A. The Indian party is to route all transactions in respect of one particular overseas JV/WOS through only one branch of an Authorized Dealer. This branch would be the ‘designated Authorised Dealer’ in respect of that JV/WOS and all transactions relating to the investment in that particular JV/WOS are to be reported only through this ‘designated’ branch of an Authorized Dealer. In case the JV/WOS is being set up abroad by two or more Indian promoters, then all Indian promoters would collectively be called the Indian party who would be required to report all transactions in respect of that JV/WOS only through one ‘designated Authorised Dealer’.

A. The Indian promoters are free to designate different branches of the same Authorised Dealer or different branches of different Authorised Dealers for their separate JVs/WOSs. The only requirement is that regardless of the number of promoters, one JV/WOS will have only one ‘designated Authorsied Dealer’ to report all its transactions.

A. Yes. An application by way of a letter may be made to the concerned Regional Office of the Reserve Bank.

A. No prior registration with the Reserve Bank is necessary for direct investments under the automatic route. After the report of remittance/investment in form ODR is received by the Reserve Bank, from the designated Authorised Dealer, an identification number for that particular JV/WOS will be issued for the purpose of taking on record the overseas direct investment with the objective of maintaining a database for monitoring the outflows/inflows in respect of the overseas entities. Subsequent investments in the same project can be made only after allotment of the identification number.

A. No. The allotment of the identification number does not constitute an approval from the Reserve Bank for the investment made/to be made in the JV/WOS. The issue of an identification number only signifies the taking on record of the investment for maintaining the database.

A. Yes. Indian Parties which are under investigation by the Enforcement Directorate/other investigative agencies/regulatory authorities, or are on the Reserve Bank’s exporters caution list or are included in the list of defaulters to the banking system in India published/circulated by CIBIL/RBI are not eligible to make investment under the automatic route.

A Requests under the normal route are considered by taking into account inter alia the prima facie viability of the proposal, business track record of the promoters, experience and expertise of the promoters, benefits to the country, etc.

A. Funding for overseas direct investment can be made by one or more of the following sources:

1. the balances held in Exchange Earners Foreign Currency account of the Indian Party maintained with an authorised dealer;
2. proceeds of ADR/GDR issues;
3. market purchases of foreign exchange;
4. share swap (refers to the acquisition of the shares of an overseas entity by way of exchange of the shares of the Indian entity);
5. capitalisation of exports, royalties, etc.;
6. proceeds of ECBs/FCCBs raised abroad.

A. Yes, capitalization of export proceeds by an Indian Party, to its overseas JV/WOS, is permitted under the automatic route provided the export proceeds have not remained unrealised beyond a period of six months from the date of export. Such proceeds shall not be capitalized without the prior permission of the Reserve Bank.

A. No. Loan and guarantee can be extended to an overseas entity only if there is already an equity participation by way of direct investment.

A. Partnership firms registered under the Indian Partnership Act 1932 can make overseas direct investments subject to the same terms and conditions as applicable to corporate entities.

A. It will be in order for individual partners to hold shares for and on behalf of the firm in an overseas JV/WOS, only if the host country regulations or operational requirements warrant such holding. However, the funding for the overseas JV/WOS has to be made by the firm.

A. There are no restrictions on entities having JVs/WOSs abroad setting up second generation companies (step-down subsidiaries) within the overall limits applicable for investments under the Automatic Route. However, companies wishing to set up step-down subsidiaries to undertake financial sector activities will have to comply with the additional requirements for direct investment in the financial sector.