FOREIGN
INVESTMENT IN INDIA
Introduction
PART A -
INVESTMENTS BY NON-RESIDENTS IN GENERAL
Reporting of investment inflows
PART B
Approvals for
Technical Collaboration Agreements
Investment in Shares
by Foreign Collaborators
Investment by Foreign
Institutional Investors
Remittance of
Royalties/Technical Fees
Remittance of Interest
Transfer
of Shares/Securities by Non-residents to Residents
Repatriation of Capital
Investment in India
Euro Issues by Indian Companies
PART C - NON-RESIDENT INDIAN
INVESTMENT
Non-resident Indian Nationals
Persons of Indian origin
Overseas Corporate Bodies
General permission to subscribe to the Memorandum and Articles of Association
Direct Investment in
Firms/Companies in India
Investment in
Partnership/Proprietorship Concerns
Investment in New Issues of Shares/Debentures of Indian Companies
Purchase of Shares of Indian Companies by Private Arrangement
-
- Foreign investment in India is subject to policy guidelines framed by the
Government of India from time to time in accordance with its Industrial Policy.
In terms of the Industrial Policy announced by the Government of India on 24th July 1991
followed by subsequent guidelines issued by them, foreign equity upto
50%/51%/74%, as the case may be, is permitted by Reserve Bank under the
Automatic Route in specified industries/services sector. Applications which do
not conform to the parameters of the Automatic Route, are required to be made to
the Secretariat for Industrial Assistance (SIA), Ministry of Industry,
Government of India, New Delhi. Foreign Institutional Investors are permitted to
invest in all securities in primary and secondary markets in India as per
guidelines issued by Ministry of Finance, Government of India, New Delhi.
- A wide range of facilities for making investments in India in shares and
securities,
bank deposits, company deposits, etc. is available to individuals of Indian
nationality or origin resident outside India (NRIs) and overseas corporate
bodies predominantly owned by such persons (OCBs). They are subject to different
rules and investments both with repatriation and non-repatriation benefits are
permitted under various schemes.
- Foreign investment in India is also subject to regulation through the various
provisions of FERA 1973. However, once foreign investment is approved by
Government under its foreign investment and industrial policy, requisite
approvals under FERA 1973 are granted by Reserve Bank in pursuance of the
Government approval/guidelines. While the relative provisions of FERA 1973 have
been explained in Part 'A', detailed regulations governing investments and
certain ancillary matters such as remittance of dividend, royalty and technical
know-how fee, sale/transfer of shares, repatriation of capital, etc. are given
in Part 'B'. The various schemes for investment by NRIs/OCBs and other matters
relating to loans, overdrafts and guarantees to non-residents have been
explained in Parts 'C' and 'D' respectively.
NOTE: Regulations relating to foreign investment in immovable property in India have
been explained in
- Purchase of Shares and Securities by Non-residents
In terms of Section 29(1)(b) of FERA 1973, no person resident outside India,
whether an individual or a firm/company (other than a banking company)
incorporated outside India,
can acquire shares of any company carrying on trading, commercial or industrial
activity in India without permission of Reserve Bank. Permission of Reserve Bank
is also required for transfer or issue of any security (which includes shares,
debentures, bonds, etc.) to a person resident outside India in terms of Sections
19(1)(b) or 19(1)(d) of the Act. While granting permission for transfer or issue
of shares to a non-resident investor under Section 19(1)(b) or 19(1)(d),
permission under Section 29(1)(b) for purchase of shares by him is granted
simultaneously and hence it is not generally necessary for non-resident
investors to apply separately for permission to purchase shares in Indian
companies in such cases.
NOTES:
- Issue and transfer of Indian rupee shares and securities to any person resident
in Nepal requires permission of Reserve Bank.
- Section 19(1)(b) of the Act also prohibits creation or transfer of any interest
in a security in favour of a non-resident. This prohibition also precludes
pledging of any security to or in favour of a non-resident (e.g. as collateral
or prime security for credit facilities abroad) or utilising them for forming a
trust or settlement of which a non-resident is the beneficiary.
- Reserve Bank has granted general permission (i) to persons of Indian
nationality/origin(NRIs) to subscribe to the Memorandum and Articles of
Association and to take up shares of an Indian company for its incorporation and
(ii) to an Indian company to issue shares to NRIs subject to certain conditions.
The scope of the general permission has been explained in paragraph
Shares of Indian Companies held by Non-residents
at the commencement of FERA 1973
- In terms of Section 29(4)(a) of FERA 1973, non-resident individuals (including
Indian nationals), firms, companies, etc. holding shares of Indian companies
which were
acquired before the commencement of the Act i.e. 1st January 1974, had to take
permission of Reserve Bank for continuing to hold the shares. Reserve Bank had
issued holding licences in these cases indicating the eligibility of the
non-resident holder in regard to repatriation or non-repatriation of the capital
or income earned thereon depending upon the condition imposed in this regard
while permitting the original investment.
Transfer of Shares/Securities from Non-residents to Non-residents
- Until 1992, transfer of shares of a company registered in India made by a person
resident
outside India to another person also resident outside India was required to be
confirmed by Reserve Bank in terms of Section 19(5) of FERA 1973. After the
amendment to FERA 1973 made in January 1993, no such confirmation of Reserve
Bank is required to be obtained for transfer of shares (as also bonds or
debentures) between two non-residents. The non-resident transferee, however,
requires permission under Section 29(1)(b) of FERA 1973 for purchase of the
shares or the Indian company for registering the transfer in favour of another
non-resident under Section 19(4) of FERA 1973. Such transfers will, therefore,
not be registered by the Indian company unless the non-resident purchaser has
obtained the necessary permission under Section 29 ibid (Also see paragraph
10A.5).
Transfer of Shares/Bonds/Debentures
from Non-residents to Residents
- In terms of Section 19(5) of FERA 1973, no transfer of shares/bonds/debentures
of a company registered in India made by a person resident outside India to
another person
resident in India will be valid unless the transfer is confirmed by Reserve Bank
on an application made to it by the transferor or the transferee. Reserve Bank
has, however, exempted transfer of shares, bonds or debentures of Indian
companies held by persons of Indian nationality/origin(NRIs) on both
repatriation and non-repatriation basis to residents as also transfer of shares,
bonds or debentures by way of gift from the purview of Section 19(5) through
issue of Notifications under Section 19(6) of the Act, subject to fulfilment of
certain conditions. The scope of the exemption has been explained in paragraphs
10C.26 to 10C.28.
