Waive late submission fee of nearly Rs 225 crore: Oil companies to RBI

OilMin writes to Department of Financial Services to end impasse

Some of the large companies in the oil and gas sector have written to the Reserve Bank of India (RBI) to waive a late penalty of roughly Rs 225 crore that they need to pay for not reporting their overseas investments in time.

In a circular issued in August 2022, the RBI had said that any Indian entity that did not submit evidence of investment within the specified time frame could make such a submission or file it along with a late submission fee (LSF).

A late submission was allowed within three months, failing which the entity would not be allowed to make new remittances.

According to sources with direct knowledge of the development, several banks reported to the central bank that the reporting of overseas investment had not been completed since the August 2022 circular became effective.

Sources said such reporting was important for the central bank from a capital account convertibility point of view.

“The RBI needs to know how much overseas investment has been carried out, in which sectors, and how much in the form of equity, loans, guarantees, etc.,” informed a source.

“The idea is to simplify the ease of doing business. Simultaneously, we expect discipline from market participants,” said the source, interpreting the rationale behind the August 2022 circular, which made the penalty system straightforward.

“The idea is not to disrupt business if you have a commitment overseas that needs to be honoured. Otherwise, it will reflect on the nation as well,” the person added, explaining why banks continued with remittances from such companies, notwithstanding previous investments not being reported.

Regardless of not reporting the earlier investment, entities are still allowed to send funds abroad since banks are now taking prior approval from the regulator every time a new investment is made.

Sources said the RBI cannot simply waive the penalty.

Firstly, another notification needs to be issued. Secondly, and more importantly, it would be unfair to entities that have paid the LSF. The RBI has collected approximately Rs 25 crore as LSF.

State Bank of India (SBI), the country’s largest lender, was the banker for most of these transactions. It said the bank was not at fault and has reported all such investments based on documentation furnished by remitting entities.

“LSF has been introduced by the RBI with retrospective effect vide Foreign Exchange Management (Outside India) Regulation, 2000. Regularisation of the submission of overseas direct investment (ODI)-related data by companies to the RBI under a specific unique identification number assigned to each project through their ‘authorised dealer’ banks covers several thousands of ODI remittances processed since 2000. SBI has invariably reported all ODIs, based on documents provided by the remitting entities, to the RBI in line with applicable guidelines at the material time,” SBI said in a written response to Business Standard.

Under the Foreign Exchange Management Act, the onus to share the details of investments is on the entity that is remitting the money.

An email sent to the central bank for its observations remained unanswered until the time of going to press.

To break the deadlock, sources said the Ministry of Petroleum and Natural Gas has written to the Department of Financial Services in the finance ministry, and a high-level meeting is likely to discuss the matter soon.

ON SLIPPERY GROUND

• RBI’s August 2022 circular makes it mandatory to report overseas investment
• For late reporting, a late submission fee imposed
• When an entity makes an overseas investment, the RBI allots a unique identification number (UIN)
• Every time the entity remits, it needs to quote that UIN
• A form needs to be filled out with relevant information, which is shared with the RBI
• Petroleum Ministry writes to the Finance Ministry; a high-level meeting is likely soon