All Authorised Dealers
in Foreign Exchange,

Dear Sirs,

RUPEE LOANS AND CREDITS TO FOREIGN CONTROLLED COMPANIES

The instructions laid down in Paragraph 4, Chapter XIX of the Foreign Exchange Manual, empower Authorized Dealers to grant rupee loan and credits to foreign controlled companies to the extent of their entitlement which is related to the borrower’s paid-up capital, reserves, undistributed profits and unremitted dividends. If a company has any unadjusted loss, the amount of the loss is required to be deducted from its paid-up capital or Head Office investment, as the case may be, for the purpose of working out its borrowing entitlement.

2. It has now been decided that in the case of a company having a negative net worth, which raises its paid-up capital, rupee loan and credit may be granted to the extent of the applicable percentages (laid down in the paragraph) of the additional paid-up capital for a period of three years from the date of increase in capital, after which the normal rules shall apply. Accordingly the following sub-Para (d) may be added at the end of paragraph 4 ibid.

"(d) Where a company having a negative net worth, raises its paid-up capital, its borrowing entitlement may be worked out with reference to the additional capital injected. This facility would be available for a period of three years from the date of increase in capital".