What changed
Earlier, conversion of import payables for capital goods into FDI had to be completed within 180 days from shipment. Now, only the application (complete in all respects) must be made within 180 days. Similarly, for pre-operative/incorporation expenses, the earlier requirement of capitalization completion within 180 days from incorporation is replaced by the requirement to file a complete application within 180 days.
What it means for you
Banks and their customers get breathing room: the hard deadline for actual conversion is removed, replaced by a softer deadline for filing the application. This reduces pressure on companies to finalise valuations and documentation within the same window. AD banks must ensure applications are complete before submission to avoid delays.
What you must do
- Update internal checklists to reflect that only the application (not the conversion) must be filed within 180 days from shipment/incorporation.
- Advise customers to submit complete applications well before the 180-day deadline to avoid rejection.
- Monitor pending cases where conversion was not completed within 180 days; they may now qualify if a complete application is filed in time.
Who it affects
Category-I Authorised Dealer Banks, Indian companies receiving FDI via conversion of import payables, Foreign investors supplying capital goods or funding pre-operative expenses
Does this circular change the 180-day timeline for actual conversion of import payables into equity?
Yes. Earlier, the conversion itself had to be completed within 180 days from shipment. Now, only the submission of a complete application for conversion must be made within that period.
What happens if the application is incomplete when filed within 180 days?
The circular specifies that the application must be 'complete in all respects' to meet the deadline. Incomplete applications may not be considered as having met the timeline.
Does this circular affect the Government route approval process for FDI?
No. The circular only relaxes the timeline for filing the application. All other conditions from the earlier circular (June 30, 2011) remain unchanged, including the need for Government route approval.