Review of Foreign Direct Investment (FDI) in e-commerce
Press Note No. 2 (2018 Series) dated December 26, 2018 issued by Department of Industrial Policy and Promotion (DIPP)
To provide clarity, FDI Policy on e-commerce has been amended to provide that:
(i) E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such an ownership or control over the inventory render the business into inventory based model. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.
(ii) An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity. The earlier 25% cap of sales by one vendor on e-commerce platform is now done away with.
(iii) E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfilment, logistics, warehousing advertising/marketing, payments, financing etc. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.
(iv) E-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only.
(v) E-commerce marketplace entity will be required to furnish a certificate along with a report of statutory auditor to Reserve Bank of India, confirming compliance of above guideline, by 30th September every year for the preceding financial year.
The above changes will be effective from February 1, 2019.
External Commercial Borrowings (ECB) Policy – New ECB Framework
Notification No. FEMA 3(R)/2018-RB dated December 17, 2018 and A.P. (DIR Series) Circular No. 17 dated January 16, 2019
The Reserve Bank has, in consultation with the Government of India, rationalized the extant framework for ECB and Rupee Denominated Bonds in light of the experience gained to improve the ease of doing business. The salient features of the new ECB framework are as under:
(i) Merging of Tracks: Merging of Tracks I and II as “Foreign Currency denominated ECB” and merging of Track III and Rupee Denominated Bonds framework as “Rupee Denominated ECB”.
(ii) Eligible Borrowers: This has been expanded to include all entities eligible to receive FDI. Additionally, Port Trusts, Units in SEZ, SIDBI, EXIM Bank, registered entities engaged in micro-finance activities, viz., registered not for profit companies, registered societies/trusts/cooperatives and non-government organisations can also borrow under this framework.
(iii) Recognised Lender: The lender should be resident of FATF or IOSCO compliant country. Multilateral and Regional Financial Institutions, Individuals and Foreign branches / subsidiaries of Indian banks can also be lenders.
(iv) Minimum Average Maturity Period (MAMP): MAMP will be 3 years for all ECBs. However, for ECB raised from foreign equity holder and utilised for specific purposes, the MAMP would be 5 years. Similarly, for ECB up to USD 50 million per financial year raised by manufacturing sector, which has been given a special dispensation, the MAMP would be 1 year.
(v) Late Submission Fee (LSF) for delay in Reporting: Any borrower, who is otherwise in compliance of ECB guidelines, except for delay in reporting drawdown of ECB proceeds before obtaining LRN or Form ECB 2 returns, can regularize the delay by payment of LSF as per the laid down procedure.
ECB up to USD 750 million or equivalent per financial year, which otherwise are in compliance with the parameters and other terms and conditions set out in the new ECB framework, will be permitted under the automatic route not requiring prior approval of the Reserve Bank. The designated AD Category I bank while considering the ECB proposal is expected to ensure compliance with applicable ECB guidelines by their constituents. Any contravention of the applicable provisions will invite penal action or adjudication under the Foreign Exchange Management Act, 1999.
Lending and borrowing under the ECB framework by Indian banks and their branches/subsidiaries outside India will be subject to prudential guidelines issued by the Department of Banking Regulation of the Reserve Bank. Further, other entities raising ECB are required to follow the guidelines issued, if any, by the concerned sectoral or prudential regulator.
The Reserve Bank has also rationalised the Principal Regulations governing the ECB Policy by issue of the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 notified through Notification No. FEMA.3(R)/2018-RB dated December 17, 2018.
For detailed guidelines, aforesaid circular and notification as available on RBI website can be referred.