Question 1

What is the system of getting enlistment as an Alternative Investment Fund from Securities and Exchange Board of India?

Accepted Answer

To get enlisted as an AIF from SEBI, the applicant shall make an application in Form A as provided in the SEBI (Alternative Investment Funds) Regulations, 2012 along with necessary supporting documents.

Application fees of INR 1,00,000/- must be paid along with the application to SEBI.

On receipt of approval from SEBI, Registration/re registration fee/scheme fee as applicable, may be paid.

The application in Form A shall be submitted to the below mentioned address:

Investment Management Department
Division of Funds- 1
Securities and Exchange Board of India
SEBI Bhavan, 3rd Floor A Wing,
Plot No. C4-A, G Block,
Bandra-Kurla Complex,
Bandra (E), Mumbai - 400 051.

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Question 2

What is the upper limit for investors under Alternative Investment Fund (AIF)?

Accepted Answer

No scheme of Alternative Investment Fund (AIF) shall have more than 1,000 investors, subject to the provisions of the Companies Act, 1956 if the AIF is formed as a company.

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Question 3

In which authoritative documents can an Alternative Investment Fund be set up?

Accepted Answer

An alternative investment fund (AIF) under the SEBI (Alternative Investment Funds) Regulations, 2012 can be established or incorporated in the form of a trust or a company or a limited liability partnership or a body corporate.

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Question 4

In what classifications can a candidate look for enrolment as an AIF?

Accepted Answer

Applicants can seek registration as an AIF in one of the following categories, and in sub-categories thereof, as may be applicable


	Category I AIF: 
	
		Venture capital funds (Including Angel Funds) 
		SME Funds
		Social Venture Funds
		Infrastructure funds
	
	
	Category II AIF 
	Category III AIF


For more information, click here.

Question 5

What are the reporting requirements to SEBI for Alternate Investment Funds registered with SEBI?

Accepted Answer

As per circular No.CIR/IMD/DF/10/2013 dated 29th July, 2013, Category I and II AIFs and the Category III AIFs which do not undertake leverage are required to submit report to SEBI on a quarterly basis while Category III AIFs which undertake leverage are required to submit the reports on a monthly basis. The formats for such reports are provided as a part of the said circular. All AIFs shall submit the report irrespective of whether or not the AIF has started activity.  

Currently, all AIFs shall send reports to SEBI by email to aifreporting@sebi.gov.in. No physical reports are required to be filed with SEBI.

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Question 6

Could an Alternative investments funds dispatch a reserve/plan of any size?

Accepted Answer

No, each scheme of the Alternative Investment Fund (other than angel fund) shall have corpus of at least INR twenty crore. In case of an angel fund, it shall have a corpus of at least INR ten crore.

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Question 7

Is an AIF allowed to make a solicitation to general society to buy in to its securities?

Accepted Answer

No, AIFs are privately pooled investment vehicles. AIFs shall raise funds through private placement by issue of information memorandum or placement memorandum, by whatever name called. As an eligibility criterion for registration as an AIF, the applicant is required to be prohibited by its memorandum and articles of association/ trust deed/ partnership deed from making an invitation or solicitation to the public to subscribe to its securities.

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Question 8

What is the enrolment charge to be paid by an Alternative Investment Fund?

Accepted Answer

Registration fee to be paid by an AIF is as under:
Category I Alternative Investment Funds - INR 5,00,000
Category II Alternative Investment Funds - INR 10,00,000
Category III Alternative Investment Funds - INR 15,00,000
Angel Funds - INR 2,00,000

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Question 9

What is an Angel Investor?

Accepted Answer

"Angel investor" means any person who proposes to invest in an angel fund and satisfies one of the following conditions, namely,


	 Net tangible assets of at least INR 2 cr excluding value of his principal residence, and who:

	
		 has early stage investment experience, or
		 has experience as a serial entrepreneur, or
		 is a senior management professional with at least ten years of experience
	
	



	A body corporate with a net worth of at least INR 10 cr, or
	An AIF/ VCF registered under these regulations.


