IT arms must bring back part of income: RBI

The Reserve Bank of India has said that the overseas branches of software export firms will have to repatriate to India at least 30% of the value of ‘on-site’ contracts.
The balance amount may be utilised for contract related expenses, including branch expenses abroad. The overseas office of the firm will also have to repatriate 100% of the value of ‘off-site’ contracts.
An audited annual statement showing receipts under ‘off-site’ and ‘on-site’ contracts undertaken by the overseas office, expenses and repatriation will also have to be sent to the authorised dealer.
“Though the RBI has been slowly relaxing exchange control guidelines, it is still monitoring things very closely. The new circular to authorised dealers is a part of its micro-management of exchange control norms,� said the treasury head of a private bank.
The central bank has also permitted Indian companies to open, hold and maintain, in the name of their offices or branches outside India, foreign currency accounts with banks outside India. This can be done by making remittances for the purpose of normal business operations of the overseas branch.
However, RBI has said that the overseas offices should not create any financial liabilities, contingent or otherwise, for the head office in India. The overseas office should also not invest surplus funds abroad without the prior approval of the RBI. “Any funds rendered surplus should be repatriated to India,� said the RBI in a circular to all authorised dealers of foreign exchange.
The RBI’s stipulation is not likely to have a major impact on the IT biggies in Bangalore. “Wipro has a policy of repatriating back to India,� says Mr J Shankar, corporate-treasurer, Wipro Limited. Wipro, Mr Shankar added, had a policy of retaining a minimum balance (with the approval of RBI) to meet the operational expenses at the overseas branches. Sources at Infosys also said that they were already doing what the RBI has suggested.