnight for the banking sector shows a
slowdown in business. Major indicators like deposits, bank credit
as well as investments recorded a negative growth during the fortnight
ended November 3. According to the figures released in the WSS
released by the Reserve Bank of India, aggregate deposits mobilised
by the banking sector fell Rs 3,458 crore during the fortnight
ended November 3 to Rs 8,87,995 crore.
Post IMD flow not to fuel inflation:
HIGH inflation level is unlikely to be driven up by a surge in
domestic liquidity from a multi-billion dollar overseas deposit
offering as demand in the economy remains muted, rating agency
Crisil said on Friday.
The India Millennium Deposits, floated by SBI, collected $5.5
billion from expatriate Indians and the resultant inflows are
expected to result in a large boost to domestic money supply.
Such a surge in money supply would normally stoke inflationary
pressures. But Crisil said it did not expect any upward pressure
on inflation.
It said the current high levels of inflation were more due to
either supply-side factors or a rise in administered prices than
due to demand. “Given this, the higher projected growth of M3
on account of IMD inflows is not expected to exert inflationary
pressures in the immediate term,” Crisil said.
Crisil expected M3 money supply growth to rise to 18 per cent,
against the 15.5-16 per cent for 2000/01 (April-March) estimate
by RBI. The year-on-year inflation rate, based on wholesale prices,
was 6.92 per cent in the week ended September 23, compared to
3.22 during the same period in the previous year.
The inflation rate based on consumer prices was 3.5 per cent in
September 2000 compared to 2.14 a year earlier. The country’s
year-on-year M3 money supply growth was 14.7 per cent in the two
weeks to October 20 compared to 15.9 per cent a year earlier.
Crisil said the millennium deposits will result in an additional
external debt service burden of $7.4-7.5 billion in 2005/2006.
According to RBI, external debt rose to $98.435 billion on March
31, 2000 from $97.666 billion a year ago.
Barring this adverse impact, the IMD inflows are expected be positive
on the economy and bolster foreign exchange reserves, Crisil said.
The inflows will help in providing some stability to the rupee
against the dollar during the second half of the financial year,
Crisil said.
Bankers say the RBI encouraged SBI to launch the scheme to boost
reserves, which have been falling since the rupee convertible
only on the current account, came under pressure from high global
oil prices and a slowdown in foreign capital inflows. Foreign
exchange reserves are down 9.39 per cent from a mid-April peak
of $38.341 billion while the rupee, at 46.83/84 per dollar in
Friday’s afternoon trade, has lost more than seven percent against
the dollar since January.
The addition to money market liquidity will also help the Central
bank complete the rest of the government’s borrowings for the
financial year without affecting interest rates, Crisil said.
CrisiL expected the central bank to extensively use open market
operations to absorb excess domestic money market liquidity. —
Reuters
FCNR(B) deposits' tenure may be raised
to 5 years
THE INDIA Millennium Deposit is over, the
kitty is swollen. But the world is full of surprises and it’s
time to plan other ways to tap the savings of non-resident Indians.
The Reserve Bank of India is considering extending the tenure
of Foreign Currency Non-Resident (B) deposits from three years
to five years.
At present, banks can only accept deposits up to three years,
while the minimum tenure is one year. The central bank has indicated
this in recent discussions with banks, top sources told The Economic
Times. “(The) RBI has informally conveyed us that they are planning
to extend the tenure of FCNR(B) deposits,” said a senior banker.
The outstanding FCNR deposits in end August 2000 stood at $9.4
billion. Thanks to the low maturity period, banks cannot deploy
FCNR deposits to create long-term assets. This is an area where
India has lost out to China which has been more aggressive in
tapping non-resident savings. If five-year deposits can be attracted,
they could be more gainfully employed. Banks often choose to park
the money abroad and derive a marginal or even negative spread
on the deposits.
Such funds can be better utilised if banks bring them in and extend
forex or rupee loans to finance domestic projects. Moreover, such
foreign currency liability can also used to finance overseas acquisitions
by local companies.
Sources said the proposal could also be aimed at building a more
comfortable cushion to address a possible Balance of Problem and
meeting bunching of payments. And, in this case a five-year deposit
could offer a more stable source. While FCNR funds don’t add to
the country’s reserves, the RBI, as it did in the 1991-92 crisis,
can always direct banks to surrender it. But under the present
circumstances, this is only a remote possibility. “Instead of
floating foreign currency papers, it could be wiser to extend
the tenure of the FCNR(B) deposits,” said a senior banker. However,
banks will have to change the way they handle the FCNR(B) deposits.
