The Reserve Bank of India vide A.P. circular no. 59 (DIR Series) dated 13.04.2016 cleared the ambiguous position on deposits made by a person or on behalf of any other person residing outside India for nomination as a director in an Indian company. The clarification was given in regard to Regulation 3 of the Foreign Exchange Management (Deposit) Regulations, 2016 which states that no person resident in India shall accept a deposit from, or make any deposit with, a person resident outside India without the prior permission of RBI.
RBI has cleared the ambiguity by stating that, the deposits made by any person to nominate himself or any other person for the position of Director with the company, does not need any specific approval from the Reserve Bank under Notification No. FEMA 5(R)/2016 RB dated 01.04.2016. This is in accordance with Section 160 of Companies Act, 2013 wherein, any such deposit made would be considered a current account (payment) transaction and as such, does not require any approval from the Reserve Bank. Also, the refunds of such deposits arising in event of selection of person as director or getting more than twenty-five percent shares shall be treated similarly.
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