What changed
This Master Circular No.11/2011-12 consolidates all existing instructions on direct investment by residents in JVs/WOS abroad into a single document, issued under FEMA Notification 120/RB-2004, effective July 1, 2011, with a sunset clause of one year.
What it means for you
Banks must ensure all overseas direct investment transactions comply with the consolidated guidelines, including automatic route limits, funding methods, and reporting requirements. The circular clarifies obligations for Indian entities and authorized dealer banks, impacting compliance and operational processes.
What you must do
- Review and implement the consolidated instructions for processing overseas direct investment applications.
- Ensure designated branches handle investments as per Part II operational instructions, including those under Regulations 6, 9, and 11 of FEMA 120/2004-RB.
- Verify evidence of investment and allot Unique Identification Numbers (UIN) for each JV/WOS.
- Monitor post-investment changes, including additional investments and restructuring, as per the circular.
- Prepare for the sunset clause by planning for the updated Master Circular expected after July 1, 2012.
Who it affects
All banks authorized to deal in foreign exchange, Indian residents investing in overseas JVs/WOS, Authorized dealer banks handling foreign remittances, Compliance and forex departments of banks
What is the sunset clause in this Master Circular?
The circular is valid for one year from July 1, 2011, and will stand withdrawn on July 1, 2012, to be replaced by an updated version.
Which FEMA notification governs direct investment abroad?
The Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004, under FEMA Notification 120/RB-2004 dated July 7, 2004.
What are the key sections for authorized dealer banks?
Part II provides operational instructions, including designated branches, procedural guidelines, allotment of UIN, and verification of investment evidence.