Responsibility of Companies Registering Transfer
of Shares/Securities in favour of Non-residents
- In terms of clause (a) of Section 19(4) of FERA 1973 no person can enter
transfer of securities in any register or book in which securities are
registered or inscribed, if he has any ground to
suspect that the transfer involves a contravention of the provisions of Section
19, i.e. issue, transfer or creation of interest in any security to/in favour of
a person resident outside India. Clause (b) of this Section prohibits the
registration of the foreign address of the holder of a security except by way of
substitution for any such address in the same country or for which permission
has been granted by Reserve Bank. Before registering any transfer of
shares/securities in the names of non-residents, companies concerned must obtain
permission of Reserve Bank except where such permission has already been
obtained by transferor/transferee.
NOTE:
See paragraphs 10C.30 and 10C.31 regarding general permission granted to Indian
companies for recording overseas address consequent on change of status of the
security holder from resident to non-resident or for conversion of holdings into
joint holdings between residents/non-residents.
Safe Custody of Shares/Securities
- Authorised dealers and financial institutions extending custodial services may
hold in
their safe custody, shares and securities issued/transferred to non-residents
and also release the shares/securities from non-resident safe custody account
for purposes like recording change of name, sale, etc., provided the relative
purchase/sale/transfer is covered by the general or special permission of
Reserve Bank.
General rule for Remittance of Dividend/Interest/
Sale proceeds of Securities
- As a general rule, the dividend, interest and other income on shares/securities
and sale proceeds of shares and securities originally purchased out of funds
held in the investor's
Ordinary Non-resident Rupee(NRO) accounts as also those acquired subject to the
condition that they will not carry the right of repatriation are required to be
credited to the investor's NRO account. In other cases, authorised dealers
may remit the net amount of dividend, interest, sale proceeds etc. after
deducting Indian taxes at applicable rates or credit them to the investor's
NRE/FCNR accounts to the extent permitted by Reserve Bank [see paragraphs
10B.6, 10B.7 and 10C.24]. Export of Shares/Securities
- In terms of Section 19(1)(a) of FERA 1973, export of anysecurity (which includes
shares, bonds, debentures, etc.) to anyplace outside India requires permission
of Reserve Bank.
NOTES:
- Unit Trust of India has been granted general permission by Reserve Bank to
export certificates covering units purchased by non-resident investors from out
of foreign exchange remittances to India or from their non-resident accounts in
India.
- At the time of granting permission for purchase/issue of shares/bonds/debentures
by/to non-residents, permission for export of the share/bond/debenture
certificates is generally granted by Reserve Bank. Permission for export of
shares/securities will, therefore, be required to be obtained only in cases
where such a permission has not been given.
- Reserve Bank has granted general permission under Sections 19(1)(d),
19(1)(a) and 29(1)(b) of the Foreign Exchange Regulation Act, 1973 to Indian
companies for issue and exports of shares/securities to non-resident investors,
and to non-resident investor to acquire shares/securities of Indian companies
under various non-resident direct investment schemes. In terms of Reserve Bank
Notification Nos.FERA 188 and 189/RB-98 dated 11th November 1998 it is
obligatory on the part of Indian companies seeking non-resident investment to
file a report containing the following particulars with the Regional Office of
Reserve Bank not later than 30 days from the date of receipt of remittance.
- Name of the foreign investor:
- Country of residents or incorporation of the foreign investor;
- Date of receipt of remittance and its rupee equivalent;
- Name and address of the authorised dealer in India through whom the
remittance is received;
- Number and date of SIA/FIPB approval in respect of which remittance is
received.
This requirement is in addition to the submission of the prescribed declaration
in form FC(RBI)/ISD(R)/ISD, as the case may be, alongwith the documents, within
30 days form the date of issue of shares.
(i)
INVESTMENT BY FOREIGN COMPANIES UNDER TECHNICAL/ FINANCIAL COLLABORATIONS
(ii)
INVESTMENT BY FOREIGN INSTITUTIONAL INVESTORS
-
- Under the old procedure, all proposals for entering into foreign technical
collaborations were required to be approved by the Government of India and on
receipt of Government's approval, formal authorisations under FERA 1973 were
being issued by Reserve Bank. Copies of collaboration agreements were required
to be filed with Reserve Bank/Government of India. However, under the revised
liberalised procedure Reserve Bank considers under the Automatic Route,
applications from Indian companies for foreign technical collaborations, for
lumpsum payment of technical know-how fee upto Rs.one crore and/or royalty up to
5% on domestic sales and 8% on exports over a period of 7 years from the date of
commencement of commercial production or 10 years from the date of agreement,
whichever is earlier. Since November 1996, the limit for lumpsum payment of
technical know-how fee has been increased from Rs. one crore to US $ 2 million.
Applications for foreign technical collaborations under the Automatic Route
should be made to the concerned regional office of Reserve Bank in form FT
(RBI). Proposals which do not conform to the above parameters would require the
approval of Secretariat for Industrial Assistance (SIA), Ministry of Industry,
Government of India, New Delhi. The extension of foreign technical collaboration
agreements (including those approved by Reserve Bank) would also need the
approval of SIA, Government of India.
- In cases where the collaboration is approved by Reserve Bank/Government
of India, a letter of approval will be issued indicating the terms and
conditions of the approval. A copy of the letter of approval will also be issued
by Reserve Bank to the designated branch of an authorised dealer (as mentioned
in the application) through whom remittances of technical know-how fee and/or
royalty are to be made by the Indian company. A registration number will be
granted by Reserve Bank when an approval is granted for foreign technical
collaboration under the Automatic Route. Also in cases where the approval for
collaboration is granted by the Government, the Indian company should obtain a
registration number for the collaboration agreement from the concerned regional
office of Reserve Bank before remittances under the agreement are made.
- The Indian company which has obtained approval for the foreign collaboration
agreement from the Reserve Bank/Government should file a copy of the agreement
with the designated branch of the authorised dealer through whom remittances
falling due under the collaboration agreement would be made. The Indian company
should also submit a Return in form TCD to the concerned office of Reserve Bank
in the first fortnight of January each year showing payments made under the
collaboration during the preceding calendar year duly countersigned by the
designated branch of an authorised dealer.
- Indian companies which had executed collaboration agreements under
the old procedure and the agreements are subsisting should switch over to the
revised procedure for making payments under the agreement (see paragraph 10B.5).
Application for the purpose should be made to the concerned office of the
Reserve Bank together with a Return in Form TCD showing details of all payments
made under the collaboration till the 31st December of the previous year.
Reserve Bank will grant a registration number and approval to the concerned
authorised dealer to effect future remittances.
-
- As per the Foreign Investment guidelines issued by the Government of
India, Ministry of Industry, foreign investment(equity/preference shares) upto
certain specified limits would be permitted by Reserve Bank under Automatic
Route as under:
- Foreign investment (equity/preference) upto 50% in respect of Mining
activities referred to in Part 'A' of Annexure III to Ministry of Industry's
Press Note No.14 (1997 Series) dated 8th October 1997;
- Foreign investment (equity/preference) upto 51% in (i) industries/items
included in part 'B' of Annexure III to Ministry of Industry's Press Note No.14
(1997 series) dated 8th October 1997 and (ii) a trading company primarily
engaged in export activity;
- Foreign investment (equity/preference) upto 74% in industries/items included
in part 'C' of Annexure III to Ministry of Industry's Press Note No.14 (1997
series) dated 8th October 1997;
- Foreign Investment upto 100% in industries/items included in Part ‘D’ of
Annexure III, to Ministry of Industry’s Press Note No.14(1997 Series) as amended
from time to time provided the foreign investment in a project does not exceed
Rs.1500 crores.
