As per the current exchange control regulations, for certain purposes the Reserve Bank had prescribed monetary ceilings upto which banks can allow, on their own, remittance of foreign ex- change. For remittances beyond the prescribed limits, the au- thorised dealers are required to obtain the Reserve Bank's approval. The Reserve Bank of India has today announced removal of these ceilings and authorised dealers can now allow remittanc- es for the following purposes without prior clearance from the Reserve Bank:

1. Maintenance expenses of representatives posted abroad by Indian newspapers/news agencies and periodicals;
2. Charges incurred towards electronic database costs including charges for computer connections/time, software, hits etc.
3. The charges incurred towards feasibility/pre-feasibiltiy studies.
4. Annual maintenance/service charges for imported machinery, software, etc.,
5. Actual cost of advertisements in print media abroad.
6. Initial expenses for opening of overseas non-trading offices/representative offices by eligible exporters.
7. Actual cost of imports of designs and drawings.
8. Actual cost of goods imported through post parcel.
9. Expenses incurred towards legal services relating to import transactions.
10. Amount of retainer's fees payable to the overseas agents.
11. Remittances towards solicitors' fees/average adjusters' fees by Indian shipping companies.

The removal of these limits which covers a wide area will reduce delay and thus further facilitate all current account transactions.

Alpana Killawal)
Deputy General Manager

Press Release : 1996-97/378

To

All Authorised Dealers in Foreign Exchange

Dear Sirs,

1. Legal Expenses Connected with Imports(Paragraph 7A.25 of ECM)

   In terms of paragraph 7A.25 of ECM, authorised dealers have been permitted to release exchange towards expenses incurred on legal services relating to import transactions up to U.S.$ 10,000 or its equivalent subject to certain conditions stated therein. The monetary limit of US $ 10,000 has since been removed. Accordingly, it will be in order for authorised dealers to allow remittances of actual expenses incurred/to be incurred on legal services relating to import transactions, subject to the same terms and conditions as stated in paragraph 7A.25. However, where the amount of remittance exceeds U.S.$ 100,000/- or its equivalent, full details of such remittances should be reported by authorised dealers to the concerned office of Reserve Bank on a quarterly basis.

2. Postal Imports (Paragraph 7A.22 of ECM)

   In terms of paragraph 7A.22 of ECM, authorised dealers are permitted to allow remittances against bills received for collection in respect of imports by post parcel up to U.S.$ 5,000 or its equivalent and the goods imported are such as are normally despatched by post parcel. It has been decided to remove the existing monetary limit and accordingly authorised dealers may hereafter allow remittances of the actual cost of the goods imported through post parcel irrespective of the amount involved subject to fulfilment of the other conditions mentioned in paragraph 7A.22 of ECM.

3. Import of Designs and Drawings [Paragraph 7A.1(iii) of ECM ]

   Under the existing instructions, authorised dealers are permitted to allow remittances towards import of designs and drawings up to Rs.25 lakhs or its equivalent subject to certain conditions. It has been decided that authorised dealers may hereafter allow remittances towards the actual cost of designs and drawings imported by their importer clients subject to fulfilment of other conditions stated in paragraph 7A.1(iii) ibid.

4. Establishment of Overseas Offices by Exporters [ Paragraph 9B.1(ii) of ECM ]
   1. In terms of paragraph 9B.1 (ii) of ECM, authorised dealers are permitted to release exchange towards initial expenses up to the amount not exceeding U.S.$ 25,000 or its equivalent for opening of non-trading offices abroad and up to U S.$ 10,000 or its equivalent for posting representatives abroad, by Indian firms/companies. It has been decided to remove these monetary ceilings and accordingly authorised dealers may release exchange towards initial expenses for the above purpose up to the actual expenses to be incurred by the applicant firm/company, provided the applicant satisfies the eligibility criteria laid down in paragraph 9B.1(ii) ibid. The recurring expenses may, however, continue to be released up to 10% of the average annual export realisations during the preceding two years for all the overseas offices taken together as hitherto. The other conditions mentioned in paragraph 9B.1 of ECM also remain unchanged.