Banks would be required to do aggressive forex and interest rate
swap operations to better utilise the FCNR(B) funds. If rupee
loans are extended out of the FCNR(B) funds, a forex swap rollover
will have to be done every six months to take care of the exchange
risk; and if it’s a fixed rate loan, interest swaps will have
to be carried out to protect the exposure from interest rate fluctuations
in the domestic market. “A lot will depend on the banks’ ability
to monitor the market and carry out these operations on a continuous
basis,” said a banker.
Significantly, the bulk of FCNR deposits (may be close to 40 per
cent) is of one-year maturity. Attracting five-year deposits may
call for higher rates. “But, long-term loans also have their returns,”
said a banker. Also, a longer tenure FCNR scheme will primarily
attract remittances from semi-skilled labourers in the Gulf and
low-end software professionals, but is unlikely to interest high
net-worth non-resident Indians.
HDFC's service for Gulf NRIs
Our Gulf Correspondant,
ABU DHABI
HOUSING Development and Finance Corporation (HDFC) is holding
its first value-added consultancy service week in Dubai , targeted
exclusively at non-resident Indians.
Mr. Thomas Cherian, Manager of the Dubai-based regional office
of HDFC, told Business Line today that the consultancy week, titled
`Prop Talk', is the first such service offered by any financial
institution. ``The consultancy service is being launched for the
first time at the Dubai office with NRIs as the main clientele.
At a later stage, if the services are found useful, it may be
introduced for resident Indians also,'' he said.
Two senior HDFC officials from Bangalore and Mumbai will be on
hand at `Prop Talk' to offer guidance and advisory services on
a number of issues related to buying property in India. They will
provide project details of nearly 250 real estate projects in
Bangalore, New Delhi, Goa, Mangalore, Mysore, Mumbai and Pune.
They will also provide information on legal aspects such as power
of attorney and stamp duties, pricing, location, how to select
the ideal property, garnering funds for purchases, construction,
extension or improvement of the property, Mr. Cherian said. ``There
will be no representatives of the builders with us, so there is
no pressure on the clients. They can decide in a free manner about
the kind of property they would like to buy and choose from a
variety of options.
HDFC will offer them viable and varied projects to choose from,''
he explained. may, at a later stage, be taken to other Gulf states
such as Kuwait, Oman and Doha, if the response is good, he said.
NRIs from the Gulf are showing a renewed interest in Indian real
estate due to the levelling off of property prices and the devaluation
of the Indian rupee.
NRI identification proposal accepted
ABU DHABI, March 26
THE Indian Ministry of
External Affairs has accepted a proposal for some sort of identification
for non-resident Indians (NRIs), according to Dubai-based Indian
businessmen and social worker, Mr. Bharatkumar Shah. Mr. Shah,
who had pursued the matter with the Indian Government, received
a letter from Mr. S.R. Tayal, Joint Secretary and Chief Passport
Officer, at the Ministry, confirming that the proposal has been
accepted and is being considered for implementation.
The proposal was under consideration by the concerned Ministry
and was being co-ordinated by the India Investment Centre, Mr.
Shah told the local dailies.
The matter would be followed up through the Indian missions in
the UAE, according to the letter. Mr. Shah expressed satisfaction
that his efforts on the issue had proved to bring results.
A number of representations had been made and meetings had been
held with the Indian leaders on the matter, he said. Mr. Shah
has suggested that instead of an identity card, Indian missions
abroad should affix a stamp on the passport after verifying the
NRI status. The stamp would indicate that the concerned person
was an NRI. A nominal fee could be charged for the purpose, he
suggested.
For Gulf NRIs, this would be useful, as they were vulnerable to
harassment by authorities in India, right from the time of customs
clearance, to purchasing property, and admitting children in educational
institutions, Mr. Shah said. Mr. Shah planned to meet the External
Affairs Minister and the Home Minister to discuss the matter in
further.
FEMA effective from June 1
New Delhi
The Government has notified that the Foreign Exchange Management
Act (FEMA) 1999 which has been approved by Parliament will come
into force from June 1.
