Overseas fund for investment in india

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Subhash (Querist)
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23 December 2014 Dear Sir

One of our client overseas is having a fund corpus and is willing to invest the same in India for project funding through our existing / nely formed company, with an understanding that e need to return the fund after 5 years with the requisite interest as per their demand. Please provide us a detail procedure to do this, and what documents should be required on either side, how RBI is involved in this & if involved hat are the clearances / declarations are to be made, and what kind of agreement should we have with the investor for such kind of investment ?

On the basis of your guidance we will proceed further in this regards

Thanks & Regards

Subhahs

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 December 2014 It is ECB external commercial borrowing please see the link.

https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8101

Subhash

Subhash (Querist)
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24 December 2014 Dear Mr Seetharaman

It is tru - this is ECB. But what I failed to tell you earlier is that the fund will be given to us for further investing in the industries for different projects and do roll overs with the fund. Fund will remain invested with us by overseas company and he will keep on receiving his interest every 5 years from us. That is, we need to reinvest the fund received from overseas in different Indian Projects. Now sir what is your stand ? Please tell us the procedure for doing such activity legitimately.

Thanks & Regards

Subhash

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 December 2014 If you are going to pay interest it is ECB. You can modify the repayment terms suitable to you whenever you want.

Subhash

Subhash (Querist)
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25 December 2014 That is right. Actually what I want to know that in a simple private limited company can I receive such an overseas fund and can I further lend / invest the fund into the market. What are the norms and specific procedure , if any ?

Thanks & Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 December 2014 You can't lend or invest in capital market. you can utilize it only for permitted end use see the RBI circular.

ix) End-uses not permitted

Other than the purposes specified hereinabove, the borrowings shall not be utilised for any other purpose including the following purposes, namely:

(a) For on-lending or investment in capital market or acquiring a company (or a part thereof) in India by a corporate except Infrastructure Finance Companies (IFCs), banks and financial institutions eligible under paragraph I (B) (i) (a), (b), (d), (e), (f), (m) and (n).

(b) For real estate.

(c) For and general corporate purpose which includes working capital [except as stated at I(B)(v)(i) and (j)] and repayment of existing Rupee loans [except as stated at I(B)(v) (d), (f) and (vi)].

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