March 2016
FOREX COMMITEE NEWSLETTER
FOREX COMMITTEE NEWSLETTER
The monthly turnover in India’s foreign exchange market including merchant and interbank
transactions in the category of purchases increased from USD 442 billion in January 2016 to about1
USD 500 billion in February 2016. In the category of sales, the turnover also scaled up from about
USD 484 billion in January 2016 to around USD 529 billion in February 2016.
In the month of February 2016, the exchange rate of rupee against USD has been hovering around
67 to 69. The exchange rate of rupee against Japanese yen has depreciated from about 55 in the
beginning of February 2016 to around 61 in the end of February 2016. The exchange rate of rupee
against Euro has remained in the range of 73-77 in the month of February 2016. While, the exchange
rate of rupee against pound sterling has remained in the range of 95-98 during February 2016.
On the other hand, India’s foreign exchange reserves stands at about USD 348 billion in the month of
February 2016 as against USD 350 billion in January 2016. The latest position of foreign exchange
reserves as on March 4, 2016 is about USD 351 billion consisting of Foreign Currency Assets of USD
327 billion, Gold reserves at USD 19.3 billion, SDRs at around USD 1.5 billion and Reserve Position in
the IMF at USD 2.6 billion.
At regulatory front, to further liberalize the procedure and facilitate settlement of export and import
transactions where the invoicing is in a freely convertible currency and the settlement takes place in
the currency of the beneficiary, which though convertible, does not have a direct exchange rate, it
has been decided by RBI that AD Category-I banks may permit settlement of such export and import
transactions.
Further, Reserve Bank of India has issued 17 master directions covering foreign exchange
transactions on money changing activities, opening and maintenance of Rupee/Foreign Currency
Vostro Accounts of Non-resident Exchange Houses, external commercial borrowings, trade credit,
borrowing and lending in foreign currency by authorised dealers and persons other than authorised
dealers, import and export of goods and services, direct investment by residents in Joint Venture (JV)
/ Wholly Owned Subsidiary (WOS) Abroad, establishment of liaison/ branch/ project offices in India
by foreign entities, Liberalised Remittance Scheme (LRS)etc.
The net FII investments in the month of February 2016 stands at (-) USD 2001 million as against (-)
USD 8814 million in January 2016. The net FII investments registered a y-o-y growth of around (-)
150% in February 2016 over investments of about USD 3966 million in February 2015. The net FII
investments registered a growth of about (-) 262% in January 2016 (Y-O-Y).
Stock Markets’ performance didn’t depict an impressive picture in February 2016. S&P BSE Sensex
closed at 23,002 as on 29th February 2016 as against 24,870.69 as on 29th January 2016, registering
a decline of about (-)7.5%. While, CNX Nifty closed at 6987.05 as on 29th February 2016 as against
7563.55 as on 29th January 2016, registering a decline of about (-)7.6%.
The commodities’ prices scenario scripted an increasing trend in the month of February 2016. The
price of gold has increased to Rs. 28,320 (spot average price per 10 grams) in the month of February
2016 as against Rs. 25,981 in the month of January 2016. The price of crude oil has also scaled up to
about USD 30.5 per barrel in February 2016 as against around USD 28 per barrel in the month of
January 2016.
1
Data pertains to upto 29th February 2016
2| March 2016
FOREX COMMITEE NEWSLETTER
India’s Foreign Exchange market turnover
The monthly turnover in India’s foreign exchange market including merchant and interbank
transactions in the category of purchases increased from USD 442 billion in January 2016 to
about2 USD 500 billion in February 2016. In the category of sales, the turnover also scaled
up from about USD 484 billion in January 2016 to around USD 529 billion in February 2016.
Monthly Turnover in foreign exchange market
(USD billion)
Source: PHD Research Bureau compiled from RBI
Rupee Movement
Average Exchange rate of Rupee against USD stands
at 68.2 in Feb 2016, 97.5 against pound sterling,
75.7 against Euro and 59.4 against Japanese Yen.
Daily trend of exchange rate of rupee against various currencies—In the month of February
2016, the exchange rate of rupee against USD has been hovering around 67 to 69. The
exchange rate of rupee against Japanese yen has depreciated from about 55 in the
beginning of February 2016 to around 61 in the end of February 2016. The exchange rate of
rupee against Euro has remained in the range of 73-77 in the month of February 2016.
While, the exchange rate of rupee against pound sterling has remained in the range of 95-98
during February 2016.
Trend of rupee against various currencies
Source: PHD Research Bureau compiled from RBI
2
Data pertains to upto 29th February 2016
3| March 2016
(Feb 2016)
FOREX COMMITEE NEWSLETTER
Monthly trend of rupee exchange rate (High and Low) against currencies
In the month of February 2016, the exchange rate of rupee against
USD recorded highest at 68.7, while it registered lowest at 67.6. The
exchange rate of rupee against pound registered highest at 98.9
and lowest at 95.2. In case of Euro currency, exchange rate of rupee
recorded highest at 77.3 and lowest at 73.4.
Trend of rupee’s high and low against currencies
Exchange rate of
Rupee against USD
stood highest at
68.7 and lowest at
67.6 in Feb 2016
(Rupees per unit of foreign currency)
Source: PHD Research Bureau compiled from RBI
Foreign exchange reserves
Foreign exchange reserves
at USD 348 billion ending
Feb 2016
India’s foreign exchange reserves stands at about USD 348 billion in the month of February
2016 as against USD 350 billion in January 2016. The latest position of foreign exchange
reserves as on March 4, 2016 is about USD 351 billion consisting of Foreign Currency Assets
of USD 327 billion, Gold reserves at USD 19.3 billion, SDRs at around USD 1.5 billion and
Reserve Position in the IMF at USD 2.6 billion.
Movement In Foreign exchange reserves
Source: PHD Research Bureau compiled from RBI
4| March 2016
(USD Billion)
FOREX COMMITEE NEWSLETTER
h
5| March 2016
FOREX COMMITEE NEWSLETTER
Recent regulatory developments
Settlement of Export/ Import transactions in currencies not having a direct exchange rate-- To
further liberalize the procedure and facilitate settlement of export and import transactions where
the invoicing is in a freely convertible currency and the settlement takes place in the currency of the
beneficiary, which though convertible, does not have a direct exchange rate, it has been decided by
RBI that AD Category-I banks may permit settlement of such export and import transactions
(excluding those put through the ACU mechanism), subject to conditions as under:
x
x
x
x
x
Exporter/ Importer shall be a customer of the AD Bank,
Signed contract / invoice is in a freely convertible currency,
The beneficiary is willing to receive the payment in the currency of beneficiary instead of the
original (freely convertible) currency of the invoice/ contract/ Letter of Credit as full and final
settlement,
AD bank is satisfied with the bonafides of the transactions, and;
The counterparty to the exporter / importer of the AD bank is not from a country or
jurisdiction in the updated FATF Public Statement on High Risk & Non Co-operative
Jurisdictions on which FATF has called for counter measures.