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Question 10

Can an Alternative Investment Fund (AIF) launch schemes?

Accepted Answer

Yes, an AIF may launch schemes subject to the filing of placement memorandum with SEBI. In terms of scheme fees, INR 1 lakh should be paid to SEBI by an AIF at least 30 days prior to the launch of a scheme. However, payment of scheme fees shall not be applicable in case of the launch of the first scheme by the AIF (other than angel fund) and to angel funds.

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Question 11

What does Alternative Investment Funds stand for?

Accepted Answer

Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.

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Question 12

How can the investors redress their complaints against Alternative Investment Funds (AIFs)?

Accepted Answer

SEBI has a web-based centralized grievance redress system called SEBI Complaint Redress System (SCORES) where investors can lodge their complaints against AIFs.

For more information, click here.

Question 13

What are Category I AIFs?

Accepted Answer

Category I of the Alternative Investment Funds (AIF) include funds which invest in start-up, early stage ventures, social ventures, small & medium enterprises (SME), infrastructure or other sectors or areas which the Government or regulators consider as socially or economically desirable.

It shall include venture capital funds, SME funds, social venture funds, infrastructure funds and such other AIF.

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Question 14

What are Category II AIFs?

Accepted Answer

Alternative Investment Funds (AIF) which do not fall in Category I and III and which do not undertake borrowing other than to meet day-to-day operational requirements and as permitted in the SEBI (Alternative Investment Funds) Regulations, 2012 are Category II AIF.

Various types of funds such as real estate funds, private equity funds, funds for distressed assets, etc. are registered as Category II AIF.

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Question 15

What are Category III AIFs?

Accepted Answer

Alternate Investment Funds (AIFs), which employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. Various types of funds such as hedge funds, PIPE Funds, etc. are registered as Category III AIFs.

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Question 16

What is the meaning of Angel Fund?

Accepted Answer

"Angel Fund” is a sub-category of Venture Capital Fund under Category I Alternative Investment Fund that raises funds from angel investors and invests in accordance with the provisions of AIF Regulations.



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Question 17

What does debt fund mean?

Accepted Answer

Debt fund is an Alternative Investment Fund (AIF) which invests primarily in debt or debt securities of listed or unlisted investee companies according to the stated objectives of the Fund. These funds are registered under Category II.

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Question 18

What is included in fund of funds?

Accepted Answer

Fund of Funds, in general, is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. In the context of Alternative Investment Funds (AIF), a Fund of Fund is an AIF which invest in another AIF.

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Question 19

What is the limit specified under AIF regulations for number of investors?

Accepted Answer

No scheme of an AIF (other than angel fund) shall have more than 1000 investors. (Please note that the provisions of the Companies Act, 1956 shall apply to the AIF if it is formed as a company). In case of an angel fund, no scheme shall have more than two hundred angel investors. However, an AIF cannot make invitation to the public at large to subscribe its units and can raise funds from the sophisticated investors only through private placement.

Please refer to section 4(b), 10(f) and 19E(4) of SEBI (Alternative Investment Funds) Regulations, 2012 at the link for more information

Question 20

Can the registration of Venture Capital Funds be done again under SEBI (AIF)?

Accepted Answer

The venture capital funds (VCF) registered under the repealed SEBI (Venture Capital Funds) Regulations, 1996 shall continue to be regulated by the said regulations until existing fund is wound up and no new fund or scheme shall be launched after that under the said regulations.

However, the existing VCF may seek re-registration under SEBI (Alternative Investment Funds) Regulations, 2012 subject to approval of two-third of its investors by the value of their investment.

For more information, click here

Question 21

What are the end-utilize solutions for ECB raised under track I?

Accepted Answer

1) Investment in real estate or purchase of land

2) Investment in capital market.

3) Investment in capital market.

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Question 22

What are the reporting requirements under ECB?

