The Reserve Bank of India (RBI) has introduced a significant amendment to reporting requirements for foreign direct investments (FDI). All Indian companies which have received FDI till date are required to comply with this regulation. The RBI will introduce a Single Reporting Form, through which all FDI reporting can be completed in one go.
What is FDI?
The term FDI stands for Foreign Direct Investment which means investments received from foreign countries. FDI may be in the form of investment in equity shares, preference shares or convertible notes.
Under the Foreign Exchange Management Act guidelines whenever an Indian entity receives an investment from to RBI, by two forms.
- Advance Remittance Form (Form ARF) – This form has to be filed within 30 days from the date of receipt of investment
- Foreign Currency-Gross Provisional Return (Form FC-GPR) -This form has to be filed within 60 days from the allotment of Shares.
The forms will have to be filed through the company’s banker. The Single Master Form (SMF) will replace these forms. The concept of SMF was first announced in First Bi-monthly Monetary Policy Review dated April 5, 2018. The objective of introduction of SMF is to simplify the process of reporting to RBI.
What are the next steps?
Before the implementation of SMF, the RBI will provide an interface to the Indian entities to input data on total foreign investment received. The data will be collected in a specified format. This interface will be available on RBI website (www.rbi.org.in) between June 28, 2018 and July 12, 2018.
Please note that Indian entities not complying with this pre-requisite will not be able to receive foreign investment (including indirect foreign investment) henceforth. Additionally, this will be treated as a non-compliance of the FEMA guidelines which could call for prosecution.
Form SMF will be introduced shortly after the data is submitted through the interface. We shall be writing another on the matters contained in SMF.
Whom does SMF reporting apply to?
All Companies and Limited Liability Partnerships that have, at anytime,
- Received investments from outside India (i.e. have received FDI)
- Have made investments outside India (i.e. have made ODI)
shall be required to update the details called for by RBI by July 12, 2018.