Foreign Exchange Management (Acquisition and Transfer of Immovable Property outside India)
Regulations, 2015- In terms of these Regulations, acquisition or transfer of any immovable property
outside India by a person resident in India would require prior approval of Reserve Bank except in
the following cases:
a) Property held outside India by a foreign citizen resident in India;
b) Property acquired by a person on or before 8th July, 1947 and held with the permission of
Reserve Bank;
c) Property acquired by way of gift or inheritance from: persons referred to in (b) above and
persons referred to in section 6(4) of the Act;
d) Property purchased out of funds held in Resident Foreign Currency (RFC) account held in
accordance with the Foreign Exchange Management (Foreign Currency Accounts by a person
resident in India) Regulations, 2015;
e) Property acquired jointly with a relative who is a person resident outside India provided there
is no outflow of funds from India;
f) Property acquired by way of inheritance or gift from a person resident in India who acquired
such property in accordance with the foreign exchange provisions in force at the time of such
acquisition
Please find detailed directions onhttps://rbidocs.rbi.org.in/rdocs/notification/PDFs/CR308198FAFCC474D44A4A8DCC7F0CFD3D684.P
DF
Foreign Exchange Management (Foreign currency accounts by a person resident in India)
Regulations, 2015-- According to the regulations, a “Foreign Currency Account” means an account
held or maintained in currency other than the currency of India or Nepal or Bhutan. These
regulations seek to regulate opening and maintenance of foreign currency accounts in and outside
India by a person resident in India. In terms of Regulation No. 4, a person resident in India may open,
6| March 2016
FOREX COMMITEE NEWSLETTER
hold and maintain with an authorized dealer in India the following accounts, subject to the
conditions specified in the regulations
x Exchange Earner's Foreign Currency (EEFC) Account subject to the terms and conditions of
the Exchange Earner’s Foreign Currency Account Scheme (Schedule I to the regulations);
x Resident Foreign Currency (RFC) Account out of sources of receipt of foreign exchange
mentioned in sub-regulation (B) of the regulations;
x Resident Foreign Currency (Domestic) [RFC(D)] Account with an authorised dealer in India
out of sources of receipt of foreign exchange mentioned in sub-regulation (C) of the
regulations;
x Diamond Dollar Account (DDA) - firms and companies who comply with the eligibility criteria
stipulated in the Foreign Trade Policy of Government of India, subject to the terms and
conditions of the DDA Scheme (Schedule II to the regulations)
Please find detailed directions onhttps://rbidocs.rbi.org.in/rdocs/notification/PDFs/CR30965E80F557FB647A8985CCBBA9F27C5EB.PDF
Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks-The Reserve Bank of
India released Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks (SCBs) for
the quarter ended December 2015. The highlights of the same are following:
x Growth (year-on-year) in deposits decelerated to 10.3% in the quarter from 10.9% for the
same quarter a year ago, while credit accelerated to 10.9% from 10.1%.
x According to size of total business (deposits plus credit) of SCBs, seven states, viz.,
Maharashtra, NCT of Delhi, Tamil Nadu, Karnataka, Uttar Pradesh, West Bengal and Gujarat
accounted for 68.2 per cent of the total business. Maharashtra alone contributed 25.4% of
the total. These seven states accounted for 65.7% of deposits and 71.3% of credit.
x The all India credit-deposit (C-D) ratio was 76.8% at the end of the quarter. This ratio was
the highest for Chandigarh (121.4%) followed by Tamil Nadu (113.7%), Andhra Pradesh
(104.8%), Telangana (104.6%), Maharashtra (97.6%), NCT of Delhi (94.5%), and Rajasthan
(87.3%).
x Year-on-year growth of deposits and credit of SBI and its Associates as also private sector
banks accelerated at the end of the quarter as compared to their levels a year ago, while
nationalised banks recorded year-on-year growth deceleration. Foreign banks and regional
rural banks, however, demonstrated mixed movement. While growth in their deposits
accelerated, credit decelerated.
x Nationalised banks continued to maintain their dominant position contributing around half
of aggregate deposits as well credit of all SCBs. SBI and Associates and private sector banks
had almost similar shares - in the range of 20-23 per cent each in both deposits and credit.
RBI released comprehensive Master Directions on Know Your Customer (KYC)- The Reserve Bank of
India issued the Master Direction on Know Your Customer (KYC), Anti-Money Laundering (AML) and
Combating of Financing of Terrorism (CFT). In terms of the provisions of Prevention of MoneyLaundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules,
2005, Regulated Entities (REs) are required to follow certain customer identification procedure while
undertaking a transaction either by establishing an account based relationship or otherwise and
monitor their transactions. Accordingly, in exercise of the powers conferred by Sections 35 A of the
Banking Regulation Act, 1949 and the Banking Regulation Act (AACS), 1949, read with Section 56 of
the Act ibid and Rule 9(14) of Prevention of Money-Laundering (Maintenance of Records) Rules,
2005 the Reserve Bank of India being satisfied that it is necessary and expedient in the public
interest to do so, hereby, issues the Directions
7| March 2016
FOREX COMMITEE NEWSLETTER
x
There shall be a Know Your Customer (KYC) policy duly approved by the Board of Directors of
REs or any committee of the Board to which power has been delegated.
x The KYC policy shall include following four key elements:
a.
Customer Acceptance Policy;
b.
Risk Management;
c.
Customer Identification Procedures (CIP); and
d.
Monitoring of Transactions
x Compliance of KYC policy- REs shall ensure compliance with KYC Policy through:
a. Specifying as to who constitute ‘Senior Management’ for the purpose of KYC
compliance.
b. Allocation of responsibility for effective implementation of policies and procedures.
c. Independent evaluation of the compliance functions of REs’ policies and procedures,
including legal and regulatory requirements.
d. Concurrent/internal audit system to verify the compliance with KYC/AML policies
and procedures.
e. Submission of quarterly audit notes and compliance to the Audit Committee.
Please find detailed directions onhttps://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10292 .
Extension of SAARC Swap Arrangement- To further financial stability and economic cooperation
within the SAARC region, the Reserve Bank of India has, with the concurrence of the Government of
India, decided to extend the SAARC Currency Swap Arrangement till November 14, 2017. It may be
recalled that the SAARC Swap Arrangement was offered by the RBI to SAARC nations on November
15, 2012. Under this arrangement, RBI will offer Swap Arrangement up to and overall amount of US
$ 2 billion both in foreign currency and Indian rupee. The facility will be available to all SAARC
member countries, viz., Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.
The swap amount available to various member central banks has been arrived at broadly based on
two months import cover subject to a floor of US$ 100 million and a maximum of US$ 400 million
per country.
RBI advised SLBC Convenor banks to identify villages with population above 5000 for opening of
bank branches- In February 2013, SLBC Convenor banks were advised to review the roadmap and
increase the proportion of branches for covering the unbanked villages allotted to them such that
about 5 percent of the unbanked villages identified in a State is covered through branch mode.
Further, keeping in view the ongoing implementation of Pradhan Mantri Jan Dhan Yojana (PMJDY),
SLBC Convenor banks and lead banks were advised vide circular FIDD.CO.LBS.BC.No.
47/02.01.001/2014-15 dated January 2, 2015 to complete the process of providing banking services
in unbanked villages with population below 2000 by August 14, 2015.
On a review of the roadmap, it has been observed by RBI that coverage of banking services in
unbanked villages is skewed towards the BC model and the ratio of branches to BC is very low. For
increasing banking penetration and financial inclusion, brick and mortar branches are an integral
component. Therefore, it has been decided to focus on villages with population above 5000 without
a bank branch of a scheduled commercial bank. This will also enable banks to provide quality
financial services and timely support to BC outlets that would help in sustaining and strengthening
the services provided through BCs and also ensure close supervision of BC operations.
