Section 6(3) in The Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004
(3)Investment under this regulation may be funded out of one or more of the following sources, namely:--(i)out of balance held in the Exchange Earners' Foreign Currency account of the Indian party maintained with an authorised dealer in accordance with regulation 4 of Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000;(ii)[drawal of foreign exchange from an authorised dealer in India shall not exceed 100%, or as decided by the Reserve Bank from time to time, of the net worth of the Indian Party as on the date of last audited balance sheet; [Substituted by Notification No. G.S.R. 552(E) dated 14.8.2013 (w.e.f. 19.11.2004)]Explanation : For the purpose of the limit of 100%, or as decided by the Reserve Bank from time to time, of the net worth, the following shall be reckoned, namely:](a)cash remittance by market purchase;(b)capitalisation of export proceeds and other dues and entitlements as mentioned in regulations 11 and 12;(c)[hundred per cent. of the amount of guarantees] [ Substituted by G.S.R. 13(E), dated 9.10.2007, for " fifty per cent. of the amount of grantees" (w.r.e.f. 14.6.2007).] issued by the Indian party to or on behalf of the Joint Venture company or Wholly Owned Subsidiary.[ Explanation .-An Indian party may offer to a person resident outside India any form of guarantees, that is, corporate or personal/primary or collateral/guarantee by promoter company in India/guarantee by group company, sister concern or associate company in India, provided that:-(a)total "financial commitment" including all forms of guarantees remains within the overall ceiling stipulated for overseas investment by an Indian party, and(b)no guarantee is "open ended";](d)utilisation of the amount raised by issue of ADRs/GDRs by the Indian party;(e)external Commercial Borrowing in conformity with other parameters of the ECB guidelines;(f)[ swap of shares;] [ Inserted by G.S.R. 13(E), dated 9.10.2007 (w.r.e.f. 7.7.2004).](g)[ ADR/GDR stock swap subject to the valuation norms and sectoral cap.] [ Inserted by G.S.R. 13(E), dated 9.10.2007 (w.r.e.f. 20.4.2007).](h)[ Fifty per cent of the value of performance guarantee issued by Indian party to or on behalf of the JV/WOS. [Substituted by Notification No. G.S.R. 552(E) dated 14.8.2013 (w.e.f. 19.11.2004)]Explanation : In cases where invocation of the performance guarantees breach the ceiling for the financial exposure of 100%, or as decided by the Reserve Bank from time to time, of the net worth of the Indian party, the Indian party shall seek the prior approval of the Reserve Bank before remitting funds from India, on account of such invocation.](i)[ hundred per cent of the value of the bank guarantee issued by a resident bank on behalf of an overseas JV/WOS of the Indian party, which is backed by a counter guarantee/collateral by the Indian party.] [Inserted by Notification No. G.S.R. 516 (E) dated 8.5.2013 (w.e.f. 28.3.2012)]Explanation .-For the purpose of reckoning net worth of an Indian party, the net worth of its holding company (which holds at least 51% stake in the Indian party) or its subsidiary company (in which the Indian party holds at least 51% stake) may be taken into account to the extent not availed of by the holding company or the subsidiary independently and has furnished a letter of disclaimer in favour of the Indian party:Provided further that the ceiling mentioned in sub-clause (2)(i) shall not apply where the investment is made out of balances held in its EEFC account, maintained in accordance with the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2000, as amended from time to time.
