With a view to promote ease of doing business, Reserve Bank of India (RBI) has taken a step in this direction by easing reporting of transactions related to the Foreign Direct Investment (FDI) by implementation of Single Master Form (SMF) under the Foreign Investment Reporting Management System (FIRMS) portal. A new portal by the name of FIRMS has been created by the RBI to enable online filing of some specified returns in a more transparent way. RBI has issued FIRMS user manual containing step-by-step instructions for data entry in the SMF for the users to simplify the usage of new returns.
For more information on SMF and FIRMS portal kindly read our blog on the same Single Master Form (SMF) And The New Filing Platform FIRMS
Challenges being faced in context of SMF while transitioning from E-Biz to FIRMS Portal
“Not everything that is faced can be changed, but nothing can be changed until it is faced” by James Baldwin.
This is the correct demystification for the current scenario of reporting structure introduced by the RBI. This blog mentions some of the issues / challenges faced by us in the transition process from e-Biz portal to the FIRMS Portal.
Highlights of some changes and initial hick-ups in SMF reporting:
RBI’s role in SMF filing process has been minimized as SMF filing will need to be completed by the entities and verified, scrutinized and approved (or rejected) by their respective AD banks. Therefore, the AD Bank’s obligations have increased which was previously being handled by the RBI. AD Bank’s will have only the five working days for approving or rejecting the form. This is a welcome change as we agree that Regulator’s role should be limited to framing of policies and maybe in adjudication rather than approving routine filings. This is not new for the AD Banks as they had been playing active role in approval / rejection of the FDI related filings by the companies. The big challenge though is to be able to do so with independent responsibility and within the strict timelines.
RBI seems to have not accounted for all the inconvenience and problems faced by the entities while entering details (of returns) on FIRMS portal including crashing of website with short logging sessions and non-availability of different particulars of issue details. Moreover, most of the time the post transaction shareholding pattern is not correctly fetched in the SMF return.
The registration as a Business User has not been an easy task as the approval and rejection of the registration lies with the AD bank which has to be verified by them. Lag in getting login details was another challenge being faced.
Logging into FIRMs is not an easy task post registration as a Business User, as the login details are received on the Email-ID provided during the registration process. There has been as issue of multiple login ID’s being sent from RBI which leads to blocking of account. Also, sometimes the support system which has been provided by RBI are also struggling to support at the moment. They are also adjusting and learning to this new system of reporting.
Time taken to scrutinize the returns filed, by the AD Bank, has been limited under the new regime of reporting, to five days by the RBI. Therefore, the Business Users have to be extra cautious while filing returns w.r.t. its completeness. Because if the return is not found in order it will be rejected with no scope of relaxation such as “Resubmission of an Application” or “Clarification Required” as in the case of E-biz Portal. It is to be noted that for the rejected returns, a fresh return has to be filed as there is no provision for resending or attaching any clarification once the return is submitted. The business user should take into account these factors while trying to meet the reporting timelines of SMF.
Though the ARF has been deemed redundant by combining the ARF and FC_GPR forms under the new reporting regime, more clarifications are needed from RBI as the AD banks are rejecting the FC-GPR forms on the basis of non- filing of ARF.
For more information: SMF User Manual
According to Department of Industrial Policy and Promotion (DIPP), the total FDI investments in India during 2017-18 were approximately US$ 44.86 billion, reflecting positively on government’s effort to improve ease of doing business and relaxation in FDI norms. India being the fastest growing nation for foreign investors, the new reporting system initiated by RBI will bring relief for the foreign investors. Moreover, with the introduction of both the SMF and the Entity Master, seems to be aimed at gathering accurate foreign investment data and facilitate consistent and simple reporting requirements. In nutshell, all these above stated issues will surely be ironed in coming days and weeks and will help India take another leap in the world ranking of Ease of doing Business.