RESERVE BANK OF INDIA
Foreign Exchange Department
Central Office
Mumbai - 400 001
RBI/2009-10/22
Master Circular No.2/2009-10 July 01, 2009
To,
All Category - I Authorised Dealer banks
Madam / Sir,
Master Circular on Foreign Investment in India
Foreign investment in India is governed by sub-section (3) of Section 6 of the
Foreign Exchange Management Act, 1999 read with Notification No. FEMA 20/2000-RB
dated May 3, 2000, as amended from time to time. The regulatory framework and
instructions issued by the Reserve Bank have been compiled in this Master Circular. The
list of underlying circulars/notifications is furnished in Appendix. In addition to the above,
this Master Circular also covers the following areas:
(i) Acquisition of immovable property which is regulated in terms of Section 6(3) (i)
of Foreign Exchange Management Act, 1999 read with Notification No. FEMA 21/
2000-RB dated May 3, 2000;
(ii) Establishment of Branch/Liaison Office in India, which is regulated in terms of
Section 6(6) of Foreign Exchange Management Act, 1999 read with Notification
No. FEMA 22/ 2000-RB dated May 3, 2000; and
(iii) Investment in capital of partnership firms or proprietary concern which is
regulated in terms of Section 2(h) of Section 47 of Foreign Exchange Management
Act, 1999, read with Notification No. FEMA 24/2000-RB dated May 3, 2000.
2. This Master Circular is being issued with a sunset clause of one year. This circular
will stand withdrawn on July 1, 2010 and be replaced by an updated Master Circular on
the subject.
Yours faithfully,
(Salim Gangadharan)
Chief General Manager-in-Charge
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INDEX
PART – I ......................................................................................................................................................0
Foreign Investments in India—Schematic Representation: .........................................................0
SECTION - I: FOREIGN DIRECT INVESTMENT ........................................................................................1
1. Foreign Direct Investment in India............................................................................................1
2. Entry routes for investments in India .......................................................................................1
3. Prohibition on investment in India ............................................................................................2
4. Eligibility for Investment in India ...............................................................................................3
5. Type of instruments..................................................................................................................4
6. Investments in Small Scale Industrial (SSI) units....................................................................4
7. Investments in Asset Reconstruction Companies (ARCs) .......................................................5
8. Investment in infrastructure companies in the Securities Market ............................................6
9. Investment in Credit Information Companies ..........................................................................6
10. Investment in Commodity Exchanges ....................................................................................6
11. Investment in Public Sector banks .........................................................................................7
12. Investments from Nepal & Bhutan..........................................................................................7
13. Issue of Rights / Bonus shares...............................................................................................7
14. Prior permission of Reserve Bank for Rights issue to erstwhile OCBs ..................................7
15. Additional allocation of rights share by residents to non-residents ........................................7
16. Acquisition of shares under Scheme of Merger / Amalgamation ...........................................8
17. Issue of shares under Employees Stock Option Scheme (ESOPs) .......................................8
18. Reporting of FDI ....................................................................................................................9
19. Issue Price...........................................................................................................................11
20. Foreign Currency Account....................................................................................................11
21. Transfer of Shares and convertible debentures ...................................................................11
22. Prior permission of RBI in certain cases for transfer of security..........................................14
23. Conversion of ECB / Lumpsum Fee / Royalty / Import of capital goods by..........................15
SEZs in to Equity........................................................................................................................15
24. Remittance of sale proceeds................................................................................................17
25. Remittance on winding up/liquidation of Companies............................................................17
26. Issue of shares by Indian companies under ADR / GDR .....................................................17
27. Two-way Fungibilty Scheme ................................................................................................19
28. Sponsored ADR/GDR issue.................................................................................................20
29. Reporting of ADR/GDR Issues.............................................................................................20
SECTION - II: FOREIGN PORTFOLIO INVESTMENTS ...........................................................................21
1. Portfolio Investment Scheme (PIS) .......................................................................................21
2. Investment by FIIs under PIS ................................................................................................21
3. Short Selling by FIIs ..............................................................................................................22
4. Exchange Traded Derivative Contracts.................................................................................23
5. Accounts with AD Category – I banks ...................................................................................24
6. Private placement with FIIs ...................................................................................................24
7. Reporting of FII investments .................................................................................................25
8. Investments by Non-Resident Indians (NRIs) .......................................................................25
9. Monitoring of investment position by RBI ..............................................................................26
10. Caution List ..........................................................................................................................27
11. Ban List ...............................................................................................................................27
12. Investments by Overseas Corporate Bodies (OCBs)...........................................................27
SECTION - III: FOREIGN VENTURE CAPITAL INVESTMENTS..............................................................28
Investments by Venture Capital Funds ......................................................................................28
SECTION - IV: OTHER FOREIGN INVESTMENTS ..................................................................................29
1. Purchase of other securities by NRIs .....................................................................................29
2. Purchase of other securities by FIIs .......................................................................................29
3. Investment by Multilateral Development Banks (MDBs) ........................................................30
4. Foreign Investment in Tier I and Tier II instruments issued by banks in India .......................30
PART II ......................................................................................................................................................32
Acquisition and Transfer of Immovable Property in India...........................................................32
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1. Acquisition and Transfer of Immovabe Property in India.......................................................32
2. Purchase / Sale of Immovable Property by Foreign Embassies / Diplomats / Consulate
General......................................................................................................................................33
3. Acquisition of Immovable Property for carrying on a permitted activity................................33
4. Repatriation of sale proceeds................................................................................................34
5. Prior permission to citizens of certain countries for acquisition or transfer of immovable
property in India..........................................................................................................................34
PART III .....................................................................................................................................................36
Establishment of Branch / Liaison / Project Offices in India .......................................................36
1. Application to RBI..................................................................................................................36
2. Liaison Office.........................................................................................................................36
3. Liaison Office of foreign Insurance Companies....................................................................37
4. Branch Offices........................................................................................................................37
5. Branch Office in Special Economic Zones (SEZs) ...............................................................38
6. Branches of Banks ...............................................................................................................38
7. Project Offices ......................................................................................................................39
8. Opening of Foreign Currency Account ................................................................................39
9. Intermittent remittances by Project Offices in India .............................................................40
10. General conditions ..............................................................................................................40
11. Closure of Offices.................................................................................................................40
PART IV.....................................................................................................................................................42
INVESTMENT IN PARTNERSHIP FIRM / PROPRIETARY CONCERN ...................................................42
1. Investment in Partnership Firm / Proprietary Concern ........................................................42
2. Investments with repatriation benefits ..................................................................................42
3. Investment by non-residents other than NRIs / PIO.............................................................42
4. Restrictions...........................................................................................................................43
Annex - 1 ...................................................................................................................................44
Annex - 2 ...................................................................................................................................54
Annex - 3 ...................................................................................................................................55
Annex- 4 ....................................................................................................................................61
Annex - 5 ...................................................................................................................................62
Annex - 6 ...................................................................................................................................63
Annex - 7 ...................................................................................................................................65
Annex - 8 ...................................................................................................................................66
Annex - 9 ...................................................................................................................................77
Annex - 10 ................................................................................................................................82
Annex - 11 ................................................................................................................................84
Annex - 12 .................................................................................................................................85
Annex - 13 .................................................................................................................................87
APPENDIX.................................................................................................................................................90
Section - I: Foreign Direct Investment
1. Foreign Direct Investment in India
Foreign Direct Investment (FDI) in India is governed by the FDI Policy announced
by the Government of India and the provisions of the Foreign Exchange
Management Act (FEMA), 1999. Reserve Bank has issued Notification No. FEMA
20 /2000-RB dated May 3, 2000 which contains the Regulations in this regard. This
Notification has been amended from time to time.
2. Entry routes for investments in India
(i) Foreign Direct Investment is freely permitted in almost all sectors. Under the
Foreign Direct Investments (FDI) Scheme, investments can be made by nonresidents
in the shares / convertible debentures / preference shares1 of an Indian
company, through two routes; the Automatic Route and the Government Route.
Under the Automatic Route, the foreign investor or the Indian company does not
require any approval from the Reserve Bank or Government of India for the
investment. Under the Government Route, prior approval of the Government of
India, Ministry of Finance, Foreign Investment Promotion Board (FIPB) is required.
If the investor has existing venture or tie-up in India as on January 12, 2005,
through investment / technical collaboration / trade mark agreement in the same
field in which the Indian company, whose shares are being issued, is engaged, he
has to obtain prior permission of Secretariat of Industrial Assistance (SIA) / Foreign
Investment Promotion Board (FIPB), to acquire the shares. This restriction is,
however, not applicable to the issue of shares for investments to be made by
Venture Capital Funds registered with the Securities and Exchange Board of India
(SEBI). This restriction is also not applicable for investments by multinational
financial institutions; or where in the existing joint venture, investment by either of
the parties is less than 3 per cent; or where the existing joint venture / collaboration
is defunct or sick or for issue of shares of an Indian company engaged in
Information Technology sector or in the mining sector, if the existing joint venture
1 "Shares" mentioned in this Master Circular means equity shares, "convertible debentures" means fully and mandatorily convertible
debentures and "preference shares" means fully and mandatorily convertible preference shares [cf. A. P. (DIR Series) Circular Nos.
73 & 74 dated June 8, 2007]
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or technology transfer / trade mark agreement of the person to whom the shares
are to be issued are also in the Information Technology sector or in the mining
sector for same area / mineral.
Entry route for non-resident investors in India as well as sector-specific investment
limits in India are given in Annex -1.
(ii) FDI Policy is formulated by the Government of India. The policy and
procedures in respect of FDI in India is available in "the Manual on Investing in
India - Foreign Direct Investment, Policy & Procedures". This document is
available in public domain and can be downloaded from the website of Ministry of
Commerce and Industry, Department of Industrial Policy and Promotion -
https://www.dipp.nic.in/manual/fdi_text_manual_nov_2006.pdf.
FEMA Regulations prescribe the mode of investments i.e. manner of receipt of
funds, issue of shares / convertible debentures and preference shares and
reporting of the investments to the Reserve Bank.
3. Prohibition on investment in India
(i) Foreign investment in any form is prohibited in a company or a partnership firm or
a proprietary concern or any entity, whether incorporated or not (such as, Trusts)
which is engaged or proposes to engage in the following activities2:
(a) Business of chit fund, or
(b) Nidhi company, or
(c) Agricultural or plantation activities, or
(d) Real estate business, or construction of farm houses, or
(e) Trading in Transferable Development Rights (TDRs).
(ii) It is clarified that “real estate business” does not include development of
townships, construction of residential / commercial premises, roads or bridges
educational institutions, recreational facilities, city and regional level infrastructure,
townships. It is further clarified that partnership firms /proprietorship concerns
having investments as per FEMA regulations are not allowed to engage in print
Media sector.
2 As per Notification no. FEMA 1/2000-RB dated May 3, 2000
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(iii) In addition to the above, investment in the form of FDI is also prohibited in
certain sectors such as (Annex-2)3:
(a) Retail Trading (except single brand product retailing)
(b) Atomic Energy
(c) Lottery Business
(d) Gambling and Betting
(e) Business of chit fund
(f) Nidhi company
(g) Trading in Transferable Development Rights(TDRs)
(h) Activities / sectors not opened to private sector investment
(i) Agriculture (excluding Floriculture, Horticulture, Development of
seeds, Animal Husbandry, Pisciculture and cultivation of vegetables,
mushrooms, etc. under controlled conditions and services related to
agro and allied sectors) and Plantations (other than Tea Plantations)
4. Eligibility for Investment in India
(i) A person4 resident outside India (other than a citizen of Pakistan) or an entity
3 As per Notification no. FEMA 20/2000-RB dated May 3, 2000
4 A "person" is defined under FEMA (Section 2 u) as:
(a) an individual,
(b) a Hindu undivided family,
(c) a company,
(d) a firm,
(e) an association of persons or a body of individuals, whether incorporated or not,
(f) every artificial juridical person, not falling within any of the preceding sub-clauses, and
(g) any agency, office or branch owned or controlled by such person;
• “person resident in India” means—[As per FEMA Sec 2( v)]
(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial
year but does not include—
(A) a person who has gone out of India or who stays outside India, in either case—
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an
uncertain period;
(B) a person who has come to or stays in India, in either case, otherwise than—
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an
uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person resident outside India,
(iv) an office, branch or agency outside India owned or controlled by a person resident in India;
• “person resident outside India” means a person who is not resident in India; [As per FEMA Sec 2(w)].
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incorporated outside India, (other than an entity incorporated in Pakistan) can
invest in India, subject to the FDI Policy of the Government of India. A person who
is a citizen of Bangladesh or an entity incorporated in Bangladesh can invest in
India under the FDI Scheme, with the prior approval of the FIPB.
(ii) Overseas Corporate Body (OCB) means a company, partnership firm, society
and other corporate body owned directly or indirectly to the extent of at least sixty
per cent by Non-Resident Indians and includes overseas trust in which not less than
sixty per cent beneficial interest is held by Non-Resident Indians, directly or
indirectly, but irrevocably. OCBs have been de-recognised as a class of investors in
India with effect from September 16, 2003. Erstwhile OCBs which are incorporated
outside India and are not under adverse notice of Reserve Bank can make fresh
investments under the FDI Scheme as incorporated non-resident entities, with the
prior approval of Government of India if the investment is through Government
Route; and with the prior approval of Reserve Bank if the investment is through
Automatic Route.
5. Type of instruments
i) Indian companies can issue equity shares, fully and mandatorily convertible
debentures and fully and mandatorily convertible preference shares subject to
pricing guidelines / valuation norms prescribed under FEMA Regulations.
ii) Issue of other types of preference shares such as, non-convertible, optionally
convertible or partially convertible, have to be in accordance with the guidelines
applicable for External Commercial Borrowings (ECBs). Since these instruments are
denominated in rupees, the rupee interest rate will be based on the swap equivalent
of London Interbank Offered Rate (LIBOR) plus the spread permissible for ECBs of
corresponding maturity.
iii) As far as debentures are concerned, only those which are fully and mandatorily
convertible into equity, within a specified time would be reckoned as part of equity
under the FDI Policy.
6. Investments in Small Scale Industrial (SSI) units
(i) A foreign investor can invest in an Indian company which is a Small Scale
Industrial Unit provided it is not engaged in any activity which is prohibited under the
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FDI policy. Such investments are subject to a limit of 24 per cent of paid-up capital
of the Indian company/SSI unit. An SSI unit can issue equity shares / fully and
mandatorily convertible preference shares / fully and mandatorily convertible
debentures more than 24 per cent of its paid-up capital if :
a) It has given up its small scale unit status,
b) It is not engaged or does not propose to engage in manufacture of items
reserved for small scale sector, and
c) It complies with the sectoral caps specified in Annex -1.
(ii) It is clarified that the Indian company / SSI Unit would be reckoned as having
given up its SSI status, if the investment in plant and machinery exceeds the limits
prescribed under the Micro, Small and Medium Enterprises (MSME) Development
Act, 2006.
(iii) An SSI unit, which is an Export Oriented Unit (EOU) or a unit in Free Trade
Zone (FTZ) or in Export Processing Zone (EPZ) or in a Software Technology Park
(STP) or in an Electronic Hardware Technology Park (EHTP), can issue shares /
fully and mandatorily convertible debentures / fully and mandatorily convertible
preference shares exceeding 24 per cent of the paid-up capital up to the sectoral
caps specified in Annex – 1.
7. Investments in Asset Reconstruction Companies (ARCs)
(i) Persons resident outside India [other than Foreign Institutional Investors (FIIs)],
can invest in the equity capital of Asset Reconstruction Companies (ARCs) registered
with Reserve Bank only under the Government Route. Automatic Route is not
available for such investments. Such investments have to be strictly in the nature of
FDI. Investments by FIIs are not permitted in the equity capital of ARCs and FDI is
restricted to 49 per cent of the paid-up capital of the ARC.