The RBI is now expected to shortly specify the permissible class
of capital account transactions, the manner and form in which
the declaration is to be furnished by every exporter of goods,
the period and the manner of repatriation of foreign exchange
and the permissible limits up to which foreign currency, foreign
coins and foreign exchange may be acquired or retained. -- Our
Bureau
RBI to launch new, improved FEMA soon
New Delhi
Reserve Bank will soon come out with the draft of the proposed
Foreign Exchange Management Act (FEMA), which would be more flexible,
transparent and business-friendly, a top official said today.
"The basic philosophy behind framing FEMA is to make exchange
control simpler. As compared to Foreign Exchange (Regulation)
Act (FERA), FEMA would be more transparent, business friendly
and flexible,"
RBI Executive Director Khizer Ahmed said at a conference organized
by PHD Chamber of Commerce and Industry. Asked about the time,
he said it would be completed "soon".
The time by which government comes out with the draft also depends
on the Ministry of Finance, he added. "RBI is in the final stages
of completing the draft but the legal matters pertaining to the
norms for adjudications are being prepared by the revenue department
of the ministry," he said.
Terming the new draft of exchange control as "two steps forward
rather than a step backward," he said many facilities that are
available now under FERA would be provided in FEMA.
However, procedures under exchange control are being curtailed
and documentations are made simpler, Ahmed said. About role of
the Enforcement Directorate (ED), he said "the directorate can
only investigate and take a person to adjudication but it cannot
prosecute him." "The norms for external commercial borrowing would
be the same and companies will be allowed to borrow up to USD
10 million without prior permission," Ahmed said while clarifying
that FERA would not cast a shadow over the proposed FEMA.
He said the new norms would enable companies to obtain foreign
exchange for business purposes much more easily. "If the companies
seek foreign exchange, the banks would be bound to offer it without
questioning about the end use," he said. Before FEMA is put into
practice, the government seeks to provide two years time frame
within which opinions of the people, industry and chambers, would
be taken and final changes made. Asked about applicability of
FEMA to companies in the information technology sector, the RBI
official said the government was working out the laws regarding
transfer of money through the internet.
ICICI Bank launches web products for NRIs
Our Banking Bureau in Mumbai
ICICI Bank has launched a host of special web banking products
targeted at non-resident Indians (NRIs). NRIs would now be allowed
to open an account online, avail of easy transfer of funds to
173 locations in India as well as earn higher interest rates as
part of a special package.
Called the 'Millennium Offer', the package is valid till December
31. Speaking at a press conference here, M N Shenoi, senior vice-president--retail
banking, said, "NRIs were the initial target of Net banking, and
there has been a very good response from them. Of the 10,000 NRI
customers we currently have, around 80-90 per cent avail of the
Internet service as well." Opening an account online would involve
just two steps.
The first would be submission of an electronic form; after which,
they would receive a password within 72 hours. NRIs would be allowed
to have a zero balance on such accounts.
In the second step, they would have to mail all necessary documents
and would be allowed to withdraw money and conduct other transactions
only after receipt of such material by the bank. The bank would
also be launching other products, including bill presentment,
demand draft requisition and web ATM facilities in the near future.
"Customers would then be allowed to use their ATM personal identification
number to withdraw money from the Internet," said Shenoi. ICICI
Bank will also be installing kiosks near their ATMs, which would
allow customers to access their Internet accounts. Says Shenoi,
"A couple of kiosks would be put in place initially, and once
they are tested, we expect to install kiosks next to all our ATMs."
At present the bank has 111 ATMs, and there is a move to install
more off-site ATMs in the future. Their recent product would also
allow NRIs to query on financial matters, including tax laws,
and investment opportunities in India. Fund transfer would be
allowed for non-customers as well.
Forbes 500 honours Indian enterprise in US
Ela Dutt NEW YORK
SEVERAL Indian American companies
have made it to the Forbes 500 list, especially some of the newcomers.
Of these, at least 10 are Indian American-owned or operated. This
year’s Forbes 500s list is the largest in its 32-year history,
with 892 companies qualifying in at least one of the four categories
—sales, profits, assets and market capitalisation.
There are 190 newcomers compared to the 76 first-timers among
last year’s Forbes 500s. Among the 190 who made it for the first
time, mostly because of their soaring stock prices, the 10 that
are Indian American-owned or operated, include i2 Technologies,
Juniper Networks and Sycamore. Even as the lists were being made,
Forbes had to consider the major setbacks in market value of many
of the newcomers as technology stocks plunged on April 4 and 5.
