This alert
summarizes the A.P. (DIR Series) Circular No. 30, 31 & 32 issued by the
Reserve Bank of India (RBI) on 4 September, liberalizing the end use
restrictions under the External Commercial Borrowing (ECB) Regulations and
providing further clarifications on circulars issued on 14 August 2013 amending
the investment conditions prescribed under the Overseas Direct Investment (ODI)
Regulations and Liberalized Remittance Scheme (LRS).
The
RBI, while issuing these circulars, has tried to indicate that restrictive ODI
guidelines were issued keeping the macro economic situation in mind and they do
not intend to restrict any bona-fide and genuine ODI transactions. Allowing ECB
for the general corporate purposes will meet the dual objective, on one hand it
will provide liquidity to Indian companies having foreign shareholder to meet
their day to day expenses through cheap loan and at the same time India will
receive valuable foreign exchange on a long term basis.
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