Foreign investment in India is required for the development of the economy and improvement of the gross domestic product. However, when receiving foreign investment, there is a requirement of compliance under the respective foreign exchange laws. One such law that is enacted by the Parliament is the Foreign Exchange Management Act, 1999 (FEMA). The regulatory body that checks and administers foreign investment in India is the RBI. RBI also amends the rules relating to foreign investment. When an applicant is making an application for receiving foreign investment, there is a particular procedure for doing the same. In September 2018, the RBI brought out the manual regarding the process of Single Master Form (SMF) for reporting requirements regarding Foreign Investment Received in India. By having this process of reporting under the Single Master Form, the RBI can keep monitoring the amount of foreign investment received in India. This would also put a system in place to keep track of the application for foreign investment. The requirement of having an RBI Single Master Form of Reporting This process of RBI Single Master Form reporting of Foreign Investment in India has certain benefits to the country: Improves the Economy and GDP of India.Assists in keep track of the amount of foreign investment received in India. Assists in monitoring the application status of the applicant regarding the grant or opposition of the investment.Through the RBI Single Master Form, compliance with the FEMA can be controlled. Who can make an application under the RBI Single Master Form? The following entities can make an application under the RBI Single Master Form: A company which is defined as per the companies’ act 2013An LLPA start-up How was reporting done before the RBI Single Master Form? Before the RBI Single Master Form was introduced in 2018, the reporting compliances were carried out by the RBI through an online system. This system is called the e-biz online application system. When reporting a Foreign Investment or Foreign currency in India, the application was made through Foreign Currency Transfer of Shares (FCTRS) through the online portal called the e-biz portal. This initiative was taken by the Government of India in order to connect government to businesses and to achieve ease of doing business in India. Under the previous e-biz reporting regime, investment in shares or transfer of shares could be made by a foreign company to Indian Company and vice versa. The online process facilitated a gateway through which the applicants could apply for foreign investment in the country. After uploading the application for foreign investment, the Authorised dealer or bank would review the application and forward the same to the RBI. On receipt of the application under the e-biz portal, the RBI would scrutinize the application for foreign investment. After examining, the RBI would approve and reject the same. This system related to Foreign Investment was present until 2018. This has been replaced by a new RBI Single Master Form. Why was reporting under the e-biz replaced by the RBI Single Master Form (SMF) reporting? In September 2018, this new system was brought out, the RBI Single Master Form (SMF) reporting. Under the previous e-biz portal, there were different forms available for reporting foreign investment. Under the RBI Single Master Form, the reporting for all nine types of investment is carried out through a Single Master Form. If an application for foreign investment has to be made, then only the Single Master Form is used. The SMF has replaced the nine forms. The following are the nine forms used for foreign investment: FC-GPR- The form which is used for issue of capital instruments by an Indian Company to a person resident outside IndiaFC-TRS - The form is used for the transfer of capital instruments from a foreign resident to a person in India. LLP-I- The form is used for Foreign Direct Investment, which is required by an LLP.LLP-II-The form which is used for Divestment or transfer of capital contribution in an LLPCN - The form which is used for the issue or to transfer convertible notes DRR- The form which is used for issue of transfer of depository receiptsESOP- The form which is used for issuing employee stock options or sweat equity sharesDI- The form which is used for reporting of downstream investment or some form of foreign indirect investment in a business InVi- The form used for reporting of investment by a foreign investor in an investment machine. Apart from replacing the nine forms for foreign investment, the RBI Single Master Form provides the applicant to monitor the status of the application. Our Recommendation: NBFC Registration Process in India with RBI. Process of Reporting under the RBI Single Master Form (SMF) Under the Single Master Form system, the online application can be processed through the FIRMS website (Foreign Investment and Reporting Management Systems) under which an Indian entity is required to provide certain information to the RBI. This will only be relevant if the entity has some form of a direct or indirect form of foreign investment present. There are two forms considered under the FIRMS website. One is the Entity Master Form and the other is the Single Master Form. The entity master form (EMF) is required to know the amount of foreign investment that is needed for the respective