of a floor on the expected returns and venture capital investment has indeed been granted that latitude. allowing such an arrangement on a secular basis is a matter for future policy. b. it is a fair requirement that an asset must be sold at its fair value to an investor. underpricing the sale of an asset to a non - resident investor is a stratagem to dodge tax and transfer value and accordingly the regulatory framework prescribed a specific valuation methodology – the discounted cash flow ( dcf ) method – for bis central bankers ’ speeches sale of shares of unlisted companies. surely, notwithstanding its problems, the dcf method may be the most appropriate ; but with a view to affording the investors and investees greater freedom in carrying out their transactions, we have last month amended the regulations to permit any internationally accepted valuation methodology at an arm ’ s length basis. 10. as far as portfolio investment is concerned, the access to foreign investors is fairly well defined – the only constraint, consistent with the international norm, is that portfolio investment by an individual investor cannot exceed 10 % of the outstanding stock of a company and the aggregate portfolio investment cannot exceed 24 % or such higher limit as may be decided by the company concerned. this is subject to the sectoral caps, wherever applicable. earlier this year sebi has put in place a comprehensive regime for registration of potential portfolio investors, which has also been notified under fema, 1999. an important relaxation that i like to mention here is that rbi has dispensed with additional kyc requirement for a bank account that a registered foreign portfolio investor has to open for the purpose of investment. the finance minister, in his budget speech, has sought to address a long - standing demand for level playing field in respect of tax treatment of foreign funds whose fund managers are india - based. i am sure this will bring more professional employment and income to indian shores. 11. while on the subject of foreign investment, it is important to note about the proposed revamping of the regulatory framework for depository receipts. depository receipts are essentially instruments to address the home - country bias of international investing communities and over the years has proved a useful tool for indian companies to raise capital abroad. with a view to further expanding the scope of these instruments, a government of india appointed committee ( chairman : shri m s sahoo ) recently looked into the entire gamut of issues and its recommendations are being taken up for implementation. without going into details, the overar

g padmanabhan : fema administration – prospects and challenges address by mr g padmanabhan, executive director of the bank of india, at the kuwait / muscat chapter of institute of chartered accountants of india seminar, muscat, 5 august 2014. * * * assistance provided by mr h s mohanty in finalising this address is gratefully acknowledged. 1. it is a great pleasure and privilege to be here today. i thank the kuwait / muscat chapter of the institute of chartered accountants of india for the unique opportunity to address its members and a cross section of indian population in the gulf region. the institute has set high standards in professionalism and contributed greatly to the development of the corporate business. it is heartening to note that the institute has a large presence in this region and that they are making important contributions to the business world here. 2. india ’ s engagement with the gulf region has been civilisational, dating back to ancient times and beyond. located strategically, the gulf region provided a critical trading node between ancient indian civilisations, predominantly the indus valley urban centres, and the “ fertile crescent ” of mesopotamia. archaeological evidence seems to indicate a great deal of human interactions accompanied the trade and possibly, wealthy merchants from indian principalities had set up base in the gulf region, not very unlike the case today. 3. indians have been sea - faring into distant lands from both her eastern as well as western coast down the centuries. but systematic migration was not a phenomenon beyond what was necessary to support buoyant and sustained trade until the colonial era when the need of cheap labour for plantation industries lured large number of indian labour to foreign shores. during the 1970 ’ s, migration from india acquired a different structure which included large scale flow of professional, skilled, and unskilled labour to support the oil - fuelled development and construction activity in the gulf region. today, i understand that about six million indians working in the gulf region account for about 50 % of the total remittance to india. that this magnitude of remittance has significant implications for our balance of payments is undeniable. the future engagement has to traverse beyond this in greater trade, commerce, investment and entrepreneurial ventures. 4. as you are aware, the regulatory framework for external sector transactions in india has evolved over the years. the rather restrictive regime of the 1970 ’ s progressively yielded space to liberalisations since the mid 1980 ’ s. the process of