Accordingly, SLBC Convenor banks are advised by RBI to identify villages with population above 5000
without a bank branch of a scheduled commercial bank in their State. The identified villages may be
allotted among scheduled commercial banks (including Regional Rural Banks) for opening of
8| March 2016
FOREX COMMITEE NEWSLETTER
branches. The opening of bank branches under this Roadmap should be completed by March 31,
2017.
RBI modifies norms for credit facilities to overseas step-down subsidiaries of Indian Corporates- In
reference to the circular DBOD.IBD.BC.No.96/23.37.001/2006-07 dated May 10, 2007 permitting
banks in India to extend funded and/or non-funded credit facilities to step-down subsidiaries of the
overseas subsidiaries of Indian companies that may not be wholly owned, subject to certain
conditions. RBI has revived the above instructions and modified the same which are mentioned
below.
Modified norms
x
x
x
x
Banks may extend funded and/or non-funded credit facilities to the step-down subsidiaries
of Indian companies including to those beyond the first level, to finance the projects
undertaken abroad.
The immediate overseas subsidiary of the Indian company must be directly controlled by the
Indian parent company through any of the modes of control recognised under the Indian
Accounting Standards. As per the Indian Accounting Standards, control has been defined as
(a) the ownership, directly or indirectly, through subsidiary(ies), of more than one-half of the
voting power of an enterprise; or (b) control of the composition of the board of directors in
the case of a company or of the composition of the corresponding governing body in case of
any other enterprise so as to obtain economic benefits from its activities. In addition, the
Indian parent company must directly hold a minimum 51% of its shareholding.
All the step-down subsidiaries, including the intermediate ones, must be wholly owned
subsidiary of the immediate parent company or its entire shares shall be jointly held by the
immediate parent company and the Indian parent company and / or its wholly owned
subsidiary. The immediate parent should, wholly or jointly with Indian parent company and /
or its wholly owned subsidiary, have control over the step-down subsidiary.
Banks shall make additional provision of 2% (in addition to country risk provision that is
applicable to all overseas exposures) against standard assets representing all exposures to
the step-down subsidiaries, to cover the additional risk arising from complexity in the
structure, location of different intermediary entities in different jurisdictions exposing the
Indian company, and hence the bank, to greater political and regulatory risk.
RBI issues master directions on Foreign Exchange Transactions-Reserve Bank of India issued 17
Master Directions covering foreign exchange transactions. Master Directions on foreign exchange
being issued consolidate relevant A.P (DIR Series) Circulars issued so far within the ambit of the
relevant regulations, amended up to date and cover different classes of transactions permitted
under the rules and regulations framed under the Foreign Exchange Management Act, 1999 (FEMA).
Master direction on Money Changing Activities--Full Fledged Money Changer (FFMCs) are
authorised to purchase foreign exchange from residents and non-residents visiting India and to sell
foreign exchange for private and business travel purposes only. The guidelines for issue of new FFMC
licence and renewal of FFMC licence, branch licensing, approval for appointment of agents /
franchisees and Know Your Customer (KYC) / Anti Money Laundering (AML) / Combating of Financing
of Terrorism (CFT) Guidelines for Authorised Persons (AP) are given below.
(i) Entry Norms
(a) The applicant has to be a company registered under the Companies Act, 1956.
(b) The minimum Net Owned Funds (NOF) required for consideration as FFMC are as follows:
9| March 2016
FOREX COMMITEE NEWSLETTER
Category
Minimum Net Owned Funds
Single branch FFMC
Rs.25 lakh
Multiple branch FFMC
Rs.50 lakh
Please find detailed directions onhttps://rbidocs.rbi.org.in/rdocs/notification/PDFs/17MD4774FA600E4B4AF483BE8C0760D65E07.P
DF
Opening and Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange
Houses-- Rupee vostro accounts can be used for channeling cross- border inward remittances into
India primarily on private account. The remitter and the beneficiary should be individuals barring a
few exceptions. Remittances through Exchange Houses for financing of trade transactions are
permitted up to Rs.15,00,000 (Rupees fifteen lakhs only) per transaction. The accounts should not be
used for cross-border outward remittances from India. Please find detailed directions on
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/16MCDF82CC17C279247FCB66E2A39BDAD38F6.P
DF
External Commercial Borrowings, Trade Credit, Borrowing and Lending in Foreign Currency by
Authorised Dealers and Persons other than Authorised Dealers- ECBs are commercial loans raised
by eligible resident entities from recognised non-resident entities and should conform to parameters
such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.
The parameters apply in totality and not on a standalone basis. The framework for raising loans
through ECB (herein after referred to as the ECB Framework) comprises the following three tracks:
Track I : Medium term foreign currency denominated ECB with minimum average maturity of 3/5
years.
Track II : Long term foreign currency denominated ECB with minimum average maturity of 10 years.
Track III : Indian Rupee (INR) denominated ECB with minimum average maturity of 3/5 years.
Please find detailed directions on https://rbidocs.rbi.org.in/rdocs/content/pdfs/15MD010116_A.pdf
Reporting under Foreign Exchange Management Act, 1999-- Foreign Exchange Management Act,
1999 (FEMA) is administered through the authorised persons and is based on the declarations and
averments made to them by persons while undertaking the transactions. The Reserve Bank,
therefore, has prescribed various reports and forms under FEMA to be submitted by/ through
Authorised Persons/ Authorised Dealer Category – I Banks/ Authorised Banks. Accurate compilations
and timely submission of these reports are of critical importance as they not only act as a
supervisory tool but also help in fine-tuning the policies relating to foreign exchange transactions
regulated under FEMA. The various reports/ forms required to be submitted under FEMA are
consolidated under this Master Direction. Please find detailed directions on
https://rbidocs.rbi.org.in/rdocs/content/pdfs/13MDR291215.pdf
Import of Goods and Services- Rules and regulations to be followed by the AD Category – I banks
from the foreign exchange angle while undertaking import payment transactions on behalf of their
clients are set out in the following paragraphs. Where specific regulations do not exist, AD Category
– I banks may be governed by normal trade practices. AD Category – I banks may particularly note to
adhere to "Know Your Customer" (KYC) guidelines issued by Reserve Bank (Department of Banking
Regulation) in all their dealings. AD Category I Banks may allow remittance for making payments for
imports into India, after ensuring that all the requisite details are made available by the importer
and the remittance is for bona fide trade transactions as per applicable laws in force. Please find
detailed
directions
on
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/12MDFB8AD1B34BCB4D0A8F6869DA4A53082E.P
DF
10| March 2016
FOREX COMMITEE NEWSLETTER
Export of Goods and Services—The requirement of declaration of export of goods and software in
the prescribed form will not apply to the cases indicated in Regulation 4 of Notification No. FEMA
23/2000-RB dated May 3, 2000. The exporters shall, however, be liable to realize and repatriate
export proceeds as per FEMA Regulations. AD Category – I banks may consider requests for grant of
EDF waiver from exporters for export of goods free of cost, for export promotion up to 2 per cent of
the average annual exports of the applicant during the preceding three financial years subject to a
ceiling of Rs.5 lakhs. For status holder exporters, the limit as per the present Foreign Trade Policy is
Rs.10 lakhs or 2 per cent of the average annual export realization during the preceding three
licensing years (April-March), whichever is higher. Exports of goods not involving any foreign
exchange transaction directly or indirectly requires the waiver of EDF procedure from the Reserve
Bank.