(ii) However, FIIs registered with SEBI can invest in the Security Receipts (SRs)
issued by ARCs registered with Reserve Bank. FIIs can invest up to 49 per cent of
each tranche of scheme of SRs, subject to the condition that investment by a single
FII in each tranche of SRs shall not exceed 10 per cent of the issue.
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8. Investment in infrastructure companies in the Securities Market
Foreign investment is permitted in infrastructure companies in Securities Markets,
namely, stock exchanges, depositories and clearing corporations, in compliance
with SEBI Regulations and subject to the following conditions :
i. There is a composite ceiling of 49 per cent for Foreign Investment, with a
FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital;
ii. FDI will be allowed with specific prior approval of FIPB; and
iii. FII can invest only through purchases in the secondary market.
9. Investment in Credit Information Companies
Foreign investment is permitted in Credit Information Companies in compliance with
the Credit Information Companies (Regulations) Act, 2005 and subject to the
following :
i. There is a composite ceiling of 49 per cent for Foreign Investment, with a
FDI limit of 25 per cent and an FII limit of 24 per cent of the paid up capital.
ii. FDI will be allowed with specific prior approval of FIPB and regulatory
clearance from the Reserve Bank.
iii. Investment by SEBI Registered FIIs is permitted only through purchases in
the secondary market to an extent of 24 per cent.
iv. No FII can individually hold directly or indirectly more than 10 per cent of
the equity.
10. Investment in Commodity Exchanges
Foreign investment is permitted in Commodity Exchanges subject to the following
conditions:
i. There is a composite ceiling of 49 per cent for Foreign Investment, with a
FDI limit of 26 per cent and an FII limit of 23 per cent.
ii. FDI will be allowed with specific prior approval of the FIPB.
iii. The FII purchases in equity of Commodity Exchanges are restricted to the
secondary markets only.
iv. Foreign Investment in Commodity Exchanges is also subject to compliance
with the regulations issued, in this regard, by the Forward Market
Commission.
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11. Investment in Public Sector banks
FDI and Portfolio Investment in nationalised banks are subject to overall statutory
limits of 20 per cent as provided under Section 3 (2D) of the Banking Companies
(Acquisition & Transfer of Undertakings) Acts, 1970/80. The same ceiling would also
apply in respect of such investments in State Bank of India and its associate banks.
12. Investments from Nepal & Bhutan
NRIs, resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are
permitted to invest in shares and convertible debentures of Indian companies under
FDI Scheme on repatriation basis, subject to the condition that the amount of
consideration for such investment shall be paid only by way of inward remittance in
free foreign exchange through normal banking channels.
13. Issue of Rights / Bonus shares
FEMA provisions allow Indian companies to freely issue Rights / Bonus shares to
existing non-resident shareholders, subject to adherence to sectoral cap, if any.
However, such issue of bonus / rights shares have to be in accordance with other
laws / statutes like the Companies Act, 1956, SEBI (Disclosure and Investor
Protection) Guidelines (in case of listed companies), etc. The price of shares offered
on rights basis by the Indian company to non-resident shareholders shall not be
lower than the price at which such shares are offered to resident shareholders.
14. Prior permission of Reserve Bank for Rights issue to erstwhile OCBs
OCBs have been de-recognised as a class of investors with effect from September
16, 2003. Therefore, companies desiring to issue rights share to such erstwhile
OCBs will have to take specific prior permission from the Reserve Bank5. As such,
entitlement of rights share is not automatically available to OCBs. However, bonus
shares can be issued to erstwhile OCBs without the Reserve Bank approval.
15. Additional allocation of rights share by residents to non-residents
Existing non-resident shareholders are allowed to apply for issue of additional
shares / convertible debentures / preference shares over and above their rights
share entitlements. The investee company can allot the additional rights share out of
5 Applications to be addressed to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department,
Foreign Investment Division, Central Office, Mumbai
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unsubscribed portion, subject to the condition that the overall issue of shares to nonresidents
in the total paid-up capital of the company does not exceed the sectoral
cap.
16. Acquisition of shares under Scheme of Merger / Amalgamation
Mergers and amalgamations of companies in India are usually governed by an order
issued by a competent Court on the basis of the Scheme submitted by the
companies undergoing merger/amalgamation. Once the scheme of merger or
amalgamation of two or more Indian companies has been approved by a Court in
India, the transferee company or new company is allowed to issue shares to the
shareholders of the transferor company resident outside India, subject to the
conditions that :
(i) the percentage of shareholding of persons resident outside India in the
transferee or new company does not exceed the sectoral cap, and
(ii) the transferor company or the transferee or the new company is not engaged
in activities which are prohibited under the FDI policy (refer para 3 above).
17. Issue of shares under Employees Stock Option Scheme (ESOPs)
i) Listed Indian companies are allowed to issue shares under the Employees
Stock Option Scheme (ESOPs), to its employees or employees of its joint venture
or wholly owned subsidiary abroad who are resident outside India, other than to
the citizens of Pakistan. Citizens of Bangladesh can invest with the prior approval
of the FIPB. Shares under ESOPs can be issued directly or through a Trust
subject to the condition that :
a. The scheme has been drawn in terms of relevant regulations issued by the
SEBI, and
b. The face value of the shares to be allotted under the scheme to the nonresident
employees does not exceed 5 per cent of the paid-up capital of the
issuing company.
ii) Unlisted companies have to follow the provisions of the Companies Act, 1956.
The Indian company can issue ESOPs to employees who are resident outside
India, other than to the citizens of Pakistan. ESOPs can be issued to the citizens
of Bangladesh with the prior approval of the FIPB.
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iii) The issuing company is required to report the details of such issues to
the Regional Office concerned of the Reserve Bank, within 30 days from the date
of issue of shares.
18. Reporting of FDI
(i) Reporting of inflow
(a) An Indian company receiving investment from outside India for issuing shares
/ convertible debentures / preference shares under the FDI Scheme, should
report the details of the amount of consideration to the Regional Office
concerned of the Reserve Bank not later than 30 days from the date of receipt
in the Advance Reporting Form enclosed in Annex - 6.
The Form can also be downloaded from the Reserve Bank's website
https://www.rbi.org.in/Scripts/BSViewFemaForms.aspx.
(b) Indian companies are required to report the details of the receipt of the
amount of consideration for issue of shares / convertible debentures, through
an AD Category - I bank, together with a copy/ies of the FIRC/s evidencing the
receipt of the remittance along with the KYC report (enclosed as Annex – 7) on
the non-resident investor from the overseas bank remitting the amount. The
report would be acknowledged by the Regional Office concerned, which will
allot a Unique Identification Number (UIN) for the amount reported.
(ii) Time frame within which shares have to be issued
The equity instruments should be issued within 180 days from the date of receipt of
the inward remittance or by debit to the NRE/FCNR (B) account of the non-resident
investor. In case, the equity instruments are not issued within 180 days from the
date of receipt of the inward remittance or date of debit to the NRE/FCNR (B)
account, the amount of consideration so received should be refunded immediately
to the non-resident investor by outward remittance through normal banking
channels or by credit to the NRE/FCNR (B) account, as the case may be. Noncompliance
with the above provision would be reckoned as a contravention under
FEMA and could attract penal provisions. In exceptional cases, refund of the
amount of consideration outstanding beyond a period of 180 days from the date of
receipt may be considered by the Reserve Bank, on the merits of the case.
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(iii) Reporting of issue of shares
(a) After issue of shares (including bonus and shares issued on rights basis) and
shares issued under ESOP)/fully and mandatorily convertible debentures / fully
and mandatorily convertible preference shares, the Indian company has to file
Form FC-GPR, enclosed in Annex - 8, not later than 30 days from the date of
issue of shares. The Form can also be downloaded from the Reserve Bank's
website https://www.rbi.org.in/Scripts/BS_ViewFemaForms.aspx.
(b) Part A of Form FC-GPR has to be duly filled up and signed by Managing
Director/Director/Secretary of the Company and submitted to the Authorised
Dealer of the company, who will forward it to the Reserve Bank. The following
documents have to be submitted along with Part A:
(i) A certificate from the Company Secretary of the company certifying that :
a) all the requirements of the Companies Act, 1956 have been complied
with;
b) terms and conditions of the Government’s approval, if any, have been
complied with;
c) the company is eligible to issue shares under these Regulations; and
d) the company has all original certificates issued by authorised dealers in
India evidencing receipt of amount of consideration.
(ii) A certificate from Statutory Auditor or Chartered Accountant indicating the
manner of arriving at the price of the shares issued to the persons resident
outside India.
(c) The report of receipt of consideration as well as Form FC-GPR have to be
submitted by the AD bank to the Regional Office concerned of the Reserve
Bank under whose jurisdiction the registered office of the company is situated.
(d) Part - B of Form FC-GPR should be filed on an annual basis by the Indian
company, directly with the Reserve Bank6. This is an annual return to be
submitted by 31st of July every year, pertaining to all investments by way of
direct/portfolio investments/re-invested earnings/other capital in the Indian
company made during the previous years (i.e. the information in Part B
submitted by 31st July 2009 will pertain to all the investments made in the
6 Addressed to the Advisor, Balance of Payment Statistical Division, Department of Statistics and Information
Management, Reserve Bank of India, C9, 8th Floor, Bandra-Kurla Complex, Bandra (E), Mumbai – 400051.
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previous years up to March 31, 2009). The details of the investments to be
reported would include all foreign investments made into the company which is
outstanding as on the balance sheet date. The details of overseas investments
in the company both under direct / portfolio investment may be separately
indicated.
(e) Issue of bonus/rights shares or stock options to persons resident outside India
directly or on amalgamation / merger with an existing Indian company, as well
as issue of shares on conversion of ECB / royalty / lumpsum technical knowhow
fee / import of capital goods by units in SEZs has to be reported in Form
FC-GPR.
19. Issue Price
Price of shares issued to persons resident outside India under the FDI Scheme,
shall be on the basis of SEBI guidelines in case of listed companies. In case of
unlisted companies, valuation of shares has to be done by a Chartered Accountant
in accordance with the guidelines issued by the erstwhile Controller of Capital
Issues (CCI).
20. Foreign Currency Account
Indian companies which are eligible to issue shares to persons resident outside
India under the FDI Scheme will be allowed to retain the share subscription amount
in a Foreign Currency Account, with the prior approval of Reserve Bank.
21. Transfer of Shares and convertible debentures
(i) Foreign investors can also invest in Indian companies by purchasing /
acquiring existing shares from Indian shareholders or from other non-resident
shareholders. General permission has been granted to non-residents / NRIs for
acquisition of shares by way of transfer subject to the following:
a. A person resident outside India (other than NRI and OCB) may transfer by
way of sale or gift, the shares or convertible debentures to any person resident
outside India (including NRIs).
b. NRIs may transfer by way of sale or gift the shares or convertible debentures
held by them to another NRI.
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In both the above cases, if the transferee has existing venture or tie-up in India
as on January 12, 2005, through investment/technical collaboration/trade mark
agreement in the same field in which the Indian company, whose shares are
being transferred, is engaged, he has to obtain prior permission of SIA/FIPB to
acquire the shares. This restriction is, however, not applicable to the transfer of
shares for investments to be made by Venture Capital Funds registered with
SEBI; investments by multinational financial institutions (i.e. ADB, IFC, CDC,
DEG); or where in the existing joint venture investment by either of the parties is
less than 3 per cent; or where the existing joint venture / collaboration is defunct
or sick or for transfer of shares of an Indian company engaged in Information
Technology sector or in the mining sector, if the existing joint venture or
technology transfer/trade mark agreement of the person to whom the shares are
to be transferred are also in the Information Technology sector or in the mining
sector for same area/mineral.
c. A person resident outside India can transfer any security to a person resident
in India by way of gift.
d. A person resident outside India can sell the shares and convertible debentures
of an Indian company on a recognized Stock Exchange in India through a
stock broker registered with stock exchange or a merchant banker registered
with SEBI.
e. A person resident in India can transfer by way of sale, shares / convertible
debentures (including transfer of subscriber's shares), of an Indian company in
sectors other than financial services sector (i.e. Banks, NBFC, Insurance,
ARCs, CICs, infrastructure companies in the securities market viz. Stock
Exchanges, Clearing Corporations, and Depositories, Commodity Exchanges,
etc.) under private arrangement to a person resident outside India, subject to
the guidelines given in Annex - 3.
f. General permission is also available for transfer of shares / convertible
debentures, by way of sale under private arrangement by a person resident
outside India to a person resident in India, subject to the guidelines given in
Annex - 3.
g. The above General Permission also covers transfer by a resident to a nonresident
of shares / convertible debentures of an Indian company, engaged in
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an activity earlier covered under the Government Route but now falling under
Automatic Route of RBI, as well as transfer of shares by a non-resident to an
Indian company under buyback and / or capital reduction scheme of the
company. However, this General Permission is not available in case of
transfer of shares / debentures, from a Resident to a Non-Resident / Non-
Resident Indian, of an entity engaged in any activity in the financial services
sector (i.e. Banks, NBFCs, ARCs, CICs, Insurance, infrastructure companies
in the securities market such as Stock Exchanges, Clearing Corporations, and
Depositories, Commodity Exchanges etc.).
(ii) Reporting of transfer of shares between residents and non-residents and viceversa
is to be done in Form FC-TRS (enclosed in Annex - 9). The Form FC-TRS
should be submitted to the AD Category – I bank, within 60 days from the date of
receipt of the amount of consideration. The onus of submission of the Form FCTRS
within the given timeframe would be on the transferor / transferee, resident in
India. The AD Category – I bank, would forward the same to its link office. The link
office would consolidate the Form FC-TRS and submit a monthly report to the
Reserve Bank7.
(iii) The sale consideration in respect of equity instruments purchased by a person
resident outside India, remitted into India through normal banking channels, shall be
subjected to a KYC check by the remittance receiving AD Category – I bank at the
time of receipt of funds. In case, the remittance receiving AD Category – I bank is
different from the AD Category - I bank handling the transfer transaction, the KYC
check should be carried out by the remittance receiving bank and the KYC report be
submitted by the customer to the AD Category – I bank carrying out the transaction
along with the Form FC-TRS.
(iv) AD Category – I banks have been given general permission to open Escrow
account and Special account of non-resident corporates for open offers / exit offers
and delisting of shares. The relevant SEBI (SAST) Regulations or any other
applicable SEBI Regulations / provisions of the Companies Act, 1956 will be
applicable.
7 To the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division,
Central Office, Mumbai
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22. Prior permission of RBI in certain cases for transfer of security
(i) The following instances of transfer of shares from residents to non-residents by
way of sale require Reserve Bank approval:
a) Transfer of shares or convertible debentures of an Indian company engaged in
financial services sector (i.e. Banks, NBFCs, Asset Reconstruction Companies,
CICs, Insurance, Infrastructure companies in the securities market such as,
Stock Exchanges, Clearing Corporations, and Depositories, Commodity
Exchanges, etc.).
b) Transactions which attract the provisions of SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 1997.
c) The activity of the Indian company whose securities are being transferred falls
outside the automatic route and the approval of the FIPB has been obtained for
the said transfer.
d) The transfer is to take place at a price which falls outside the pricing guidelines
specified by the Reserve Bank from time to time.
e) Transfer of equity instruments where the non-resident acquirer proposes
deferment of payment of the amount of consideration, prior approval of the
Reserve Bank would be required. Further, in case approval is granted for a
transaction, the same should be reported in Form FC-TRS, duly certified by the
AD Category – I bank, within 60 days from the date of receipt of the full and
final amount of consideration.
(ii) The following instances of transfer of shares from residents to non-residents by
way of sale or otherwise requires Government approval followed by permission
from RBI:
a. Transfer of shares of companies engaged in sectors falling under the
Government Route.
b. Transfer of shares resulting in foreign investments in the Indian company,
breaching the sectoral cap applicable.
(iii) A person resident in India, who intends to transfer any security, by way of gift
to a person resident outside India, has to obtain prior approval from Reserve
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Bank8. While forwarding applications to Reserve Bank for approval for transfer of
shares by way of gift, the documents mentioned in Annex - 4 should be enclosed.