The market data for this year’s list was compiled on March 10,
when technology stocks peaked. If the data had been culled last
week, 48 of these companies would not have made it to the list,
said Forbes. Aspect Development, Exodus (founded by Indian Americans
but later bought out), Healtheon (where an Indian American is
second in command and critical to the company’s growth); InfoSpace,
MicroStrategy, Redback Networks and Tibco Software are also on
the Forbes newcomers list. Fifteen per cent of the new companies
were in the business of computers and electronics, 14 per cent
in telecommunications, 11 per cent in computer software and services
and 6 per cent in banking and financial services.
But the line-up is overwhelmingly dominated by one industry —the
internet, not surprisingly. Twenty-three per cent of the new companies
on the list fit the internet bill. The way things are going, many
of these companies may not even be in business next year, much
less on the Forbes 500s, the magazine predicts. Furthermore, Forbes
notes, never have so many companies worth so much had so little
revenue.
Some 172 of the companies that joined the Forbes 500s this year
have less than $250 million in sales and make it to the list because
of other attributes like market capitalisation. The minimum amount
to qualify for the Forbes 500s in terms of sales is $2.8 billion
The composite sales numbers for the 895 companies listed in the
Forbes 500s under different categories rose 11 per cent in 1999
to $6.5 trillion. Profits rose 26 per cent to $440 billion. —IANS
Govt sets up NRI group on IT
New Delhi,
The government today constituted a select group of nonresident
infotech professionals from Silicon Valley of the United States
to carve out a global strategy for promoting India as an "IT destination"
in tune with the global scenario.
According to an official statement, the 8-member group will be
headed by the Minister for Information Technology Pramod Mahajan.
The group's mandate will be to take note of emerging areas in
information technology globally and fine tune IT policy prescriptions
within the country in order to attract foreign investment.
The members of the group are P.V. Jayakrishnan, secretary in the
ministry of information technology, Kanwal Rekhi, president of
the TiE group, Vinod Khosla of the US firm KPCB, Suhas Patil of
Cirus Logic, K.B. Chandrasekhar chairman of Exodus Corp, USA,
Sabeer Bhatia of hotmail.com fame and Devendra Chaudhry, director,
ministry of information technology, who would be convenor of the
group.
One of the key areas of the group will be to advise the ministry
of information technology with regard to new emerging areas. Special
attention will be given to facilitation of angel investment, venture
creation and incubation facilities. The group is expected to keep
the government abreast with the latest developments taking place
in the infotech world and also the market trends.
The government may seek the group's advice in the formulation
of policies in the area of it and strengthening of telecommunications
vis-a-vis it policies and with regard to specific targets set
by the government. The group has also been given the responsibility
of facilitating the growth of human resource development within
the information technology sector with the objective of creating
quality-based education.
German green cards on the way Following on from Chancellor Gerhard
Schroeder's call for IT engineers from India (and Eastern Europe),
Germany will issue American style green cards in summer, according
to agency reports. A German official was quoted as saying, "''A
decree will come into effect by August 1 at the latest." Under
the new proposals, about 20,000 engineers will be brought in,
of which between 7-10,000 would be Indians. However, there has
already been opposition to this plan in Germany, as many politicians
fear that Germans will lose their jobs as a result. Further, Germany
has a large number of immigrants, which has already caused a considerable
amount of racial tension in the country. In any case, the question
is, how many Indians will be interested? The US has long been
the Mecca for IT, more so now than ever before, as many Indians
are reaching the very pinnacles of the profession there. And given
that Germany is not an English speaking country, it is doubtful
if the issuing of green cards will result in a flood of applications.
But you never know!
RBI eases investment norms for NRIs,
OCBs
The Reserve Bank of India (RBI) has further relaxed investment
guidelines for non-resident Indians (NRIs).
The RBI has granted general permission to Indian companies for
issuing non-convertible debentures (NCDs) by way of public issue
to NRIs/OCBs on a repatriation basis. The central bank has said
that Indian companies need not take permission from the RBI.
The RBI has also said that authorised dealers may grant rupee
loans and overdrafts in India to NRIs against the security of
shares, securities, debentures or immovable properties held by
them for purposes other than investments. The RBI has also decided
to delegate powers to authorised dealers to permit portfolio investments
by NRIs/persons of Indian origin (PIOs) and Overseas Corporate
Bodies (OCBs) in shares and debentures.