Accepted Answer

Borrowings under ECB Framework are subject to following reporting requirements apart from any other specific reporting required under the framework:


	Loan Registration Number (LRN): Any draw-down in respect of an ECB should happen only after obtaining the LRN from the RBI. To obtain the LRN, borrowers are required to submit duly certified Form ECB, which also contains terms and conditions of the ECB, in duplicate to the bank
	Changes in terms and conditions of ECB: Changes in ECB parameters in consonance with the ECB norms, including reduced repayment by mutual agreement between the lender and borrower, should be reported to the DSIM through revised Form ECB at the earliest, in any case not later than seven days from the changes effected. While submitting revised Form ECB the changes should be specifically mentioned in the communication 
	Monthly reporting of actual transactions: The borrowers are required to report actual ECB transactions through Form ECB 2 Return (Annex II) through the AD Bank on monthly basis so as to reach DSIM within seven working days from the close of month to which it relates. Changes, if any, in ECB parameters should also be incorporated in Form ECB 2 Return

Question 23

Who are the eligible borrowers under ECB framework?

Accepted Answer

All entities except a Limited Liability Partnership are allowed to obtain ECB as per the prescribed guidelines.

Question 24

What are the Reporting prerequisites for converting External commercial borrowing into equity?

Accepted Answer

In case of partial or full conversion of ECB into equity, the reporting to the RBI will be as under:


	For partial conversion, the converted portion is to be reported to the concerned Regional Office of the Foreign Exchange Department of RBI in Form FC-GPR prescribed for reporting of FDI flows, while monthly reporting to DSIM in ECB 2 Return will be with suitable remarks "ECB partially converted to equity".
	For full conversion, the entire portion is to be reported in Form FC-GPR, while reporting to DSIM in ECB 2 Return should be done with remarks ECB fully converted to equity. Subsequent filing of ECB 2 Return is not required.
	For conversion of ECB into equity in phases, reporting through ECB 2 Return will also be in phases.


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Question 25

How can one raise loans through ECB?

Accepted Answer

The framework for raising loans through external commercial borrowings (ECB) comprises the following three tracks:


	Track I: Medium-term foreign currency denominated ECB with minimum average maturity of 3/5 years (exception of minimum average maturity of 1 year for manufacturing sector companies)
	Track II: Long-term foreign currency denominated ECB with minimum average maturity of 10 years
	Track III: Indian Rupee (INR) denominated ECB with minimum average maturity of 3/5 years (exception of minimum average maturity of 1 year for manufacturing sector companies.


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Question 26

Can proceeds of External commercial borrowing raised under Track I of the framework be used for payment of overdue import bills?

Accepted Answer

No, though proceeds from external commercial borrowing (ECB) raised under Track I can be utilized for the purposes, among others, such as refinancing of existing trade credit raised for import of capital goods and payment of capital goods already shipped but unpaid, the borrowing are not prescribed for payment of overdue import bills.

For more information, click here.

Question 27

What is the currency in which ECBs can be raised?

Accepted Answer

External Commercial Borrowing (ECB) can be raised in Indian Rupees (INR) and/ or any convertible currency. Any entity raising INR denominated ECB is not permitted to convert the liability arising out of this ECB into foreign currency liability in any manner or assuming foreign currency risk in any manner by either entering into a derivative contract or otherwise.

For more information, click here.

Question 28

What are the requirements in respect of currencies of ECB?

Accepted Answer

ECB can be raised in Indian Rupees (INR) and / or any convertible currency. Further, any entity raising INR denominated ECB shall not be permitted to convert the liability arising out of this ECB into foreign currency liability in any manner or assume foreign currency risk in any manner by either entering into a derivative contract or otherwise.

Question 29

What are the conditions to be fulfilled in relation to Minimum Average Maturity Period (MAMP)?

Accepted Answer

ECB raised by manufacturing sector: One year (for ECB up to US$50 million or equivalent per FY)
	ECB raised from foreign equity holder: Five years (if utilized for working capital purposes, general corporate purposes or repayment of rupee loans)
	Others: Three years

Question 30

What is the ceiling prescribed for ECB?

