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Possible to invest in chit funds as non-resident?

The subscription would be on non-repatriation basis.

Many Indians invest in chit funds. I have been doing so when I was working in India. I am a non-resident for the past seven years. Is it possible for me to still invest in chit funds as a non-resident?
R.K. Chatterjee, Sharjah

The Reserve Bank of India (RBI) has permitted non-resident Indians to invest in regulated chit funds. This is subject to certain conditions. The subscription can be made by remittance of funds to India through banking channels or through bank accounts maintained in India. The subscription would be on non-repatriation basis. Further, the relevant State Government or Registrar of Chits must permit chit funds to accept subscription from non-resident Indians.

Earlier, non-resident Indians were not allowed to invest in chit funds operating in India. However, the RBI has now amended the relevant provisions of Foreign Exchange Management Regulations. No ceiling has been placed on the amount of investment which NRIs can now make in chit funds.

I am planning to return to India in October and start a medium scale manufacturing unit. Initially, I will keep my permanent work force at a minimum level and will engage labour on contract basis as needed. Are there any changes in the contract labour laws?
P.P. Mundra, Dubai

Recently, the government has proposed fresh guidelines for engaging employees on contract basis. Under the draft rules, factories can hire workers for a specific period of time. Their working hours, wages and allowances will be the same as those provided to permanent employees. Employees can also be engaged for a particular project. This will benefit companies engaged in construction and mining industry.

Under the draft rules, the employer will not have to give the worker any notice for termination at the end of his job tenure or when the project is completed. Therefore, there will be no need to give any intimation to the government nor will any compensation be payable by the employer. Under the new rules, it will not be necessary for the employer to provide permanent employment at the end of the contract period.

There are Press reports that the non-performing assets of a few banks have increased. Are any concrete steps being taken by the RBI to remedy the situation?
B.A. Khan, Doha

The RBI has now permitted banks to acquire 51 per cent or more equity capital in defaulting companies when the loans are restructured. Banks can also sell the equity shares to a new promoter who is in no way related to the defaulting borrower. These measures have been taken by the RBI to resolve stress in the banking system.

Under the strategic debt restructuring scheme, banks are permitted to convert debt into equity within 30 days of review of the accounts of the defaulting companies. Banks are also exempted from making open offers when they unload the share capital of the defaulting companies. The open offer rules under Securities and Exchange Board of India guidelines have been exempted in such cases. Where a debt is to be restructured by a bank, the aforesaid conversion clause will be incorporated before the restructuring agreement is entered into with the defaulting company.

The writer is a practising lawyer specialising in tax and exchange management laws of India.

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