Please
find
detailed
directions
on
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/11MDE3181360B2BC944BDABC2D5CC6F877B23.P
DF
Direct Investment by Residents in Joint Venture (JV) / Wholly Owned Subsidiary (WOS) Abroad-Indian Parties are prohibited from making investment (or financial commitment) in foreign entity
engaged in real estate (meaning buying and selling of real estate or trading in Transferable
Development Rights (TDRs) but does not include development of townships, construction of
residential/commercial premises, roads or bridges) or banking business, without the prior approval
of the Reserve Bank. An overseas entity, having direct or indirect equity participation by an Indian
Party, shall not offer financial products linked to Indian Rupee (e.g. non-deliverable trades involving
foreign currency, rupee exchange rates, stock indices linked to Indian market, etc.) without the
specific approval of the Reserve Bank. Any incidence of such product facilitation would be treated as
a contravention of the extant FEMA regulations and would consequently attract action under the
relevant provisions of FEMA, 1999. General permission has been granted to persons residents in
India for purchase / acquisition of securities in the following manner:
x out of the funds held in RFC account;
x as bonus shares on existing holding of foreign currency shares; and
x when not permanently resident in India, out of their foreign currency resources outside
India.
General permission is also available to sell the shares so purchased or acquired.
Please
find
detailed
directions
on
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/10MD76767A66C23C48E6B342DD63A8D6E551.P
DF
Deposits and Accounts-- The following persons can open a foreign currency account with a bank
outside India for carrying on normal business and incidental transactions. An authorized dealer in
India with its branch/ head office/ correspondent outside India, a branch outside India of a bank
incorporated in India, an Indian shipping or airline company, Life Insurance Corporation (LIC) of India
or General Insurance Corporation (GIC) of India and its subsidiaries, an India firm/ company/ body
corporate in the name of its foreign office/ branch or its representative posted outside India and an
exporter who is exporting services and engineering goods on deferred payment terms or executing a
turnkey project or a construction contract abroad. Please find detailed directions
on https://rbidocs.rbi.org.in/rdocs/notification/PDFs/09MDD593B2F2D48648C8AB3D37625C9F245
D.PDF
Remittance of assets-- ADs may allow remittance of assets by a foreign national where the person
has retired from employment in India, the person has inherited from a person referred to in section
6(5) of the Act and the person is a non-resident widow and has inherited assets from her deceased
11| March 2016
FOREX COMMITEE NEWSLETTER
spouse who was an Indian national resident in India. Please find detailed direction
on https://rbidocs.rbi.org.in/rdocs/notification/PDFs/08MDROA112016989330DF1FF9494784DAC3
2B488E6AE4.PDF
Acquisition and Transfer of Immovable Property under Foreign Exchange Management Act, 1999-According to section 6(4) of the FEMA, a person resident in India can hold, own, transfer or invest in
any immovable property situated outside India if such property was acquired, held or owned by him/
her when he/ she was resident outside India or inherited from a person resident outside India. A
resident can acquire immovable property outside India by way of gift or inheritance from a person
referred above and a person resident in India who had acquired such property on or before July 8,
1947 and continued to be held by him with the permission of the Reserve Bank. Please find detailed
directions
on https://rbidocs.rbi.org.in/rdocs/notification/PDFs/07MIP0101168C51C4CB845342D09E8A4A613
B1F1C6D.PDF
Establishment of Liaison/ Branch/ Project Offices in India by foreign entities-- A body corporate
incorporated outside India (including a firm or other association of individuals), desirous of opening
a Liaison Office (LO) / Branch Office (BO) in India have to obtain permission from the Reserve Bank
under provisions of FEMA 1999. The applications from such entities in Form FNC will be considered
by Reserve Bank under two routes:
Reserve Bank Route — Where principal business of the foreign entity falls under sectors where 100
per cent Foreign Direct Investment (FDI) is permissible under the automatic route.
Government Route — Where principal business of the foreign entity falls under the sectors where
100 per cent FDI is not permissible under the automatic route. Applications from entities falling
under this category and those from Non - Government Organisations / Non - Profit Organisations /
Government Bodies / Departments are considered by the Reserve Bank in consultation with the
Ministry
of Finance, Government
of India.
Please
find detailed
directions
on https://rbidocs.rbi.org.in/rdocs/notification/PDFs/6MDE0C03B42BAB8642349746C8108241E2A1
.PDF
Insurance-- Policies may be issued in foreign currency to resident persons of Indian nationality or
origin who have returned to India after being non-resident provided the premia are paid out of
remittances from foreign currency funds held by them abroad or from their Resident Foreign
Currency (RFC) account with authorised dealers in India. Policies denominated in foreign currency or
rupees may be issued to foreign nationals not permanently resident in India provided the premia are
paid out of foreign currency funds or from their income earned in India or repatriable
superannuation/pension
fund
in
India.
Please
find
detailed
directions
on https://rbidocs.rbi.org.in/rdocs/notification/PDFs/5MDCCED71186DC342FCAE819F1460C3C836.
PDF
Liberalised Remittance Scheme (LRS)-- Under the Liberalised Remittance Scheme, Authorised
Dealers may freely allow remittances by resident individuals up to USD 2,50,000 per Financial Year
(April-March) for any permitted current or capital account transaction or a combination of both. The
Scheme is not available to corporates, partnership firms, HUF, Trusts, etc. Please find detailed
directions
on
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/03MD945692290C104C5595AEDAC89AE78788.PD
F
Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and NonResident Indians/ Persons of Indian Origin--Persons resident in Indian may borrow in INR from
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FOREX COMMITEE NEWSLETTER
NRIs/PIOs under the following two routes:Borrowing in INR by persons other than companies in
India i.e. A person resident in India, not being a company incorporated in India, may borrow in INR
from NRIs/PIOs and a company incorporated in India may borrow in INR, on repatriation or nonrepatriation basis, from NRIs/PIOs after satisfying certain conditions. Please find detailed directions
on
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/02MD787706E669D641C090B415DBE22DEE29.PD
F
Compounding of Contraventions under FEMA, 1999-- If any person contravenes any provisions of
Foreign Exchange Management Act, 1999 (42 of 1999) except clause (a) of Section 3 of that Act.
(a) in case where the sum involved in such contravention is ten lakhs rupees or below, by the
Assistant General Manager of the Reserve Bank of India;
(b) in case where the sum involved in such contravention is more than rupees ten lakhs but less than
rupees forty lakhs, by the Deputy General Manager of Reserve Bank of India;
(c) in case where the sum involved in the contravention is rupees forty lakhs or more but less than
rupees hundred lakhs by the General Manager of Reserve Bank of India;
(d) in case the sum involved in such contravention is rupees one hundred lakhs or more, by the Chief
General Manager of the Reserve Bank of India;
Please
find
detailed
directions
on
https://rbidocs.rbi.org.in/rdocs/notification/PDFs/01MDC010116BADB4521C423465C9679DBFA228
45C7D.PDF
For 17 master directions issued by RBI covering foreign exchange transactions, please follow the link
mentioned below: https://rbi.org.in/Scripts/BS_ViewMasterDirections.aspx
Master circular on Basel III Capital Regulations clarified by RBI -- In order to remove any potential
ambiguity and to fully reflect the intent of the amendment, para 1.8(e), Annex 4 of the Master
Circular is re-worded as “Coupons must be paid out of distributable items. In this context, coupon
may be paid out of current year profits. However, if current year profits are not sufficient, coupon
may be paid subject to availability of sufficient revenue reserves (those which are not created for
specific purposes by a bank) and / or credit balance in profit and loss account, if any.
