Investment by a foreign holding company in Indian subsidiary

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Amit Mittal (Querist)
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19 September 2020 A foreign holding company is having a 100% Indian subsidiary with an authorised and paid-up capital of INR 1.0 million. Due to the losses in Indian subsidiary, the capital is now exhausted, and the foreign holding company is not interested in buying new shares in the subsidiary, instead can issue a temporary loan (repayable in two years - interest-free). They can do so? If yes, what is the process?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 September 2020 you need to know the FEMA law related to external commercial borrowings for the same. Loans from abroad in foreign currency are regulated by ECB provisions which regulate the interest part, maturity and the end use provision. Most of the time loan from abroad can only be used for capital purposes and cannot be used for working capital or general corporate purposes. Just check the same. You need to get a Loan Registration Number (LRN) from RBI prior to taking loans.

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