Existing Indian companies are also permitted to raise foreign investment
(equity/preference) to the level permissible as indicated above under the
Automatic Route in case the company is engaged in the manufacture of item/s
included in the Annexure III industries or the proposed expansion of capital is
for undertaking an activity covered under the said Annexure. Raising of foreign
investment (equity/preference) upto 51% in an existing trading company [cf.
sub-paragraph 10B.,2(i)(b)(i) above] will be permitted if the company has
already been registered as Export/Trading/Star Trading House.
Reserve Bank, vide its Notifications No.F.E.R.A.180/98-RB dated 13th January
1998 as amended by Notification No.F.E.R.A.188/98-RB dated 11th November 1998
has granted general permission under Sections 19(1) (a), 19(1)(d) and 29(1)(b)
of Foreign Exchange Regulation Act, 1973 to Indian companies for issue and
export of equity/preference shares to foreign investors in respect of eligible
investments under the Automatic Route. As a result of the general permission,
Indian companies seeking foreign investment (equity/preference) under the
Automatic Route of Reserve Bank and satisfying the conditions laid down in the
said Notifications will not require prior clearance of Reserve Bank. Such Indian
companies may issue shares to foreign investors and file a declaration in form
FC(RBI) together with the required documents with the concerned Regional Office
of Reserve Bank under whose jurisdiction their registered office is situated,
within 30 days from the date of issue of shares to foreign
investors/collaborators. Accordingly, non-residents who have been issued shares
under the general permission granted by this Notification would not need
specific approval under Section 29(1)(b) of FERA 1973 from Reserve Bank.
Issue of preference shares to Non-Resident Indians/Overseas Corporate Bodies is
also permitted under 100% Scheme.
- Applications for foreign investment which do not satisfy the parameters
prescribed for Automatic Approval by Reserve Bank or in 100% Export Oriented
Units located outside the Export Processing Zones are required to be made to the
Secretariat for Industrial Assistance (SIA)/Foreign Investment Promotion Board
(FIPB), as the case may be. If the unit is located in any of the Export
Processing Zones, applications should be made to the Development Commissioner of
the Export Processing Zone concerned.
- With a view to simplifying the procedure under SIA/FIPB route, Reserve Bank,
vide its Notification No.F.E.R.A.182/98-RB dated 10th February 1998 has granted
general permission under Sections 19(1) and 29(1)(b) of FERA 1973 to Indian
companies for issue and export of shares/securities to foreign
investors/collaborators in respect of such investments approved by SIA/FIPB. As
a result of the general permission, Indian companies seeking foreign investments
based on the approvals granted by SIA/FIPB and satisfying the conditions laid
down in the notification will not require any prior clearance of Reserve Bank.
Such Indian companies may issue shares to foreign investors/collaborators and
file a declaration in form ISD together with the required documents, with the
concerned Regional Office of Reserve Bank under whose jurisdiction their
Registered Office is situated, within 30 days from the date of issue of
shares/securities to foreign investors/collaborators. In the case of composite
approvals granted by SIA/FIPB for foreign financial as also technical
collaborations, while issue of shares/securities will be governed by the general
permission, in respect of technical collaboration, the procedure contained in
paragraph 10B.1 should be followed
A.D.(M.A. Series) Circular No.29
- Retention of share subscriptions in foreign currency accounts in India/abroad
for
financing import of capital goods, etc. requires prior approval of Reserve Bank.
Reserve Bank will also permit receipt of interest-free loans as advance share
subscription from the collaborators to be adjusted against share capital
contribution later, for meeting expenses in India of the Indian company.
NOTE:
Indian companies intending to raise foreign equity through preferential
allotment of shares to non-residents are required to comply with the guidelines
issued by Government of India, Reserve Bank of India, SEBI and other regulatory
authorities from time to time.
A.D.(M.A. Series) Circular No.29
A.D.(M.A. Series) Circular No.2
- Issue of Rights/Bonus Shares to Non-Residents
In terms of Notification No.F.E.R.A.208/99-RB dated 31st July 1999, Reserve Bank
has granted general permission to (a) Indian Companies to issue rights/bonus
shares to Non-Residents and to send such shares out of India and (b)
non-residents to acquire such shares, subject to the following conditions:
- the issue of rights/bonus shares does not bring any change in the percentage
of foreign equity already approved.
- the existing shares on which the rights/bonus shares are proposed to be
issued are held by the Non-Resident holders with the Reserve Bank's permission
under Section 29 of the F.E.R.A, 1973, and where the shares were issued under
the general permission of the Reserve Bank, the Indian Company had made the
requisite report to Reserve Bank in Form FC, form ISD/ISD (R) as the case may
be.
- the rights shares are not issued to the Non-Residents at a price lower than
that at which the rights shares are offered to resident shareholders.
- the rights/bonus shares are subject to the same restrictions with regard to repatriability and other conditions as are applicable to the original shares
against which rights/bonus shares are issued.
-
- in case of foreign nationals and companies incorporated outside India, the
consideration is received by way of inward remittance,
- in case the original investment was made by NRIs/Persons of Indian Origin/OCBs
on repatriation basis, the funds are received through normal banking channels by
way of inward remittance or by debit to the FCNR/NRE account of the NRI/PIO/OCB
concerned,
- in case the original investment was made by NRIs/Persons of Indian Origin/OCBs
on non-repatriation basis, the funds are received through normal banking
channels by way of inward remittance or by debit to the FCNR/NRE/NRO/NRSR
account of the NRI/PIO/OCB concerned.
- the original project cost as approved by FIPB does not exceed Rs.600 crores.
It may be noted, that issue of rights/bonus shares resulting in increase in the
percentage of foreign equity as also issue of shares by companies whose original
project cost was more than Rs.600 crores shall continue to require prior
approval by Government of India, as per the existing procedure.
