What foreign banks are in India

Banking Law (FEMA) & Loan Protection

Banking and Securities Law in India

InDe® lawyers advise at financing of projects and companies as well as in German-Indian Payment transactions. We also support the Loan protection and advise you with our Indian cooperation lawyers in India Securities law. We know the legal framework in which Indian banks operate and the needs of borrowers and investors. We act as yours external legal department in Germany, i.e. we will stay with you Contact person in Germanywho reliably masters the cultural and legal hurdles in India for you.

The following is a brief overview of Indian banking and securities law.

1. Banking Law

The Role and Powers of Banks in India are often far from foreign investors underrated. The Indian banks are not only the pure executing financial service providers of the bank customers, but the Supervisory bodieswho the Reserve Bank of India Policy as well as the legal requirements of the Foreign Exchange and Management Act, among others (FEMA) implement. In particular, you control the Payment transactions between India and abroad. Next Notification requirements The Reserve Bank of India must therefore be informed at regular intervals of, for example, capital inflows and share issues of a company, among other things, if outstanding payments to foreign suppliers or service providers have not yet been settled (so-called "Trade credits"). In addition, the Indian banks act as a kind of extended arm of the Indian tax authorities, because for bank transfers abroad it must also be proven that the Indian taxes related to the transfer have been properly paid (e.g. when transferring profit distributions, tax refunds, selling real estate, etc.).

While incoming payments are therefore generally credited to the Indian current account without checking the admissibility of the reason for payment, at Payments abroad are a reason for payment can be specified. This reason for payment will be checked by the Indian bank before the transfer abroad. For this purpose, the bank must regularly receive a confirmation from an Indian Chartered Accountant that payment will be presented lawful and the Height according to appropriate is as well as the corresponding Taxes (Withholding tax) have been paid in full. If such a confirmation is not available, the transfer abroad will be blocked by the Indian bank. This applies not only to foreign entrepreneurs, but also to Indian companies. For example, if a German company is acquired by an Indian, the Indian bank may not approve the transfer of the purchase price to Germany to the German company seller, despite the willingness of the Indian buyer to pay, if the Indian bank has not received all the permits and documents . This must be taken into account when drafting a contract when purchasing a company. Similar problems with payment transactions can occur, for example, with (Patent) license payments and lending to / from Indian companies as this can be viewed as a hidden profit distribution.

Already at the beginning of a foreign direct investment, the Reserve Bank on India is involved, compared to the specific one Notification or even authorization requirements must be fulfilled (see the section on market entry strategies. When founding companies in India, the capital may only be provided via so-called authorized banks which - together with the Register of Companies - check whether the Equity or borrowed capital was carried out in accordance with the legal requirements (for the financing of Indian companies, see the section on corporate law. Also with the Distribution of profits of the Indian company or if the salary received in India is transferred, an Indian bank first checks whether the legal requirements for the transfer to Germany are met. If this is not the case, the Indian bank will not release the money for transfer.

However, the above statements should not be misunderstood to the effect that the repatriation of investments and profits made in India is not permitted. Rather, equity, profits from foreign investments, license fees, etc. - after paying the taxes due in India - in principle fully traceable and can be transferred abroad. If problems arise in payment transactions, these problems can be solved - usually after submitting additional documents.

When opening an Indian bank account, it should also be noted that there are different types of bank accounts that have different legal implications. There are bank accounts that "fully repatriable“Are (the money that was paid in from abroad can be transferred back abroad in the same amount) and also Foreign currency accounts. The latter are through accounts, whereupon each payment in the corresponding currency is first credited and exchanged for rupees by the end of the following month at the latest.

From a purely practical point of view, doing business in India has to get used to the fact that different Monetary denominations are common. For example, INR 100,000 in India is a “lakh” and INR 10,000,000 is a “crore” (written in India as 1,000,0000). In addition, in payment transactions in India the Payment by check very common (regulated in the Negotiable Instrument Act). In the case of bank transfers, it must also be ensured that a transfer is only possible after the beneficiary has registered in advance - which will only be activated after a few days - although there are exceptions due to other types of transfer.

