Laws and sections by number or title, due dates, pages, and updates.
The Reserve Bank of India amends the Foreign Exchange Management (Guarantees) Regulations, 2000 to define and permit Irrevocable Payment Commitments for foreign institutional investors. An authorized dealer custodian bank issues Irrevocable Payment Commitments in favor of stock exchanges or clearing corporations. The bank issues the commitment on behalf of registered foreign institutional investor clients for share and convertible debenture purchases under the portfolio investment scheme. This regulation takes effect retrospectively from April 29, 2011, and no person is adversely affected by the retrospective effect. The bank reckons the commitment for capital market exposure computations when the bank issues it before receiving customer funds.
What you must do
Key dates
Law this touches
Who is affected
If you do not comply
Ask about this notification
Relative A.P. (DIR) circular: 54/29.04.2011
RESERVE BANK OF INDIA FOREIGN EXCHANGE DEPARTMENT CENTRAL OFFICE MUMBAI-400 001
Notification No. FEMA.227/2012-RB.
March 30, 2012
Foreign Exchange Management (Guarantees) (Amendment) Regulations, 2010
In exercise of the powers conferred by clause (j) of sub-section (3) of Section 6, and sub section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Guarantees) Regulations, 2000 (Notification No. FEMA 8/2000-RB dated May 3, 2000), namely:-
In the Foreign Exchange Management (Guarantees) Regulations, 2000 (Notification No.FEMA 8/2000-RB dated May 3, 2000), (hereinafter referred to as ‘the Principal Regulations’), after sub-regulation (iii) of Regulation 2, the following new sub-regulation shall be added and it shall deemed to have been added with effect from 29th day of April 2011, namely;
“(iv) ‘ Irrevocable Payment Commitment (IPC)’ means irrevocable confirmation issued by the custodian bank in favour of a stock exchange / clearing corporation of a stock exchange on behalf of its customers, to meet the payment obligation arising out of a 'buy' transaction".
In Regulation 4,after sub-regulation (3), the following new sub-regulation shall be added and it shall be deemed to have been added with effect fromApril 29, 2011, namely,-
“(4) An authorized dealer (custodian bank), subject to the directions issued by the Reserve Bank, from time to time, may issue Irrevocable Payment Commitments (IPCs) in favour of the Stock Exchanges / Clearing Corporations of the Stock Exchanges, on behalf of their registered FII clients for purchase of shares and convertible debentures under the portfolio investment scheme (PIS) notified vide Schedule 2 to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (Notification No.FEMA.20/2000-RB) dated May 3, 2000, as amended from time to time.
Explanation : (i) If the IPC, which is in the nature of a financial guarantee, is issued prior to receipt of the required funds from the customer, it will be reckoned for the computation of Capital Market Exposure of the custodian bank.
(ii) Issue of IPC should be in accordance with the regulations on banks' exposure to the capital market issued by the Reserve Bank from time to time and also comply with the instructions issued by Department of Banking Operations and Development, Reserve Bank of India (DBOD), from time to time.
(Meena Hemchandra) Chief General Manager-in-charge
Foot Note:
(i)The Principal Regulations were published in the Official Gazette vide No. G.S.R. No.391 (E) dated May 5, 2000 in Part II, Section 3, Sub-Section (i) and subsequently amended vide : No. G.S.R.575 (E) dated 19-8-2002 No. G.S.R.745 (E) dated 16-11-2004 No. G.S.R.61 (E) dated 9-2-2005 No. G.S.R.196 (E) dated 14-3-2007 No. G.S.R.300 (E) dated 01-05-2009 No. G.S.R.298 (E) dated 01-05-2009 No.G.S.R.634(E) dated 27-7-2010
(ii) It is clarified that no person will be adversely affected as a result of retrospective effect being given to these regulations.
Published in the Official Gazette of Government of India – Extraordinary – Part-II, Section 3, Sub-Section (i) dated 21.12.2012- G.S.R.No.914 (E)