Reserve Bank considers the following factors while processing such applications:
a) The proposed transferee (donee) is eligible to hold such security under
Schedules 1, 4 and 5 of Notification No. FEMA 20/2000-RB dated May 3,
2000, as amended from time to time.
b) The gift does not exceed 5 per cent of the paid-up capital of the Indian company
/ each series of debentures / each mutual fund scheme.
c) The applicable sectoral cap limit in the Indian company is not breached.
d) The transferor (donor) and the proposed transferee (donee) are close relatives
as defined in Section 6 of the Companies Act, 1956, as amended from time to
time. The current list is reproduced in Annex - 5.
e) The value of security to be transferred together with any security already
transferred by the transferor, as gift, to any person residing outside India does
not exceed the rupee equivalent of USD 25,000 during a calendar year.
f) Such other conditions as stipulated by Reserve Bank in public interest from time
to time.
23. Conversion of ECB / Lumpsum Fee / Royalty / Import of capital goods by
S EZs in to Equity
(i) Indian companies have been granted general permission for conversion of
External Commercial Borrowings (ECB) into shares / preference shares, subject to
the following conditions and reporting requirements.
a) The activity of the company is covered under the Automatic Route for FDI or
the company has obtained Government approval for foreign equity in the
company;
b) The foreign equity after conversion of ECB into equity is within the sectoral
cap, if any;
c) Pricing of shares is as per SEBI regulations or erstwhile CCI guidelines in the
case of listed or unlisted companies respectively; and
8 Addressed to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange
Department, Foreign Investment Division, Central Office, 11th floor, Fort, Mumbai 400 001 along with the
documents prescribed in Annex-4.
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d) Compliance with the requirements prescribed under any other statute and
regulation in force.
e) The conversion facility is available for ECBs availed under the Automatic or
Approval Route and is applicable to ECBs, due for payment or not, as well as
secured / unsecured loans availed from non-resident collaborators.
(ii) General permission is also available for issue of shares / preference shares
against lump-sum technical know-how fee, royalty, under automatic route or SIA /
FIPB route, subject to pricing guidelines of SEBI / CCI and compliance with
applicable tax laws.
(iii) Units in Special Economic Zones (SEZs) are permitted to issue equity shares to
non-residents against import of capital goods subject to the valuation done by a
Committee consisting of Development Commissioner and the appropriate Customs
officials.
(iv) Reporting
Details of issue of shares against conversion of ECB has to be reported to the
Regional Office concerned of the Reserve Bank, as indicated below:
a. In case of full conversion of ECB into equity, the company shall report the
conversion in Form FC-GPR to the Regional Office concerned of the Reserve
Bank as well as in Form ECB-2 to the Department of Statistics and
Information Management (DSIM), Reserve Bank of India, Bandra-Kurla
Complex, Mumbai – 400 051, within seven working days from the close of
month to which it relates. The words "ECB wholly converted to equity" shall
be clearly indicated on top of the Form ECB-2. Once reported, filing of Form
ECB-2 in the subsequent months is not necessary.
b. In case of partial conversion of ECB, the company shall report the
converted portion in Form FC-GPR to the Regional Office concerned as well
as in Form ECB-2 clearly differentiating the converted portion from the nonconverted
portion. The words "ECB partially converted to equity" shall be
indicated on top of the Form ECB-2. In the subsequent months, the
outstanding balance of ECB shall be reported in Form ECB-2 to DSIM.
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c. The SEZ unit issuing equity as mentioned in para (iii) above, should report
the particulars of the shares issued in the Form FC-GPR.
24. Remittance of sale proceeds
AD Category – I bank can allow the remittance of sale proceeds of a security (net of
applicable taxes) to the seller of shares resident outside India, provided the
security has been held on repatriation basis, the sale of security has been made in
accordance with the prescribed guidelines and NOC / tax clearance certificate from
the Income Tax Department has been produced.
25. Remittance on winding up/liquidation of Companies
AD Category – I banks have been allowed to remit winding up proceeds of
companies in India, which are under liquidation, subject to payment of applicable
taxes. Liquidation may be subject to any order issued by the court winding up the
company or the official liquidator in case of voluntary winding up under the
provisions of the Companies Act, 1956. AD Category – I banks shall allow the
remittance provided the applicant submits:
i. No objection or Tax clearance certificate from Income Tax Department for the
remittance.
ii. Auditor's certificate confirming that all liabilities in India have been either fully
paid or adequately provided for.
iii. Auditor's certificate to the effect that the winding up is in accordance with the
provisions of the Companies Act, 1956.
iv. In case of winding up otherwise than by a court, an auditor's certificate to the
effect that there is no legal proceedings pending in any court in India against
the applicant or the company under liquidation and there is no legal
impediment in permitting the remittance.
26. Issue of shares by Indian companies under ADR / GDR
i) Depository Receipts (DRs) are negotiable securities issued outside India by a
Depository bank, on behalf of an Indian company, which represent the local
Rupee denominated equity shares of the company held as deposit by a Custodian
bank in India. DRs are traded on Stock Exchanges in the US, Singapore,
Luxembourg, etc. DRs listed and traded in the US markets are known as
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American Depository Receipts (ADRs) and those listed and traded elsewhere are
known as Global Depository Receipts (GDRs). In the Indian context, DRs are
treated as FDI.
ii) Indian companies can raise foreign currency resources abroad through the
issue of ADRs/GDRs, in accordance with the Scheme for issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt
Mechanism) Scheme, 1993 and guidelines issued by the Government of India
thereunder from time to time.
iii) A company can issue ADRs / GDRs if it is eligible to issue shares to persons
resident outside India under the FDI Scheme. However, an Indian listed company,
which is not eligible to raise funds from the Indian Capital Market including a
company which has been restrained from accessing the securities market by the
Securities and Exchange Board of India (SEBI) will not be eligible to issue
ADRs/GDRs.
iv) Unlisted companies, which have not yet accessed the ADR/GDR route for
raising capital in the international market, would require prior or simultaneous
listing in the domestic market, while seeking to issue such overseas instruments.
Unlisted companies, which have already issued ADRs/GDRs in the international
market, have to list in the domestic market on making profit or within three years of
such issue of ADRs/GDRs, whichever is earlier.
ADRs / GDRs are issued on the basis of the ratio worked out by the Indian
company in consultation with the Lead Manager to the issue. The proceeds so
raised have to be kept abroad till actually required in India. Pending repatriation or
utilisation of the proceeds, the Indian company can invest the funds in:-
a. Deposits with or Certificate of Deposit or other instruments offered by banks
who have been rated by Standard and Poor, Fitch, IBCA or Moody's, etc.
and such rating not being less than the rating stipulated by Reserve Bank
from time to time for the purpose;
b. Deposits with branch/es of Indian Authorised Dealers outside India; and
c. Treasury bills and other monetary instruments with a maturity or unexpired
maturity of one year or less.
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v) There are no end-use restrictions except for a ban on deployment / investment
of such funds in real estate or the stock market. There is no monetary limit up to
which an Indian company can raise ADRs / GDRs.
vi) The ADR / GDR proceeds can be utilised for first stage acquisition of shares
in the disinvestment process of Public Sector Undertakings / Enterprises and also
in the mandatory second stage offer to the public in view of their strategic
importance.
vii) Voting rights on shares issued under the Scheme shall be as per the
provisions of Companies Act, 1956 and in a manner in which restrictions on voting
rights imposed on ADR/GDR issues shall be consistent with the Company Law
provisions. Voting rights in the case of banking companies will continue to be in
terms of the provisions of the Banking Regulation Act, 1949 and the instructions
issued by the Reserve Bank from time to time, as applicable to all shareholders
exercising voting rights.
viii) Erstwhile OCBs who are not eligible to invest in India and entities prohibited
to buy, sell or deal in securities by SEBI will not be eligible to subscribe to ADRs /
GDRs issued by Indian companies.
ix) The pricing of ADR / GDR issues should be made at a price determined
under the provisions of the Scheme of issue of Foreign Currency Convertible
Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme,
1993 and guidelines issued by the Government of India and directions issued by
the Reserve Bank, from time to time.
x) The pricing of sponsored ADRs/GDRs would be determined under the
provisions of the Scheme of issue of Foreign Currency Convertible Bonds and
Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and
guidelines issued by the Government of India and directions issued by the
Reserve Bank, from time to time.
27. Two-way Fungibilty Scheme
[
A limited two-way Fungibility scheme has been put in place by the Government of
India for ADRs / GDRs. Under this Scheme, a stock broker in India, registered with
SEBI, can purchase shares of an Indian company from the market for conversion
into ADRs/GDRs based on instructions received from overseas investors. ReWebsite
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issuance of ADRs / GDRs would be permitted to the extent of ADRs / GDRs which
have been redeemed into underlying shares and sold in the Indian market.
28. Sponsored ADR/GDR issue
An Indian company can also sponsor an issue of ADR / GDR. Under this
mechanism, the company offers its resident shareholders a choice to submit their
shares back to the company so that on the basis of such shares, ADRs / GDRs
can be issued abroad. The proceeds of the ADR / GDR issue is remitted back to
India and distributed among the resident investors who had offered their Rupee
denominated shares for conversion. These proceeds can be kept in Resident
Foreign Currency (Domestic) accounts in India by the resident shareholders who
have tendered such shares for conversion into ADRs / GDRs.
29. Reporting of ADR/GDR Issues
The Indian company issuing ADRs / GDRs has to furnish to the Reserve Bank, full
details of such issue in the Form enclosed in Annex -10, within 30 days from the
date of closing of the issue. The company should also furnish a quarterly return in
the Form enclosed in Annex - 11, to the Reserve Bank within 15 days of the close
of the calendar quarter. The quarterly return has to be submitted till the entire
amount raised through ADR/GDR mechanism is either repatriated to India or
utilized abroad as per the extant Reserve Bank guidelines.
------------------------------------
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Section - II: Foreign Portfolio Investments
1. Portfolio Investment Scheme (PIS)
(i) Foreign Institutional Investors (FIIs) registered with SEBI and Non-resident
Indians (NRIs) are eligible to purchase shares and convertible debentures issued by
Indian companies under the Portfolio Investment Scheme (PIS).
(ii) The FIIs, which have been granted registration by SEBI, should approach their
designated AD Category - I bank (known as Custodian bank), for opening a foreign
currency account and / or a Non Resident Special Rupee Account.
(iii) NRIs can approach the designated branch of any AD Category - I bank
authorised by the Reserve Bank to administer the Portfolio Investment Scheme for
permission to open a NRE/NRO account under the Scheme for routing investments.
2. Investment by FIIs under PIS
Reserve Bank has given general permission to SEBI registered FIIs/sub-accounts to
invest under the PIS.
(i) Shareholding
(a) Total shareholding of each FII/sub-account under this Scheme shall not exceed
10 per cent of the total paid-up capital or 10 per cent of the paid-up value of
each series of convertible debentures issued by the Indian company.
(b) Total holdings of all FIIs /sub-accounts put together shall not exceed 24 per
cent of the paid-up capital or paid-up value of each series of convertible
debentures. This limit of 24 per cent can be increased to the sectoral cap /
statutory limit, as applicable to the Indian company concerned, by passing a
resolution of its Board of Directors followed by a special resolution to that effect
by its General Body.
(c) A domestic asset management company or portfolio manager, who is
registered with SEBI as an FII for managing the fund of a sub-account can
make investments under the Scheme on behalf of;
i. a person resident outside India who is a citizen of a foreign state, or
ii. a body corporate registered outside India;
Provided, such investment is made out of funds raised or collected or brought
from outside through normal banking channel. Investments by such entities
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shall not exceed 5 per cent of the total paid-up equity capital or 5 per cent of
the paid-up value of each series of convertible debentures issued by an Indian
company, and shall also not exceed the overall ceiling specified for FIIs.
(ii) Prohibition on investments
(a) FIIs are not permitted to invest in equity shares issued by an Asset
Reconstruction Company.
(b) FIIs are also not allowed to invest in any company which is engaged or proposes
to engage in the following activities:
i) Business of chit fund, or
ii) Nidhi company, or
iii) Agricultural or plantation activities, or
iv) Real estate business, or construction of farm houses, or
v) Trading in Transferable Development Rights (TDRs).
"Real estate business" does not include construction of housing / commercial
premises, educational institutions, recreational facilities, city and regional level
infrastructure, townships.
3. Short Selling by FIIs
Foreign Institutional Investors (FIIs) registered with SEBI and sub-accounts of FIIs
are permitted to short sell, lend and borrow equity shares of Indian companies.
Short selling, lending and borrowing of equity shares of Indian companies shall be
subject to such conditions as may be prescribed by the Reserve Bank and the SEBI
/ other regulatory agencies from time to time. The permission is subject to the
following conditions:
a) The FII participation in short selling as well as borrowing / lending of equity
shares will be subject to the current FDI policy and short selling of equity
shares by FIIs shall not be permitted for equity shares of Indian companies
which are in the ban list and / or caution list of the Reserve Bank.
b) Borrowing of equity shares by FIIs shall only be for the purpose of delivery into
short sales.
c) The margin / collateral shall be maintained by FIIs only in the form of cash. No
interest shall be paid to the FII on such margin/collateral.
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4. Exchange Traded Derivative Contracts
(i) SEBI registered FIIs are allowed to trade in all exchange traded derivative
contracts approved by RBI/SEBI on recognised Stock Exchanges in India subject
to the position limits and margin requirements as prescribed by RBI / SEBI from
time to time as well as the stipulations regarding collateral securities as directed by
the Reserve Bank from time to time. The SEBI registered FII / sub-account may
open a separate account under their Special Non-Resident Rupee Account through
which all receipts and payments pertaining to trading / investment in exchange
traded derivative contracts will be made (including initial margin and mark to
market settlement, transaction charges, brokerage, etc.). Further, transfer of funds
between the Special Non-Resident Rupee Account and the separate account
maintained for the purpose of trading in exchange traded derivative contracts can
be freely made. However, repatriation of the Rupee amount will be made only
through their Special Non-Resident Rupee Account subject to payment of relevant
taxes. The AD Category – I banks have to keep proper records of the above
mentioned separate account and submit them to the Reserve Bank as and when
required.
(ii) FIIs are allowed to offer foreign sovereign securities with AAA rating as
collateral to the recognised Stock Exchanges in India for their transactions in
derivatives segment. SEBI approved clearing corporations of stock exchanges and
their clearing members are allowed to undertake the following transactions subject
to the guidelines issued from time to time by SEBI in this regard:
a. to open and maintain demat accounts with foreign depositories and to
acquire, hold, pledge and transfer the foreign sovereign securities, offered
as collateral by FIIs;
b. to remit the proceeds arising from corporate action, if any, on such foreign
sovereign securities; and
c. to liquidate such foreign sovereign securities if the need arises.
(iii) Clearing Corporations have to report, on a monthly basis, the balances of
foreign sovereign securities, held by them as non-cash collaterals of their clearing
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members to the Reserve Bank9. The report should be submitted by the 10th of the
following month to which it relates.
5. Accounts with AD Category – I banks
(i) FIIs/sub-accounts can open a Foreign Currency Account and / or a Special
Non-Resident Rupee Account with an AD Category – I bank, for the purpose of
investment.
(ii) They can transfer sums from the Foreign Currency Account to the Special Non-
Resident Rupee Account for making genuine investments in securities in terms of
the SEBI (FII) Regulations, 1995.
(iii) The sums may be transferred from foreign currency account to Special Non-
Resident Rupee Account at the prevailing market rate and the AD Category - I bank
may transfer repatriable proceeds (after payment of tax) from the Special Non-
Resident Rupee Account to the Foreign Currency account.
(iv) The Special Non-Resident Rupee Account may be credited with the sale
proceeds of shares / debentures, dated Government securities, Treasury Bills, etc.
Such credits are allowed, subject to the condition that the AD Category - I bank
should obtain confirmation from the investee company / FII concerned that tax at
source, wherever necessary, has been deducted from the gross amount of dividend
/ interest payable / approved income to the share / debenture / Government
securities holder at the applicable rate, in accordance with the Income Tax Act.