entity. Initially, the RBI had opened the EMF window on the FIRMS website from 28 June 2018 to 20 July 2018 (“Previous Window”). However, the RBI has clarified that this window would again reopen after 01 September 2018. The entities would be allowed to submit the EMF after this period. However, entities would need to state the reasons for not uploading information in the Previous Window. The entity would need to provide the authority letter as a relevant document with this. The RBI Single Master Form requires all Indian Entities to submit information regarding any foreign investment from 01 September 2018. Previously there was a two-step process of filing the requirement of foreign investment in India. Firstly there was a requirement of submitting a remittance form- The Advanced Remittance Form (ARF) and then the Form FC- GPR. In the current process, there is no requirement of the two-stage process. An entity is just required to fill the FC-GPR. This is considered as a benefit for the applicant as there is a lesser requirement to provide information. The Procedure under the RBI Single Master Form In the previous system, the Authorised Bank acted as a mode of processing the foreign exchange application form. The application form would be filled by the applicant and would be forwarded to the authorized bank. After the authorized bank scrutinizes the application, this would be forwarded to the RBI. The RBI has the power to either accept the application for foreign exchange or reject the application for foreign exchange. However, in the new system, the Authorised Dealer would only have to deal with the application regarding foreign exchange. Hence, due to this RBI Single Master Form System, the responsibility of the RBI has significantly reduced as the Authorised Dealer scrutinizes applications for Foreign Exchange. The applicant has to make an application on the RBI Single Master Form. The transaction details have to be mentioned. This is done by logging on to the FIRMS website and providing information. If the applicant wants to represent another entity, then they have to register themselves on the FIRMS website separately. After this step is completed, the applicant would have to choose an appropriate IFSC code for the purposes of electronic KYC verification. The electronic KYC verification has to be done by the Authorised Bank. The applicant would need to finish the electronic KYC before submitting the form. However, the verification of electronic KYC is done by the Authorized bank. With the electronic KYC submitted, the applicant would also have to provide an authority letter in the prescribed format. The authority letter with the prescribed format is found in the SMF manual. For verification of electronic KYC, the banks have up to three working days. Once the verification is complete, the applicant will have to provide information about the company, such as the following: CIN Number- Corporate Identity NumberType of Foreign Investment- Whether it is direct or indirect foreign investmentSectoral Caps on the value of the investmentConcerned certificate regarding the valuation from a Certified Chartered Accountant or a Company Secretary All the above information must be provided in the FIRMS website. The application form, along with all the relevant documentation in the FIRMS website, would be scrutinized by the Authorised dealer/bank. The authorised dealer/bank has seven working days to accept the application for foreign exchange or reject the application for foreign exchange. The authorized bank can ask for recommendations from the RBI on the SMF. However, the authorized bank can only ask for these forms of representation if there is some delay with the application online. The RBI would act in such circumstances and guide the authorized bank whether to accept the application for foreign exchange or reject the application. When the authorized bank has scrutinized the application, the details under the Entity Master Form will be automatically updated. This is beneficial to the applicant as foreign investment applications in the future do not require any application. Penalty provisions for making an application under the RBI Single Master Form Non Compliance by an entity would attract severe penalty provisions under FEMA. Apart from this, if the applicant provides any misleading information or delays in providing information without any reasonable cause, then they would not be allowed to receive any foreign investment for carrying out their activities. Conclusion Hence, it can be understood that the new system of the RBI Single Master Form (SMF) to receive foreign investment is simplified and straightforward. The new system has abolished the requirement of having multiple forms under the e-biz portal. There is no requirement for the applicant to fill the form of remittance, such as the ARF. They would just require filing the Form FC-GPR. The role played by the RBI is minimized as it does not act as the ultimate authority for reviewing all the applications. In the previous system, the RBI was the foremost authority in scrutinizing applications, and the authorized bank just acted as a medium through which applications are sourced. In the RBI Single Master Form system, the authorized bank only has to work on the applications, thus reducing the burden for the RBI. Also, Read: Procedure for Foreign Direct Investment (FDI) Reporting.