The RBI on Tuesday clarified its stance on foreign outflows from residents and coporates, saying that expenses for education and medical expenses would not fall under the $75,000 cap placed on remittances by resident Indians and added that corporates can still invest up to 400% of net worth if funded through ECBs.
Companies have also been allowed to raise ECBs with minimum maturity of seven years from foreign equity holders in the company for general corporate purposes.
?On a review, it has been decided to permit eligible borrowers to avail of ECB under the approval route from their foreign equity holder company with minimum average maturity of seven years for general corporate purposes,? RBI said in a notification.
The RBI has relaxed the norms subject to certain conditions such as minimum paid-up equity of 25% should be held directly by the lender, repayment of the principal will commence only after completion of minimum average maturity of seven years and no prepayment will be allowed before maturity. The central bank also said that such ECBs would not be used for any purpose not permitted under extant the ECB guidelines.
Separately RBI issued clarifications on revised guidelines pertaining to overseas direct investment by Indian companies, which was notified on August 14, 2013. Then, RBI had said companies raising ECBs will be only allowed to invest up to 100% of their net worth compared to 400% earlier. However, now RBI has said it plans to continue with the 400% limit provided the investment is funded by ECBs.
The RBI also clarified that new limit on overseas direct investment will not be applicable on commitments made on or before August 14. In a another notification, RBI clarified that in case of outward remittance, the upper limit of $75,000 per year will be applicable to resident individuals for purposes of gifting and donation. For all other uses, including medical and educational expenses, the limits are separate, distinct and mutually exclusive.
In case of medical expenses, individuals will be allowed to remit money abroad up to the estimate from a doctor in India or hospital/ doctor abroad under general permission, without RBI approval. Resident individuals are allowed to make remittances up to $25,000 for maintenance expenses of a patient going abroad for medical treatment or check-up abroad or for accompanying as attendant to a patient going abroad. For educational purposes, a resident individual will be allowed to remit up to the cost estimates of a university abroad or $100,000, whichever is higher. This is over and above the $75,000 limit, which can be made under the liberalised remiitance scheme route.