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All insurers with joint venture agreements with foreign entities must examine option clauses and ensure compliance with FEMA Regulations and pricing guidelines. The Government of India clarifies that any agreement with options entered into before 12 November 2013 violates Regulation 2(ii) of the Foreign Exchange Management (Transfer or Issue of Securities by a Person Resident Outside India) Regulations, 2000. Insurers must furnish a confirmation of compliance to the Authority.
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[Image omitted. See the official document.]
Ref.: IRDA/F&A/CIR/GLD/156/07/2017
Date: 05.07.2017
Circular
To, All Insurers,
Sub: Pricing in case of Put or Call options in JV Agreements.
The Reserve Bank of India had, vide amendment Notification No. FEMA 294/2013-RB dated 12th November, 2013, permitted the optionality clause (put and call options) in contracts. In this context some insurers had approached the Authority seeking clarification as to whether the existing contracts with optionality clauses, entered prior to the notification of the above amendment were in compliance with the FEMA stipulations.
The Government of India, in consultation with the Reserve Bank of India, has clarified that any Agreement with "options" entered into prior to 12th November, 2013 is in contravention of Regulation 2(ii) of the Foreign Exchange Management (transfer or Issue of Securities by a person Resident outside India) regulations, 2000. It has also been reiterated that all existing contracts should be in compliance with the pricing guidelines issued by the RBI under the FEMA Regulations.
In view of the above, all insurers who have Joint Venture Agreements with foreign entities should examine whether they have option clauses therein and ensure that they are in compliance with the FEMA Regulations, including those regarding pricing.
Insurers are advised to furnish a confirmation of compliance with the above, to the Authority.
[Image omitted. See the official document.]
(Dr Mamta Suri) CGM and HOD-F&A
പരിശ്രമം ഭവന്, تیسرا তল, बशीरबाग, हैदराबाद-500 004. भारत (ு) : 91-040-2338 1100, फैक्स: 91-040-6682 3334 ई-मेल: irda@irda.gov.in वेब: www.irda.gov.in
Parisharam Bhavan, 3rd Floor, Basheer Bagh, Hyderabad-500 004. India. Ph.: 91-040-2338 1100, Fax: 91-040-6682 3334 E-mail: irda@irda.gov.in Web.: www.irda.gov.in
