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What is Form FC?
In Form FC, information relating to financial commitment including ODI, restructuring and disinvestment by Indian entities (as defined under the OI Rules) and resident individuals, as applicable is furnished to RBI.
Regulations/Master Directions Applicable:
Foreign Exchange Management Act, 1999
Foreign Exchange Management (Overseas Investment) Rules, 2022
Foreign Exchange Management (Overseas Investment) Regulations, 2022.
Foreign Exchange Management (Overseas Investment) Directions, 2022
What is financial commitment?
‘Financial commitment ‘is defined in Foreign Exchange Management (Overseas Investment) Rules, 2022 as follows: –
“Financial commitment” means the aggregate amount of investment made by a person resident in India by way of Overseas Direct Investment, debt other than Overseas Portfolio Investment in a foreign entity or entities in which the Overseas Direct Investment is made and shall include the non-fund-based facilities extended by such person to or on behalf of such foreign entity or entities.
Kinds of Financial Commitment:
Foreign Exchange Management (Overseas Investment) Regulations, 2022 provides for the various kinds of financial commitment:
Obligations of person resident in India
Reporting requirements for Overseas Investment:
Provided that in case of OPI by way of acquisition of shares or interest under Employee Stock Ownership Plan or Employee Benefits Scheme, the reporting shall be done by the office in India or branch of an overseas entity or a subsidiary in India of an overseas entity or the Indian entity in which the overseas entity has direct or indirect equity holding where the resident individual is an employee or director.
No reporting is required where:
Overseas investment to be made in bonafide business activity.
Rule 9 of Foreign Exchange Management (Overseas Investment) Rules, 2022 provides that Overseas investment must be made in a foreign entity which is engaged in a bonafide business activity. Investment can be made directly or through step down subsidiary or the special-purpose vehicle. Provided that ODI in a Company incorporated in Pakistan or any other jurisdiction shall require prior approval of the Central Government.
Requirement of obtaining a ‘No Objection Certificate’.
Rule 10 of Foreign Exchange Management (Overseas Investment) Rules, 2022 provides that:
Any person resident in India who –
shall, before making any financial commitment or undertaking disinvestment obtain a No Objection Certificate from the lender bank or regulatory body or investigative agency by making an application.
Provided that where the lender bank or regulatory body or investigative agency concerned fails to furnish the certificate within sixty days from the date of receipt of such application, it may be presumed that there was no objection to the proposed transaction.
Specified procedures:
Pricing guidelines
Non-applicability of Foreign Exchange Management (Overseas Investment) Rules, 2022
Foreign Exchange Management (Overseas Investment) Rules, 2022 are not applicable in the following cases:
(a) any investment made outside India by a financial institution in an IFSC;
(b) acquisition or transfer of any investment outside India made, –
Penalty for Late Submission of Form FC (Form – Financial Commitment):
Notes:
Restriction on further financial commitment or transfer:
Where a person has made financial commitment in a foreign entity and there is a delay in reporting Form FC, then he cannot make further commitment or transfer in the same entity until such delay in reporting is regularised.
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