2. Loan protection

Regardless of this, (Indian) banks also play a major role in securing credit in German Indian goods traffic, as these Security means for deliveries of goods or purchase price payments able to offer. German banks in particular are now offering special export credit guarantees in order to further promote German-Indian trade. So if goods are delivered to India, the Indian company should either pay in advance or the delivery should be via e.g. Bank guarantees be secured. In the opposite case, too, that is, if goods are ordered from India and the purchase price has already been paid in advance - as usual -, appropriate legal precautions should be taken in the event that the goods are delivered does not correspond to the agreed quality.

3. Securities Law

Due to the attractive growth rates in India, the Indian stock market was very interesting for foreign institutional investors. Even today, Indian stocks are still in demand with foreign investors. The legal framework results in particular from the following laws.

in the Companies Act This regulates the issue, allotment and transfer of securities as well as the payment of dividends and various notification obligations (e.g. for public share issues, annual reports). The Securities and Exchange Board of India Act (SEBI) was issued to protect the interests of investors as well as to promote and regulate the securities market, which also deals with equal opportunities for shareholders, the protection of minorities and the transparency of company takeovers. To prevent unwanted securities transactions, the Securities Contracts (Regulation) Act the aspects of securities transactions (including the operation of stock exchanges), during the Depositories Act regulates the prerequisites for opening a securities account for a quick - incorporeal - transfer of securities In addition to the laws, listed Indian companies must also observe the statutes of the respective stock exchange and the conditions of the stock exchange admission agreement.

When it comes to securities issues, Indian law distinguishes between, among other things public emissions (public offering of shares of an issuer to new investors), which in turn can be divided into first and second issues. Of Initial issues one speaks when an unlisted company issues shares on the stock exchange for the first time or offers its already existing securities for sale for the first time. In case of Second issues if an already listed company gives new shares - usually for Capital increase - out.

To determine the issue price for first-time issues, there is basically the Book building process or that Fixed price procedure. In the case of the fixed price procedure - to put it simply - the issuing company can den Set the price of a share freely. However, the price must be justified by, among other things, disclosure of the calculation basis of the issue price - including the qualitative and quantitative facts. This procedure can only be used if the issuer meets the selection criteria of the ICDR regulations Fulfills. The bookbuilding process applies to initial issues of securities for which only the Price range can be determined, i.e. neither the issue price nor the securities allotment are known. In this process, the demand for securities is determined on a daily basis.

Other types of emissions are e.g. Rights issues (New issue of securities with an offer of the securities to existing companies) or the Private placement or preferential allocation (issue of securities to certain investors).

For large corporations with high investment volume also come Indian Depository Receipts considered as financial instruments. These allow foreign companies to raise capital from Indian markets by offering equity and listing on Indian stock exchanges. Conversely, with the approval of the Indian Ministry of Finance, Indian stock corporations can also place equity abroad.

We are happy to be at your disposal with our Indian cooperation lawyers in all legal matters of banking and securities law. You will find a list of our services offered in the menu on the right.

Services

  • Advice on payment and foreign exchange transactions
  • Advice on profit repatriation from India
  • Advice on financing projects
  • Capital financing of companies
  • Advice on loan security law
  • Advice on securities and stock exchange law
  • Company purchase and sale
  • Dispute settlement and legal proceedings

Laws

  • The Reserve Bank of India Act, 1934
  • The Foreign Exchange Management Act, 1999
  • The Foreign Exchange Regulation Act, 1973
  • The Securities and Exchange Board of India Act, 1992
  • The Foreign Trade (Development and Regulation) Act, 1992
  • The Foreign Trade (Regulation) Rules, 1993
  • The Negotiable Instruments Act, 1881
  • The Remmittances of Foreign Exchange and Investment in the Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991
  • The Industrial Disputes (Banking Companies Decision) Act, 1955
  • The Prevention of Money-Laundering Act, 2002
  • Banking Companies Act, 1970
  • The Insurance Act, 1938
  • The Public Liability Insurance Rules, 1991
  • Finance Act, 2011
  • The Securities Contracts (Regulation) Act, 1956
  • The Securities Contract (Regulation) Rules, 1957
  • The Foreign Contribution (Regulation) Act,
  • The Depositories Act, 1996
  • All laws










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