At present, NRIs/PIOs/OCBs are permitted portfolio investments
in shares and debentures. These permissions by RBI are originally
for a period of five years and can be renewed by designated banks.
According to Jalan, these measures are being taken to create an
environment which is favourable to investment and strenghthening
of financial links with the NRI community abroad.
RBI nod for issue of shares to NRIs
Mumbai:
RBI has issued general permission under FERA for issue of shares
to NRIs vide notification No. FERA 215/2000-RB dated March 22,
2000.
Accordingly, the eligible Indian companies can issue shares to
NRIs and file the prescribed declarations etc with the regional
offices of RBI as hitherto, a central bank release said on Thursday.
It may be recalled that the government had recently issued directions
expanding substantially the `automatic route of RBI' to cover
FDI/NRI/OCB investments.(UNI)
HDFC cuts interest
rates for NRIs to 20-year low
Our Mumbai Bureau
HDFC has reduced interest rates on a niche segment of housing
loans that are available for non resident Indians (NRIs) by one
percentage point.
The announcement comes close on the heels of the government's
decision to trim interest rates on public provident funds and
other small savings schemes. Sources said a review of the standard
loans rates would depend on the ability of HDFC to bring down
its cost of funds on deposits. This would in turn depend on the
banks bringing down their long-term deposit rates.
For NRI's, interest on loans up to five years has been slashed
from 13 per cent to 12 per cent while interest on loans up to
seven years has been reduced to 13 per cent from 14 per cent.
Interest rates on other NRI loans such as home improvement loans
and land loans have also been reduced to 12 per cent. Unlike loans
to resident Indians where the interest rate is determined by the
size of the loan, interest on loans for NRIs depend on maturity.
Loans are available for a maximum of Rs 50 lakh. According to
a statement issued by HDFC, NRIs particularly those who come from
the Middle East and the US have shown interest in buying real
estate in India due to the low property prices. "With this reduction,
interest rates on loans for NRIs are at a 20-year low.
The reduction of interst rates is expected to increase the investment
in real estate by the NRIs," the statement said. HDFC raises funds
for its loans from loan repayments, fixed deposits and institutional
borrowings.
Repatriate of profits without RBI approval
allowed
IN AN effort to take the liberalisation process forward, the
government is toying with the idea of giving foreign investors
the freedom to repatriate money to their home country, minus approvals.
The government may put an automatic system in place according
to which investors would only have to intimate the Reserve Bank
of India (RBI) of the amount they would be taking out of the country.
They will not have to seek permission to do the same. According
to sources in the commerce and industry ministry, the logic behind
the move is simple. The government wants to roll out the red carpet
and reduce red tape in order to boost FDI. Towards this end, it
has even increased the automatic list.
Now, it needs to be equally liberal in allowing investors take
back their due, be it dividend or any other entity that reflects
profits. Sources said that the department of industrial policy
& promotion has recommended that licensed foreign exchange dealers
be roped in to assist in monitoring the outflows made foreign
investors such as MNCs and even NRIs. These foreign exchange dealers
would simplify matters further, they added.
India's forex reserves stand at a comfortable $34bn. It is hoped
that phase-II of the reforms process coupled with certain changes
in the trade policy help increase reserves even further. The trade
policy changes are likely to be incorporated in the Union budget
that is scheduled to be tabled in Parliament on February 29. The
current policy exercises checks, largely sector-specific, on forex
outflows. For example, in accordance with the recommendations
of the RBI and the finance ministry, foreign investors can repatriate
up to 15 per cent of the dividend earned on preference shares.
Foreign investors have repeatedly sought redressal, arguing that
the apex bank takes months to clear applications to repatriate
funds. This is largely because the RBI, before processing applications,
consults the ministries as well as the state governments. "This
is not needed as foreign investors have usually toed the policy
line. They would like to avoid being penalised or be involved
in any litigation," an industry ministry source said. In any case,
a monitoring mechanism is in place, so the extra checks could
be abolished, the source added.
Global Trust Bank launches Internet banking
Our Correspondent in Hyderabad
The city-based Global Trust Bank (GTB) yesterday launched its
Internet banking service, ibank@gtb, and claimed to have to become
the first bank in the country to provide customers access to their
depository accounts through the Internet.
Formally launching the service, the Reserve Bank of India governor
Bimal Jalan visualised that sooner than later, Internet banking
would become as common as signing a cheque.