-
- Foreign Institutional Investors (FIIs) including pension funds, mutual
funds, investment trusts, university funds, endowments, foundations or
charitable trusts or charitable societies, etc. are permitted to invest in all
securities, i.e. equity shares/debentures/ PCDs/FCDs/Rights
renunciations/warrants of Indian companies (other than Banking Companies) listed
as well as unlisted, dated Government securities, Treasury bills and units of
domestic mutual fund schemes in the primary and secondary markets. Investments
by FIIs will be subject to a ceiling of 24% of the total paid up equity capital
of the company. The ceiling would apply to all holdings taken together including
conversions out of the fully and partly convertible debentures issued by the
company. The holding of a single FII or each SEBI approved sub-account of an FII
or the concerned FII group in any company would also be subject to a ceiling of
10% of the total issued and paid up capital of the company. Indian companies,
however, would be permitted to raise the normal ceiling limit of 24% to 40% of
the issued and paid up capital of the company provided it has been approved by
the Board of Directors of the company and a Special Resolution is passed to that
effect by the General Body. The ceiling of 24% or 40%, as the case may be,
applicable for investment by FIIs will not include investments made by NRIs/OCBs
under the Portfolio Investment Scheme. It will also not include direct foreign
investment by an FII as a foreign collaborator and investment by FIIs through
off-shore funds, Global Depository Receipts and Euro - Convertible Bonds.
- FIIs are required to register themselves with Securities and Exchange Board
of India (SEBI) before they invest in the Indian capital market. Application for
registration should be made by FIIs to SEBI in the prescribed form in duplicate.
One copy of the application will be forwarded by SEBI to Reserve Bank. Reserve
Bank will grant permission under FERA 1973 to the bank branch designated by the
applicant FII to buy/sell equity shares/debentures/warrants/dated Government
securities/Treasury Bills/units of domestic mutual funds. Reserve Bank's
permission will be initially valid for five years and will be operative only
after obtaining registration from SEBI. This permission can be renewed for a
further period of five years on request. Reserve Bank's permission would enable
the FIIs to buy/sell the securities and remit the income/dividend/sale proceeds
after payment of applicable taxes through the designated bank branch. Reserve
Bank's permission will also cover investment in shares/debentures of Indian
companies in primary market i.e. new issues provided the company has reserved
certain quota out of its public issue in favour of FIIs. The designated bank
branch is required to submit to Reserve Bank a statement in form LEC(FII) on
daily basis in respect of purchases/sales of shares/debentures made for the
purpose of monitoring by Reserve Bank the overall ceiling of 24% or 40%, as the
case may be, referred to in sub-paragraph (i).
- In order to facilitate making of investments in India and repatriation of
income/sale proceeds of such investments, Reserve Bank will permit the
designated bank to open a foreign currency denominated account and a special
Non-resident Rupee account in the name of FII. The designated bank branch will
also be permitted (a) to transfer funds from foreign currency account to rupee
account and vice versa, (b) to make investments out of the balance in the rupee
account, (c) to credit sale proceeds of shares and other investments as also
dividend/interest earned on the investments to the rupee account and (d) to
transfer the repatriable proceeds (net of taxes) from the rupee account to the
foreign currency account.
(iv) Reserve Bank vide its Notification No.F.E.R.A.212/99-RB dated 18th October
1999 has granted general permission to mutual funds in India to issue units or
similar instruments to FIIs under the schemes approved by Securities and
Exchange Board of India and to send such units/instruments out of India to their
global custodians, as also to repurchase units/instruments from FIIs (cf.
paragraph 10C.16A).
-
- Reserve Bank has granted general permission to Indian companies for
making payment of technical fee/royalty through an authorised dealer designated
for
the purpose under the technical collaboration arrangement approved by the
Government of India/Reserve Bank, vide its Notification No. FERA.92/91-RB dated
13th September 1991. Indian companies who have obtained approval from Government
of India/Reserve Bank for technical collaborations may, therefore, approach the
designated authorised dealer for remittance of technical fee/royalty. The
application should be supported by a certificate from the company's auditors, in
form TCK / TCR, and other documents specified in the form. It will be in order
for authorised dealers to allow remittances strictly in accordance with the
terms and conditions prescribed by Reserve Bank/Government while approving the
collaboration provided a registration number for the collaboration has been
allotted by Reserve Bank. Authorised dealers should maintain a proper record of the collaboration
agreements
and the remittances allowed thereagainst which should be preserved for a period
of five years from the date of expiry of the agreement.Remittance of Dividend
-
- Indian companies intending to remit dividend to their non-resident
shareholders should make an application to an authorised dealer in
Form RCD 1, supported by the particulars of non-resident shareholding in form
RCD 2 and other documents prescribed in the form. Authorised dealers may allow
the remittance of dividend in accordance with the procedure mentioned below.
- Authorised dealers should verify the particulars with reference to the documents
submitted in support of the non-resident shareholding and satisfy themselves
that necessary permission of the Reserve Bank has been obtained by the
non-resident shareholders in terms of Section 29(1)(b) or 29(4)(a) of the Act
for purchase/holding of the shares and/or the company has permission under
Section 19(1) of the Act for issue of shares to the non-residents and that the
terms of the permission do not prohibit remittance of dividend.
- Authorised dealers should also verify that the certificate given in Part 'B' of
the form RCD 1 has been properly completed by the company's auditors and
specifically confirm on form A2 that they have verified the Reserve Bank's
approval for purchase/holding/issue of the shares held by the non-resident
beneficiary and it does not prohibit the remittance of dividend.
- Authorised dealers should separately forward one copy of the application in form
RCD 1 (without its enclosures) to the office of Reserve Bank within whose
jurisdiction the Head/Registered Office of the company is situated, after
completing the certificate in Part C thereof.
- The Indian company/authorised dealers should ensure that the reference number,
date, etc. of Reserve Bank's permission and the repatriable/non-repatriable
nature of the shares/debentures/bonds held by the concerned non-residents are
incorporated on the counterfoil of the dividend warrants.
- As Indian companies are required to remit dividend to all their non-resident
shareholders through the normal banking channels, it is not necessary for them
to prepare individual dividend warrants for despatch to such non-resident
shareholders. However, dividends due to non-resident shareholders who are not
eligible for having the amounts remitted to them abroad or those who wish to
have the dividend paid in India for credit to their non-resident accounts, may
be paid by issuing individual dividend warrants to their mandatee bankers in
India for credit to their Ordinary Non-resident Rupee (NRO) accounts. In cases
where dividend is to be credited to NRO accounts of the non-resident investors,
there is no need to follow the procedure in sub-paragraph (i) above.
- As regards the remittance of interim dividend, application may be made by
the company in India to the authorised dealer by letter (in duplicate) enclosing
only the form RCD 2 and a copy of the Board Resolution approving the payment of
interim dividend. Authorised dealers may allow the remittance of interim
dividend subject to what has been stated in paragraph (i) above.
- As regards non-resident investment in consumer goods industries,
the Government/Reserve Bank would stipulate that the dividend outflow should be
balanced with inflow on account of export earnings. The balancing is required to
be done for a period of 7 years from the date of commencement of commercial
production. Reserve Bank's permission is also necessary for carrying on
agricultural/plantation activities by FERA companies in terms of Section
29(1)(a) of FERA 1973. Before allowing remittance of dividend in such cases,
authorised dealers should verify that items 'C' and 'D' of Part 'B' in the
auditor's certificate in form RCD 1 have been properly completed by the
company's auditors.
