Indian companies are accessing overseas market for debt funds through overseas associated enterprises at rates exceeding the ceiling applicable in terms of extant FEMA regulations and that the funds so raised are routed to the Indian companies which accounts for sole/major operations of the group.
On a review of the matter in light of the existing regulatory framework, it is clarified as under
- Indian companies or their banks are not allowed to issue any direct or indirect guarantee or create any contingent liability or offer any security in any form for such borrowings by their overseas associated enterprises except for the purposes explicitly permitted in the relevant Regulations.
- Further, funds raised abroad by overseas associated enterprises cannot be used in India unless it conforms relevant Regulations.
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