Royalty payments overseas need no prior approval: RBI

14 May 2010

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Royalty and lump-sum payments overseas under technical collaboration agreements would no longer require the approval of the ministry of commerce and industry, the Reserve Bank of India said in a notification on Thursday.

Under Rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules 2000, prior approval of the ministry of commerce and industry, had to be obtained for drawing foreign exchange for remittances under technical collaboration agreements where payment of royalty exceeds 5 per cent on local sales and 8 per cent on exports and lump-sum payment exceeds $2 million.

The government has reviewed the extant policy with regard to liberalisation of foreign technology agreement and it was decided to omit item number 8 of Schedule II to the Foreign Exchange Management (Current Account Transaction) Rules, 2000, and the entry relating thereto, the RBI notification said.

The Government of India had decided to permit, with effect from 16 December 2009, payments for royalty, lump sum fee for transfer of technology and payments for use of trademark/brand name on the automatic route.

The amendment to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, in this regard has been duly notified by the government, RBI said.

Accordingly, RBI has advised Category-I authorised dealer banks to inform their constituents and customers concerned of the changes.

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