However, payment of coupons on PDIs from the revenue reserves is subject to the issuing bank
meeting minimum regulatory requirements for CET1, Tier 1 and Total Capital ratios at all times and
subject to the requirements of capital buffer frameworks (i.e. capital conservation buffer,
countercyclical capital buffer and Domestic Systemically Important Banks). Banks must ensure and
indicate in the offer document that they have full discretion at all times to cancel distributions /
payments in order to meet the eligibility criteria for perpetual debt instruments.
RBI released revised guidelines for Financial Literacy Centres (FLCs)- RBI has revised guidelines for
Financial Literacy Centres of Lead Banks and the operational guidelines for the conduct of camps by
FLCs and rural branches of banks have been prepared.
Stronger FLC Architecture – Board Approved Policies: Financial Literacy Centres are the building
blocks or the basic units that initiate the financial literacy activities at the ground level. Hence banks
should provide the minimum basic infrastructure and strengthen the existing FLC Eco-system.The
Financial Literacy Counsellor /Director heading the Financial Literacy Centre is the key stakeholder in
driving the financial literacy initiatives at the ground level. Banks should immediately put in place
board approved policies on the modalities for engagement/recruitment of Financial Literacy
Counsellors in FLCs.
13| March 2016
FOREX COMMITEE NEWSLETTER
Some points to keep in mind are:
a.
The qualifications and the knowledge/skills of the FL Counsellor in conducting camps
b.
Prior Experience in banking/related fields
c.
Working knowledge of computers
d.
Knowledge of the local language
e.
Maximum Age for FL Counsellors
f.
Fixed Remuneration at market rates with incentives for better performance
x Physical Infrastructure: The FLC being a part of the lead bank office or a rural branch should
have a separate room/space with a seating capacity of minimum 10 members to address
walk in customers.
x Basic amenities like Computers/laptops and printers and furniture and fixtures to be
provided.
x Vehicular support may be provided for FL counsellors.
x Each FLC should have a dedicated Help line for addressing grievances of the public in the
district and the helpline should be adequately publicized.
x Skill building of FL Counsellors: RBI will organize a workshop/training program in
collaboration with CAB, Pune to train the Financial Literacy Counsellors this year. Regional
offices of RBI will hold workshops at state level every year as part of the Financial Literacy
Week in each state.
x Each SLBC Convenor bank should update the database on Financial Literacy Centres through
their SLBC/UTLBC Website on a real time basis with inputs from the LDMs/Sponsor banks
Tailored Approach to Financial Literacy and conduct of camps: In a diverse country like ours,
financial education should be customized to meet the requirements of different target groups,
besides the basic financial literacy that every person is expected to know.In this regard, FLCs and
rural branches should identify different target groups at the ground level and conduct camps for a
homogenous audience so that there could be more focus and in depth transmission of financial
education. Going forward, the approach of FLCs and rural branches of banks on conduct of camps
will be as follows:
Special camps for the newly included people in the financial system, including PMJDY account
holders: FLCs and rural branches of banks across the country should address this target group on a
special footing given that they have recently come into the financial system. They should be
encouraged to make meaningful transactions and start using the associated benefits of having a
bank account. A sample booklet containing the information to this target group has been prepared.
Banks may translate the booklet in the local language and provide to the camp participants.
Target: Minimum of one outdoor camp per month by each FLC and rural branch of banks. The
special camps need to be conducted for a period of one year. In each camp, efforts may be taken to
cover maximum number of participants.
Relaxations in Branch Authorisation Policy - With a view to provide operational freedom to banks, it
is advised by RBI that banks are now free to offer all their products and services through the ATM
channels provided the technology permits the same, and adequate checks are put in place to
prevent the channel from being misused to perpetuate frauds on the banks/other genuine
customers.
Credit information reporting in respect of Self Help Group (SHG) members—In reference to the
instructions in paragraph (v) of the Annex III to circular DBOD.No.CID.BC.127/20.16.056/2013-14
14| March 2016
FOREX COMMITEE NEWSLETTER
dated 27 June, 2014 advising banks to report the member level data relating to the SHGs within six
months from the date of the circular. A review of the implementation of the aforesaid directions by
the Reserve Bank of India (RBI) revealed that banks had not made a significant progress in this
regard. The banks also pointed out a number of challenges in implementation of these directions
and requested for greater clarity on their scope. Consequently, the RBI constituted a working group
with members from within RBI, NABARD, banks and credit information companies (CICs), to study
the implementation challenges and suggest measures to address them.
Underscoring the importance of credit information reporting in respect of the SHG members for
financial inclusion, credit decision of banks and Micro Finance Institutions (MFIs) and credit quality
of the SHG loan portfolios, the working group has emphasised the need for putting in place the
credit information reporting for SHG members sooner than later. Nonetheless, the group has
suggested following a phased approach to the implementation of the RBI direction so as to ensure
that the data quality is not compromised. This circular sets out the implementation requirements in
the first two phases.
Other key announcements
Government of India announces Repurchase of Government Stocks of ༤ϭϱ͕ϬϬϬ ĐƌŽƌĞ- The
Government of India have notified the repurchase of its Securities through reverse auction for an
aggregate amount of ༤ ϭϱ͕ϬϬϬ ĐƌŽƌĞ ;ĨĂĐĞ ǀĂůƵĞͿ͘ dŚĞ ƐĞĐƵƌŝƚLJ-wise details of the repurchase are
given as under:
Sr. No.
Nomenclature
1.
7.59% Government Stock 2016
2.
10.71% Government Stock 2016
3.
7.02% Government Stock 2016
Source: RBI
Date of maturity
April 12, 2016
April 19, 2016
August 17, 2016
Liquidity Measures - With a view to addressing the expected tightening of liquidity conditions in
March on account of advance tax payments by corporates and in order to provide flexibility to the
banking system in its liquidity management towards March-end 2016, the Reserve Bank of India will
inject adequate additional liquidity using a combination of appropriate instruments, while
continuing with its normal Liquidity Adjustment Facility (LAF) operations. Based on a continuous
assessment of the evolving liquidity conditions, the tenor and magnitude of additional liquidity
operations will be announced a few days in advance of each tranche. As a special case, Standalone
Primary Dealers will be allowed to participate along with other eligible participants in four regular
term repo auctions to be conducted during the fortnight starting from March 19, 2016 within the
usual notified amount. The dates of auctions and the notified amount under each auction will be
announced in due course.
RBI releases working group report on introducing interest rate options-- Currently, the only
interest rate derivatives (IRD) permitted in India are Interest Rate Swap (IRS) and Forward Rate
Agreement (FRA) in the OTC segment and Interest Rate Futures (IRF) on the Exchanges. IRS market
has evolved over a period of time and is fairly liquid. Trading in IRF market has gradually increased
with wider participation by different categories of participants. These IRDs can be used by the
banks and other market participants to manage market risk effectively in their books. However, the
financial entities, including banks, do not have any instruments to manage the embedded options
on their balance sheets.
15| March 2016
FOREX COMMITEE NEWSLETTER
The Technical Advisory Committee (TAC) of the Reserve Bank on Financial markets, at its meeting
held on April 21, 2015 had constituted a Working Group to comprehensively look into all relevant
issues and give recommendations on the framework for introduction of Interest Rate Options in
India.
The Reserve Bank of India released the Report of the Working Group on Introduction of Interest
Rate Options in India. The key recommendations of the Group are:
x
x
x
x
x
To begin with, simple call and put Options, caps, floors, collars and swaptions may be
permitted. Complex structures may be introduced subsequently.
