CIR. NO. 09/2005-06-RB, DT. 29/08/2005

Overseas Direct Investment in Bhutan
Attention of Authorised Dealer (AD) Banks is invited to 'Explanation' to sub clause (i) of clause (2) of Regulation 6 of Notification No.FEMA.120/RB-2004 dated 7th July 2004 (Transfer or Issue of any Foreign Security), as amended from time to time, in terms of which overseas direct investment in Bhutan and Nepal is permitted in Indian Rupees only.

2. It has now been decided by the Reserve Bank, in consultation with Government of India, to allow direct investments in Bhutan in freely convertible currencies. This facility will be in addition to the existing facility of making investments in Indian Rupees. It is clarified that all dues receivable on such investments as well as their sale / winding up proceeds are required to be repatriated to India in freely convertible currencies only. As hitherto, direct investments in Nepal can only be made in Indian Rupees.

3. Accordingly, Foreign Exchange Management (Transfer or issue of any Foreign Security) notified vide Reserve Bank Notification No. FEMA 120/RB-2004 dated July 7, 2004, has been amended vide Notification No. FEMA 135/2005-RB dated May 17, 2005 [Foreign Exchange Management (Transfer or issue of any Foreign Security) (Second Amendment) Regulations, 2005]. A copy of the Government Notification G.S.R. No. 337(E) dated May 27, 2005 incorporating the amendment is annexed.

4. Authorised Dealer Banks may bring the contents of this circular to the notice of their constituents/customers concerned.

5. The directions contained in this circular have been issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law.

Yours faithfully,

(Vinay Baijal)
Chief General Manager

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Annex
[A. P. (DIR Series) Circular No. 09 dated August 29, 2005]

NOTIFICATION No. FEMA 135/2005-RB dated May 17, 2005

Foreign Exchange Management (Transfer or Issue of any Foreign Security (Second Amendment) Regulations, 2005

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