Fema / rbi / ecb

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

15 September 2014 Hello..

Have following query on a transaction between foreign Parent Company(PC) situated in USA and Indian (100%) Subsidiary (IS).

The PC has directly made the payments to the vendors and employees (salary) of the IS in India during the financial year.

Ideally, the PC should transfer the money to the account of IS as share application or otherwise and upon receipt of such money, IS should utilize it for the purpose of release of payments to its suppliers / employees as the case may be.

In the above instance, due to payments being released by the PC to the suppliers/employees of IS in India, any provisions from FEMA/RBI perspective need to complied with. Whether this will be treated as loan attracting ECB provisions?

Regards,

Nikhil Kaushik

Nikhil Kaushik (Expert)
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16 September 2014 yes ECB provisions will apply for loans exceeding 3 years tenor..

Querist : Anonymous

Querist : Anonymous (Querist)

19 September 2014 Thanks for your reply. In case less than 3 years tenor, is it implied that ECB Provisions are not applicable.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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19 September 2014 Then circular on trade credits will apply

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