Central Bank Increases ATM Cash Withdrawal Limit
India’s central bank the Reserve Bank of India (RBI) on December 30 raised the daily ATM withdrawal limit to US$65 (Rs 4,500) from January 1, from the earlier limit of US$36 (Rs 2,500) per day. The weekly limit of US$351 (Rs 24,000) remains the same; for traders the limit is US$732 (Rs 50,000) per week. The development comes after the RBI stated that there should be enough currency notes in circulation following the surprise demonetization of the US$7 (Rs 500) and US$14 (Rs 1000) rupee notes on November 8. While the increase in withdrawal limit is welcome, most ATMs still do not have enough cash, particularly in big cities like Delhi, Mumbai, Kolkata, Chennai and Bangalore. A report by a leading newspaper stated that only 40 percent of the 220,000 ATMs in the country. Other reports say that the situation will fully normalize by March. Analysts have questioned the regulation saying that the increase in cash withdrawal might make the situation worse as the new currency is still not enough to meet demand.
India, Singapore Amend Tax Treaty
The governments of India and Singapore revised their tax treaty on gaining taxation rights over capital gains. The development comes after similar agreements with Mauritius and Cyprus. The new pact will take effect from April 1. There will be a transition period. Two years from the date, capital gains tax will be subject to 50 percent of the prevailing domestic rate; the short term rate at present is 15 percent. The full rate will apply from April 1, 2019. Mauritius and Singapore are the two top FDI sources to India. Total FDI from Mauritius in the past decade stood at US$95.9 billion while from Singapore it was US$45.8 billion.
Effective April 1, when a Singapore resident sells Indian equity shares, acquired on or after April 1, 2017, the capital gains arising on such a transaction will be taxable in India. There is no change or impact on equity shares acquired before April 1, 2017 as both governments agreed to grandfather such investments irrespective of when they are sold or transferred. But, like in the past, this grandfathering or exemption from tax will be subject to the Singapore resident meeting the criteria set out in the Limitation of Benefits clause in the treaty.
Digital Lending Firms Included in Credit Guarantee Scheme
The government has announced the inclusion of non-banking financial companies (NBFCs) in the credit guarantee scheme to provide credit to small, medium and micro enterprises (SMEs). This inclusion has opened up opportunities for digital lending players who had seen a slowdown in borrowings after demonetization. The scheme for NBFCs has been extended for loans up to US$293,880 (Rs 20,000,000) with a guarantee cover of 85 percent of the sanctioned amount. Until now, the credit guarantee scheme included loans up to US$146,949 (Rs 10,000,000) per SME borrower with no collateral security or third-party guarantee.
Earlier, the eligible lending institutions were only commercial and rural banks, but now the inclusion of digital players will allow them to reach out to more borrowers. NBFCs earlier had to face substantial risk by providing loans to borrowers who would not be eligible as per established norms. This move will allow NBFCs to reach out to smaller business and personal loan segments. Such schemes have already been successful in developed economies like the UK and Indian NBFCs hope to repeat the success and push for financial inclusion.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email firstname.lastname@example.org or visit www.dezshira.com.
Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.
An Introduction to Doing Business in India 2016 Doing Business in India 2016 is designed to introduce the fundamentals of investing in India. As such, this comprehensive guide is ideal not only for businesses looking to enter the Indian market, but also for companies who already have a presence here and want to stay up-to-date with the most recent and relevant policy changes.
Pre-Investment Due Diligence in India
In this issue of India Briefing Magazine, we examine issues related to pre-investment due diligence in India. We highlight the different regulatory, tax, and socio-economic issues that a company should be aware of before entering the Indian market. We also detail some of the topics related to entry structures while investing in the Indian market, as well as cultural and HR due diligence, which may differ from state to state.
Strategies for Repatriating Funds from India
In this issue of India Briefing Magazine, we look at issues related to repatriating funds from India. We highlight the unique regulations for sending funds back from India, examine the various strategies companies can make use of while repatriating, and look at remittance procedures for different types of Indian entities. Finally, we give some tips on how expats can remit their Indian money to their home countries.