Both OTC as well as exchange traded options may be introduced. While in the OTC
segment only European options may be permitted, both American and European
structures may be permitted on Exchanges.
Fixed Income Money Market and Derivatives Association of India (FIMMDA)/Financial
Benchmark India Private Limited (FBIL) may come out with the list of eligible domestic
money or debt market rates as benchmarks like G-Sec, T-Bills, MIBOR,OIS, MIFOR, IRF etc.
While banks, PDs and other regulated entities having sound financials and prudent risk
management may be allowed as market makers subject to the approval of concerned
regulator, all domestic entities having underlying interest rate risk may be permitted as
users.
While no documentation relating to underlying exposure may be required for exposures
upto Rs. 5 crore, large corporates may also be allowed to take hedging positions for their
anticipated interest rate exposures.
Changes in Timeframe for Issue of Shares and Reporting of FDI- The Reserve Bank of India has
proposed certain changes in respect of the time frame for issue of shares to align the provisions of
Foreign Exchange Management Act, 1999 which requires an investee company receiving Foreign
Direct Investments to issue shares within 180 days of receipt of foreign investment with the
provisions of the Companies Act, 2013 and in respect of filing of report with the Reserve Bank
regarding receipt of foreign investment and issue of shares and to further streamline the
compliance process, as below:
S.
Paragraph
No. Schedule 1
1
8
2
9(1) (A)
9(1) (B)
Source: RBI
16| March 2016
of Proposed Amendments
Time frame for issue of shares: At the time of filing FC-GPR the
investee company shall be required to submit a certificate from a
practising Company Secretary/Chartered Accountant to the effect that
provisions of section 42 of Companies Act, 2013 have been complied
with.
and Time frame for reporting: Delay in reporting beyond the prescribed
period (30 days from receipt of funds in case of report ARF and 30
days from issue of shares in case of report FC-GPR) shall attract a
penalty of one percent of the total amount of investment subject to a
minimum of Rupees Five thousand and maximum of Rupees Five lakh
per month or part thereof for the first six month of delay and twice
that rate thereafter, to be paid online into a designated account in
Reserve Bank of India.
FOREX COMMITEE NEWSLETTER
RBI asks Banks to file FDI related Forms Online from February 8 2016- The Reserve Bank of India
has today asked authorised dealers (AD) Category - I banks to mandatorily file, from February 8,
2016, forms Advanced Remittance Form (ARF), Foreign Collaboration General Permission Route(FCGPR) and Foreign Collaboration Transfer of Shares (FC-TRS) only through online mode on e-Biz
portal. Physical filing of these forms will be discontinued from February 8, 2016.
At present, the facility for online filing of ARF, FC-GPR and FC-TRS forms related to Foreign Direct
Investment related transactions on Government’s e-Biz portal is available in addition to the option of
physical filing of these forms. While launching the FC-TRS module on e-Biz portal on August 24, 2015,
banks were informed that the facility of physical filing will be discontinued in three months. The
decision to completely switch over to online filing of forms has been taken after assessing the
readiness of AD Category - I banks to file these forms online.
Implementation of Indian Accounting Standards (Ind AS)—RBI has advised that scheduled
commercial banks (excluding RRBs) shall follow the Indian Accounting Standards as notified under
the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction
issued by the Reserve Bank in this regard, in the following manner:
x
x
Banks shall comply with the Indian Accounting Standards (Ind AS) for financial statements
for accounting periods beginning from April 1, 2018 onwards, with comparatives for the
periods ending March 31, 2018 or thereafter. Ind AS shall be applicable to both standalone
financial statements and consolidated financial statements. “Comparatives” shall mean
comparative figures for the preceding accounting period.
Banks shall apply Ind AS only as per the above timelines and shall not be permitted to adopt
Ind AS earlier.
The critical issues which need to be factored in the Ind AS implementation plan include the
following:
a. Ind AS Technical Requirements: Diagnostic analysis of differences between the current
accounting framework and Ind AS, significant accounting policy decisions impacting financials,
drafting accounting policies, preparation of disclosures, documentation, preparation of proforma Ind
AS financial statements, timing the changeover to Ind AS, and dry-run of accounting systems and
end-to-end reporting process before the actual conversion.
b. Systems and processes: Evaluate system changes - assessment of processes requiring changes,
issues having significant impact on information systems (including IT systems), and
develop/strengthen data capture system, where required.
c. Business Impact: Profit planning and budgeting, taxation, capital planning, and impact on capital
adequacy.
d. People - Evaluation of resources: Adequate and fully dedicated internal staff for implementation,
comprehensive training strategy and program.
e. Project management: Managing the entire process-holistic approach to planning and execution
by ensuring that all linkages are established between accounting, systems, people and business,
besides effective communication strategies to stakeholders.
17| March 2016
FOREX COMMITEE NEWSLETTER
RBI clarifies regulatory relaxations for start-ups-- Attention of Authorised Dealer Category - I (AD
Category-I) banks is invited to the Foreign Exchange Management (Foreign currency accounts by a
person resident in India) Regulations, 2000, notified by the Reserve Bank vide Notification No.
FEMA. 10 (R) /2015-RB dated January 21, 2016, as amended from time to time. Pursuant to Sixth
Bi-Monthly Monetary Policy Statement for 2015-16, Reserve Bank of India vide Press Release dated
February 2, 2016, had announced that in case of start-ups, to facilitate ease of doing business,
certain permissible transactions under the existing regime shall be clarified. One of the issues
relate to the start-ups accepting payment on behalf of overseas subsidiaries. In this connection, it
is clarified as under by RBI:
x
x
x
x
x
A start-up in India with an overseas subsidiary is permitted to open foreign currency
account abroad to pool the foreign exchange earnings out of the exports/sales made by
the concerned start-up;
The overseas subsidiary of the start-up is also permitted to pool its receivables arising from
the transactions with the residents in India as well as the transactions with the nonresidents abroad into the said foreign currency account opened abroad in the name of the
start-up;
The balances in the said foreign currency account as due to the Indian start-up should be
repatriated to India within a period as applicable to realisation of export proceeds
(currently nine months);
A start-up is also permitted to avail of the facility for realising the receivables of its
overseas subsidiary or making the above repatriation through Online Payment Gateway
Service Providers (OPGSPs) for value not exceeding USD 10,000 (US Dollar ten thousand) or
up to such limit as may be permitted by the Reserve Bank of India from time to time under
this facility; and
To facilitate the above arrangement, an appropriate contractual arrangement between the
start-up, its overseas subsidiary and the customers concerned should be in place.
Clarifications relating to Issue of Shares --Attention of Authorised Dealer Category - I (AD
Category-I) banks is invited to the Foreign Exchange Management (Transfer or Issue of Security by
a Person Resident outside India) Regulations, 2000, notified by the Reserve Bank vide Notification
No. FEMA. 20/2000-RB dated 3rd May 2000, as amended from time to time. Pursuant to Sixth BiMonthly Monetary Policy Statement for 2015-16, Reserve Bank of India vide Press Release dated
February 2, 2016, had announced that in case of startups, certain permissible transactions under
the existing regulatory framework shall be clarified. One of the issues related to issue of shares
without cash payment by the investor through sweat equity or against any legitimate payment
owed by the company remittance of which does not require any permission under FEMA, 1999.
