The Reserve Bank of India (RBI) had envisaged a scheme for simplifying and integrate the existing means of reporting foreign direct investments (FDI) in India in its Monetary Policy Committee’s First Bi-Monthly Monetary Policy Statement 2018-19 Resolution dated 5th April 2018. In this spirit, the RBI has further issued Circular No. RBI/2017-18/194 A.P (DIR Series) Circular No. 30 dated 7th June 2018 that introduces a Single Master Form (SMF) for reporting all FDIs in a single platform/interface (hereinafter the “Circular”).
Pursuant to the said Circular, all Indian Entities, i.e. all Indian Companies and Limited Liability Partnerships (LLPs) incorporated under the laws of India, have been granted a time period of 15 days beginning from 28th of June 2018 to 12th July 2018 for reporting their existing FDI on an interface available on the official website of the RBI. Existing FDIs in Indian entities will have to be reported to the RBI in the “Entity Master Form”, the format of which can be found at Annex 1 of the Circular. Details of business activities carried out and total FDI received, applicable sectoral cap and entry route etc. will have to be disclosed therein. The Single Master Form’s format has been provided at Annex 2 of the Circular where forms of various FDI reporting can also be found in an apparently simplified format. The final SMF, when hosted, will be available in the Master Direction-Reporting under Foreign Exchange Management Act, 1999 (FEMA, 1999).
Failure to abide by the Circular will lead to the Indian entity being tagged as ‘non-compliant’ with FEMA, 1999, and said entities will be disabled from receiving any future foreign investment, whether direct or indirect.
The Circular is addressed to all Category-I Authorized Dealer Banks (AD Banks) who are informed that they may inform their concerned customers/constituents of the contents and requirements of the Circular. However, because AD Banks have not been directed to mandatorily inform their customers and constituents, non-information may lead to lack of knowledge of Indian entities and hence low compliance.
The Circular is a move towards making India more open to FDIs with a simplified FDI reporting process. But the new compliances come with a very short notice for concerned Indian companies. Not only does the Circular seem to apply retrospectively to every Indian entity having received FDIs without any limit in time, but said entities are also required to report all relevant information within a very short time frame, i.e. 15 days from 28th June 2018. Indian companies and LLPs with existing FDIs are hence advised to quickly comply with the Circular and report their FDI details before 12th July 2018 or else face the consequence of no longer being able to receive future foreign investments.
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