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Can an Indian Party extend loan or guarantee to an overseas entity without any equity participation in that entity?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked about 2 years ago

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered almost 2 years ago

i) No. Loan and guarantee can be extended to an overseas entity only if there is already existing equity / CCPS participation by way of direct investment. However, based on the business requirement of the Indian Party and legal requirement of the host country in which JV/WOS is located, proposals from the Indian party for undertaking financial commitment without equity contribution in JV / WOS may be considered by the Reserve Bank under the approval route.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered about 2 years ago

Let me informed that i) No. Loan and guarantee can be extended to an overseas entity only if there is already existing equity / CCPS participation by way of direct investment. However, based on the business requirement of the Indian Party and legal requirement of the host country in which JV/WOS is located, proposals from the Indian party for undertaking financial commitment without equity contribution in JV / WOS may be considered by the Reserve Bank under the approval route.

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Open uri20170510 32134 s5bvk0?1494421637 ARJUN PRATAP SINGH answered about 2 years ago

Dear Friend, as far as your query is concerned that Can an Indian Party extend loan or guarantee to an overseas entity without any equity participation in that entity? Let me informed that i) No. Loan and guarantee can be extended to an overseas entity only if there is already existing equity / CCPS participation by way of direct investment. However, based on the business requirement of the Indian Party and legal requirement of the host country in which JV/WOS is located, proposals from the Indian party for undertaking financial commitment without equity contribution in JV / WOS may be considered by the Reserve Bank under the approval route. In case, however, the overseas entity is a first level step down operating subsidiary of the Indian party, guarantee may be issued by the Indian party on behalf of such step down operating subsidiary provided such guarantee is reckoned for the purpose of computing the total financial commitment of the Indian party. In case, the overseas entity is a second or subsequent level step down operating subsidiary of the Indian party, guarantee may be issued by the Indian party on behalf of such step down operating subsidiary with prior approval of the Reserve Bank provided such Indian party holds indirect stake of not less 51% in the step down operating subsidiary and guarantee is reckoned for the purpose of computing the financial commitment of the Indian party. ii) Eligible Indian companies are allowed to participate in a consortium with other international operators to construct and maintain submarine cable systems on co-ownership basis under the automatic route. Hope answer was helpful to you Regards, Arjun Pratap Singh

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