Accepted Answer

​​​​​​The ceiling prescribed


	For TC is benchmark rate plus 250 basis points spread
	For ECB is benchmark rate plus 450 basis points spread


Benchmark rate in case of FCY ECB/TC refers to six-months London Inter-bank Offered rate (LIBOR) of different currencies or any other six-month interbank interest rate applicable to the currency of borrowing, for e.g., Euro Inter-bank Offered Rate (EURIBOR). Benchmark rate in case of Rupee denominated ECB/TC will be prevailing yield of the Government of India securities of corresponding maturity

Question 31

What is the meaning of “all-in-cost”?

Accepted Answer

All-in-cost shall include rate of interest, other fees, expenses, charges, guarantee fees, ECA charges, whether paid in foreign currency or INR but will not include commitment fees and withholding tax payable in INR. In the case of fixed rate loans, the swap cost plus spread should not be more than the floating rate plus the applicable spread

Question 32

Who are eligible lenders under ECB framework?

Accepted Answer

Lender for ECB purposes should be:


	A resident of Financial Action Task Force (FATF) [or International organization of Securities commissions (IOSC) compliant country
	Multilateral and regional financial institution where India is a member country
	Individuals, if they are foreign equity holders or for subscription to bond/debentures listed abroad
	Foreign branches / subsidiaries of Indian Banks – only for FCY ECB except FCCBs and FCEBs

Question 33

What is the procedure of raising ECB?

Accepted Answer

Entities looking to raise ECB may approach the RBI with an ECB application form in prescribed format for examination through their AD Category I bank. Cases shall be considered keeping in view the overall guidelines, macroeconomic situation and merits of the specific proposals.

ECB proposals received by the RBI above certain threshold limit (re-fixed from time to time) would be placed before the Empowered Committee set up by the Reserve Bank. The Empowered Committee will have external as well as internal members and the Reserve Bank will take the decision based on the recommendation of the Empowered Committee.

Entities desirous to raise ECB under the automatic route may approach an AD Category I bank with their proposal along with duly filled Form 83. Formats of ECB Form and Form 83 are available at Annex I and II respectively of Part V of the Master Directions Reporting under Foreign Exchange Management Act, 1999.

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Question 34

What are the routes ECB can be raised in?

Accepted Answer

Under the (External Commercial borrowing) ECB/Trade Credit (TC) framework, ECB/TC can be raised either under the automatic route or under the approval route. Under the approval route, the prospective borrowers are required to send their requests to the RBI through their banks for examination.

Question 35

Where can one get the details of extant External Commercial Borrowings (ECB) and Trade Credits (TC) framework?

Accepted Answer

Master Direction No. 5 on ‘External Commercial Borrowings, Trade Credits and Structured Obligations dated March 26, 2019 may be referred to for guidance on the extant framework on ECB and TC. ECBs and TCs raised under the prior frameworks should continue to be in compliance with the corresponding guidelines applicable at the time of availing the ECBs and TCs.

For more information, click here.

Question 36

How can one channel External Commercial Borrowing loans?

Accepted Answer

External Commercial Borrowing (ECB) can be raised either under the automatic route or under the approval route. For the automatic route, a case is examined by the Authorised Dealer (AD) Category-I bank. Under the approval route, the borrower is required to send the request to the Reserve Bank of India (RBI) through the AD for examination. While the regulatory provisions are mostly similar, some differences between the two routes include the amount of borrowing, eligibility of the borrowers and the permissible end-uses.

For more information, click here.

Question 37

What is the currency of borrowing in case of ECBs?

Accepted Answer

ECB can be raised in Indian Rupees (INR) and / or any convertible currency. Any entity raising INR denominated ECB is not permitted to convert the liability arising out of this ECB into foreign currency liability in any manner or assuming foreign currency risk is any manner by either entering into a derivative contract or otherwise.

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Question 38

What does the term framework division mean with the end goal of ECB?

