Overseas Corporate Bodies (OCBs) have been de-recognized as a separate class of investor entity in India and will now be treated the same as any other foreign incorporated company. This decision follows a review by India's Reserve Bank of the investment activities of OCBs, based on the recommendations of the Joint Parliamentary Committee on Security Market Scams.
The consequence of such de-recognition is that OCBs have been prohibited from a range of activities.
OCBs may no longer make investments in securities. Existing investments can be disposed off by sale, through a registered stockbroker on a recognized stock exchange, or by making a gift to non-resident Indians.
They cannot purchase shares or convertible debentures of an Indian company offered on a rights basis. However, OCBs may renounce existing offers in favour of persons resident in India or persons resident outside India who are eligible.
OCBs are barred from lending to, or borrowing from, any person resident in India. They cannot renew any outstanding facilities nor will any interest accrue from the date the repayment falls due.
They cannot open or maintain any account. However, existing NRE or NRO Term Deposit/Recurring Deposit or FCNR (B) accounts can be continued till maturity.
They cannot obtain any facility on the security of an account held in thier name. Further existing facilities will not be renewed and will be closed by adjustment of the proceeds on maturity of the deposit.
However, OCBs may enter into forward contracts with rupees as one of the currencies with an authorized dealer in India to hedge:
- the amount of dividend due on existing investment in the form of shares of an Indian company;
- the balances held in an existing FCNR or NRE Term Deposit account; or
- the amount of existing investment made under a Portfolio Investment Scheme.