- Investment in companies engaged in export trading activity is permitted by
Reserve Bank provided the company registers itself as an Export/Trading/Star
Trading House. Authorised dealers should, therefore, before allowing the
remittance of dividend by such companies ensure that the company has attained
the status of an Export/Trading/Star Trading House.
- In the case of investments by Foreign Institutional Investors (FIIs),
Reserve Bank authorises the designated branch of an authorised dealer to credit
the net amount of dividend on the shares purchased to the special non-resident
rupee account [see paragraph 10B.4(iii)]. It will, therefore, be in order for
companies to pay the dividend amounts to the designated branches of FIIs by way
of dividend warrant together with a statement, under the signature of an
authorised official, showing the number of shares held by the non-resident
shareholder, face value, rate of dividend declared, year/period to which it
relates, gross dividend, tax deducted at source, net dividend, and the
particulars of Reserve Bank's approval under Section 19(1) 29(1)(b) of FERA,
1973 for issue/purchase of shares.
- Applications for remittance of interest on bonds or debentures issued to
non-residents, should be made by the Indian companies concerned to authorised
dealers giving the following particulars -
- Name and address of the non-resident bond or debenture holder
- Nationality or place of incorporation
- Number and face value of the bond/debenture
- Number & date of Reserve Bank approval for issue of bond/debenture along with a
certified copy
- Amount of gross interest
- Tax deducted at source
- Net remittable amount
On receipt of the application, authorised dealers may allow the remittance of
the net amount of interest i.e. after payment of tax at applicable rate after
verifying that the necessary permission of Reserve Bank for issue of the
bond/debenture to the non-resident holder was obtained and that it does not
prohibit the remittance of interest. Interest due to non-residents who are not
eligible for having it remitted abroad can, however, be credited only to their
Ordinary Non-resident Rupee (NRO) accounts. The Indian company/authorised
dealers should ensure that the reference number, date etc. of Reserve Bank's
permission and the repatriable/non-repatriable nature of the bonds/debentures
held by the concerned non-residents are incorporated on the counterfoil of
interest warrants.
NOTE:
While granting permission for purchase of bonds/debentures with repatriation
rights on behalf of the Foreign Institutional Investors, Reserve Bank authorises
the designated bank branches to credit interest to the special non-resident
rupee account of the investor (see paragraph 10B.4). The Indian companies
concerned may, therefore, send the interest warrants to designated bank branch
concerned giving the necessary particulars as indicated above.
-
- Applications for transfer of shares by non-resident investors to
residents should be made to the concerned Regional Office of Reserve Bank under
whose jurisdiction the Head/Registered Office of the company, whose shares are
to be transferred, is situated, in form TS 1 together with the documents
mentioned therein. These applications will be considered by Reserve Bank in
accordance with the following guidelines:
- In case the shares to be transferred are traded on Stock Exchange, Reserve
Bank will permit such transfers provided the sale is made at the prevailing
market price on stock exchange/s through a registered merchant banker or a stock
broker.
- In the case of transfer of shares by private arrangement (i.e. other than
through stock exchange) to a resident, Reserve Bank will satisfy itself that the
shares are proposed to be sold at a price arrived at by taking the average
quotations (average of daily high and low) for one week preceding the date of
application with ± 5 per cent variation. However, if the disinvestment of shares
is by the foreign collaborators/promoters of the Indian company in favour of
existing Indian promoters with the objective of passing management control in
favour of the resident promoters, the proposal will be considered by Reserve
Bank at a price which is higher by up to a ceiling of 25% over the price arrived
at as above.
- Applications for disinvestment of unlisted/thinly traded shares by
non-residents to residents for gross consideration upto Rs.20 lakhs per seller,
per company, per annum, will be cleared at mutually agreed price based on any
valuation methodology currently in vogue. In respect of transactions exceeding
Rs.20 lakhs the non-resident seller will have the following options:
- To sell the shares with prior approval of Reserve Bank at higher of the
price based on Earning Per Share (EPS) linked to the Price Earning (P/E)
multiple and that based on the Net Asset Value (NAV) linked to Book Value (BV)
multiple. The NAV per share may be calculated by subtracting the miscellaneous
expenses carried forward, accumulated losses, total outside liabilities,
revaluation reserves and capital reserves except subsidy received in cash, from
the total assets and then dividing the amount of net assets thus arrived at by
the number of equity shares. Alternatively, intangible assets may be subtracted
from the equity capital and reserves (excluding revaluation reserves) and the
figure so arrived at should be divided by the number of equity shares. For
computing the price based on EPS, the earning per share as per the latest
audited balance sheet of the company will be used in conjunction with the
average P/E multiple of Bombay Stock Exchange National Index (BSEN) for the
calendar month immediately preceding the month in which the application is made.
The P/E multiple will be discounted by 40 per cent. Similarly, for computing
price based on Net Asset Value, the NAV per share calculated as above will be
used in conjunction with the average BV multiple of BSEN during the calendar
month immediately preceding the month in which application is made. The BV
multiple will be discounted by 40 per cent.
- To sell the thinly traded shares, with the prior approval of Reserve Bank,
on stock exchange at the prevailing market price in small lots so that the
entire holding is sold in not less than five trading days through screen based
trading system.
- To sell the shares, with the prior approval of Reserve Bank, at a price
which is lower of the two independent valuations, one by the statutory auditors
and the other by a Chartered Accountant or SEBI registered category-I merchant
banker, giving a reasoned report in respect of the price.
A share/security will be considered as thinly traded if on the main exchange(s)
in India, the annualised trading turnover in that share/security during the
preceding six calendar months prior to the month in which the application is
submitted, is less than 2 per cent (by number of shares) of the listed stock.
For this purpose, the weighted average of the number of shares listed during the
said six months period may be taken. In cases of securities with a history of
listing and trading of less than six months, the trading turnover may be
annualised with reference to the actual number of days for which the stock has
been listed.
- In the case of sale of shares of Indian companies listed on a stock
exchange in India, the application may be submitted by the transferor or his
attorney. Applications for sale/transfer of shares by private arrangement (i.e.
other than through stock exchange), may, however, be made either by the
transferor or the transferee with a copy of letter of consent for the
sale/transfer from other party. While conveying its approval, Reserve Bank will
stipulate the conditions subject to which the sale/transfer should be effected.
NOTE: Transfer of Indian shares and securities standing in the names of persons
resident in Nepal to persons resident in India is also subject to the
regulations laid down in the above paragraph.