He commended the initiative taken by Global Trust Bank for the
stage-wise launch and the emphasis on security features which
would be essential for success in this new area. The bank's chairman
Ramesh Gelli said the launch of Internet banking was part of his
bank's strategy to provide world-class products with superior
service levels. According to the bank, its (National Securities
Depository Ltd) demat account holders can look up their equity
holdings and also conduct transactions on the Net.
Earlier this week, yet-unnamed financial institutions were reported
to have picked up a stake in the bank following divestment by
two foreign partners. Gelli confirmed the purchase, but did not
reveal the identity of the new stakeholders. According to a company
official, the shares were acquired by members of the promoters'
group of the bank who then placed these directly in the market
where they had been picked up by institutions.
The deal was reportedly brokered by Credit Suisse First Boston
(CSFB), though CSFB declined to comment on the issue when contacted
in this regard. Global Trust had earlier announced that it is
seeking a tie-up with a foreign bank and is prepared to shed a
chunk of its equity, after the pull-out of its two strategic partners,
Hambrecht & Quist of the US and TA Enterprises of Malaysia, who
were with the bank since its inception five years ago. According
to the bank, since 13 per cent of the holding has been vacated
by the two foreign partners, the bank was looking to tie up with
other partners.
ICICI Bank nets large NRI deposits
Mumbai ICICI Bank has reaped rich dividends for going the whole
hog in Internet banking having doubled its Non-Resident Indian
(NRI) deposits to Rs 500 crore in less than nine months since
April 1999.
The pioneering Web initiatives are expected to swell the bank's
NRI deposits by another Rs 250 crore by March 31, 2000. The bank
has built up the NRI deposits without any physical presence abroad
and utilises the correspondent banking arrangements to channel
the deposits put in by NRIs.
The bank, which offers the highest interest rates on NRI deposits,
is in the process of assisting NRIs take a decision on choosing
from among the available deposit schemes by providing a `Calculator'
on its website to know the returns each of the schemes would fetch
for them.
NRI inflows lag at $13m in Apr-Aug despite incentives
NRI investments continued to lag behind in the
first five months of the current financial year against the inflows
in the same period last year, despite the plethora of sops extended
by the government.
Against an inflow of $42m in the same period last year, FDI inflows
up to August are a third at $13m. Since the buoyant inflows of
'95-96, NRI investments have been falling. They were just $62m
in '98-99, about one-tenth of the peak $715m inflow of '95-96.
In '95-96, the government had visualised the possibility of the
diaspora helping the country to develop, just as Chinese expats
had helped China. However, the optimism has been short-lived,
given the low level of inflows recorded despite all the sops.
The BJP government has been particularly keen on wooing the India
diaspora and it is amongst the first to grant NRIs a Person of
Indian Origin (PIO) card, even while promising to look at the
possibility of dual citizenship.
The PIO card entitles an NRI to a range of benefits, including
tax shields for investment in numerous sectors. Yet, NRI investments
have actually tapered off. Significantly, while NRI investments
(FDI) are negligent, deposits in NRI accounts have been stable.
The investor profile is totally different for investors and depositors.
But, as a thumb rule, officials see NRIs as nothing more than
fairweather friends out to maximise returns rather than help the
parent country.
The government obviously has expectations from NRIs because it
has accorded them special treatment as compared to the other foreign
investors. Unfortunately, there is little reciprocation of sentiment.
NRI deposits are stable as domestic interest rates are still not
aligned with international rates, making India an attractive destination
for depositing funds. Officials say it is unclear if NRI deposits
will remain undisturbed once domestic and international rates
are aligned. During the BoP crisis of '90-91, NRIs were the first
to withdraw their money. It is unclear if this will happen again
when interest rates are progressively shifted southwards and get
aligned with international ones.
Conditions removed to facilitate more
NRI Investment in Health Sector
Keeping in view the need to augment health services and to facilitate
NRI investments, the Government has removed the following conditions
earlier imposed on investment in health sector to NRIs: i. The
centres are equipped as per the norms specified by the Ministry
of Health and Family Welfare ii. 25% of the facilities available
in hospitals / centres are provided free of cost to poor and the
needy. The removal of these conditions is without prejudice to
any conditions agreed to by companies while availing any special
incentives / concessions. It is hoped that the removal of these
conditions will facilitate greater NRI investment in the health
service sector and encourage induction of up-to-date diagnostic
facilities.
