Tag: rbi

Survey on Foreign Collaboration in Indian Industry: 2023–2025 – Data Release

by Pushkar Mer

Reserve Bank released the results of the fifteenth round of its biennial survey on foreign collaboration in Indian industry (FCS) covering the financial years 2023-24 and 2024-25. This survey captures information on financial parameters and operations of the Indian companies having technical collaboration with foreign companies.

Highlights:

  • Foreign technical collaboration (FTC) agreements were primarily present in the foreign direct investment (FDI) companies, which were either foreign subsidiaries (i.e., single foreign investor holding more than 50 per cent of total equity) or foreign associate companies (i.e., foreign investors’ equity holding ranging between 10 to 50 per cent), with 68 per cent and 21 per cent share of the total FTCs, respectively.
  • The FTCs in the manufacturing sector entities accounted for 78.4 per cent of the total reported FTCs, of which, machinery and motor vehicles together accounted for 30.6 per cent; while FTCs in the services sector constituted 16.6 per cent.
  • Japan, the United States of America (USA) and Germany remained the top three countries contributing to the technical collaborations in the Indian entities.
  • Around 61 per cent of FTCs involved technology know-how transfer by the foreign collaborators and 8 per cent FTCs were for use of trademarks / brand names.
  • Royalty payments, inclusive both royalty and lump sum technical fees, was the payment mode for around two-thirds of FTCs.
  • Of the 601 reported FTC agreements, 187 had export restriction clauses and 188 FTC had provision for exclusive rights on assets transferred.
  • Manufacturing sector had the highest share in value of production among the FTC companies. Within manufacturing, motor vehicles sector had the largest share.
  • The exports of the FTC reporting entities grew at a faster pace (20.3 per cent) as compared to the imports (4.6 per cent) in 2024-25 – they had 17.7 per cent and 18.6 per cent shares, respectively, in the total value of production.
  • Average profitability of FTC reporting companies, measured by the ratio of gross profit to capital employed, stood at 14.4 per cent in the current survey round.

Amendments to Directions – Compounding of Contraventions under FEMA 1999

by Pushkar Mer

Reserve Bank of India’s (RBI) updated Master Directions on Compounding of Contraventions under the Foreign Exchange Management Act, 1999 (FEMA), issued on April 22, 2025, vide Notification No. RBI/FED/2025-26/135, FED Master Direction No.04/2025-26) and amended via RBI/FED/2025-26/32, A.P. (DIR Series) Circular No. 04/2025-26 dated April 24, 2025. The said guidelines aim to streamline the compounding process, promote voluntary compliance, and enhance transparency in handling FEMA violations.

Below is a summary of the key aspects in reference to the Master Directions:

1. What is Compounding?


Compounding is a process that allows individuals or entities to voluntarily admit breaches of FEMA provisions, plead guilty, and seek redressal by paying a penalty.

This simplifies resolution, minimizes legal proceedings, and ensures compliance.

2. Key Updates in the Master Direction:

• Revised Compounding Rules: The Foreign Exchange (Compounding Proceedings) Rules, 2024, notified on September 12, 2024, have replaced the Foreign Exchange (Compounding Proceedings) Rules, 2000,

introducing higher monetary limits for compounding authorities and modernized payment methods.
• Application Process: Applications for compounding can be submitted physically or via the RBI’s PRAVAAH Portal with a fee of ₹10,000 plus GST. The application must include details such as foreign direct investment, external commercial borrowings, or branch/liaison office activities, along with an undertaking that the applicant is not under investigation by the Directorate of Enforcement (DoE).
• Compounding Authorities: The RBI’s Regional Offices and the Foreign Exchange Department (FED), CO Cell in New Delhi, are authorized to handle compounding applications.

• Non-Compoundable Cases: Contraventions involving unquantifiable amounts, serious offenses like money laundering, terror financing, or those already adjudicated by the DoE are not eligible for compounding.

Repeated contraventions within three years or cases under DoE investigation may also be ineligible.
• Payment of Penalty: The compounding amount, as specified in the order, must be paid within 15 days via demand draft or NEFT or RTGS or other permissible electronic modes in favor of the RBI. Failure to pay deems the application invalid, potentially leading to DoE referral.
• Compounding Matrix: A refined matrix provides transparency in calculating penalties, considering factors like undue gains, loss caused, and the contravener’s conduct. For non-reporting contraventions, the compounding authority may cap the penalty at ₹2,00,000 per contravention in exceptional cases, promoting a less punitive approach for technical lapses.
• Certificate of Compliance: Upon payment, the RBI issues a certificate confirming compliance with the compounding order.

It may be ensured that intimation of payment of application fee, to respective Regional Office, CO Cell, or Central Office, as the case may be. The compounding application must be accompanied by the payment details including the UTR number evidencing the payment of the application fee.

Please refer to the RBI’s official guidelines at https://www.rbi.org.in or contact the RBI’s Foreign Exchange Department for further details.

Disclaimer: This is for informational purposes only and does not constitute legal advice.

Storage of Payment System Data

by Pushkar Mer

The entire payment data shall be stored in systems located only in India, except in cases clarified herein.