- Repatriation of investments made in India is permissible (except where
investment
was permitted on specific condition that it will not be eligible for
repatriation),
provided the disinvestment has been made with the approval of Reserve Bank (See
paragraph 10B.8). Applications for repatriation of the capital investment should
be made to Reserve Bank through an authorised dealer stating the full
particulars of the investment, number and date of Reserve Bank's approval for
disinvestment, documentary evidence in support of disinvestment proceeds and 'No
Objection'/Tax Clearance Certificate from the Indian Income Tax authorities. In
cases of sale/transfer of shares and debentures acquired with repatriation
rights, repatriation of sale proceeds of bulk holdings (i.e.
shares/bonds/debentures exceeding Rs. one lakh in face value or 5% of the
company's paid-up capital, whichever is lower) will be permitted only on
production of a certificate from a chartered accountant or the concerned
company's secretary stating that shares with necessary transfer forms duly
signed have been received/lodged with the company for registration in favour of
the transferee.
-
- In terms of the Guidelines issued by the Government of India, vide
Ministry of Finance Notification No.S-II(25)CCI-II/89/NRI dated 12 November 1993
(as amended), Indian companies are permitted to raise foreign currency resources
through issue of Foreign Currency Convertible Bonds (FCCBs) and/or issue of
ordinary equity shares through Global Depository Receipts (GDRs)/American
Depository Receipts (ADRs) to foreign investors i.e. institutional investors or
individuals (including NRIs) residing abroad. Applications for necessary
permission should be made to the Government of India, Ministry of Finance,
Department of Economic Affairs, New Delhi. After obtaining the necessary
approval from the Government, the Indian company should submit an application to
the General Manager, Foreign Investment Division, Exchange Control Department,
Reserve Bank of India, Central Office, Mumbai - 400 001 enclosing a copy of the
application made to the Government and the in-principle/final approval granted
by the Government, for necessary permission under FERA 1973 for
issue/acquisition of shares to/by non-residents, remittance of issue expenses,
opening of foreign currency accounts, etc.
- The FCCBs/GDRs/ADRs issued by Indian companies to non-residents have free
convertibility outside India. As regards transfer of shares (on conversion of
GDRs/ADRs into shares) in favour of residents, the non-resident holder of
GDRs/ADRs should approach the Overseas Depository bank with a request to the
Domestic Custodian bank to get the corresponding underlying shares released in
favour of the non-resident investor for being sold by the non-resident or for
being transferred in the books of the issuing company in the name of the
non-resident. Reserve Bank has granted general exemption vide its Notification
No.F.E.R.A.185/98-RB dated 19th August 1998, permitting transfer of shares from
non-residents to residents, provided (a) such shares were released by the Indian
custodian of a GDR/ADR issue against surrender of GDRs/ADRs by the non-resident
concerned and (b) the sale is made on a stock exchange or the shares are offered
for sale in terms of an offer made under the Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeover) Regulations, 1997.
Authorised dealers may allow remittance of sale proceeds of such underlying
shares on verification of the following documents:
- Release Order in original from the Domestic Custodian bank of the GDR/ADR
issue.
- Sale note from a SEBI registered broker/merchant banker showing the number
of shares transferred and the amount of sale proceeds.
- An undertaking/Accountant's certificate regarding payment of Income-tax (cf.paragraph
3B.10).
Authorised dealers may also allow the non-resident transferor to keep the above
mentioned shares in their safe custody till the sale of the shares is effected
and to open a non-resident non-interest bearing account to collect the sale
proceeds of the shares. A statement giving details, such as the name of the
company whose shares have been sold, number of shares sold and the amount
remitted should be submitted to the General Manager, Foreign Investment
Division, Exchange Control Department, Reserve Bank of India, Central Office,
Mumbai 400 001 within a period of 7 days from the date of effecting the
remittance.
NOTE: The above general permission will be applicable for transfer of shares
underlying GDRs/ADRs through stock exchange or under an offer made under the
Securities and Exchange Board of India (Substantial Acquisition of Shares and
Takeovers) Regulations 1997. All other cases including transfer of shares, on
conversion of FCCBs into shares in favour of residents, will require approval of
Reserve Bank.
- A Reserve Bank has granted general exemption vide its Notification
No.F.E.R.A.193/99-RB dated 16th March 1999 permitting, (a) the non-resident
holders of ADRs/GDRs issued by a company registered in India to acquire the
underlying shares against surrender of ADRs/GDRs held by them when such shares
are released by the Indian Custodian of the ADR/GDR issue, and (b) the
company/depository concerned to enter in its register or books an address
outside India of the non-resident holder in respect of the underlying shares
issued against surrender of ADRs/GDRs.
- In terms of Government guidelines, issue proceeds are required to be kept
in foreign currency and can be utilised only for certain purposes such as for
meeting the cost of expansion/diversification /acquisition/import of new plants
and machinery, repayment of foreign currency loans, etc. as approved by the
Government. Pending deployment of funds for approved purposes, the Indian
company is allowed to keep the foreign currency funds abroad with foreign banks
(which are rated for short-term obligations as A1 + by Standard & Poor or P1 by Moody's ) or with branches of Indian banks abroad as deposits, or to invest them
abroad in treasury bills and other monetary instruments with maturity not
exceeding one year. Funds raised through GDRs/ADRs, FCCBs and ECBs will also be
allowed to be invested in rated certificates of deposit abroad. The issue
proceeds can also be kept in foreign currency accounts with authorised
dealers/public financial institutions in India authorised to deal in foreign
exchange. It will accordingly be in order for authorised dealers/public
financial institutions to accept foreign currency deposits from Indian companies
out of Euro Issue proceeds subject to the following conditions:
- The foreign currency deposits would carry interest at a rate not exceeding
LIBOR for the respective period for which the deposit is accepted.
- Authorised dealers/public financial institutions with whom the foreign
currency deposits are kept should not swap the foreign currency for rupees but
use the amounts for on-lending in foreign currency to eligible clients.
- Authorised dealers may also invest surplus foreign currency out of such Euro
Issue proceeds as permitted in paragraph 5B.9 subject to the condition indicated
in (b) above.
- Authorised dealers/public financial institutions accepting the foreign
currency deposits would be eligible to charge interest at the rate not exceeding
2.5 per cent over six months LIBOR for lending out of such funds.
- Authorised dealers will have to comply with the requirements of CRR/SLR as
laid down by Reserve Bank from time to time.
- The deposits can be converted into Indian rupees only as and when expenditure
for approved end uses (including upto a maximum of 15% of the proceeds earmarked
for general corporate restructuring) are incurred by the Indian company.
- Authorised dealers/public financial institutions accepting such deposits as
also the Indian company, as the case may be, should comply with the conditions
stipulated by Government of India in their approval letters for such issues.
- Non-resident Indian nationals generally fall under the following broad
categories:
- Indian citizens who stay abroad for employment or for carrying on any business
or vocation or for any other purpose in circumstances indicating an indefinite
period of stay outside India.
- Indian citizens working abroad on assignments with foreign Governments,
Government agencies or international/multinational agencies like United Nations
Organisation (UNO), International Monetary Fund (IMF), World Bank (IBRD), etc.
