Rise in remittances, FEMA violations behind move
By R Chandrasekaran
The non-resident Indians (NRIs) will soon find it easy to transfer funds to India for incorporation of companies if the draft guidelines, which are in the process of finalization, are approved by the government.
The move will come on the heels of India generating a significant percentage of 17.2 percent in total global remittances in 2012. Remittances to India reached $69 billion representing 19 percent growth over the previous year’s estimated $58 billion remittances.
Replying to a question in Parliament, Minister of State for Finance Namo Narain Meena confirmed that the Reserve Bank of India is finalizing a draft notification that will ease norms for fund transfer for incorporation of companies by NRIs in India.
The minister told the Parliament that NRIs are not generally well equipped to handle the documentation/other requirement for registering a company in India with Registrar of Companies. Therefore, they prefer to appoint consultants to take care of the process of incorporation of companies and other official procedure.
Meena disclosed that “such a practice often leads to violations of provisions of Foreign Exchange Management Act (FEMA).”
The issue of company incorporation was discussed at length and the central bank will finalize a draft notification after ascertaining the government’s suggestions. The minister viewed that “It will have a positive impact on the economic scenario,” which is facing rough weather currently.
At a time when India is facing deteriorating current account deficit, easing of norms for companies’ registration in India is likely to attract more inflows into the country from the Indians settled abroad. However, one can only keep fingers crossed until the draft notifications are made public.
To contact the author, e-mail:rchandrasekaran@americanbazaaronline.com