The pricing norms for sale of equity shares by an Indian entity to non-resident entity and vice-versa under the foreign direct investment route have been modified. According to the new guidelines issued by Reserve Bank of India on Tuesday, when a resident entity is selling shares of a listed Indian company to a non-resident, the price of the transferred shares should not be less than the price at which a preferential allotment of shares can be made under the SEBI Guidelines. According to SEBI guidelines, the issue of shares on a preferential basis can be made at a price not less than the average weekly high and low of the closing prices over a six-month period or the average weekly high and low of the closing prices over a two-week period, whichever is higher. Under the earlier guidelines, residents could transfer shares to non-residents at a price not less than the current market price quoted on the stock exchange. Non-resident Entities Non-resident entities are foreign nationals, non-resident Indians, foreign institutional investors and incorporated non-resident entities other than erstwhile Overseas Corporate Bodies. The modifications will come into force with immediate effect, the RBI circular said. For shares on unlisted Indian entities, the new guidelines propose that the transfer of shares from a resident to a non-resident should not be at a price less than the fair value according to the discounted free cash flow method determined by merchant bankers registered with SEBI or by a Chartered Accountant. Earlier, the fair value was arrived as per the guidelines issued by the erstwhile Controller of Capital Issues. In case of transfer of shares by a non-resident to a resident, the sale price of the shares should not be more than the minimum price at which the transfer can be made from a resident to a non-resident, the circular said.