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August 7, 1998


Order on bank sops for infotech comes through

Email this story to a friend. The government today announced a number of changes in the procedures and guidelines on provision of bank credit, access to foreign exchange and equity investments in companies abroad for the benefit of information technology and software industry.

These measures, announced as a follow-up of the recommendations of the National Taskforce for Information Technology and Software are expected
Re. dial
Sops for IT announced
to help in the development of the industry and strengthen its export potential.

Working capital finance, irrespective of the turnover or business age of the borrowers, will be provided for undertaking software services - staffing or programming services project services-customised software development or systems solution and integration software products and packages and information related services.

Banks have been asked to create information technology financing cells in identified branches at centres where the software and services units are sufficiently large in number.

Banks have been asked to devise a reporting system by themselves in respect of borrowers enjoying credit where cash budget is not the basis for sanction limit.

Indian software companies will be granted blanket investment approval up to 50 per cent of their cumulative export or foreign exchange earnings in the preceding three years subject to a maximum of $25 million under the fast-track route of the Reserve Bank of India.

This is to provide greater flexibility to Indian software companies in terms of choice of overseas investments.

Banks have been advised that equity investments in dedicated venture capital funds meant for IT would also be eligible for inclusion within the 5 per cent limit prescribed for investments in equity shares. This will include PSU shares, convertible debentures of corporations and in units of mutual fund schemes, the corpus of which is not exclusively invested in corporate debt instruments.

Indian software companies have been permitted to offer ADR-GDR linked stock option schemes to their permanent non-resident employees, including Indian and overseas working directors.

The scheme of overseas investments in joint ventures and wholly owned subsidiaries abroad under the Exchange Earners' Foreign Currency fast-track window to facilitate investment abroad by Indian companies has been relaxed.

Authorised dealers can approve proposals for overseas investment under the EEFC fast-track window even in cases where the balance in the EEFC accounts are not sufficient to cover in full the proposed investment at the time of approval.

Under the existing guidelines, the dealer has to ensure that the applicant has adequate balance in the account to fully cover the proposed investment.

Authorised foreign exchange dealers have been permitted to allow reimbursement up to $15,000 against international credit cards used by software developers or exporters for making advance payment of cost of software to be obtained through the Internet.

These dealers can also allow payment of fees for training of technical or scientific nature availed of through the Internet, and remittances towards registration of the Internet domain name and hosting charges for Web sites.

These dealers also can arrange issue of international credit cards for software engineers going abroad on software assignments, provided that the reimbursement will be from the software engineer's bank accounts abroad.


Lending to IT industry put on priority


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