Accordingly, the following is clarified by RBI:
x
Issue of shares without cash payment through sweat equity: Reserve Bank of India vide
Notification No. FEMA.344/2015 RB dated June 11, 2015 has permitted Indian companies
to issue sweat equity, subject to conditions, inter-alia, that the scheme has been drawn
either in terms of regulations issued under the Securities Exchange Board of India Act,
1992 in respect of listed companies or the Companies (Share Capital and Debentures)
Rules, 2014 notified by the Central Government under the Companies Act 2013 in respect
of other companies.
x
Issue of shares against legitimate payment owed: Reserve Bank of India vide Notification
No. FEMA.315/2014-RB dated July 10, 2014, has permitted Indian companies to issue
equity shares against any other funds payable by the investee company (e.g. payments for
18| March 2016
FOREX COMMITEE NEWSLETTER
use or acquisition of intellectual property rights, for import of goods, payment of
dividends, interest payments, consultancy fees, etc.), remittance of which does not require
prior permission of the Government of India or Reserve Bank of India under FEMA, 1999
subject to conditions relating to adherence to FDI policy including sectoral caps, pricing
guidelines, etc. and applicable tax laws (cf. paragraph 3 of Schedule 1 to Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2015).
RBI releases working group report on introducing interest rate options-- Currently, the only
interest rate derivatives (IRD) permitted in India are Interest Rate Swap (IRS) and Forward Rate
Agreement (FRA) in the OTC segment and Interest Rate Futures (IRF) on the Exchanges. IRS market
has evolved over a period of time and is fairly liquid. Trading in IRF market has gradually increased
with wider participation by different categories of participants. These IRDs can be used by the
banks and other market participants to manage market risk effectively in their books. However, the
financial entities, including banks, do not have any instruments to manage the embedded options
on their balance sheets.
The Technical Advisory Committee (TAC) of the Reserve Bank on Financial markets, at its meeting
held on April 21, 2015 had constituted a Working Group to comprehensively look into all relevant
issues and give recommendations on the framework for introduction of Interest Rate Options in
India.
The Reserve Bank of India released the Report of the Working Group on Introduction of Interest
Rate Options in India. The key recommendations of the Group are:
x
To begin with, simple call and put Options, caps, floors, collars and swaptions may be
permitted. Complex structures may be introduced subsequently.
x
Both OTC as well as exchange traded options may be introduced. While in the OTC
segment only European options may be permitted, both American and European
structures may be permitted on Exchanges.
x
Fixed Income Money Market and Derivatives Association of India (FIMMDA)/Financial
Benchmark India Private Limited (FBIL) may come out with the list of eligible domestic
money or debt market rates as benchmarks like G-Sec, T-Bills, MIBOR,OIS, MIFOR, IRF etc.
x
While banks, PDs and other regulated entities having sound financials and prudent risk
management may be allowed as market makers subject to the approval of concerned
regulator, all domestic entities having underlying interest rate risk may be permitted as
users.
x
While no documentation relating to underlying exposure may be required for exposures
upto Rs. 5 crore, large corporates may also be allowed to take hedging positions for their
anticipated interest rate exposures.
19| March 2016
FOREX COMMITEE NEWSLETTER
20| March 2016
FOREX COMMITEE NEWSLETTER
Macro-Economic Indicators
January 2016 IIP stands at (-)1.5% -- Growth in industry output, as measured in terms of IIP, for
the month of January 2016 is estimated at (-)1.5 % as compared with -1.2% during December
2015. The cumulative growth for the period Apr-January 2016 stands at 2.7% as compared to 2.7%
in the corresponding period of the previous year. The growth in the three sectors mining,
manufacturing and electricity in January 2016 stands at 1.2%, -2.8% and 6.6% respectively as
compared to 2.7%, -2.18% and 3.1% in December 2015. The cumulative growth for the period AprJanuary 2015-16 in the three sectors mining, manufacturing and electricity over the corresponding
year stands at 2.1%, 2.5% and 4.7% respectively. Capital goods growth stands at -20.4% during
January 2016 as compared to -19.7% during December 2015. The cumulative growth of capital
goods stands at -0.6% during Apr-January 2015-16 as compared to 5.8% during Apr-January 201415.
February 2016 CPI inflation stands at 5.18% -- The all India general CPI (Combined) for
February 2016 stands at 5.18% as compared to 5.69% in January 2015. The inflation rates for rural
and urban areas for February 2016 are 5.97% and 4.3% as compared to 6.48% and 4.81%
respectively, for January 2015.
February 2016 WPI inflation stands at (-)0.91% -- Driven by the decrease in the prices of
onions, wheat, pulses, vegetables, inflation decreased to (-)0.91% (Y-O-Y) for the month of January
2016 as compared to (-)0.90% (Y-O-Y) for the month of January 2016. The Index for Wholesale Prices
for the month of January 2016 declined by 1% to 174.0 (provisional) from 175.7 (provisional) for the
previous month.
Net FII investments stands at about (-) USD 2001 million in Feb 2016-- The net FII
investments in the month of February 2016 stands at (-) USD 2001 million as against (-) USD 8814
million in January 2016. The net FII investments registered a y-o-y growth of around (-) 150% in
February 2016 over investments of about USD 3966 million in February 2015. The net FII
investments registered a growth of about (-) 262% in January 2016 (Y-O-Y).
ECBs stand at US$ 1.3 bn during January 2016--Indian firms have raised US$ 1.3 billion through
external commercial borrowings (ECBs) in the month of January 2016 as against US$ 3 billion during
December 2015 by automatic and approval route. The borrowings stood at US$ 1.3 billion in January
2016 as compared to US$ 2.5 billion in January 2015.
CAD narrowed to 1.3% of GDP in Q3 2015-16--India’s current account deficit (CAD) stands at US$
7.1 billion (1.3 per cent of GDP) in Q3 of 2015-16, which is lower than US$ 7.7 billion (1.5 per cent of
GDP) in Q3 of 2014-15 and US$ 8.7 billion (1.7 per cent of GDP) in the preceding quarter. The
contraction in CAD was primarily on account of a lower trade deficit (US$ 34.0 billion) than in Q3 of
last year (US$ 38.6 billion) and US$ 37.4 billion in the preceding quarter.
Merchandise exports decline by (-) 5.7% in February 2016 -- India’s exports for the month of
February 2016 stands at around USD 21 billion as compared to USD 22 billion in February 2015
registering a growth of around (-) 5.7%. During February 2016, the imports are registered at USD
27.3 billion as compared to USD 29 billion in February 2015, registering a growth of (-) 5 %. The
balance of trade stands at around USD (-)6.5 billion during February 2016 as compared to USD(-)6.7
billion for February 2015.
21| March 2016
FOREX COMMITEE NEWSLETTER
Value of Foreign Trade
Period
USD Billion
December
January
February
22.3
(-)14.7
21.1
(-) 13.6
20.7
(-) 5.7
Exports
FY16
Growth (%)
Imports
FY16
34
28.7
27.3
Growth (%)
(-)3.8
(-)11
(-)5
Trade balance
FY16
(-) 11.7
(-) 7.6
(-) 6.5
Source: PHD Research Bureau, compiled from Ministry of Commerce and Industry, Govt of India
Gross Bank Credit grows at 9.5% in January 2016--Gross bank credit grows at 9.5% in the month of
January 2016 as against 9.2% in the month of December 2015. The gross bank credit growth stands
at 9.6% during January 2015. On a year-on-year (y-o-y) basis, non-food bank credit increased by 9.8%
in January 2016 as against 9.3% in December 2015. Credit to agriculture and allied activities
increased by 13.4% in January 2016 as compared to around 13% in December 2015.