- Officials of Central and State Governments and public sector undertakings
deputed abroad on assignments with foreign Governments/agencies/ organisations
or posted to their own offices (including Indian Diplomatic Missions) abroad.
NOTE:
Non-resident Indians become resident in India only when they come back to India
for employment or for carrying on in India any business or vocation or for any
other purpose indicating an indefinite period of stay in India. They are not
regarded as persons resident in India during their short visits to India, say,
on holiday, leave, etc.
- For the purpose of the facility of opening and maintenance ofvarious types of
bank accounts and making investments in shares and securities in India, a
Foreign
citizen (not being a citizen of Pakistan or Bangladesh) is deemed to be a person
of Indian origin if (i) he at any time held an Indian passport, or (ii) he or
either of his parents or any of his grand parents was a citizen of India by
virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1955). A
spouse (not being a citizen of Pakistan or Bangladesh) of an Indian citizen or
of a person of Indian origin is also treated as a person of Indian origin for
the above purposes provided the bank accounts are opened or investments in
shares/securities in India are made by such persons only jointly with their NRI
spouses.
-
- Overseas corporate bodies predominantly owned by individuals of Indian
nationality or origin resident outside India (OCBs) include Overseas
companies, partnership firms, societies and other corporate bodies which are
owned, directly or indirectly, to the extent of at least 60% by individuals of
Indian nationality or origin resident outside India as also overseas trusts in
which at least 60% of the beneficial interest is irrevocably held by such
persons. The various facilities granted to NRIs are also available, with certain
exceptions, to OCBs so long as the ownership/beneficial interest held in them by
persons of Indian nationality/origin resident outside India continues to be at
or above the level of 60%. In order to establish that the ownership interest of
or beneficial interest in any OCB held by individuals of Indian
nationality/origin resident outside India is not less than 60%, the concerned
corporate body/trust should obtain and furnish, at the time of applying for the
facility for the first time and thereafter as and when required by Reserve Bank/authorised
dealer, a certificate from an overseas auditor/chartered accountant/certified
public accountant in form OAC where the ownership/beneficial interest is
directly held by NRIs, and in form OAC 1 where it is held indirectly by NRIs.
- Authorised dealers maintaining bank accounts or making investments in the names
of OCBs should obtain an undertaking from each such corporate
body/trust stating that it will promptly intimate to the authorised dealer if
the ownership interest or the irrevocable beneficial interest held by NRIs in
the OCB falls below the level of 60% at any time. The corporate body/trust
should also submit a certificate in form OAC or OAC 1, as appropriate, to the
authorised dealer on an annual basis and the authorised dealer should satisfy
himself that the ownership/beneficial interest held by NRIs continues to be at
or above the level of 60%. If such ownership/beneficial interest is reduced to a
level below 60%, the authorised dealer should report the matter to Reserve Bank
immediately for instructions together with full particulars of the investments
made by the corporate body/trust in its name.
NOTE: In the case of closely held OCBs i.e. where shareholders belong to the
same family or are closely related to each other, certificate in form OAC / OAC
1 may be submitted in the first instance alongwith documentary evidence to the
effect that the shareholders belong to the same family or are closely related to
each other. Annual submission of OAC/OAC 1 thereafter is not necessary and it
will suffice if a certificate signed by the Managing Director/Chief Executive
Officer of the OCB is submitted stating that there is no change in the
shareholding pattern since submission of the last certificate.
- In order to facilitate NRIs to set up new companies in India, Reserve Bank vide
its Notification No.FERA.143/93-RB dated 26th April 1993, has granted general
permission under Section 29(1)(b) read with Section 19(1)(d) of the Foreign
Exchange Regulation Act, 1973 to NRIs to subscribe to the Memorandum and
Articles of Association and to take up the shares of Indian companies for their
incorporation. The general permission empowers such Indian companies to issue
shares to NRIs provided the total face value of the shares to be issued does not
exceed Rs.10,000/- and the company is not engaged in any activity relating to
agricultural and plantation. The Indian company is required to file a
declaration of the issue to Reserve Bank in form DSS within period of 90 days
from the date of its incorporation. The repatriability or otherwise of this
investment will be decided by Reserve Bank while granting permission under
Section 19(1)(d) of the Act for issue of further shares to NRIs.
- NRIs are permitted to make direct investment in partnership/proprietorship
concerns in India as also by way of subscription to shares/debentures of Indian
companies. They are
also permitted to place funds in company deposits. Similar facilities are also
available to OCBs with certain exceptions. Wherever the investments are allowed
with repatriation benefits, the funds for the purpose should be received by
inward remittances from abroad or from the investor's NRE/FCNR Accounts.
However, in respect of investment on non-repatriation basis, funds in NRO
Accounts could also be used.
- Investment facility for NRIs resident in Nepal
Non-resident Indians resident in Nepal will be permitted to make investments in
India provided the funds for the purpose are remitted in free foreign exchange
through proper
banking channels. Such investments will either be on repatriation or on
non-repatriation basis depending on the terms and conditions applicable under
the existing schemes for NRI investment.
- Investments without Repatriation Benefits
NRIs/OCBs who undertake not to seek at any time repatriation of the capital
invested in
India and the income earned thereon are permitted to invest on non-repatriation
basis, as explained in paragraph 10C.6 to 10C.10. The incomes earned on these
investments as and when accrued are required to be credited to the Ordinary
Non-resident Rupee (NRO rupee) account of the investor. Reserve Bank would,
however, permit repatriation of the net (i.e. after payment of tax)
income/interest earned during the financial year 1994-95 and onwards on such
investments/deposits in accordance with the procedure laid down in paragraph
10C.24A.
-
- By its Notification No. FERA.113/92-RB dated 27th April 1992, Reserve Bank has
granted general permission to NRIs to invest by way of capital contribution in
any
proprietary or partnership concern in India engaged in any industrial, trading
or commercial activity on non-repatriation basis subject to the following
conditions:
- The amount invested should be remitted from abroad through normal banking
channels or by transfer of funds held in investor's bank accounts in India.
- The concern or the NRI does not engage in any agricultural/plantation activity
or real estate business i.e. dealing in land and immovable property with a view
to earning profit or income therefrom.
- The amount invested and income accruing thereon are not eligible for
repatriation
outside India and are payable only in non-convertible Indian rupees.
Consequently, it will not be necessary for such partnership/ proprietorship
concerns in India to obtain prior permission of Reserve Bank for receiving
capital contribution from NRIs provided the conditions mentioned in the
Notification are satisfied. The firm should, however, submit the declaration in
form DIN to the concerned Regional Office of the Reserve Bank in whose
jurisdiction it is situate within a period of 90 days from the date of receipt
of investment. The profits due to the NRI investor may be credited to his
ordinary Non-Resident Account maintained with a bank in India.