Investments by Non-residents of Indian
Nationality / Origin in Urban Development and Housing
The Government of India has recently announced a scheme to encourage
Non-residents of Indian Nationality / Origin to invest in the
urban development and housing sector.
The scheme has three components:
a.
Under the first component, existing or new companies, both private
and public limited, engaged or proposing to engage in the development
of serviced plots and construction of built-up residential premises,
real estate covering construction of residential and commercial
premises, including business centres and offices, development
of townships, city and region level urban infrastructural facilities,
including roads and bridges, manufacturing of building materials
and financing of housing development are to be allowed, on application,
to issue equity shares/convertible debentures to Non-residents
of Indian nationality / origin upto 100% of the new issues with
repatriation benefits.
The repatriation of original investment will be allowed after
a lock-in period of 3 years from the date of issue of equity shares/convertible
debentures with prior permission of the Reserve Bank of India.
b.
The second component of the scheme relates to the acquisition
of immovable properties by individuals NRIs. It makes the following
three provisions in these respects:
i. Foreign citizens of Indian origin and non-residents
holding Indian passports are to be allowed, against applications,
to repatriate the original investment in equivalent foreign exchange
in residential properties upto a maximum of 2 houses.
ii. General permission has been granted to foreign citizens
of Indian Origin, whether resident in Indian or not and to non-residents
holding Indian passport to acquire by way of purchase or inheritance
and transfer or dispose of by sale, commercial immovable properties
situated in India. Repatriation of original investment in equivalent
foreign exchange will be allowed by the Reserve Bank of India
on receipt of an application.
iii. General permission has been granted to foreign citizens
Indian origin, whether resident in India or not, to acquire, transfer
or dispose of residential properties upto two houses situated
in India by way of gift from or to a relative who may be an Indian
citizen or a person of Indian origin, whether resident in India
or not, subject to the condition that gift tax, if any, shall
be paid. Apart from repatriation of the original investment in
equivalent foreign exchange, the rental income and the proceeds
of any investments out of such income will be allowed to be repatriated
in a phased manner over a 3 year period as per the Circular of
RBI, Exchange Control Department, AD ( M.A. Series) Circular No.
18 dated August 19, 1994.
c.
The third component of the scheme related to Overseas Corporate
Bodies. Such bodies predominantly owned by Non-residents of Indian
nationality / persons of Indian Origin, understood to include
overseas companies, partnership firms, societies and other corporate
bodies which are owned directly or indirectly to the extent of
at least 60% by individuals of Indian nationality / origin resident
outside India and also overseas trusts in which at least 60% of
the beneficial interest irrevocably held by such persons, are
allowed to:
i. Invest in the development of serviced plots, construction
of built up residential premises, construction of residential
and commercial premises, development of townships, development
of infrastructure facilities, manufacture of building materials
and participatory ventures in these areas and in housing finance
institutions.
ii. Repatriate the principal investment in foreign exchange
and in net profit upto 16% earned after the first three years
of investment , and
iii. Repatriate dividend on equity / interest on shares
/ convertible debentures subject to the payment of applicable
taxes without any lock in period.
The above scheme has opened the way for substantial investment
by Non-resident of Indian nationally /origin in the urban development
and housing sector.
Guidelines for Foreign Equity Participation
in Private banks modified
Under the existing policy, foreign direct investment in private
sector banks up to 20 percent by foreign banking companies or
finance companies, including multilateral Financial institutions
as technical collaborators or co-promoters is permissible. Under
this policy, NRIs are also allowed equity participation in private
sectors banks up to 40 percent, which would be include of equity
participation by other foreign investors as indicated above.
With a view to attracting foreign direct investment up to the
permissible limit of 40 percent in private sector banks, in case
of shortfall in NRI contributions, multilateral financial institutions
would be allowed to contribute foreign equity to the extent of
the shortfall in NRI contributions within the overall limit of
40 percent.
RBI notifies 40% FII investment limit
MUMBAI:
In line with the proposal made by Finance Minister Yashwant Sinha
in Budget-2000, the Reserve Bank of India (RBI) has permitted
Indian companies to allow foreign institutional investors (FIIs)
invest up to 40 per cent of their issued and paid up capital under
portfolio investment scheme (PIS). The enhancement of the aggregate
ceiling for FII investments under PIS from the existing 30 per
cent is subject to approval by board of directors and passing
of a special resolution by the general body of the company to
this effect, according to a RBI release here.
