Remittance norms relaxed further

Another step towards CAC, Fema to be amended

In a fresh move towards capital account convertibility, the government decided to further relax foreign exchange remittance norms.

Indian companies will no longer require permission from the Reserve Bank of India (RBI) to extend short-term credit to their overseas offices, pay royalties to foreign collaborators and make remittances for trademark use, franchise purchase and for buying advertising slots on foreign television channels.

Individuals can also purchase health insurance from foreign insurers and engage real estate agents abroad for selling residential and commercial property in India.

Besides, dancers, wrestlers and entertainers will not require RBI approval for making remittances abroad.

The move comes two days after the RBI allowed individuals to spend up to $25,000 abroad without restriction. The release said the relaxation had been made in view of the strength of the economy and to reduce transaction costs.

The government will amend the Foreign Exchange Maintenance Act (Fema) to empower the central bank to impose penalties in case of violation of foreign exchange transactions.

Offences dealing with hawala transactions would, however, continue to be vested with the enforcement directorate, an official release said.

The liberalisation of current account transactions is against the backdrop of burgeoning forex reserves of over $104 billion.

Following today's decision, restrictions on royalty and lump-sum fee payments under technical collaboration agreements, not registered with the RBI, have been removed.

While the use of trademarks has been allowed freely, their purchase will require the central bank's approval.

In engaging real estate agents abroad, the release said no permission would be required for amounts up to $25,000 or 5 per cent of the inward remittance per action, whichever is higher.

The RBI approval for remittances for advertising on foreign television channels by a person whose export earnings are less than Rs 10 lakh has been done away with.

Such remittances will now be allowed without any ceiling and the benefit will be available to non-exporters as well.

D D Rathi, group executive president & CFO, Grasim Industries, welcomed the reduction of paperwork for remittances. However, there was still a case for freeing capital account remittances, he said.

Tarun Jain, finance director of Sterlite Industries, said this was one more step towards capital account convertibility. Empowering the RBI to impose penalties on Fema violations was a good move as the apex bank was the best judge in such cases, he added.

Opening up further

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• No permission needed to buy health insurance from abroad
• Short-term credit for overseas offices will not need RBI nod
• Advertisement on foreign television channels allowed without any ceiling
• No RBI approval required for payment of royalty & fees for technical collaborations
• Restrictions removed on use of trademarks and franchise