RBI amends provisions / reviews instructions relating to permitting banks in India to extend funded and/or non-funded credit facilities to step-down subsidiaries of overseas subsidiaries of Indian cos., prescribes conditions; Reviewed instructions include: (i) Banks may extend funded and/or non-funded credit facilities to the step-down subsidiaries of Indian cos. including to those beyond the first level, to finance the projects undertaken abroad, (ii) Immediate overseas subsidiary of Indian co. must be directly controlled by Indian parent co. through any of the modes of control recognised under Ind AS (in addition, Indian parent company must directly hold a minimum 51% of its shareholding), (iii) All step-down subsidiaries (including intermediate ones) must be wholly owned subsidiary of the immediate parent co. / its entire shares shall be jointly held by immediate parent co. and the Indian parent co. and / or its wholly owned subsidiary, (iv) Banks shall make additional provision of 2% (in addition to country risk provision as 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; States that such modification shall apply to credit facilities sanctioned after date of this circular and to existing facilities as and when they are renewed hereafter: RBI
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