03 July 2016
As per section 6(2)(b), RBI shall not impose any restriction on the drawal of foreign exchange for payments due on account of depreciation of direct investments in the ordinary course of business. That is an Indian company can draw foreign exchange on account of recapitalisation of foreign investment. For eg. if an Indian company has wholly owned subsidiary company in country A which requires minimum net worth of '10' and due to loss of '2' it is reduced to '8', the holding Indian company can draw '2' as recapitalisation by way of foreign exchange drawal.
03 July 2016
Direct investment is nothing but FDI( Foreign Direct Investment), simply it is investment in a foreign business enterprise with a view to acquiring controlling interest. The definition is much more elaborative as :
Direct investment outside India means investments, either under the Automatic Route or the Approval Route, by way of contribution to the capital or subscription to the Memorandum of a foreign entity or by way of purchase of existing shares of a foreign entity either by market purchase or private placement or through stock exchange, signifying a long-term interest in the foreign entity.
This is different from portfolio investment.
03 July 2016
following eg. also fits in for this sec. or not
if a PRI invested in shares of foriegn entity n at dt tm the shares were partly paid and after some time call is made by the co. but now RBI has restricted the drawl of foriegn exchng for invst. in shares and this will lead to depreciation of our asset ( share) . so RBI can not restrict the drawl for such partly paid shares
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