(v) The Special Non-Resident Rupee Account may be debited for purchase of
shares / debentures, dated Government securities, Treasury Bills, etc., and for
payment of fees to applicant FIIs’ local Chartered Accountant / Tax Consultant
where such fees constitute an integral part of their investment process.
6. Private placement with FIIs
SEBI registered FIIs have been permitted to purchase shares / convertible
debentures of an Indian company through offer/private placement, subject to the
ceilings prescribed, i.e. individual FII/sub account -10 per cent and all FIIs/subaccounts
put together - 24 per cent of the paid-up capital of the Indian company or
to the sectoral limits, as applicable. Indian company is permitted to issue such
shares provided that:
9 Addressed to the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department,
Foreign Investment Division, Central Office, Mumbai.
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a) in the case of public offer, the price of shares to be issued is not less than the
price at which shares are issued to residents; and
b) in the case of issue by private placement, the price is not less than the price
arrived at in terms of SEBI guidelines or guidelines issued by the erstwhile
Controller of Capital Issues, as applicable. Purchases can also be made of
compulsorily and mandatorily Convertible Debentures / Right Renunciations /
Units of Domestic Mutual Fund Schemes.
7. Reporting of FII investments
(i) An FII may invest in a particular share issue of an Indian company either under
the FDI Scheme or the Portfolio Investment Scheme. The AD Category – I banks
have to ensure that the FIIs who are purchasing the shares by debit to the Special
Non-Resident Rupee Account report these details separately in the Form LEC
(FII).
(ii) The Indian company which has issued shares to FIIs under the FDI Scheme
(for which the payment has been received directly into company’s account) and
the Portfolio Investment Scheme (for which the payment has been received from
FIIs' account maintained with an AD Category – I bank in India) should report
these figures separately under item no. 5 of Form FC-GPR (Annex - 8) (Post-issue
pattern of shareholding) so that the details could be suitably reconciled for
statistical / monitoring purposes.
(iii) A daily statement in respect of all transactions (except derivative trade) have
to be submitted by the custodian bank in floppy / soft copy in the prescribed format
directly to Reserve Bank10 to monitor the overall ceiling / sectoral cap / statutory
ceiling.
8. Investments by Non-Resident Indians (NRIs)
(i) NRIs are allowed to invest in shares of listed Indian companies in recognised
Stock Exchanges under the PIS. NRIs can invest through designated ADs, on
repatriation and non-repatriation basis under PIS route up to 5 per cent of the paid-
10 Addressed to the Chief General Manager- in-Charge, Foreign Exchange Department, Reserve Bank of India, Foreign Investment
Division, Central Office, Central Office Building, Mumbai 400 001.
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up capital / paid-up value of each series of debentures of listed Indian companies.
The aggregate paid-up value of shares / convertible debentures purchased by all
NRIs cannot exceed 10 per cent of the paid-up capital of the company / paid-up
value of each series of debentures of the company. The aggregate ceiling of 10 per
cent can be raised to 24 per cent, if the General Body of the Indian company
passes a special resolution to that effect.
(ii) The NRI investor has to take delivery of the shares purchased and give
delivery of shares sold. Short Selling is not permitted.
(iii) Payment for purchase of shares and/or debentures on repatriation basis has
to be made by way of inward remittance of foreign exchange through normal
banking channels or out of funds held in NRE/FCNR(B) account maintained in
India. If the shares are purchased on non-repatriation basis, the NRIs can also
utilise their funds in NRO account in addition to the above.
(iv) The link office of the designated branch of an AD Category – I bank shall
furnish to the Reserve Bank11, a report on a daily basis on PIS transactions
undertaken by it, such report can be furnished on-line or on a floppy to the
Reserve Bank.
(v) Shares purchased by NRIs on the stock exchange under PIS cannot be
transferred by way of sale under private arrangement or by way of gift (except by
NRIs to their relatives as defined in Section 6 of Companies Act, 1956 or to a
charitable trust duly registered under the laws in India) to a person resident in
India or outside India without prior approval of the Reserve Bank.
(vi) NRIs are allowed to invest in Exchange Traded Derivative Contracts approved
by SEBI from time to time out of Rupee funds held in India on non-repatriation
basis, subject to the limits prescribed by SEBI.
9. Monitoring of investment position by RBI
Reserve Bank monitors the investment position of FIIs/NRIs in listed Indian
companies, reported by Custodian/designated AD banks, on a daily basis, in Forms
LEC (FII) and LEC (NRI).
11 Addressed to the Chief General Manager- in-Charge, Foreign Exchange Department, Reserve Bank of India, Foreign Investment
Division, Central Office, Central Office Building, Mumbai 400 001.
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10. Caution List
When the total holdings of FIIs/NRIs under the Scheme reach the limit of 2 per cent
below the sectoral cap, Reserve Bank will issue a notice to all designated branches
of AD Category - I banks cautioning that any further purchases of shares of the
particular Indian company will require prior approval of the Reserve Bank. Reserve
Bank gives case-by-case approvals to FIIs for purchase of shares of companies
included in the Caution List. This is done on a first-come-first-served basis.
11. Ban List
Once the shareholding by FIIs/NRIs reaches the overall ceiling / sectoral cap /
statutory limit, the Reserve Bank places the company in the Ban List. Once a
company is placed in the Ban List, no FII or NRI can purchase the shares of the
company under the Portfolio Investment Scheme.
12. Investments by Overseas Corporate Bodies (OCBs)
With effect from November 29, 2001, OCBs are not permitted to invest under the
Portfolio Investment Scheme (PIS) in India. Further, the OCBs which have already
made investments under the PIS are allowed to continue holding such shares /
convertible debentures till such time these are sold on the stock exchange. OCBs
have been de-recognised as a class of investors in India with effect from September
16, 2003.
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Section - III: Foreign Venture Capital Investments
Investments by Venture Capital Funds
(i) A SEBI registered Foreign Venture Capital Investor (FVCI) with specific approval
from RBI under FEMA Regulations can invest in Indian Venture Capital
Undertaking (IVCU) or Indian Venture Capital Fund (IVCF) or in a Scheme floated
by such IVCFs subject to the condition that the VCF should also be registered with
SEBI.
An IVCU is defined as a company incorporated in India whose shares are not
listed on a recognized stock exchange in India and which is not engaged in an
activity under the negative list specified by SEBI. A VCF is defined as a fund
established in the form of a trust, a company including a body corporate and
registered under the Securities and Exchange Board of India (Venture Capital
Fund) Regulations, 1996 which has a dedicated pool of capital raised in a manner
specified under the said Regulations and which invests in Venture Capital
Undertakings in accordance with the said Regulations.
(ii) FVCIs can purchase equity / equity linked instruments / debt / debt instruments,
debentures of an IVCU or of a VCF through initial public offer or private placement
in units of schemes / funds set up by a VCF. At the time of granting approval, the
Reserve Bank permits the FVCI to open a Foreign Currency Account and/or a
Rupee Account with a designated branch of an AD Category – I bank.
(iii) The purchase / sale of shares, debentures and units can be at a price that is
mutually acceptable to the buyer and the seller.
(iv) AD Category – I banks can offer forward cover to FVCIs to the extent of total
inward remittance. In case the FVCI has made any remittance by liquidating some
investments, original cost of the investments has to be deducted from the eligible
cover to arrive at the actual cover that can be offered.
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Section - IV: Other Foreign Investments
1. Purchase of other securities by NRIs
(i) On non-repatriation basis
(a) NRIs can purchase shares / convertible debentures issued by an Indian
company on non-repatriation basis without any limit. Amount of consideration
for such purchase shall be paid by way of inward remittance through normal
banking channels from abroad or out of funds held in NRE / FCNR(B) / NRO
account maintained with the AD Category - I bank.
(b) NRI can also, without any limit, purchase on non-repatriation basis dated
Government securities, treasury bills, units of domestic mutual funds, units of
Money Market Mutual Funds. Government of India has notified that NRIs are
not permitted to make Investments in Small Savings Schemes including PPF.
In case of investment on non-repatriation basis, the sale proceeds shall be
credited to NRO account. The amount invested under the scheme and the
capital appreciation thereon will not be allowed to be repatriated abroad.
(ii) On repatriation basis
An NRI can purchase on repatriation basis, without limit, Government dated
securities (other than bearer securities) or treasury bills or units of domestic mutual
funds; bonds issued by a public sector undertaking (PSU) in India and shares in
Public Sector Enterprises being disinvested by the Government of India, provided
the purchase is in accordance with the terms and conditions stipulated in the notice
inviting bids.
2. Purchase of other securities by FIIs
Foreign Institutional Investors (FIIs) can buy on repatriation basis dated Government
securities / treasury bills, listed non-convertible debentures / bonds issued by Indian
companies and units of domestic mutual funds either directly from the issuer of such
securities or through a registered stock broker on a recognized stock exchange in
India. Purchase of debt instruments by FIIs are subject to limits notified by SEBI and
the Reserve Bank from time to time.
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3. Investment by Multilateral Development Banks (MDBs)
A Multilateral Development Bank (MDB) which is specifically permitted by the
Government of India to float rupee bonds in India can purchase Government dated
securities.
4. Foreign Investment in Tier I and Tier II instruments issued by banks in India
(i) FIIs registered with SEBI and NRIs have been permitted to subscribe to the
Perpetual Debt instruments (eligible for inclusion as Tier I capital) and Debt Capital
instruments (eligible for inclusion as upper Tier II capital), issued by banks in India
and denominated in Indian Rupees, subject to the following conditions:
a. Investment by all FIIs in Rupee denominated Perpetual Debt instruments
(Tier I) should not exceed an aggregate ceiling of 49 per cent of each issue,
and investment by individual FII should not exceed the limit of 10 per cent of
each issue.
b. Investments by all NRIs in Rupee denominated Perpetual Debt instruments
(Tier I) should not exceed an aggregate ceiling of 24 per cent of each issue
and investments by a single NRI should not exceed 5 percent of each issue.
c. Investment by FIIs in Rupee denominated Debt Capital instruments (Tier II)
shall be within the limits stipulated by SEBI for FII investment in corporate
debt instruments.
d. Investment by NRIs in Rupee denominated Debt Capital instruments (Tier II)
shall be in accordance with the extant policy for investment by NRIs in other
debt instruments.
(ii) The issuing banks are required to ensure compliance with the conditions
stipulated above at the time of issue. They are also required to comply with the
guidelines issued by the Department of Banking Operations and Development
(DBOD), Reserve Bank of India, from time to time.
(iii) The issue-wise details of the amount raised as Perpetual Debt Instruments
qualifying for Tier I capital by the bank from FIIs / NRIs are required to be reported
in the prescribed format within 30 days of the issue to the Reserve Bank12.
12 Addressed to the Chief General Manager-in-Charge, Foreign Exchange Department, Reserve Bank of India,
Foreign Investment Division, Central Office, Central Office Building, Mumbai 400 001.
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(iv) Investment by FIIs in Rupee denominated Upper Tier II Instruments raised in
Indian Rupees will be within the limit prescribed by SEBI for investment in corporate
debt instruments. However, investment by FIIs in these instruments will be subject
to a separate ceiling of USD 500 million.
(v) The details of the secondary market sales / purchases by FIIs and the NRIs in
these instruments on the floor of the stock exchange are to be reported by the
custodians and designated banks respectively, to the Reserve Bank through the soft
copy of the Forms LEC (FII) and LEC (NRI).
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Part II
Acquisition and Transfer of Immovable Property in India.
1. Acquisition and Transfer of Immovabe Property in India
1) A person resident outside India who is a citizen of India (NRI13) can acquire by way
of purchase, any immovable property in India other than agricultural land /
plantation property / farm house. He can transfer any immovable property other
than agricultural or plantation property or farm house to:
i. A person resident outside India who is a citizen of India, or
ii. A person of Indian origin resident outside India, or
iii. A person resident in India.
2) He may transfer agricultural land / plantation property / farm house acquired by
way of inheritance, only to Indian citizens permanently residing in India.
3) Payment for acquisition of property can be made out of:
i. Funds received in India through normal banking channels by way of inward
remittance from any place outside India, or
ii. Funds held in any non-resident account maintained in accordance with the
provisions of the Foreign Exchange Management Act, 1999 and the
regulations made by Reserve Bank from time to time.
4) Such payment cannot be made either by traveller's cheque or by foreign currency
notes or by other mode other than those specifically mentioned above.
5) A person resident outside India who is a person of Indian Origin (PIO14) can
acquire any immovable property in India other than agricultural land / farm house /
plantation property:
13 It is clarified that a person resident outside India, who is a citizen of India is treated as NRI for the purpose of this part of the
Circular.
14 ‘A person of Indian origin' means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or
China or Iran or Nepal or Bhutan), who
(i) at any time, held Indian passport; or
(ii) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the
Citizenship Act, 1955 (57 of 1955);
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i) By way of purchase out of funds received by inward remittance through
normal banking channels or by debit to his NRE / FCNR(B) / NRO
account.
ii) Such payments cannot be made either by traveller’s cheque or by foreign
currency notes or by other mode other than those specifically mentioned
above.
iii) By way of gift from a person resident in India or a NRI or a PIO.
6) A PIO may acquire any immovable property in India by way of inheritance from a
person resident in India or a person resident outside India who had acquired such
property in accordance with the provisions of the foreign exchange law in force or
FEMA regulations at the time of acquisition of the property.
7) A PIO may transfer agricultural land / plantation property / farmhouse in India
acquired by way of inheritance, by way of sale or gift to person resident in India
who is a citizen of India.
8) A PIO may transfer any immovable property other than agricultural land / Plantation
property / farmhouse in India:
i. By way of sale to a person resident in India.
ii. By way of gift to a person resident in India or a Non-Resident Indian or
a PIO.
2. Purchase / Sale of Immovable Property by Foreign Embassies / Diplomats /
Consulate General
Foreign Embassy / Consulate as well as Diplomatic personnel in India are allowed
to purchase/ sell immovable property in India other than agricultural land / plantation
property / farm house provided (i) clearance from Government of India, Ministry of
External Affairs is obtained for such purchase / sale, and (ii) the consideration for
acquisition of immovable property in India is paid out of funds remitted from abroad
through normal banking channels.
3. Acquisition of Immovable Property for carrying on a permitted activity
A branch, office or other place of business, (excluding a liaison office) in India of a
foreign company established with requisite approvals wherever necessary, is
eligible to acquire immovable property in India which is necessary for or incidental to
carrying on such activity provided that all applicable laws, rules, regulations or
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directions in force are duly complied with. The entity / person concerned is required
to file a declaration in the Form IPI (Annex - 12) with the Reserve Bank, within
ninety days from the date of such acquisition. The non-resident is eligible to transfer
by way of mortgage the said immovable property to an AD Category – I bank as a
security for any borrowing.
4. Repatriation of sale proceeds
(i) In the event of sale of immovable property other than agricultural land / farm
house / plantation property in India by NRI / PIO, the authorised dealer will allow
repatriation of sale proceeds outside India provided:
a) the immovable property was acquired by the seller in accordance with the
provisions of the foreign exchange law in force at the time of acquisition
by him or the provisions of FEMA Regulations;
b) the amount to be repatriated does not exceed (a) the amount paid for
acquisition of the immovable property in foreign exchange received
through normal banking channels or out of funds held in Foreign Currency
Non-Resident Account or (b) the foreign currency equivalent as on the
date of payment, of the amount paid where such payment was made from
the funds held in Non-Resident External account for acquisition of the
property; and
c) In the case of residential property, the repatriation of sale proceeds is
restricted to not more than two such properties.
(ii) In the case of sale of immovable property purchased out of Rupee funds, AD
Category – I banks may allow the facility of repatriation of funds out of balances held
by NRIs / PIO in their Non-Resident Rupee (NRO) accounts up to USD 1 million per
financial year, subject to production of undertaking by the remitter and a certificate
from the Chartered Accountant in the formats prescribed by the CBDT.