The data should include end-to-end transaction details and information pertaining to payment or settlement transaction that is gathered / transmitted / processed as part of a payment message / instruction. This may, interalia, include – Customer data (Name, Mobile Number, email, Aadhaar Number, PAN number, etc. as applicable); Payment sensitive data (customer and beneficiary account details); Payment Credentials (OTP, PIN, Passwords, etc.); and, Transaction data (originating & destination system information, transaction reference, timestamp, amount, etc.).

  • There is no bar on processing of payment transactions outside India if so desired by the PSOs. However, the data shall be stored only in India after the processing. The complete end-to-end transaction details should be part of the data.
  • In case the processing is done abroad, the data should be deleted from the systems abroad and brought back to India not later than the one business day or 24 hours from payment processing, whichever is earlier. The same should be stored only in India.
  • However, any subsequent activity such as settlement processing after payment processing, if done outside India, shall also be undertaken / performed on a near real time basis. The data should be stored only in India.
  • In case of any other related processing activity, such as chargeback, etc., the data can be accessed, at any time, from India where it is stored.

Banks having server outside India have been strictly directed by RBI for not sharing customer account sensitive data in bank statement

In order to be in adherence to the Reserve Bank of India (RBI) Directive, the below listed information will not be available in the periodic banks statement/s for RTGS and NEFT transactions undertaken at your end (in cases if banks are storing data outside India):-

  • Serial Number of the Transaction
  • Message to Beneficiary
  • Beneficiary IFSC Number
  • Remitting IFSC Number
  • Address of the Remitter
  • Remarks
  • Debit Account Number
  • Beneficiary Account Number
  • Remitter Account Number
  • Reject Reason Description
  • Sender to Receiver Information

Digitalization of Import/Export documentation in India

by Pushkar Mer

Information technology (IT) simplified export import functioning in India. It made all working of Custom department and Banking system very easy and systematic.

There are three revolutionary changes witnessed by Indian exporters/importers which transforms physical documentation into digitalization.

Directorate General Foreign Trade (DGFT) launched eBRC platform in 2012, RBI launched EDPMS and IDPMS system in 2014 and 2016 respectively.

eBRC platform introduced by Directorate General of Foreign Trade (DGFT) in 2012. Prior to eBRC era, it was quite cumbersome task to get Bank Realization Certificate (BRC) from AD. Once export gets inward remittance from overseas vendors, Original physical Exchange Control Copy of shipping bills needs to be submitted along with BRC application, thereafter AD was issuing BRC to exporter.

Export Data Processing and Monitoring System (EDPMS) was launched by RBI in March 2014 to monitor payments against Export Bill (Shipping Bill) . It is a system where all export transactions are captured and followed up till their realization. Outstanding get recorded by AD mentioned in shipping bill at the time of export.

AD send reminders to exporter if inward remittance not received within time period of 6 months.

If exporter continuous ignored communication from AD, then AD is liable to report to RBI for default of such exporters, thereafter RBI initiate panel action against violation of FEMA provisions.

IDPMS (IMPORT DATA PROCESSING AND MONITORING SYSTEM) LAUNCHED BY RESERVE BANK OF INDIA (RBI) IN 2016

This was the revolutionary step for digital control of Import towards a paperless documentation. Prior to IT based IDPMS era, importers and custom department required to keep original copies of bill of entry (Original for custom, duplicate for availing CENVAT Credit, Triplicate exchange control copy for making foreign remittance against imported goods). If importer lost triplicate copy, it required huge documentation process to make remittance against import. Bank mandatorily required Exchange Control Copy to avoid double payment against single bill of entry.

Post IDPMS era, importer does not require to keep original bill of entry, photocopy of bill of entry is enough for availing Input Tax Credit (ITC) and Bank also does not ask for original bill of entry for making foreign remittances.

In order to enhance ease of doing business and facilitate efficient data processing for payment of import transactions and effective monitoring thereof, Import Data Processing and Monitoring System has been developed in consultation with the customs authorities and other stakeholders.

RBI does not directly interact with imports. RBI interact with importers through Authorized Dealer (AD).

An Authorized Dealer (AD) is any person specifically authorized by the Reserve Bank under Section 10(1) of FEMA, 1999, to deal in foreign exchange or foreign securities

If we will have to start import transactions with overseas vendors, you would have to first get your self registered with Directorate General of Foreign Trade (DGFT) and get a Import Export Code (IEC). You would have to register AD code with Custom Department. For registering Code with Custom, you would have to submit details of AD code of your banker on banker letter head.

Primary data on import transactions from Customs and SEZ will first flow to the RBI secured server and thereupon depending on the AD code shall be shared with the respective banks for taking the transactions forward. The AD bank shall enter every subsequent activity, viz. document submission, outward remittance data, etc. in IDPMS so as to update the RBI database on real time basis.

All transactions are being updating in IDPMS, so there is no risk of double remittance, as a result no need of physical exchange control copy of bill of entry. If you will proceed double remittance by mistake, bank will deny for such remittance because after remittance it will automatically remove from outstanding list and will shift to settled bill of entry.

If you will not make foreign remittance within time limit as per RBI guideline, AD will send you reminders for settlement of outstanding to overseas vendors. If you will ignore such reminders, AD will be liable to intimate RBI for default of FEMA. RBI will initiate penal action against importer towards violation of FEMA.