| RBI
allows foreign banks to remit profit every quarter
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Foreign
banks operating in India will be now allowed to
remit their profit after tax on a quarterly basis
to their head offices, without the Reserve Bank
of India’s prior approval. However, in order
to remit profits overseas every three months, foreign
banks would have to compulsorily audit their books
on a quarterly basis.e
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Our Say |
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| The
RBI decision is possibly the result
of the extremely comfortable level of
foreign exchange reserves. Moreover,
the majority of the 35 foreign banks
in India turned in strong profits with
the top 5 having combined profit after
tax of Rs 1,707 crore (over US $ 379
mln), which is a comparatively sizeable
figure. |
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At
present, foreign banks remit profits to their overseas
offices only at the end of the financial year. There
is also no compulsion on them to audit their books
every quarter since they operate in India as branches
of their parents and are not publicly listed. Details
of the quarterly remittance will have to be submitted
to the RBI. |
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If
the remittances relate to unremitted profits of
earlier periods, which have not been retained for
capital adequacy but held for remittance abroad,
full details of the related periods will have to
be furnished. |
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| Proposed
Amendment to FDI rules in the offing
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A
proposal to amend the foreign direct investment
(FDI) rules and grant more freedom to overseas companies
to set up new ventures in the country, without having
to seek a no-objection certificate from their existing
local partners, will be taken up by a core group
of secretaries very soon- according to finance ministry
officials. |
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Our Say |
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| It
has frequently been alleged by foreign
investors that Indian firms are misusing
the provisions of Press Note 18 to extract
hefty premiums, when the former intend
to expand their role in the existing
joint venture or want to exit the joint
venture in favour of a new subsidiary.
Responding to the need of greater foreign
participation in almost all sectors,
the Ministry will instruct the Department
of Company Affairs to determine the
status of existing joint ventures, the
claims being made by the partners, and
other legal issues. |
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There
is a proposal to amend the no-objection certificate
clause in Press Note 18, to put tabs on local joint
venture partners that are bankrupt or declared sick,
or those who have closed operations or have a poor
financial record. As per Press Note 18, a foreign
investor is required to procure no-objection certificates
from its former or existing Indian partners in order
to set up a new subsidiary. Both financial and technical
collaborations are covered in this policy, which
was formulated to protect Indian companies from
their richer foreign partners. |
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