5. Prior permission to citizens of certain countries for acquisition or transfer of
immovable property in India
(i) No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal or Bhutan, whether resident in India or outside India, shall acquire
or transfer immovable property in India, other than lease, not exceeding five years
without prior permission of the Reserve Bank.
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(ii) Foreign nationals of non-Indian origin resident outside India are not permitted to
acquire any immovable property in India unless such property is acquired by way of
inheritance from a person who was resident in India. Foreign nationals of non-Indian
origin who have acquired immovable property in India by way of inheritance or
purchase with the specific approval of the Reserve bank cannot transfer such
property without prior permission of the Reserve Bank.
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Part III
Establishment of Branch / Liaison / Project Offices in India
1. Application to RBI
Companies incorporated outside India, desirous of opening a Liaison / Branch Office
in India have to make an application in Form FNC-1 (Annex - 13) to the Reserve
Bank15, along with the following documents:
• English version of the Certificate of Incorporation / Registration or
Memorandum & Articles of Association attested by Indian Embassy / Notary
Public in the Country of Registration.
• Latest Audited Balance Sheet of the applicant entity.
2. Liaison Office
Companies which are incorporated outside India can establish Liaison Office in
India with the specific approval of the Reserve Bank. A Liaison Office (also known
as Representative Office) can undertake only liaison activities, i.e. it can act as a
channel of communication between Head Office abroad and parties in India. It is not
allowed to undertake any business activity in India and cannot earn any income in
India. Expenses of such offices are to be met entirely through inward remittances of
foreign exchange from the Head Office outside India. The role of such offices is,
therefore, limited to collecting information about possible market opportunities and
providing information about the company and its products to the prospective Indian
customers. Permission to set up such offices is initially granted for a period of 3
years and this may be extended from time to time by the Regional Office of the
Reserve Bank under whose jurisdiction the office is set up. A Liaison Office can
undertake the following activities in India:
i. Representing in India the parent company / group companies.
ii Promoting export import from / to India.
iii Promoting technical / financial collaborations between parent /group companies
and companies in India.
15 Addressed to the Chief General Manager-in- Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment
Division, Central Office, Fort, Mumbai- 400 001.
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iv. Acting as a communication channel between the parent company and Indian
companies.
Liaison / representative offices have to file Annual Activity Certificates from the
Chartered Accountants to the Regional Office of the Reserve Bank.
3. Liaison Office of foreign Insurance Companies
Foreign Insurance companies can establish Liaison Offices in India after obtaining
approval from the Insurance Regulatory and Development Authority (IRDA).
4. Branch Offices
1) Companies incorporated outside India and engaged in manufacturing or trading
activities are allowed to set up Branch Offices in India with specific approval of the
Reserve Bank. Such Branch Offices are permitted to represent the parent / group
companies and undertake the following activities in India:
i. Export / Import of goods.16
ii. Rendering professional or consultancy services.
iii. Carrying out research work, in areas in which the parent company is
engaged.
iv. Promoting technical or financial collaborations between Indian companies
and parent or overseas group company.
v. Representing the parent company in India and acting as buying / selling
agent in India.
vi. Rendering services in Information Technology and development of software
in India.
vii. Rendering technical support to the products supplied by parent/group
companies.
2) Retail trading activities of any nature is not allowed for a Branch Office in India.
3) A Branch Office is not allowed to carry out manufacturing, processing activities in
India, directly or indirectly.
4) Branch Offices are permitted to acquire property for their own use and to carry
out the permitted / incidental activities but not for leasing or renting out the property.
16 Procurement of goods for export and sale of goods after import are allowed only on wholesale basis.
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However, entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China
are not allowed to acquire immovable property in India even for a Branch Office.
These entities are allowed to lease such property for a period not exceeding five
years. Entities from Nepal are allowed to establish only Liaison Offices in India.
5) Profits earned by the Branch Offices are freely remittable from India, subject to
payment of applicable taxes.
6) Branch Offices have to submit Annual Activity Certificates from Chartered
Accountants to the Reserve Bank.
5. Branch Office in Special Economic Zones (SEZs)
(i) Reserve Bank has given general permission to foreign companies for establishing
branch/unit in Special Economic Zones (SEZs) to undertake manufacturing and
service activities. The general permission is subject to the following conditions:
a) such units are functioning in those sectors where 100 per cent FDI is
permitted;
b) such units comply with part XI of the Companies Act,1956 (Section 592 to
602);
c) such units function on a stand-alone basis.
(ii) In the event of winding-up of business and for remittance of winding-up
proceeds, the branch shall approach an AD Category – I bank with the documents
mentioned in paragraph 11 ("Closure of Office") except the copy of the letter
granting approval by the Reserve Bank.
6. Branches of Banks
Foreign banks do not require separate approval under FEMA, for opening branch
office in India. Such banks are required to obtain necessary approval under the
provisions of the Banking Regulation Act, 1949, from Department of Banking
Operations & Development, Reserve Bank of India.
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7. Project Offices
Reserve Bank has granted general permission to foreign companies to establish
Project Offices in India, provided they have secured a contract from an Indian
company to execute a project in India, and
i. the project is funded directly by inward remittance from abroad; or
ii. the project is funded by a bilateral or multilateral International Financing
Agency; or
iii. the project has been cleared by an appropriate authority; or
iv. a company or entity in India awarding the contract has been granted Term
Loan by a Public Financial Institution or a bank in India for the project.
However, if the above criteria are not met, the foreign entity has to approach the
Reserve Bank for approval.
8. Opening of Foreign Currency Account
AD Category – I banks can open non-interest bearing Foreign Currency Account
for Project Offices in India subject to the following:
i. The Project Office has been established in India, with the general / specific
permission of Reserve Bank, having the requisite approval from the
concerned Project Sanctioning Authority.
ii. The contract, under which the project has been sanctioned, specifically
provides for payment in foreign currency.
iii. Each Project can open two Foreign Currency Accounts.
iv. The permissible debits to the account shall be payment of project related
expenditure and credits shall be foreign currency receipts from the Project
Sanctioning Authority, and remittances from parent/group company abroad or
bilateral / multilateral international financing agency.
v. The responsibility of ensuring that only the approved debits and credits are
allowed in the Foriegn Currency Account shall rest solely with the branch
concerned of the AD. Further, the Accounts shall be subject to 100 per cent
scrutiny by the Concurrent Auditor of the respective AD banks.
vi. The Foreign Currency account has to be closed at the completion of the
Project.
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9. Intermittent remittances by Project Offices in India
(i) AD Category – I bank can permit intermittent remittances by Project Offices
pending winding up / completion of the project provided they are satisfied with the
bonafides of the transaction, subject to the following:
a) The Project Office submits an Auditors' / Chartered Accountants’
Certificate to the effect that sufficient provisions have been made to meet
the liabilities in India including Income Tax, etc.
b) An undertaking from the Project Office that the remittance will not, in any
way, affect the completion of the Project in India and that any shortfall of
funds for meeting any liability in India will be met by inward remittance
from abroad.
(ii) Inter-Project transfer of funds requires prior permission of the concerned
Regional Office of the Reserve Bank under whose jurisdiction the Project Office is
situated.
10. General conditions
(i) Partnership / Proprietary concerns set up abroad are not allowed to establish
Branch /Liaison Offices in India.
(ii) Branch / Liaison / Project Offices are allowed to open non-interest bearing
current accounts in India. Such Offices are required to approach their Authorised
Dealers for opening the accounts.
(iii) Transfer of assets of Liaison / Branch Office to subsidiaries or other
Liaison/Branch Offices is allowed with specific approval of the Central Office of the
Reserve Bank.
11. Closure of Offices
(i) At the time of winding up of the Liaison Offices, the company has to approach
the respective Regional Office of the Reserve Bank with the following documents:
a) Copy of the Reserve Bank’s permission for establishing the Office in India
b) Auditor’s certificate -
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1) indicating the manner in which the remittable amount has been
arrived and supported by a statement of assets and liabilities of the
applicant, and indicating the manner of disposal of assets;
2) confirming that all liabilities in India including arrears of gratuity and
other benefits to employees, etc. of the branch / office have been
either fully met or adequately provided for;
3) confirming that no income accruing from sources outside India
(including proceeds of exports) has remained unrepatriated to India.
c) No-objection or Tax clearance certificate from Income-tax authority for the
remittance;
d) Confirmation from the applicant that no legal proceedings in any Court in
India are pending and there is no legal impediment to the remittance;
e) Once RBI’s Regional Office grants approval, AD Category – I banks can
allow remittance of surplus; and
f) At the time of closure of Branch Offices, the entities have to approach the
Central Office of the Reserve Bank for approval, with the same set of
documents as mentioned above.
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Part IV
Investment in Partnership Firm / Proprietary Concern
1. Investment in Partnership Firm / Proprietary Concern
A Non-Resident Indian17 (NRI) or a Person of Indian Origin18 (PIO) resident
outside India can invest by way of contribution to the capital of a firm or a
proprietary concern in India on non-repatriation basis provided;
i. Amount is invested by inward remittance or out of NRE / FCNR(B) / NRO
account maintained with Authorised Dealers / Authorised banks.
ii. The firm or proprietary concern is not engaged in any agricultural / plantation
or real estate business (i.e. dealing in land and immovable property with a
view to earning profit or earning income there from) or print media sector.
iii. Amount invested shall not be eligible for repatriation outside India.
2. Investments with repatriation benefits
NRIs / PIO may seek prior permission of Reserve Bank19 for investment in sole
proprietorship concerns / partnership firms with repatriation benefits. The application
will be decided in consultation with the Government of India.
3. Investment by non-residents other than NRIs / PIO
A person resident outside India other than NRIs / PIO may make an application and
seek prior approval of Reserve Bank20, for making investment by way of contribution
to the capital of a firm or a proprietorship concern or any association of persons in
17 'Non-Resident Indian (NRI)' means a person resident outside India who is a citizen of India or is a person of Indian origin;
18 'Person of Indian Origin' means a citizen of any country other than Bangladesh or Pakistan or Sri Lanka, if
a) he at any time held Indian passport; or
b) 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 the
Citizenship Act, 1955 (57 of 1955); or
c) the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b);
19 & 20 Addressed to the Chief General Manager-in-Charge , Reserve Bank of India, Foreign Exchange Department,
Foreign Investment Division, Central Office, Mumbai
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India. The application will be decided in consultation with the Government of India.
4. Restrictions
An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in
any agricultural/plantation activity or real estate business (i.e. dealing in land and
immovable property with a view to earning profit or earning income therefrom) or
engaged in Print Media.
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Annex - 1
(PART I, Section I, para 2)
Sector- specific policy for foreign investment
In the following sectors/activities, FDI up to the limit indicated below is allowed subject to other
conditions as indicated. In Sectors/Activities not listed below, FDI is permitted up to 100 per
cent on the automatic route subject to sectoral rules/ regulations applicable.
Sr.
No.
Sector/Activity FDI Cap /
Equity
Entry
Route
Other conditions
I AGRICULTURE
1. Floriculture,
Horticulture,
Development of
Seeds, Animal
Husbandry,
Pisciculture,
Aquaculture,
Cultivation of
Vegetables &
Mushrooms under
controlled
conditions and
services related to
agro and allied
sectors.
NB: Besides the
above, FDI is not
allowed in any
other agricultural
sector /activity
100% Automatic ---
2.
Tea Sector,
including tea
plantation
NB: Besides the
above, FDI is not
allowed in any
other plantation
sector /activity
100% FIPB Subject to divestment of 26%
equity in favour of Indian
partner/Indian public within 5
years and prior approval of
State Government concerned
in case of any change in
future land use.
INDUSTRY
MINING
3. Mining covering
exploration and
mining of diamonds
& precious stones;
gold, silver and
minerals.
100% Automatic Subject to Mines & Minerals
(Development & Regulation)
Act, 1957 (www.mines.nic.in)
Press Note 18 (1998) and
Press Note 1 (2005) are not
applicable for setting up 100%
owned subsidiaries in so far
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as the mining sector is
concerned, subject to a
declaration from the applicant
that he has no existing joint
venture for the same area
and / or the particular mineral.
4. Coal & Lignite
mining for captive
consumption by
power projects,
and iron & steel,
cement
production and
other eligible
activities permitted
under the Coal
Mines
(Nationalisation) Act,
1973.
100% Automatic Subject to provisions of Coal
Mines (Nationalisation) Act,
1973.
(www.coal.nic.in)
5. Mining and
mineral separation
of titanium bearing
minerals and ores,
its value addition
and integrated
activities.
NB: FDI will not be
allowed in mining
of “prescribed
substances” listed
in Government of
India notification
No. S.O. 61(E)
dated 18.1.2006
issued by the
Department of
Atomic Energy.
100% FIPB Subject to sectoral Regulations
and the Mines and Minerals
(Development & Regulation) Act,
1957 and the following conditions –
i. value addition facilities are
set up within India along with
transfer of technology;
ii. disposal of tailings during the
mineral separation shall be
carried out in accordance
with Regulations framed by
the Atomic Energy
Regulatory Board such as
Atomic Energy (Radiation
Protection) Rules, 2004 and
the Atomic Energy (Safe
Disposal of Radioactive
Wastes) Rules, 1987.
MANUFACTURING
6. Alcohol-
Distillation &
Brewing
100%
Automatic
Subject to license by
appropriate authority.
7. Cigars &
Cigarettes-
Manufacture
100%
FIPB
Subject to industrial license
under the Industries
(Development & Regulation)
Act, 1951.
8. Coffee &
Rubber
processing &
warehousing
100%
Automatic
--
9. Defence
production
26% FIPB Subject to licensing under
Website :www.fema.rbi.org.in 4 6 Email : fedcofid@rbi.org.i n
Industries (Development &
Regulation) Act, 1951 and
guidelines on FDI in production
of arms & ammunition.
10. Hazardous
chemicals, viz.,
hydrocyanic acid
and its derivatives;
phosgene and its
derivatives; and
isocyanates and
diisocyantes of
hydrocarbon.
100% Automatic Subject to industrial license
under the Industries
(Development & Regulation)
Act, 1951 and other sectoral
Regulations.
11. Industrial
explosives -
Manufacture
100% Automatic Subject to industrial license
under the Industries
(Development & Regulation)
Act, 1951 and Regulations
under Explosives Act, 1898
12. Drugs and
Pharmaceuticals
including those
involving use of
recombinant DNA
technology
100% Automatic --
POWER
13. Power including
generation
(except Atomic
energy);
transmission,
distribution and
Power trading.
100% Automatic Subject to provisions of the
Electricity Act, 2003
(www.powermin.nic.in)
SERVICES
CIVIL AVIATION SECTOR
14. Airportsa.
Greenfield projects
100%
Automatic
Subject to sectoral
Regulations notified by
Ministry of Civil Aviation
(www.civilaviation.nic. in)
b. Existing projects 100% FIPB
beyond
74%
Subject to sectoral
Regulations notified by
Ministry of Civil Aviation
(www.civilaviation.nic. in)
15. Air Transport Services including Domestic Scheduled Passenger Airlines; Non-
Schedules Airlines; Chartered Airlines; Cargo Airlines; Helicopter and Seaplane
Services
a. Scheduled Air
Transport
Services/
Domestic
49%- FDI;
100%- for
NRIs
investment
Automatic Subject to no direct or
indirect participation by
foreign airlines and Sectoral
Regulations.
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Scheduled
Passenger
Airline
(www.civilaviation.nic. in)
b. Non-Scheduled Air
Transport Service /
Non-Scheduled
airlines, Chartered
airlines, and Cargo
airlines
74%- FDI
100%- for
NRIs
investment
Automatic Subject to no direct or
indirect participation by
foreign airlines in Non-
Scheduled and Chartered
airlines. Foreign airlines are
allowed to participate in the
equity of companies
operating Cargo airlines.
Also subject to sectoral
Regulations.
(www.civilaviation.nic. in)
c. Helicopter Services
/ Seaplane services
requiring DGCA
approval
100% Automatic Foreign airlines are allowed
to participate in the equity of
companies operating
Helicopter and seaplane
airlines. Also subject to
sectoral Regulations.
