Case Study on FEMA: RBI slapped Rs.125 crore on Reliance Infrastructure

The Reserve Bank of India (RBI) has asked the Anil Dhirubhai Ambani Group firm, Reliance Infrastructure (earlier, Reliance Energy), to pay just under Rs 125 crore as compounding fees for parking its foreign loan proceeds worth $300 million with its mutual fund in India for 315 days, and then repatriating the money abroad to a joint venture company. These actions, according to an RBI order, violated various provisions of the Foreign Exchange Management Act (FEMA).

In its order, RBI said Reliance Energy raised a $360-million ECB on July 25, 2006, for investment in infrastructure projects in India. The ECB proceeds were drawn down on November 15, 2006, and temporarily parked overseas in liquid assets.… Read the rest