   2. Applications for remittances towards retainer fees by Indian companies to the overseas companies/firms for services availed of for promotion of their exports from India in lieu of posting regular representatives abroad are being referred to Reserve Bank for approval. It has been decided that authorised dealers may allow Indian companies/firms to remit the actual amount of retainer fees payable to their overseas agents who will render services for promotion of exports provided the applicant company/firm does not have a non-trading/trading office or representative posted at that centre and provided further that the eligibility criteria as stated in paragraph 9B.1(ii)(a) is satisfied and further that the amount of retainer fee is within the ceiling fixed for recurring expenses of all the overseas offices taken together.

5. Appointment/Posting of Correspondents/Representatives by Newspapers/News Agencies/Periodicals (Paragraph 9B.5)

   5.1 In terms of paragraph 9B.5(i) of ECM, authorised dealers have been permitted to allow remittances towards monthly expenses (salary, allowances, house rent, etc.) of the correspondent/representative posted abroad by the Indian newspapers/periodicals and news agencies recognised by the concerned administrative Ministry of Government of India, subject to the eligibility criteria (i.e. minimum daily/per issue circulation of the applicant company should be at least 50,000 copies). It has been decided to permit authorised dealers to allow remittance of actual monthly maintenance expenses incurred/to be incurred by the correspondent/representative posted abroad by the Indian newspapers/news agencies/periodicals as per the terms and conditions of their appointment irrespective of the country of posting and nature of appointment. All other terms and conditions mentioned in paragraph 9B.5 of ECM remain unchanged.

6. Electronic Data Base Costs [Item VII of Part B of Annexure I to Chapter 8]

   The existing limit of US$ 10,000 for release of exchange by authorised dealers has been removed. Authorised dealers may hereafter allow the actual charges incurred by Indian companies towards data base costs, computer connect/time charges, software charges, hit charges, etc.. subject to verification of invoice or debit notes received from the overseas data base centres.

7. Advertisements in Print Media Abroad [Item IX of Part B of Annexure I to Chapter 8]

   Authorised dealers may likewise allow remittances of the actual cost of advertisements in print media abroad such as overseas newspapers/periodicals by firms/companies/organisations as well as banks/financial institutions in India subject to verification of documentary evidence and other conditions referred to under item (IX) of Part B of Annexure I to Chapter 8 of ECM.

8. Solicitor's fees/Average adjustor's fees [Paragraph 8B.9(ii) of ECM]

   Authorised dealers are now permitted to allow remittances up to U.S.$ 10,000 towards Solicitor's fees, Average adjustor's fees etc. by Indian shipping companies subject to the conditions mentioned in item V of Part B of Annexure I of Chapter 8 of ECM. Authorised dealers may hereafter allow such remittances on actual basis i.e. without any monetary limit subject to the above conditions.

9. (a) Maintenance/Annual Service charges for imported machinery/software

   (b) Feasibility/Pre-feasibility studies for projects in India.

   Sometimes Indian firms/companies enter into contracts with overseas companies for providing maintenance/support services for imported machinery or software on annual basis and approach authorised dealers for making remittances towards cost of such services to overseas companies. Similarly, applications are sometimes made by Indian firms/companies for sending remittances of charges for conducting feasibility/pre-feasibility studies for projects to be set up in India through overseas consultants/agencies. Under the existing instructions such applications are required to be referred to Reserve Bank. It has been decided to delegate powers to authorised dealers to allow such remittances on the basis of contracts entered into by Indian companies with overseas companies. Authorised dealers may therefore allow remittances towards annual maintenance/service charges or for conducting feasibility/pre-feasibility studies subject to verification of the following documents:

   1. A copy of the contract/agreement entered into by the Indian firms/companies with overseas companies for providing maintenance/servicing of imported machinery/equipment/software specifying the terms of payment.

   2. Original invoice received from the overseas company indicating the nature of services rendered, description of machinery/equipment or software imported and the amount of charges levied.

   Before allowing the remittances, authorised dealers should ensure that (a) the machinery/equipment/software has actually been imported into India and required documentary evidence and bill of entry in support of such imports has been produced to them, (b) in the case of feasibility/pre-feasibility study, the relative study report has been received by the applicant and (c) an Income-tax Clearance or No Objection Certificate from Income-tax authorities has been produced.

10. Amendments to the Exchange Control Manual will be advised separately. Meanwhile, the contents of this circular may be brought to the notice of your constituents.

11. The directions contained in this circular have been issued under Section 73(3) of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.

Yours faithfully

B. Maheshwaran
Additional Chief General Manager