On 12 February 2015, with a view to promote ease of reporting for foreign direct investment (FDI) transactions, the Reserve Bank of India (RBI) made certain amendments to the process of filing of certain returns under the provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000.
Further, on 17 February 2015, with a view to promote ease of filing applications in relation to FDI transactions under the ‘approval route’, Department of Economic Affairs, Ministry of Finance launched an upgraded, secure and user friendly website for filing and processing of applications for FDI transactions that require prior approval of Foreign Investment Promotion Board (FIPB).
The aforesaid initiatives have been taken under the aegis of the e-Biz project of the Government of India, and are aimed towards achieving “Minimum Government and Maximum Governance”.
Current RBI Regulations and FIPB Website
With respect to issuance of shares/ convertible debentures, Indian companies are required to report to the RBI: (a) the details of FDI inflow in advance reporting form (Form ARF) within 30 days of the receipt of funds; and (b) the issue of shares/ convertible debentures in form foreign collaboration – general permission route (Form FC-GPR) within 30 days of such issue. Physical copies of both these forms are required to be filed with the RBI through the authorised dealer bank of the Indian company receiving FDI inflow.
With respect to applications for approval of FDI transactions, hitherto such applications were required to be filed at www.fipbindia.com, which had limited features and processing capabilities. Further, 15-18 physical copies were required to be manually submitted to the FIPB in addition to filing of an online form.
The RBI Amendment and the New FIPB Website
The RBI has now relaxed the requirement to file Form ARF and Form FC-GPR by way of permitting companies to now file these forms online. Under the new reporting platform, companies can log into the e-Biz portal, download Form ARF and Form FC-GPR and upload the completed forms onto the portal by using digitally signed certificates. The authorised dealer banks are required to download the forms, verify their contents and call for additional information from the company, if necessary. Subsequently, the authorised dealer banks can upload the forms for RBI to process and allot the Unique Identification Number. The authorized dealer banks are required to access the e-Biz portal using a Virtual Private Network Account which may be obtained from the National Informatics Centre. Whilst the aforesaid efiling facility will be operational from 19 February 2015, the manual system of reporting will continue to be in use for the time being.
Further, for applications for approval of FDI transactions under the ‘automatic route’, the website www.fipbindia.com has been replaced by www.fipb.gov.in. In the new website, applicants will need to submit only one copy of the application as against multiple copies as required earlier. Further, the new website has features for better and more efficient communication between applicants and FIPB (including communication through SMS/emails, online secure recording of all transactions and correspondences, responses to queries by relevant ministries, etc).
In terms of the substance of Form ARF and Form FC-GPR, nothing has changed. However, we believe that enabling e-filing of these forms is a good move forward, as it will save both time and cost. Further, in its attempt to simplify doing business in India and to create a system of integrated electronic services to investors, it would be much appreciated if the RBI also includes the filing of Form FC-TRS (i.e., the form required to be filed with authorised dealer banks for reporting of transfer of securities between residents and non-residents and vice versa) within the e-Biz platform.
The introduction of the new website for FIPB approval with added features will certainly be helpful for foreign investors, who were hitherto forced to grapple with the complexities of an FIPB application through the earlier website coupled with manual filing of multiple copies. In particular, the feature on responses to queries by relevant ministries is expected to be extremely useful.