(www.civilaviation.nic. in)
16. Other services under Civil Aviation Sector
a. Ground Handling
Services
74%- FDI
100%- for
NRIs
investment
Automatic Subject to sectoral
Regulations and security
clearance.
b. Maintenance and
Repair
organizations;
flying training
institutes; and
technical training
institutions
100% Automatic --
17.
Asset
Reconstruction
Companies
49%
(only FDI)
FIPB
Where any individual
investment exceeds 10% of
the equity, provisions of
Section 3(3) (f) of
Securitization and
Reconstruction of Financial
Assets and Enforcement of
Security Interest Act, 2002
should be complied with.
(www.finmin.nic.in)
18. Banking -
Private sector
74%
(FDI+FII)
Within this
limit, FII
investment
not to
exceed
49%
Automatic Subject to guidelines for setting
up branches / subsidiaries of
foreign banks issued by RBI.
(www.rbi.org.in)
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19. Broadcasting
a. FM Radio FDI +FII
investment
up to 20%
FIPB Subject to guidelines notified by
Ministry of Information &
Broadcasting. (www.mib.nic.in)
b. Cable network 49%
(FDI+FII)
FIPB Subject to Cable Television
Network Rules (1994), notified
by Ministry of Information &
Broadcasting.
(www.mib.nic.in)
c. Direct-To-Home 49%
(FDI+FII).
Within this
limit, FDI
component
not to
exceed
20%
FIPB Subject to guidelines issued by
Ministry of Information &
Broadcasting. (www.mib.nic.in)
d. Setting up
hardware facilities
such as up-linking,
HUB, etc.
49%
(FDI+FII)
FIPB Subject to Up-linking Policy
notified by Ministry of
Information & Broadcasting.
(www.mib.nic.in)
e. Up-linking a News
& Current Affairs
TV Channel
26%
(FDI+FII)
FIPB Subject to guidelines issued by
Ministry of Information &
Broadcasting. (www.mib.nic.in)
f. Up-linking a Nonnews
& Current
Affairs TV
Channel
100% FIPB Subject to guidelines issued by
Ministry of Information &
Broadcasting. (www.mib.nic.in)
20. Commodity
Exchanges
49%
(FDI+FII)
FDI – 26%
FII – 23%
FIPB FII purchases shall be
restricted to secondary market
only.
Subject to regulations
specified by concerned
Regulators.
21. Construction
Development
projects, including
housing,
commercial
premises, resorts,
educational
institutions,
recreational
facilities, city
and regional
level infrastructure,
townships.
100% Automatic Subject to conditions notified
vide Press Note 2
(2005 Series) including:
a. Minimum capitalization of
US$ 10 million for wholly
owned subsidiaries and US$
5 million for joint venture.
The funds would have to be
brought within six months of
commencement of business
of the Company.
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NB: FDI is not
allowed in Real
Estate Business
b. Minimum area to be
developed under each
project- 10 hectares in case
of development of serviced
housing plots; and built-up
area of 50,000 sq. mts. in
case of construction
development project; and
any of the above in case of
a combination project.
[Note 1: For investment by
NRIs, the conditions
mentioned in Press Note 2
(2005) are not applicable.
Note 2: For investment in
SEZs, Hotels & Hospitals,
conditions mentioned in
Press Note 2(2005) are not
applicable ]
22. Courier services
for carrying
packages, parcels
and other items
which do not come
within the ambit of
the Indian Post
Office Act, 1898.
100% FIPB Subject to existing laws and
exclusion of activity relating to
distribution of letters, which is
exclusively reserved for the
State. (www.indiapost.gov.in)
23.
Infrastructure
companies in
securities markets
namely, Stock
Exchanges,
Depositories and
Clearing
Corporations
49%
(FDI+FII)
FDI – 26%
FII – 23%
FIPB
FII purchases shall be
restricted to secondary market.
Subject to regulations
specified by concerned
Regulators.
24. Credit Information
Companies(CIC)
49%
(FDI+FII)
Within this
limit, FII
investment
not to exceed
24%
FIPB
Foreign Investment in CIC
will be subject to Credit
Information Companies
(Regulation) Act, 2005.
Subject to regulations
specified by concerned
Regulators.
25. Industrial Parks
both setting up
and in established
Industrial Parks
100% Automatic Conditions in Press Note
2(2005) applicable for
construction development
projects would not apply
provided the Industrial Parks
meet with the undermentioned
conditionsi.
it would comprise of a
minimum of 10 units and
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no single unit shall occupy
more than 50% of the
allocable area and ;
ii. the minimum percentage of
the area to be allocated
for industrial activity shall
not be less than 66% of
the total allocable area.
26. Insurance 26% Automatic Subject to licensing by the
Insurance Regulatory &
Development Authority
(www.irda.nic.in)
27. Investing
companies in
infrastructure /
services sector
(except telecom
sector)
100% FIPB Where there is a prescribed
cap for foreign investment,
only the direct investment
will be considered for the
prescribed cap and foreign
investment in an investing
company will not be set off
against this cap provided the
foreign direct investment in
such investing company
does not exceed 49% and
the management of the
investing company is with
the Indian owners.
28. Non- Banking Finance Companies
i)
Merchant
banking
ii) Underwriting
iii) Portfolio
Management
Services
iv) Investment
Advisory
Services
v) Financial
Consultancy
vi) Stock Broking
vii) Asset
Management
viii) Venture Capital
100%
Automatic
Subject to:
a. Minimum capitalization
norms for fund based
NBFCs - US$ 0.5 million
to be brought upfront for
FDI up to 51%; US$ 5
million to be brought
upfront for FDI above
51% and up to 75%;
and US$ 50 million out of
which US$ 7.5 million to
be brought upfront and
the balance in 24
months, for FDI beyond
75% and up to 100%.
b. Minimum capitalization
norms for non-fund
based NBFC activities-
US$ 0.5 million.
c. Foreign investors can set
up 100% operating
subsidiaries without the
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ix) Custodial
Services
x) Factoring
xi) Credit Rating
Agencies
xii) Leasing & Finance
xiii) Housing
Finance
xiv) Forex Broking
xv) Credit card
Business
xvi) Money
changing
business
xvii) Micro credit
xviii) Rural credit
condition to disinvest a
minimum of 25% of its
equity to Indian entities
subject to bringing in
US$ 50 million without
any restriction on
number of operating
subsidiaries without
bringing additional
capital.
d. Joint venture operating
NBFCs that have 75%
or less than 75% foreign
investment will also be
allowed to set up
subsidiaries for
undertaking other NBFC
activities subject to the
subsidiaries also
complying with the
applicable minimum
capital inflow.
e. Compliance with the
guidelines of the RBI.
29. Petroleum & Natural Gas sector
a. Refining 49% in
case of
PSUs.
100% in
case of
Private
companies
FIPB
(in case of
PSUs)
Automatic
(in case of
private
companies)
Subject to Sectoral policy
and no divestment or dilution
of domestic equity in the
existing PSUs.
(www.petroleum.nic.in)
b. Other than
Refining and
including market
study and
formulation;
investment/
financing; setting
up infrastructure
for marketing in
Petroleum &
Natural Gas sector.
100% Automatic Subject to sectoral
Regulations issued by
Ministry of Petroleum &
Natural Gas.
(www.petroleum.nic.in)
30. Print Media
a. Publishing of
newspaper and
periodicals
dealing with
news and
current affairs
26% FIPB Subject to guidelines notified by
Ministry of Information &
Broadcasting. (www.mib.nic.in)
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b. Publishing of
scientific
magazines/
specialty
journals/
periodicals
100% FIPB Subject to guidelines issued by
Ministry of Information &
Broadcasting. (www.mib.nic.in)
31. Telecommunications
a. Basic and
cellular, Unified
Access Services,
National/
International
Long Distance,
V-Sat, Public
Mobile Radio
Trunked
Services
(PMRTS),
Global Mobile
Personal
Communications
Services
(GMPCS) and
other value
added telecom
services
74%
(Including
FDI, FII,
NRI,
FCCBs,
ADRs,
GDRs,
convertible
preference
shares, and
proportionate
foreign
equity in
Indian
promoters/
Investing
Company)
Automatic
up to
49%.
FIPB
beyond
49%.
Subject to guidelines notified in
the Press Note 3(2007 Series)
dated April 19, 2007.
b. ISP with
gateways, radiopaging,
end-to-end
bandwidth.
74% Automatic
up to 49%.
FIPB
beyond
49%.
Subject to licensing and
security requirements notified
by the Department of
Telecommunications.
(www.dotindia.com)
c.
(a) ISP without
gateway;
(b) infrastructure
provider
providing dark
fibre, r ight of
way, duct space,
tower (Category I);
(c) electronic mail
and voice mail.
100% Automatic
up to 49%.
FIPB
beyond
49%.
Subject to the condition that
such companies shall divest
26% of their equity in favour
of Indian public in 5 years, if
these companies are listed
in other parts of the world.
Also subject to licensing and
security requirements,
where required.
(www.dotindia.com)
d. Manufacture of
telecom
equipments
100% Automatic Subject to sectoral
requirements.
(www.dotindia.com)
32. Trading
a.
Wholesale/cash
& carry trading
100%
Automatic
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b. Trading for Exports
100%
Automatic
c. Trading of items
sourced from small
scale sector
100%
FIPB
d. Test marketing
of such items for
which a company
has approval for
manufacture
100%
FIPB
Subject to the condition that
the test marketing approval
will be for a period of two
years and investment in
setting up manufacturing
facilities commences
simultaneously with test
marketing.
e. Single Brand
Product retailing
51% FIPB
Subject to guidelines for FDI in
trading issued by Department
of Industrial Policy &
Promotion vide
Press Note 3 (2006 Series)
dated February 10, 2006.
33. Satellites -
Establishment
and operation
74% FIPB Subject to sectoral guidelines
issued by Department of
Space / ISRO. (www.isro.org)
34. Special
Economic Zones
and Free Trade
Warehousing
Zones covering
setting up of
these Zones
and setting up
units in the
Zones
100%
Automatic Subject to Special Economic
Zones Act, 2005 and the
Foreign Trade Policy.
(www.sezindia.nic.in)
35. Drugs and
Pharmaceuticals
including those
involving
recombitant DNA
technology
100% Automatic --
Note : All the above sector / activities are governed by the respective Press Notes /
Releases issued by the issued by the Government of India from time to time
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Annex - 2
(PART I, Section I, para 3)
(A) All Activities/ Sectors would require prior approval of the Government of
India for FDI in the following circumstances:
i) where provisions of Press Note 1 (2005 Series) issued by the Government of
India are attracted;
ii) where more than 24 per cent foreign equity is proposed to be inducted for
manufacture of items reserved for the Small Scale sector.
(B) Sectors prohibited for FDI
I. Retail Trading (except single brand product r etailing)
II. Atomic Energy
III. Lottery Business
IV. Gambling and Betting
V. Business of chit fund
VI. Nidhi Company
VII. Trading in Transferable Development Rights (TDRs)
VIII. Activities/sector not opened to private sector investment
IX. Agriculture (excluding Floriculture, Horticulture, Development of
seeds, Animal Husbandary, Pisciculture and cultivation of
vegetables, mushrooms etc. under controlled conditions and
services related to agro and allied sectors) and Plantations (Other
than Tea Plantations)
X. Real estate business, or construction of farm houses.
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Annex - 3
(PART I, Section I, para 21)
Terms and conditions for Transfer of Shares /Convertible Debentures, by way of Sale,
from a Person Resident in India to a Person Resident Outside India and from a Person
Resident Outside India to a Person Resident in India
1.1 In order to address the concerns relating to pricing, documentation, payment/ receipt
and remittance in respect of the shares/convertible debentures of an Indian company, other
than a company engaged in financial service sector, transferred by way of sale, the parties
involved in the transaction shall comply with the guidelines set out below.
1.2 Parties involved in the transaction are (a) seller (resident/non-resident), (b) buyer
(resident/non-resident), (c) duly authorized agent/s of the seller and/or buyer, (d) Authorised
Dealer bank (AD) branch and (e) Indian company, for recording the transfer of ownership in its
books.
2. Pricing Guidelines
2.1 The under noted pricing guidelines are applicable to the following types of transactions:
i. Transfer of shares, by way of sale under private arrangement by a person resident in
India to a person resident outside India.
ii. Transfer of shares, by way of sale under private arrangement by a person resident
outside India to a person resident in India.
2.2 Transfer by Resident to Non-resident (i.e. to incorporated non-resident entity other
than erstwhile OCB, foreign national, NRI, FII)
Price of shares transferred by way of sale by resident to a non-resident shall not be less than
(a) the ruling market price, in case the shares are listed on stock exchange,
(b) fair valuation of shares done by a Chartered Accountant as per the guidelines issued by
the erstwhile Controller of Capital Issues, in case of unlisted shares.
The price per share arrived at should be certified by a Chartered Accountant.
2.3 Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB,
foreign national, NRI, FII) to Resident
Sale of shares by a non-resident to resident shall be in accordance with Regulation 10 B (2) of
Notification No. FEMA 20/2000-RB dated May 3, 2000 which is as below:
(a) Where the shares of an Indian company are traded on stock exchange,
i) the sale is at the prevailing market price on stock exchange and is effected through a
merchant banker registered with Securities and Exchange Board of India or through a
stock broker registered with the stock exchange;
ii) if the transfer is other than that referred to in clause (i), the price shall be arrived at by
taking the average quotations (average of daily high and low) for one week preceding
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the date of application with 5 per cent variation. Where, however, the shares are
being sold by the foreign collaborator or the foreign promoter of the Indian company to
the existing promoters in India with the objective of passing management control in
favour of the resident promoters the proposal for sale will be considered at a price
which may be higher by up to a ceiling of 25 per cent over the price arrived at as
above,
(b) Where the shares of an Indian company are not listed on stock exchange or are thinly
traded,
i) if the consideration payable for the transfer does not exceed Rs.20 lakh per seller per
company, at a price mutually agreed to between the seller and the buyer, based on
any valuation methodology currently in vogue, on submission of a certificate from the
statutory auditors of the Indian company whose shares are proposed to be
transferred, regarding the valuation of the shares; and
ii) if the amount of consideration payable for the transfer exceeds Rs.20 lakh per seller
per company, at a price arrived at, at the seller’s option, in any of the following
manner, namely:
A) a price based on earning per share (EPS linked to the Price Earning (P/E)
multiple, or a price based on the Net Asset Value (NAV) linked to book value
multiple, whichever is higher,
or
B) the prevailing market price in small lots as may be laid down by the Reserve Bank
so that the entire shareholding is sold in not less than five trading days through
screen based trading system
or
C) where the shares are not listed on any stock exchange, at a price which is lower
of the two independent valuations of share, one by statutory auditors of the
company and the other by a Chartered Accountant or by a Merchant Banker in
Category 1 registered with Securities and Exchange Board of India.
Explanation:
1. A share is considered as thinly traded if the annualized trading turnover in that share, on
main stock exchanges in India, during the six calendar months preceding the month in
which application is made, is less than 2 percent (by number of shares) of the listed
stock.
ii) For the purpose of arriving at Net Asset Value per share, the miscellaneous expenses
carried forward, accumulated losses, total outside liabilities, revaluation reserves and capital
reserves (except subsidy received in cash) shall be reduced from value of the total assets and
the net figure so arrived at shall be divided by the number of equity shares issued and paid up.
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Alternatively, intangible assets shall be reduced from the equity capital and reserves (excluding
revaluation reserves) and the figure so arrived at shall be divided by the number of equity
shares issued and paid up. The NAV so calculated shall be used in conjunction with the
average BV multiple of Bombay Stock Exchange National Index during the calendar month
immediately preceding the month in which application is made and BV multiple shall be
discounted by 40 per cent.
iii) For computing the price based on Earning Per Share, the earning per share as per the
latest balance sheet of the company shall be used in conjunction with the average Price
Earning Multiple of Bombay Stock Exchange National Index for the calendar month preceding
the month in which application is made and Price Earning shall be discounted by 40 per cent.
