One of my client is Subsidiary of a foreign company. Foreign company invested 99% in the share capital of the company. Because of some reasons they have not started their Business in India. Now they have share capital amount in the Books. They don't want to use Share capital amount for daily expenses. They have one Idea. They want to pay salary, rent etc monthly expenditures directly to the account of Employee and landlord from Foreign company account (i.e., Holding company Bank account.) Is it permissible.
Please note that foreign funds into India is to be routed through two heads:
1.FDI
2. ECB
The foreign company cannot pay directly to Indian service providers and employees. Then , there will be question of how this expenses will be reimbursed to foreign remitter later.
As said , there is end use restrictions for ECB. ECB cannot be used for repayment of term loan or working capital purposes.
ECB is not allowed to for repayment of Working Capital.
If your company is dealing in Infrastructure sector , it can avail ECB to repay upto 25% of the rupee loan availed from their bankers to repay their term loan availed for capital expenditure.
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