Accepted Answer

For the purpose of raising ECB, Infrastructure Sector has the same meaning as given in the Harmonised Master List of Infrastructure sub-sectors approved by the Government of India vide Notification F. No. 13/06/2009-INF as amended / updated from time to time. Further, for the purpose of ECB, Exploration, Mining and Refinery sectors are also deemed as in the infrastructure sector.

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Question 39

What are the requirements for converting External Commercial Borrowings/Lump entirety Fee/Royalty etc. into Equity?

Accepted Answer

The conversion of External Commercial Borrowings (ECB) in convertible foreign currency into equity is subject to the following conditions:


	The activity of the Company is covered under the Automatic Route for FDI or the Company has obtained Government approval for foreign equity
	The foreign equity after conversion of ECB into equity is within the sectoral cap, if any Pricing of shares is as per the provision of section (2), Annexure 3 of the Consolidated FDI Policy
	Compliance with the requirements prescribed under any other statute and regulation in force
	The conversion facility is available for ECB availed under the Automatic or Government Route and is applicable to ECB, due for payment or not, as well as secured/unsecured loans availed from non-resident collaborators


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Question 40

Can ECB be raised under Track III for general corporate purpose (including working capital)? What will be its minimum average maturity period?

Accepted Answer

Yes, ECB can be raised under Track III (i.e. INR denominated ECB) for general corporate purpose (including working capital). The minimum average maturity period will be 3 years for ECB up to $ 50 million or equivalent and 5 years for ECB beyond $ 50 million or equivalent.

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Question 41

What are the hedging requirements under External commercial borrowing?

Accepted Answer

Companies in infrastructure sector, Non-Banking Financial Companies -Infrastructure Finance Companies (NBFC-IFCs), NBFCs-Asset Finance Companies (NBFC-AFCs), Holding Companies and Core Investment Companies (CICs) are eligible borrowers. These companies are required to:


	Have a board-approved risk management policy and will require to keep their ECB exposure hedged 100 per cent at all times in case the average maturity is less than 5 years.
	Further, the designated AD Category-I bank shall verify that 100 per cent hedging requirement is complied with during the currency of ECB and report the position to RBI through ECB 2 returns.
	Lastly, the entities raising ECB under the provisions of tracks I and II are required to follow the guidelines for hedging issued, if any, by the concerned sectoral or prudential regulator in respect of foreign currency exposure.


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Question 42

What does External Commercial Borrowing (ECB) denote?

Accepted Answer

ECBs are commercial loans raised by eligible resident entities from recognised non-resident entities conforming to parameters such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.

For more information, click here.

Question 43

Are the shipping/airline companies allowed to raise External Commercial Borrowing for import of second hand vessels?

Accepted Answer

Yes, shipping and airline companies can raise external commercial borrowings (ECB) for import of vessels and aircrafts, however, only under Track I of the ECB framework.

For more information, click here

Question 44

What is the earliest when an External Commercial Borrowing can be matured?

Accepted Answer

Minimum average maturity period (MAMP) is three years for all external commercial borrowings (ECB). However, for ECB raised from foreign equity holder and utilised for specific purposes, as detailed in sub-section 2.1 of the Annex, the MAMP is five years. Similarly, for ECB up to INR 3.5 b per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP is one year.

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Question 45

Can External Commercial Borrowing be used for funding real estate?

Accepted Answer

No, no activity under real estate is permitted as eligible end use for raising ECB.

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Question 46

What are the various types of ECB?

Accepted Answer

ECB includes Loans, Securitized instruments, Buyers’ and supplier’s credit, Foreign Currency Convertible Bonds (FCCBs). Financial Lease and Foreign Currency Exchangeable Bonds (FCEBs). 

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Question 47

Can External Commercial Borrowing be used for importing services?

Accepted Answer

No, ECB is not permitted for import of services.

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Question 48

Can External Commercial Borrowing be used for making contribution in Limited Liability Partnership?

Accepted Answer

No, it is not permitted under any track.

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Question 49

Could a qualified borrower raise crisp External Commercial Borrowings under Track II for reimbursement of existing Rupee named External Commercial Borrowings?