3. Responsibilities / Obligations of the parties
All the parties involved in the transaction would have the responsibility to ensure that the
relevant regulations under FEMA are complied with and consequent on transfer of shares, the
relevant individual limit/sectoral caps/foreign equity participation ceilings as fixed by
Government are not breached. Settlement of transactions will be subject to payment of
applicable taxes, if any.
4. Method of payment and remittance/credit of sale proceeds
4.1 The sale consideration in respect of the shares purchased by a person resident outside
India shall be remitted to India through normal banking channels. In case the buyer is a Foreign
Institutional Investor (FII), payment should be made by debit to its Special Non-Resident Rupee
Account. In case the buyer is a NRI, the payment may be made by way of debit to his
NRE/FCNR (B) accounts. However, if the shares are acquired on non-repatriation basis by NRI,
the consideration shall be remitted to India through normal banking channel or paid out of funds
held in NRE/FCNR (B)/NRO accounts.
4.2. The sale proceeds of shares (net of taxes) sold by a person resident outside India may
be remitted outside India. In case of FII, the sale proceeds may be credited to its special Non-
Resident Rupee Account. In case of NRI, if the shares sold were held on repatriation basis, the
sale proceeds (net of taxes) may be credited to his NRE /FCNR(B) accounts and if the shares
sold were held on non repatriation basis, the sale proceeds may be credited to his NRO
account subject to payment of taxes.
4.3 The sale proceeds of shares (net of taxes) sold by an OCB may be remitted outside
India directly if the shares were held on repatriation basis and if the shares sold were held on
non-repatriation basis, the sale proceeds may be credited to its NRO (Current) Account subject
to payment of taxes, except in the case of OCBs whose accounts have been blocked by
Reserve Bank.
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5. Documentation
Besides obtaining a declaration in the enclosed Form FC-TRS (in quadruplicate), the AD
branch should arrange to obtain and keep on record the following documents:
5.1 For sale of shares by a person resident in India
i. Consent Letter duly signed by the seller and buyer or their duly appointed agent
indicating the details of transfer i.e. number of shares to be transferred, the name of
the investee company whose shares are being transferred and the price at which
shares are being transferred. In case there is no formal Sale Agreement, letters
exchanged to this effect may be kept on record.
ii. Where Consent Letter has been signed by their duly appointed agent, the Power of
Attorney Document executed by the seller/buyer authorizing the agent to
purchase/sell shares.
iii. The shareholding pattern of the investee company after the acquisition of shares by
a person resident outside India showing equity participation of residents and nonresidents
category-wise (i.e. NRIs/OCBs/foreign nationals/incorporated non-resident
entities/FIIs) and its percentage of paid up capital obtained by the seller/buyer or
their duly appointed agent from the company, where the sectoral cap/limits have
been prescribed.
iv. Certificate indicating fair value of shares from a Chartered Accountant.
v. Copy of Broker’s note if sale is made on Stock Exchange
vi. Undertaking from the buyer to the effect that he is eligible to acquire
shares/convertible debentures under FDI policy and the existing sectoral limits and
Pricing Guidelines have been complied with.
vii. Undertaking from the FII/sub account to the effect that the individual FII/ Sub
account ceiling as prescribed by SEBI has not been breached.
5.2. For sale of shares by a person resident outside India
i. Consent Letter duly signed by the seller and buyer or their duly appointed agent
indicating the details of transfer i.e. number of shares to be transferred, the name of
the investee company whose shares are being transferred and the price at which
shares are being transferred.
ii. Where the Consent Letter has been signed by their duly appointed agent the Power
of Attorney Document authorizing the agent to purchase/sell shares by the
seller/buyer. In case there is no formal Sale Agreement, letters exchanged to this
effect may be kept on record.
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iii. If the sellers are NRIs/OCBs, the copies of RBI approvals evidencing the shares
held by them on repatriation/non-repatriation basis. The sale proceeds shall be
credited NRE/NRO account, as applicable.
iv. Certificate indicating fair value of shares from a Chartered Accountant.
v. No Objection / Tax Clearance Certificate from Income Tax authority/Chartered
Account.
vi. Undertaking from the buyer to the effect that the Pricing Guidelines have been
adhered to.
6. Reporting requirements
6.1 Reporting of transfer of shares between residents and non-residents and vice versa is to
be done in Form FC-TRS. The Form FC-TRS should be submitted to the AD Category – I bank,
within 60 days from the date of receipt of the amount of consideration. The onus of submission
of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident
in India. The AD Category – I bank, would forward the same to its link office. The link office
would consolidate the Forms and submit a monthly report to the Reserve Bank21.
For the purpose the Authorized Dealers may designate branches to specifically handle such
transactions. These branches could be staffed with adequately trained staff for this purpose to
ensure that the transactions are put through smoothly. The ADs may also designate a nodal
office to coordinate the work at these branches and also ensure the reporting of these
transactions to the Reserve Bank.
6.2 When the transfer is on private arrangement basis, on settlement of the transactions,
the transferee/his duly appointed agent should approach the investee company to record the
transfer in their books along with the certificate in the Form FC-TRS from the AD branch that
the remittances have been received by the transferor/payment has been made by the
transferee. On receipt of the certificate from the AD, the company may record the transfer in its
books.
6.3 The actual inflows and outflows on account of such transfer of shares shall be reported
by the AD branch in the R-returns in the normal course.
6.4 In addition the AD branch should submit two copies of the Form FC-TRS received from
their constituents/customers together with the statement of inflows/outflows on account of
remittances received/made in connection with transfer of shares, by way of sale, to IBD/FED/or
the nodal office designated for the purpose by the bank in the enclosed proforma (which is to
be prepared in MS-Excel format). The IBD/FED or the nodal office of the bank will in turn
21 To the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign
Investment Division, Central Office, Mumbai
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submit a consolidated monthly statement in respect of all the transactions reported by their
branches together with copies of the FC-TRS Forms received from their branches to Foreign
Exchange Department, Reserve Bank, Foreign Investment Division, Central Office, Mumbai in
soft copy (in MS- Excel) by e-mail to fdidata@rbi.org.in
6.5 Shares purchased / sold by FIIs under private arrangement will be by debit /credit to
their Special Non Resident Rupee Account. Therefore, the transaction should also be reported
in Form LEC (FII) by the designated bank of the FII concerned.
6.6 Shares/convertible debentures of Indian companies purchased under Portfolio
Investment Scheme by NRIs, OCBs cannot be transferred, by way of sale under private
arrangement.
6.7 On receipt of statements from the AD, the Reserve Bank may call for such additional
details or give such directions as required from the transferor/transferee or their agents, if need
be.
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Annex- 4
(PART I, Section I, para 22)
Documents to be submitted by a person resident in India for transfer of shares to a
person resident outside India by way of gift
i. Name and address of the transferor (donor) and the transferee (donee).
ii. Relationship between the transferor and the transferee.
iii. Reasons for making the gift.
iv. In case of Government dated securities and treasury bills and bonds, a
certificate issued by a Chartered Accountant on the market value of such
security.
v. In case of units of domestic mutual funds and units of Money Market
Mutual Funds, a certificate from the issuer on the Net Asset Value of
such security.
vi. In case of shares and debentures, a certificate from a Chartered
Accountant on the value of such securities according to the guidelines
issued by the Securities & Exchange Board of India or the erstwhile CCI
for listed companies and unlisted companies, respectively.
vii. Certificate from the concerned Indian company certifying that the
proposed transfer of shares/convertible debentures by way of gift from
resident to the non-resident shall not breach the applicable sectoral cap/
FDI limit in the company and that the proposed number of
shares/convertible debentures to be held by the non-resident transferee
shall not exceed 5 per cent of the paid up capital of the company.22
viii. An undertaking from the resident transferor that the value of security to
be transferred together with any security already transferred by the
transferor, as gift, to any person residing outside India does not exceed
the rupee equivalent of USD 25,000 during a calendar year.
22 AP (DIR Series) Circular No. 08 dated August 25, 2005
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Annex - 5
(PART I, Section I, para 22)
Definition of "relative" as given in Section 6 of Companies Act, 1956.
A person shall be deemed to be a relative of another, if, and only if:
(a) they are members of a Hindu undivided family ; or
(b) they are husband and wife ; or
(c) the one is related to the other in the manner indicated in Schedule IA (as under)
1. Father.
2. Mother (including step-mother).
3. Son (including stepson).
4. Son's wife.
5. Daughter (including step-daughter).
6. Father's father.
7. Father's mother.
8. Mother's mother.
9. Mother's father.
10. Son's son.
11. Son's son's wife.
12. Son's daughter.
13. Son's daughter's husband.
14. Daughter's husband.
15. Daughter's son.
16. Daughter's son's wife.
17. Daughter's daughter.
18. Daughter's daughter's husband.
19. Brother (including step-brother).
20. Brother's wife.
21. Sister (including step-sister).
22. Sister's husband.
*****************************
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Annex - 6
[PART I, Section I, para 18 (i) (a)]
Report by the Indian company receiving amount of consideration for issue of shares /
Convertible debentures under the FDI Scheme
( To be filed by the company through its Authorised Dealer Category – I bank, with the
Regional Office of the Reserve Bank under whose jurisdiction the Registered Office of the
company making the declaration is situated, not later than 30 days from the date of receipt
of the amount of consideration, as specified in para 9 (I) (A) of Schedule I to Notification
No. FEMA 20/2000- RB dated May 3, 2000 )
Permanent Account
Number (PAN) of the
investee company given
by the IT Department
No. Particulars (In Block Letters)
Name of the Indian company
Address of the Registered Office
Fax
Telephone
1.
e-mail
2 Details of the foreign investor/ collaborator
Name
Address
Country
3. Date of receipt of funds
4. Amount
In foreign currency In Indian Rupees
5. Whether investment is under
Automatic Route or Approval Route
If Approval Route, give details (ref.
no. of approval and date)
Automatic Route / Approval Route
6. Name of the AD through whom the
remittance is received
7. Address of the AD
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A Copy of the FIRC evidencing the receipt of consideration for issue of shares/convertible
debentures as above is enclosed.
(Authorised signatory of
the investee company)
(Stamp)
(Authorised signatory of
the AD)
(Stamp)
FOR USE OF THE RESERVE BANK ONLY:
Unique Identification Number for the remittance received:
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Annex - 7
(PART I, Section I, para 18 (i) (b))
Know Your Customer (KYC) Form in respect of the non-resident investor
Registered Name of the Remitter / Investor
(Name, if the investor is an Individual)
Registration Number (Unique Identification
Number* in case remitter is an Individual)
Registered Address (Permanent Address if
remitter Individual)
Name of the Remitter’s Bank
Remitter’s Bank Account No.
Period of banking relationship with the
remitter
* Passport No., Social Security No, or any Unique No. certifying the bonafides of the remitter
as prevalent in the remitter’s country
We confirm that all the information furnished above is true and accurate as
provided by the overseas remitting bank of the non-resident investor.
(Signature of the Authorised Official
of the AD bank receiving the remittance)
Date : Place:
Stamp :
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Annex - 8
(PART I, Section I, para 18 (iii))
FC-GPR
PART - A
(To be filed by the company through its Authorised Dealer Category – I bank with the Regional Office of
the RBI under whose jurisdiction the Registered Office of the company making the declaration is situated
as and when shares / convertible debentures are issued to the foreign investor, along with the documents
mentioned in item No. 4 of the undertaking enclosed to this Form)
Permanent Account Number
(PAN) of the investee company
given by the Income Tax
Department
Date of issue of shares /
convertible debentures
No.
Particulars (In Block Letters)
Name
Address of the Registered Office
State
Registration No. given by Registrar
of Companies
Whether existing company or new
company (strike off whichever is not
applicable)
Existing company / New company
If existing company, give
registration number allotted by RBI
for FDI, if any
Telephone
Fax
1.
e-mail
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2. Description of the main business
activity
NIC Code
Location of the project and NIC
code for the district where the
project is located
Percentage of FDI allowed as per
FDI policy
State whether FDI is allowed under
Automatic Route or Approval Route
(strike out whichever is not
applicable)
Automatic Route / Approval Route
3 Details of the foreign investor / collaborator∗
Name
Address
Country
Constitution / Nature of the
investing Entity
[Specify whether
1. Individual
2. Company
3. FII
4. FVCI
5. Foreign Trust
6. Private Equity Fund
7. Pension / Provident Fund
8. Sovereign Wealth Fund
(SWF)23
9. Partnership / Proprietorship
Firm
10. Financial Institution
11. NRIs / PIO
12. Others (please specify)]
Date of incorporation
4 Particulars of Shares / Convertible Debentures Issued
(a) Nature and date of issue
∗ If there is more than one foreign investor/collaborator, separate Annex may be included for items 3 and 4 of the
Form.
23 SWF means a Government investment vehicle which is funded by foreign exchange assets, and which manages those assets
separately from the official reserves of the monetary authorities.
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Nature of issue Date of issue Number of shares/
convertible debentures
01 IPO / FPO
02 Preferential allotment /
private placement
03 Rights
04 Bonus
05 Conversion of ECB
06 Conversion of royalty
(including lump sum
payments)
07 Conversion against import
of capital goods by units in
SEZ
08 ESOPs
09 Share Swap
10 Others (please specify)
Total
(b) Type of security issued
No. Nature of
security
Number Maturity Face
value
Premium Issue
Price per
share
Amount of
inflow*
01 Equity
02 Compulsorily
Convertible
Debentures
03 Compulsorily
Convertible
Preference
shares
04 Others
(please
specify)
Total
i) In case the issue price is greater than the face value please give break up of the premium received.
ii) * In case the issue is against conversion of ECB or royalty or against import of capital goods by units in
SEZ, a Chartered Accountant's Certificate certifying the amount outstanding on the date of conversion
(c) Break up of premium Amount
Control Premium
Non competition fee
Others@
Total
@ please specify the nature
(d) Total inflow (in Rupees) on account of
issue of shares / convertible debentures to
non-residents (including premium, if any)
vide
(i) Remittance through AD:
(ii) Debit to NRE/FCNR A/c with
Bank_________
(iii) Others (please specify)
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Date of reporting of (i) and (ii) above to RBI
under Para 9 (1) A of Schedule I to
Notification No. FEMA 20 /2000-RB dated
May 3, 2000, as amended from time to time.
(e) Disclosure of fair value of shares issued**
We are a listed company and the market
value of a share as on date of the issue is*
We are an un-listed company and the fair
value of a share is*
** before issue of shares *(Please indicate as applicable)
5. Post issue pattern of shareholding
Equity Compulsorily
convertible
Preference
Shares/
Debentures
Investor category
No.
of
shares
Amount
(Face
Value) Rs.
%
No.
of
shares
Amount
(Face
Value) Rs.
%
Non-Resident
01 Individuals
02 Companies
03 FIIs
04 FVCIs
05 Foreign Trusts
06 Private Equity Funds
07 Pension/ Provident Funds
08 Sovereign Wealth Funds
09 Partnership/ Proprietorship
Firms
10 Financial Institutions
11 NRIs/PIO
12 Others (please specify)
a)
Sub Total
b) Resident
Total
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DECLARATION TO BE FILED BY THE AUTHORISED REPRESENTATIVE OF THE INDIAN
COMPANY: (Delete whichever is not applicable and authenticate)
We hereby declare that:
1. We comply with the procedure for issue of shares / convertible debentures as laid down
under the FDI scheme as indicated in Notification No. FEMA 20/2000-RB dated 3rd May 2000,
as amended from time to time.
2. The investment is within the sectoral cap / statutory ceiling permissible under the Automatic
Route of RBI and we fulfill all the conditions laid down for investments under the Automatic
Route namely (strike off whichever is not applicable).
a) Foreign entity/entities—(other than individuals), to whom we have issued shares have
existing joint venture or technology transfer or trade mark agreement in India in the
same field and Conditions stipulated in Press Note 1 of 2005 Series dated January 12,
2005 have been complied with.
OR
Foreign entity/entities—(other than individuals), to whom we have issued shares do not
have any existing joint venture or technology transfer or trade mark agreement in India
in the same field.
b) We are not an SSI unit.
