MUMBAI, Dec 16: The Reserve Bank of India (RBI) has given a fillip to employee stock-option schemes in multinationals and foreign partner-controlled joint ventures by relaxing guidelines pertaining to the acquisition, holding and disposal of foreign securities by their employees.

The foreign-currency remittance limit towards acquisition of concessionally priced shares by an employee of a multinational has been liberally raised to $10,000 once every five years, up from the existing level of $750 for the period. The RBI directive, amending the exchange-control manual (ECM), was issued in December first week.

The central bank's latest set of exchange-control relaxations has also extended the $10,000 limit to employees of domestic companies with a majority share holding -- 51 per cent and above -- by a foreign partner. The ceiling of $750 imposed per employee of multinationals while issuing bonus shares has also been removed.

The RBI will also allow resident shareholders of multinationals to remit up to $10,000 every five years for subscription to the rights issue of such companies.

Till date, it has allowed authorised dealers to remit only up to $750 per employee of a multinational towards acquisition of shares offered at concessive rates below the market price or its equivalent per employee. Under the new guidelines, this ceiling has been increased to $10,000, while also allowing the benefit to joint ventures with a majority equity holding by a foreign partner.

In the case of subscription to a rights issue of multinationals by residents, the remittance amount is allowed up to the aggregate amount of dividend repatriated on the existing holding of shares. The RBI has now increased such remittances up to $10,000 every five years, if the amount of dividend received by them is not sufficient to cover the cost of the rights.

Senior bankers, however, pointed out only a few top executives of multinationals or foreign partner-controlled joint ventures would benefit with the increase in the remittance limit. "I feel many senior executives in multinationals who have been `gifted' foreign shares in excess of the $750 limit, now may liquidate such holdings and bring them back. They just have to make an application for subscribing to foreign shares worth $10,000 under the new norms, and then liquidate the earlier excess holdings," said a foreign banker. A senior corporate executive felt they could now reward some of their senior staff by way of such foreign shares rather than only through fat salaries subject to heavy local taxes.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.