Accepted Answer

Refinancing of Rupee denominated ECB with Foreign Currency denominated ECB under Track II is not permitted.

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Question 50

What is Foreign investment facilitation board?

Accepted Answer

The Foreign Investment Facilitation Portal (FIFP) is the new online single point interface of the Government of India for investors to facilitate Foreign Direct Investment. This portal is being administered by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce & Industry.

For more information, click here

Question 51

What documents are required for sale of shares by a person resident outside India?

Accepted Answer

Documents required for the sale of shares by a person resident outside India:

i) Consent Letter duly signed by the seller and buyer or their duly appointed agent indicating the details of transfer i.e. number of shares to be transferred, the name of the investee company whose shares are being transferred and the price at which shares are being transferred.

ii) Where the Consent Letter has been signed by their duly appointed agent the Power of Attorney Document authorizing the agent to purchase/sell shares by the seller/buyer. In case there is no formal Sale Agreement, letters exchanged to this effect may be kept on record.

iii) If the sellers are NRIs/OCBs, the copies of RBI approvals evidencing the shares held by them on repatriation/non-repatriation basis. The sale proceeds shall be credited NRE/NRO account, as applicable.

iv) Certificate indicating fair value of shares from a Chartered Accountant.

v) No Objection / Tax Clearance Certificate from Income Tax authority/Chartered Account.

vi) Undertaking from the buyer to the effect that the Pricing Guidelines have been adhered to.

Please refer to subsection 5.2 of 'section 1' of Annexure-3 Consolidated FDI Policy at link for more information.

Question 52

What is the method of payment and remittance/credit of sale proceeds for a person residing outside India?

Accepted Answer

The sale consideration in respect of the shares purchased by a person resident outside India shall be remitted to India through normal banking channels. 

In case the buyer is a FII, FPI, payment should be made by debit to its Special Non-Resident Rupee Account. 

In case the buyer is a NRI, the payment may be made by way of debit to his NRE/FCNR (B) accounts. 

However, if the shares are acquired on non-repatriation basis by NRI, the consideration shall be remitted to India through normal banking channel or paid out of funds held in NRE/FCNR (B)/NRO accounts. 

The sale proceeds of shares (net of taxes) sold by a person resident outside India may be remitted outside India. In case of FII/FPI, the sale proceeds may be credited to its special Non-Resident Rupee Account. In case of NRI, if the shares sold were held on repatriation basis, the sale proceeds (net of taxes) may be credited to his NRE /FCNR (B) accounts and if the shares sold were held on non repatriation basis, the sale proceeds may be credited to his NRO account subject to payment of taxes. The sale proceeds of shares (net of taxes) sold by an OCB may be remitted outside India directly if the shares were held on repatriation basis and if the shares sold were held on non-repatriation basis, the sale proceeds may be credited to its NRO (Current) Account subject to payment of taxes, except in the case of OCBs whose accounts have been blocked by Reserve Bank.

Please refer to subsection-4 of 'Section 1' of Annexure-3 of Consolidated FDI Policy at link for more information.

Question 53

What is meant by ‘AD Category-I Bank'?

Accepted Answer

‘AD Category-I Bank’ means a bank (Scheduled Commercial, State or Urban Cooperative) which is authorized under Section 10 (1) of FEMA to undertake all current and capital account transactions according to the directions issued by the RBI from time to time.

Question 54

Are dividends repatriable?

Accepted Answer

Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be). The repatriation is governed by the provisions of Foreign Exchange Management (Current Account Transactions) Rules, 2000

For more information, click here.

Question 55

Are foreigners allowed to invest in India?

Accepted Answer

A non-resident entity can invest in India, subject to the prevailing FDI Policy, except in those sectors which are prohibited. Foreign Institutional Investor (FII) and Foreign Portfolio Investors (FPI) may invest in the capital of an Indian Company under the Portfolio Investment Scheme, subject to FEMA provisions.

For more information, click here.

Question 56

What are the project funding options available in India?