All other conditions applicable to FII portfolio investment continue
to be operative as before, it added. (PTI)
Templeton Funds for NRIs
The Citibank NRI Services has lunched the Templeton
funds for NRIs in UAE, Bahrain and Oman.
The Templeton Funds offered three rupee based Funds which are
being sold to Residents and Non Resident Indians:
1. Templeton India Growth Fund (TIGF),
2. Templeton India Income Fund (TIIF), and
3. Templeton India Liquid Fund (TILF).
TIGF is an open-ended equity fund, TIIF is an open-ended debt
fund, while TILF is an open and high liquidity debt fund that
invests in Call Money, Treasury Bills, Commercial Paper etc.
Templeton is a global fund management company with special emphasis
on emerging markets and has approximately US Dollars 240 billion
in assets under management. They have established their presence
in India since 1996 and prior to that they were investing in India
through the FII route.
For further details, interested parties may contact :Templeton
Asset Management (India) Pvt. Ltd.
At the following address under intimation to
IIC: Mr. Vijay C. Advani President & Chief Executive Officer Or
Mr. Rajiv Vij Vice President (Marketing)
Templeton Asset Management (India) Pvt. Ltd.
Sakhar Bhavan, 1st Floor, 230,
Backbay Reclamation, Nariman Point,
Mumbai-400 021.
Telephone: 2886123, 2823757 Fax: 2886133, 2886707
Sharp fall in Kerala NRE deposits
growth
Our Bureau THIRUVANANTHAPURAM
THE growth of non-resident (NRE) deposits mobilised by banks in
Kerala has slowed down drastically in 1999 in what is, perhaps,
a reflection of the changing trend of migration. NRE deposits,
which had shown an average annual growth of 25.40 per cent till
1998, fell to a mere 4.66 per cent in 1999.
The maximum growth rate of 48 per cent was recorded in 1993, according
to the latest Economic Review by the State Planning Board. During
the year, the total deposits grew by 14.45 per cent, which was
also the lowest since 1989. On the other hand, domestic deposits
increased by 22.85 per cent, which was the highest since 1989.
The NRE deposits rose to Rs. 13,329 crores in 1999 from Rs. 12,735
crores in the previous year. Of this, a major share amounting
to Rs. 5,300 crores (39.76 per cent) was mobilised by the State
Bank group, followed by the other nationalised banks with Rs.
4,492 crores (33.70 per cent) and the private banks with Rs. 3,204
crores (24.04 per cent). The review also laments the fall in the
credit-deposit ratio of banks in the State.
It has pointed out that while deposits grew by an average annual
rate of 18 per cent during 1988 to 1999, advances registered a
growth rate of only 14 per cent, which is reflected in the declining
C-D ratio in Kerala. The C-D ratio, which stood at 65.31 per cent
in 1989, has steadily declined and was at 43.11 per cent in 1994.
It moved up slightly to 45.22 per cent in March 1998. It fell
to 43.37 per cent in March 1999 and further to 40.42 per cent
by September-end. At the same time, the C-D ratio was 83.41 per
cent in Tamil Nadu, 75.78 per cent in Maharashtra, 68.80 per cent
in Andhra Pradesh and 63.57 per cent in Karnataka. The all-India
ratio stood at 52.20 per cent in September 1999. Again, out of
an aggregate credit disbursement of Rs. 2,99,274 crores by banks
at the all-India level as in June 1999, the share of Kerala was
Rs. 8,570 crores or a meagre 2.86 per cent. Bank-wise, the C-D
ratio of State Bank of India has declined from 67.50 per cent
in 1991 to 41.95 per cent in March 1999.
For State Bank of Travancore, the ratio has come down from 60
per cent to 44.93 per cent during the same period. The C-D ratio
of Canara Bank, the lead bank in the State, has remained low over
the years. Between 1991 and 1999, its ratio was lower than the
overall State-level ratio, sometimes by more than 10 per cent
in certain years.
The Avari Committee, set up by the Reserve Bank of India to examine
the reasons for the fall in the C-D ratio in Kerala, had recommended
that the banks should re-orient their credit operations in the
State in such a way as to achieve a ratio of 55 per cent by 1998-99
and 60 per cent by 2000-01. But, even in 1999, the ratio attained
was just 43.06 per cent.
More to follow...