-
- By its Notification No. FERA.114/92-RB dated 27th April 1992 amended upto 24th
February 1997 Reserve Bank has granted general permission to NRIs/OCBs to
subscribe to the shares/convertible debentures of an Indian company on
non-repatriation basis, and to an Indian company to issue shares or convertible
debentures by way of new/rights/bonus issue to NRIs/OCBs on non-repatriation
basis provided that the investee company is not engaged in
agricultural/plantation activities or real estate business (excluding real
estate development i.e. development of property or construction of houses) or
chit fund or is not a Nidhi company. The payment for these shares should,
however, be received from the NRIs/OCBs by inward remittance or by debit to
their NRE/FCNR/NRO accounts maintained with an authorised dealer or an
authorised bank in India. Consequently, it will be in order for companies in
India to issue shares/convertible debentures to NRIs/OCBs on non-repatriation
basis by way of new, rights or bonus issues without the prior approval of
Reserve Bank provided the conditions mentioned in the Notification are
satisfied. The company should, however, file a declaration in form DIN within 90
days from the date of receipt of the investment to the concerned Regional Office
of the Reserve Bank in whose jurisdiction its registered office is situated. The
company may also credit the dividend/interest in respect of the
shares/convertible debentures to the investor's NRO account with a bank in
India.
- Reserve Bank of India vide its Notification No.F.E.R.A.213/99-RB dated 1st
November 1999, has granted general permission to Indian companies to issue, by
way of public issue, non-convertible debentures (NCDs) to NRIs/PIOs/OCBs on
non-repatriation basis subject to the following conditions:
- The amount of subscription should be received by inward remittance from
abroad through normal banking channels or by debit to the non-resident's
NRE/FCNR/NRO/NRSR account, as the case may be, with an authorised dealer in
India. The principal amount representing the investment is not repatriable. If
the investment is made out of funds held in NRSR account, the principal as well
as interest earned are not repatriable.
- The rate of interest on such NCDs shall not exceed prime lending rate of
State Bank of India, plus 300 basis points.
- The minimum period for redemption of such NCDs should be three years.
- The company raising funds through NCDs should not be engaged in
agricultural/plantation activity, real estate business, trading in transferable
development rights (TDRs) or act as Nidhi/Chit Fund company.
- The issuer company files with the Regional Office of Reserve Bank, not later
than thirty days from the date of receipt of remittance, a report containing the
following:-
- A list containing names of NRIs/OCBs.
- Country of residence or incorporation of the non-resident investor;
- Amount and date of receipt of remittance and its rupee equivalent;
- Name and address of the authorised dealer in India through whom the
remittance is received.
- The issuer company files with Regional Office of Reserve Bank, not later
than thirty days from the date of issue of NCDs, the following:-
- A list containing names of NRIs/OCBs and the number and face value of NCDs
issued to each of them on non-repatriation basis.
- Certified true copy of resolution passed in the meeting of the Board of
Directors of the company, indicating the quantum and value of NCDs issued to
NRIs/OCBs and residents and other details of the issue such as coupon rate, date
of redemption, etc.
- Original Foreign Inward Remittance Certificate (FIRC)/Bank Certificate
evidencing receipt of funds, from abroad or from the NRE/FCNR/NRO/NRSR accounts
as the case may be, of the NRI/PIO/OCB.
- Memorandum and Articles of Association of the issuer company.
- Certificate in Form OAC/OAC1 indicating the NRI shareholding to the extent
of atleast 60% either directly or indirectly in case of investment by OCB.
- Any information sought by the Reserve Bank with reference to the issue of NCDs within such time as may be stipulated.
- An undertaking that the issuer company is not and shall not be engaged in
agricultural/plantation activity, real estate business, trading in TDRs or act
as Nidhi/Chit Fund company.
- NRIs/OCBs require permission of Reserve Bank for purchasing shares of Indian
companies by
private arrangement. For this purpose, application in form FNC 7 together with
the non-repatriation undertaking in form NRU may be submitted by the
non-resident investor to the office of the Reserve Bank in whose jurisdiction
the company's Head/Registered Office is situated. Investment in Domestic Public
Sector
and Private Sector Mutual Funds
- NRIs/OCBs will be permitted to invest in Mutual Funds floated by domestic public
sector and
private sector mutual funds on non-repatriation basis. Applications for the
purpose should be made to Reserve Bank in form ISD by the concerned
bank/institution. The non-resident investors do not need separate approval from
Reserve Bank for the purpose.A.D.(M.A. Series) Circular No.9
Investment in Money Market Mutual Funds (MMMFs)
- NRIs/OCBs will be permitted to invest, on non-repatriation basis, in Money
Market Mutual Funds (MMMFs) floated by commercial banks and public
sector/private sector
financial institutions, with authorisation from Reserve Bank of India/Securities
and Exchange Board of India (SEBI). Applications for the purpose should be made
to the Reserve Bank in form ISD(R) by the concerned bank/institution. The
NRI/OCB investors do not need separate permission from Reserve Bank for the
purpose.
Acceptance of deposits by proprietorship concerns/firms/companies
in India on Non-repatriation basis
-
- NRIs/OCBs will be permitted to place funds in deposits with firms/companies in
India on non-repatriation basis. The application for this purpose may be made by
the
depositor or the deposit accepting firm/company to the office of Reserve Bank
under whose jurisdiction its Head/Registered Office is situated. In case of
acceptance of deposits from NRIs/OCBs under the public deposit scheme, the
application for permission should be made by the deposit accepting firm/company
through an authorised dealer to the concerned office of Reserve Bank under whose
jurisdiction the registered office of the firm/company is situate. No separate
application from the non-resident depositor is necessary in such cases.
A.D.(M.A. Series) Circular No.9
- Indian companies wishing to raise deposits by issue of Commercial Paper
(CP) have to comply with the Non-Banking Companies (Acceptance of Deposits
through Commercial Paper) Directions, 1989 issued by Reserve Bank (IECD).
Reserve Bank (ECD) has granted general permission to Indian companies for issue
of CP to NRIs/OCBs vide Notification Notification No.F.E.R.A. 85/89-RB dated 9th
October 1989 as amended by Notification No.F.E.R.A. 205/99-RB dated 3rd July
1999 subject to the company complying with the conditions stipulated by Reserve
Bank (IECD) and (ECD). Indian companies may accordingly raise deposits from
NRIs/OCBs through issue of CP without obtaining specific permission of Reserve
Bank (ECD) provided the amount invested will not be allowed to be repatriated
outside India and the CP will not be transferable. Payment for investment in CP
should be received by remittance from abroad through normal banking channel or
by debit to investor's NRE/FCNR/NRO/NRSR account and maturity proceeds should be
paid by credit to NRO/NRSR account of the non-resident investor with a bank in
India.
NOTE:
OCBs are not permitted to invest in CPs.