Accepted Answer

Projects in India can be financed through sources such as Bank loans, Private equity, Public subscriptions, Debt instruments and Government bonds.
If you are a start-up or a SME, then you can register on Startup India. You can also register on India Investment Grid, which is our repository of investible projects.

Question 57

Are Non-Resident Indians allowed to make investments in India?

Accepted Answer

An NRI can invest in capital of Indian companies on non-repatriation basis provided:


	The amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers/Authorized banks. 
	The entity is not engaged in agricultural/plantation or real estate business or construction of farmhouses or dealing in Transfer of Development Rights.
	Amount invested not eligible for repatriation outside India. For investments on a repatriable basis, provisions of FDI policy apply.


For more information, click here.

Question 58

Where can complaints against listed company be registered?

Accepted Answer

SEBI Complaints Redress System (SCORES) is an online platform designed to help investors lodge their complaints online with SEBI pertaining to securities market  against listed companies and SEBI registered intermediaries. All complaints received by SEBI against listed companies and SEBI registered intermediaries are dealt through SCORES.

For more information, click here

Question 59

What is meant by Downstream Investment?

Accepted Answer

‘Downstream Investment’ means indirect foreign investment, by an eligible Indian entity, into another Indian company / LLP, by way of subscription or acquisition.

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Question 60

What is procedure of issuing Foreign Currency Convertible Bonds?

Accepted Answer

A.  For listed companies


	Any Indian company not eligible to raise funds from the Indian capital market or restrained from accessing securities market by SEBI is not eligible to issue FCCB
	Erstwhile Overseas Corporate Bodies not eligible to invest in India through portfolio and entities prohibited to buy, sell or deal in securities by SEBI are not eligible to subscribe to FCCB
	Pricing of GDR/ FCCB should not be less than the higher of either average of weekly high and low of closing prices of related shares for six months preceding the relevant date or average of weekly high and low of closing prices of related shared for two weeks preceding the relevant date
	The voting rights shall be as per the provisions of The Companies Act 2013


B. For unlisted companies


	Companies which have not yet accessed GDR/ FCCB route for raising capital in international market need to get listed in the domestic market
	Companies which have already issued GDR/ FCCB in the international market would now require listing in the domestic market on making profit beginning 2005-06 or within 3 years of such issue

Question 61

What is the subsidy under Micro Units Development and Refinance Agency?

Accepted Answer

There is no subsidy for the loan given under Pradhan Mantri Mudra Yojana (PMMY). However, if the loan proposal is linked to some Government scheme, wherein the Government is providing capital subsidy, it will be eligible under PMMY also.

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Question 62

Could ECB be profited for reimbursement of local INR credit?

Accepted Answer

Yes, however, it is only permitted if external commercial borrowing (ECB) is raised from direct and indirect equity holders or from a Group company, and provided the loan is for a minimum average maturity of five years.

ECB raised under Tracks I or III for repayment of Rupee loans, must be raised from a foreign equity holder.

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Question 63

What are the reporting requirements for foreign currency convertible bond/depository receipts Issues?

Accepted Answer

The domestic custodian needs report the issue/transfer of sponsored/unsponsored depository receipts as per DR Scheme 2014 in ‘Form DRR’ given in Section 5, Annexure 6 of the Consolidated FDI Policy, 2017, within 30 days of close of the issue/ program.

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Question 64

What is Two-way Fungibility Scheme?

Accepted Answer

A limited two-way Fungibility Scheme has been put in place by the Government of India for American Depository Receipts (ADR)/ Global Depository Receipts (GDR). Under this Scheme, a stock broker in India, registered with Securities & Exchange Board of India (SEBI), can purchase shares of an Indian company from the market for conversion into ADR/GDR based on instructions received from overseas investors. Re-issuance would be permitted to the extent of ADR/GDR which have been redeemed into underlying shares and sold in the Indian market.

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Questions?

What is the list of case where prior approval is needed by RBI to transfer capital instruments?

What documents are required for sale of shares by a person resident in India?

What is Sponsored American Depository System/ Global Depository System issue?