RBI maintains status quo in Sixth Bi-monthly Monetary Policy Statement, 2015-16--RBI in its sixth
Bi-monthly Monetary Policy Statement, 2015-16 has kept the policy repo rate under the liquidity
adjustment facility (LAF) unchanged at 6.75%, cash reserve ratio (CRR) of scheduled banks
unchanged at 4% of net demand and time liability (NDTL). Consequently, the reverse repo rate under
the LAF stands unchanged at 5.75%, and the marginal standing facility (MSF) rate and the Bank Rate
to 7.75%. RBI continue to provide liquidity under overnight repos at 0.25% of bankwise NDTL at the
LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75% of
NDTL of the banking system through auctions
Trends in the Secondary Market--S&P BSE Sensex closed at 23,002 as on 29th February 2016 as
against 24,870.69 as on 29th January 2016, registering a decline of about (-)7.5%. During February
2016, Sensex recorded an intraday high of 25,002.32 and an intraday low of 22,494.61.
Movement of BSE Sensex since April 2015
Month
Open
High
Low
Close
% change on closing
values over previous
month
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
27,954.86
29,094.61
26,897.54
27,011.31
(-) 3.38
27,204.63
28,071.16
26,423.99
27,828.44
3.03
27,770.79
27,968.75
26,307.07
27,780.83
(-) 0.17
27,823.65
28,578.33
27,416.39
28,114.56
1.2
28,089.09
28,417.59
25,298.42
26,283.09
(-) 6.5
26,127.04
26,471.82
24,833.54
26,154.83
(-) 0.48
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
26,344.19
27,618.14
26,168.71
26,656.83
1.92
26,641.69
26,824.30
25,451.42
26,145.67
(-) 1.92
26,201.27
26,256.42
24,867.73
26,117.54
(-) 0.11
26,101.50
26,197.27
23,839.76
24,870.69
(-) 4.7
24,982.22
25,002.32
22,494.61
23,002.00
(-) 7.5
Source: PHD Research Bureau compiled from BSE Sensex.
22| March 2016
FOREX COMMITEE NEWSLETTER
While, CNX Nifty closed at 6987.05 as on 29th February 2016 as against 7563.55 as on 29th January
2016, registering a decline of about (-)7.6%. During February 2016, Nifty recorded an intraday high
of 7600.45 and an intraday low of 6825.80.
Movement of CNX NIFTY since April 2015
Month
Open
High
Low
Close
% change on closing
values over previous
month
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
8483.70
8844.80
8144.75
8181.50
(-) 3.64
8230.05
8489.55
7997.15
8433.65
3.08
8417.25
8467.15
7940.30
8368.50
(-) 0.77
8376.25
8654.75
8315.40
8532.85
1.96
8510.65
8621.55
7667.25
7971.30
(-) 6.6
7907.95
8055
7539.50
7948.90
(-) 0.3
7992.05
8336.30
7930.65
8065.80
1.47
8054.55
8116.10
7714.15
7935.25
(-) 1.62
7958.15
7979.30
7551.05
7946.35
0.13
7938.45
7972.55
7241.50
7563.55
(-) 4.8
7589.50
7600.45
6825.80
6987.05
(-) 7.6
Source: PHD Research Bureau compiled from NSE.
Commodities
The price of gold has increased to Rs. 28,320 (Spot average price per 10 grams) in the month of
February 2016 as against Rs. 25,981 in the month of January 2016. The price of crude oil has also
scaled up to about USD 30.5 per barrel in February 2016 as against around USD 28 per barrel in the
month of January 2016.
Trend of price of Gold since Jan 2015 (Rs.)
Trend of price of Crude oil (USD/bbl)
Source: PHD Research Bureau compiled from Ministry of Petroleum & Natural Gas, Government of India and MCX.
23| March 2016
FOREX COMMITEE NEWSLETTER
India’s key Statistics so far...
S. NO.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Indicators
Turnover in foreign exchange market *
Purchase (USD billion)
Sales (USD billion)
Exchange rate of rupee against USD (monthly average)*
Exchange rate of rupee against Pound Sterling (monthly average) *
Exchange rate of rupee against Euro (monthly average) *
Exchange rate of rupee against Japanese Yen (monthly average) *
Foreign exchange reserves (USD billion)^
IIP (growth in %)**
CPI inflation (%)*
WPI inflation (%)*
FDI equity inflow (USD billion)***
FDI equity inflow (% growth)***
External Debt (USD billion)@
ECBs (USD billion)**
Net FII investments (USD million)*
Current Account Deficit as % of GDP Q3 2015-16
India’s Exports (USD billion) *
Growth of exports (%) *
India’s Imports (USD billion)*
Growth of Imports (%) *
Trade Balance (USD billion)*
BSE SENSEX $
CNX Nifty $
Repo rate ^^
Reverse repo rate^^
Cash Reserve ratio^^
Statutory Liquidity Ratio^^
Dec 2015
500
529
68.24
97.58
75.72
59.38
351
(-) 1.5
5.18
(-) 0.91
29.4
40
483
1.3
(-) 2001
1.3
20.7
(-) 5.7
27.3
(-) 5
(-) 6.5
23,002
6987.05
6.75%
5.75%
4%
21.5%
Source: PHD Research Bureau compiled from various sources. *Data for the month of Feb 2016.^ Foreign exchange reserves as on March
4, 2016 **Data for month of Jan 2016, *** Data for Apr-Dec 2015, @Data for the end Sep 2015, $Data for BSE SENSEX and CNX NIFTY are
closing figures of the month of Feb 2016. ^^Key policy rates such as repo, CRR , reverse repo and SLR pertains to as on 2nd Feb 2016
24| March 2016
FOREX COMMITEE NEWSLETTER
Disclaimer
“Forex Committee Newsletter” is prepared by PHD Chamber of Commerce and Industry to
provide a broad view of developments related to forex affairs of our economy. This
newsletter may not be reproduced, wholly or partly in any material form, or modified,
without prior approval from the Chamber.
It may be noted that this newsletter is for information purposes only. Though due care has
been taken to ensure accuracy of information to the best of the PHD Chamber’s knowledge
and belief, it is strongly recommended that readers should seek specific professional advice
before taking any decisions.
Please note that the PHD Chamber of Commerce and Industry does not take any
responsibility for outcome of decisions taken as a result of relying on the content of this
newsletter. PHD Chamber of Commerce and Industry shall in no way, be liable for any direct
or indirect damages that may arise due to any act or omission on the part of the Reader or
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Copyright 2016
PHD Chamber of Commerce and Industry
ALL RIGHTS RESERVED.
No part of this publication including the cover, shall be reproduced, stored in a retrieval
system, or transmitted by any means, electronic, mechanical, photocopying, recording or
otherwise, without the prior written permission of, and acknowledgement of the publisher
(PHD Chamber of Commerce and Industry).
25| March 2016
FOREX COMMITEE NEWSLETTER
FOREX COMMITTEE
Dr. SP Sharma, Chief Economist
Ms. Surbhi Sharma, Sr. Research Officer
Mr. Shyam Poddar, Chairman
Mr. Ambuj Jain, Co-Chairman
---------------------------------------------------------------------------PHD CHAMBER OF COMMERCE AND INDUSTRY
PHD House, 4/2 Siri Institutional Area, August Kranti Marg, New Delhi - 110016
Phone: 91-11-49545454; Fax: 91-11-26855450, 26863135
Email: [email protected]; Website: www.phdcci.in
26| March 2016