OR
We are a SSI unit and the investment limit of 24 % of paid-up capital has been
observed/ requisite approvals have been obtained.
c) Shares issued on rights basis to non-residents are in conformity with Regulation 6 of
the RBI Notification No FEMA 20/2000-RB dated 3rd May 2000, as amended from time
to time.
OR
Shares issued are bonus.
OR
Shares have been issued under a scheme of merger and amalgamation of two or more
Indian companies or reconstruction by way of de-merger or otherwise of an Indian
company, duly approved by a court in India.
OR
Shares are issued under ESOP and the conditions regarding this issue have been
satisfied
3. Shares have been issued in terms of SIA /FIPB approval No.___________________ dated
____________________
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4. We enclose the following documents in compliance with Paragraph 9 (1) (B) of Schedule 1 to
Notification No. FEMA 20/2000-RB dated May 3, 2000:
(i) A certificate from our Company Secretary certifying that
(a) all the requirements of the Companies Act, 1956 have been complied
with;
(b) terms and conditions of the Government approval, if any, have been
complied with;
(c) the company is eligible to issue shares under these Regulations; and
(d) the company has all original certificates issued by authorised dealers in
India evidencing receipt of amount of consideration in accordance with
paragraph 8 of Schedule 1 to Notification No. FEMA 20/2000-RB dated
May 3, 2000.
(ii) A certificate from Statutory Auditors / Chartered Accountant indicating the
manner of arriving at the price of the shares issued to the persons resident
outside India.
5. Unique Identification Numbers given for all the remittances received as consideration for
issue of shares/convertible debentures (details as above), by Reserve Bank.
.
.
.
(Signature of the Applicant)* :___________________________________________
(Name in Block Letters) :___________________________________________
(Designation of the signatory) :___________________________________________
Place:
Date:
(* To be signed by Managing Director/Director/Secretary of the Company)
CERTIFICATE TO BE FILED BY THE COMPANY SECRETARY24 OF THE INDIAN
COMPANY ACCEPTING THE INVESTMENT:
(As per Para 9 (1) (B) (i) of Schedule 1 to Notification No. FEMA 20/2000-RB dated May 3,
2000)
In respect of the abovementioned details, we certify the following :
24 If the company doesn’t have a full time Company Secretary, a certificate from a practising Company Secretary
may be submitted.
R
R
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1. All the requirements of the Companies Act, 1956 have been complied with.
2. Terms and conditions of the Government approval, if any, have been complied with.
3. The company is eligible to issue shares / convertible debentures under these Regulations.
4. The company has all original certificates issued by AD Category – I banks in India,
evidencing receipt of amount of consideration in accordance with paragraph 8 of Schedule 1 to
Notification No. FEMA 20/2000-RB dated May 3, 2000.
(Name & Signature of the Company Secretary) (Seal)
FOR USE OF THE RESERVE BANK ONLY:
Registration Number for the FC-GPR:
Unique Identification Number allotted to the
Company at the time of reporting receipt of
remittance
R
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[Part- B of Annex I to A. P. (DIR Series) Circular No. 44 dated May 30, 2008]
FC-GPR
PART-B
(i) This part of Form FC-GPR is to be submitted to the Director, Balance of Payment Statistical
Division, Department of Statistics and Information Management, Reserve Bank of India, C-8, 3rd
Floor, Bandra-Kurla Complex, Bandra (E), Mumbai – 400051; Tel: 2657 1265, 2657 2513, Fax:
26570848; email:surveyfla@rbi.org.in
(ii) This is an annual return to be submitted by 31st of July every year by all companies,
pertaining to all investments by way of direct/portfolio investments/re-invested earnings/others
in the Indian company made during the previous years (e,g. the information in Part B submitted
by 31st July 2008 will pertain to all the investments made in the previous years up to March 31,
2008). The details of the investments to be reported would include all foreign investments made
into the company which is outstanding as on the date of the balance sheet. The details of
overseas investments in the company both under Direct / portfolio investment may be
separately indicated. Please use end-March Market prices/exchange rates for compiling the
relevant information.
---------------------------------------------------------------------------------------------------------------------
Permanent Account Number (PAN)
of the investee company given by the
Income Tax Department
No. Particulars (In Block Letters)
1.
Name
Address
State
Registration No. given by the
Registrar of Companies
2. Name of the Contact Person: Designation:
Tel. E-mail:
Fax:
3. Account closing date:
4. Details of changes if any, with regard
to information furnished earlier
(Change in name of company /
Change of location, activities, etc.)
5. Whether listed company or
unlisted company
Listed / Unlisted
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5.1 If listed,
i) Market value per share as at
end-March
ii) Net Asset Value per share as on
date of latest Audited Balance
Sheet
5.2 If unlisted, Net Asset Value per
share as on date of latest Audited
Balance Sheet
6. Foreign Direct Investment (FDI)
Amount in Lakhs of Rupees
Foreign Liabilities In
India ∗
Foreign Assets Outside
India &
Outstanding
at end-
March of
Previous
Year
Outstanding
at end-
March of
Current
Year
Outstanding
at end-
March of
Previous
Year
Outstanding
at end-
March of
Current
Year
6.0 Equity Capital
6.1 Other Capital Ω
6.2 Disinvestments during
the year
6.3 Retained earnings during
the year +
∗ Please furnish the outstanding investments of non-resident investors (Direct Investors) who were holding 10 per
cent or more ordinary shares of your Company on the reporting date.
& Please furnish your total investments outside the country in each of which your Company held 10 per cent or
more ordinary shares of that non-resident enterprise on the reporting date.
Ω Other Capital includes transactions between the non-resident direct investor and investee / reporting company,
relating to i) Short Term Borrowing from overseas investors, ii) Long Term Borrowing from overseas investors, iii)
Trade Credit, iv) Suppliers Credit, v) Financial Leasing, vi) Control Premium, vii) Non-Competition Fee in case of
transactions not involving issue of shares, viii) Non-cash acquisition of shares against technical transfer, plant and
machinery, goodwill, business development and similar considerations and ix) investment in immovable property
made during the year.
+ Under foreign liabilities, for retained earnings (undistributed profit), please furnish the proportionate amount as per
the share holding of non-resident investors (Direct investors). Similarly under foreign assets outside India, the
retained earnings of your company would be proportionate to your shareholding of ordinary shares in the nonresident
enterprise.
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7. Portfolio and Other Investment
[Please furnish here the outstanding investments other than those mentioned under FDI above]
Amount in Lakhs of Rupees
Foreign Liabilities In
India
Foreign Assets Outside
India
Outstanding
at end-
March of
Previous
Year
Outstanding
at end-
March of
Current
Year
Outstanding
at end-
March of
Previous
Year
Outstanding
at end-
March of
Current
Year
7.0 Equity Securities
7.1 Debt Securities
7.1.1 Bonds and Notes
7.1.2 Money Market
Instruments
7.2 Disinvestments during
the year
8. Financial Derivatives
(notional value)
9. Other Investment
9.1 Trade Credit
9.1.1 Short Term
9.1.2 Long Term
9.2 Loans∞ Please see the note below
9.3 Others
9.3.1 Short Term
9.3.2 Long Term
∞ Note: As the details of the Loans availed of by your company are collected through Authorised Dealers separately
by Foreign Exchange Department of the Reserve Bank in ECB returns, the details of external loans availed by your
company need not be filled in. However, the external loans extended by your company to non-resident enterprises
other than WOS/JVs outside India should be reported under “Foreign Assets outside India”.
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10. Shareholding pattern as at end- March
Equity Compulsorily
convertible
Preference Shares/
Debentures
Investor category / Nature of investing entity
No.
of
shares
Amount
(Face
Value) Rs.
%
No.
of
shares
Amount
(Face
Value) Rs.
%
Non-Resident
01 Individuals
02 Companies
03 FIIs
04 FVCIs
05 Foreign Trusts
06 Private Equity Funds
07 Pension/ Provident Funds
08 Sovereign Wealth Fund (SWF)25
09 Partnership / Proprietorship
Firms
10 Financial Institutions
11 NRIs/PIO
12 Others (please specify)
a)
Sub Total
b) Resident
Total
11. Persons employed during the financial year ending March 31®
Directly
Indirectly
Total
Signature of the authorised
Official :__________________________________________
Name (in block letters) :__________________________________________
Designation :__________________________________________
Place: Date:
25 SWF means a Government investment vehicle which is funded by foreign exchange assets, and which manages
those assets separately from the official reserves of the monetary authorities.
® Please indicate the number of persons recruited by your company during the financial year for which the return is
being submitted. Under “Directly’, indicate the number of persons on the roll of your company, whereas under
“Indirectly”, indicate the number of persons otherwise engaged by your company during the year.
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Annex - 9
(PART I, Section I, para 21 (ii))
Form FC-TRS
Declaration regarding transfer of shares / compulsorily and mandatorily
convertible preference shares (CMCPS) / debentures by way of sale from resident
to non resident / non-resident to resident
(to be submitted to the designated AD branch in quadruplicate within 60 days from
the date of receipt of funds)
The following documents are enclosed
For sale of shares / compulsorily and mandatorily convertible preference shares /
debentures by a person resident in India
i. Consent Letter duly signed by the seller and buyer or their duly appointed
agent and in the latter case the Power of Attorney Document.
ii. The shareholding pattern of the investee company after the acquisition of
shares by a person resident outside India.
iii. Certificate indicating fair value of shares from a Chartered Accountant.
iv. Copy of Broker's note if sale is made on Stock Exchange.
v. Declaration from the buyer to the effect that he is eligible to acquire shares /
compulsorily and mandatorily convertible preference shares / debentures
under FDI policy and the existing sectoral limits and Pricing Guidelines have
been complied with.
vi. Declaration from the FII/sub account to the effect that the individual FII / Sub
account ceiling as prescribed has not been breached.
Additional documents in respect of sale of shares / compulsorily and
mandatorily convertible preference shares / debentures by a person resident
outside India
vii. If the sellers are NRIs/OCBs, the copies of RBI approvals, if applicable,
evidencing the shares held by them on repatriation/non-repatriation basis.
viii. No Objection/Tax Clearance Certificate from Income Tax Authority/ Chartered
Account.
Name of the company
Address (including e-mail ,
telephone Number, Fax no)
1
Activity
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NIC Code No.
Whether FDI is allowed
under Automatic route
2
Sectoral Cap under FDI
Policy
3 Nature of transaction
(Strike out whichever is not
applicable)
Transfer from resident to non resident /
Transfer from non resident to resident
Name of the buyer
Constitution / Nature of the
investing Entity
Specify whether
1. Individual
2. Company
3. FII
4. FVCI
5. Foreign Trust
6. Private Equity Fund
7. Pension/ Provident
Fund
8. Sovereign Wealth
Fund (SWFπ)
9. Partnership /
Proprietorship firm
10. Financial Institution
11. NRIs / PIOs
12. others
Date and Place of
Incorporation
4
Address of the buyer
(including e-mail, telephone
number. Fax no.)
5
Name of the seller
Constitution / Nature of the
disinvesting entity
π SWF means a Government investment vehicle which is funded by foreign exchange assets, and which manages those assets
separately from the official reserves of the monetary authorities.
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Specify whether
1. Individual
2. Company
3. FII
4. FVCI
5. Foreign Trust
6. Private Equity Fund
7. Pension/ Provident
Fund
8. Sovereign Wealth
Fund (SWFΠ)
9. Partnership/
Proprietorship firm
10. Financial Institution
11. NRIs/PIOs
12. others
Date and Place of
Incorporation
Address of the seller
(including e-mail, telephone
Number Fax no)
6 Particulars of earlier
Reserve Bank / FIPB
approvals
7 Details regarding shares / compulsorily and mandatorily convertible
preference shares (CMCPS) / debentures to be transferred
Date of the transaction Number of
shares
CMCPS /
debentures
Face
value
in Rs.
Negotiated
Price for
the
transfer**in
Rs.
Amount of
consideration
in Rs.
No. of shares Percentage
Before the
transfer
8
Foreign Investments in the
company
After the
transfer
Where the shares / CMCPS
/ debentures are listed on
Stock Exchange
Name of the Stock exchange
9
Price Quoted on the Stock
Π SWF means a Government investment vehicle which is funded by foreign exchange assets, and which manages those assets
separately from the official reserves of the monetary authorities.
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exchange
Where the shares / CMCPS
/ debentures are Unlisted
Price as per Valuation
guidelines*
Price as per Chartered
Accountants
* / ** Valuation report (CA
Certificate to be attached)
Declaration by the transferor / transferee
I / We hereby declare that :
i. The particulars given above are true and correct to the best of my/our knowledge
and belief.
ii. I/ We, was/were holding the shares compulsorily and mandatorily convertible
preference shares / debentures as per FDI Policy under FERA/ FEMA Regulations
on repatriation/non repatriation basis.
iii. I/ We, am/are eligible to acquire the shares compulsorily and mandatorily
convertible preference shares / debentures of the company in terms of the FDI
Policy. It is not a transfer relating to shares compulsorily and mandatorily
convertible preference shares / debentures of a company engaged in financial
services sector or a sector where general permission is not available.
iv. The Sectoral limit under the FDI Policy and the pricing guidelines have been
adhered to.
Signature of the Declarant or
his duly authorised agent
Date:
Note:
In respect of the transfer of shares / compulsorily and mandatorily convertible preference
shares / compulsorily and mandatorily convertible debentures from resident to non
resident the declaration has to be signed by the non resident buyer, and in respect of the
transfer of shares / compulsorily and mandatorily convertible preference shares /
compulsorily and mandatorily convertible debentures from non-resident to resident the
declaration has to be signed by the non-resident seller.
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Certificate by the AD Branch
It is certified that the application is complete in all respects.
The receipt /payment for the transaction are in accordance with FEMA Regulations /
Reserve Bank guidelines.
Signature
Name and Designation of the Officer
Date: Name of the AD Branch
AD Branch Code
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Annex - 10
[Part I, Section I, para 29]
Form DR
[Refer to paragraph 4(2) of Schedule 1]
Return to be filed by an Indian Company who has arranged issue of GDR/ADR
Instructions : The Form should be completed and submitted to the Reserve Bank of
India, Foreign Investment Division, Central Office, Mumbai.
1. Name of the Company
2. Address of Registered Office
3. Address for Correspondence
4. Existing Business (please give the NIC
Code of the activity in which the company is
predominantly engaged)
5. Details of the purpose for which
GDRs/ADRs have been raised. If funds are
deployed for overseas investment, details
thereof
6. Name and address of the Depository abroad
7. Name and address of the Lead Manager/
Investment/Merchant Banker
8. Name and address of the Sub-Managers to
the issue
9. Name and address of the Indian Custodians
10. Details of FIPB approval (please quote the
relevant NIC Code if the GDRs/ADRs are
being issued under the Automatic Route)
11. Whether any overall sectoral cap for foreign
investment is applicable. If yes, please give
details
12. Details of the Equity Capital Before Issue After Issue
(a) Authorised Capital
(b) Issued and Paid-up Capital
(i) Held by persons Resident in
India
(ii) Held by foreign investors other
than FIIs/NRIs/PIOs/ OCBs (a
list of foreign investors holding
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more than 10 percent of the
paid-up capital and number of
shares held by each of them
should be furnished)
(iii) Held by NRIs/PIOs/OCBs
(iv) Held by FIIs
Total Equity held by non-residents
(c) Percentage of equity held by nonresidents
to total paid-up capital
13. Whether issue was on private placement
basis. If yes, please give details of the
investors and GDRs/ADRs issued to each
of them
14. Number of GDRs/ADRs issued
15. Ratio of GDRs/ADRs to underlying shares
16. Issue Related Expenses
(a) Fee paid/payable to Merchant
Bankers/Lead Manager
(i) Amount (in US$)
(ii) Amount as percentage to the
total issue
(b) Other expenses
17. Whether funds are kept abroad. If yes,
name and address of the bank
18. Details of the listing arrangement
Name of Stock Exchange
Date of commencement of trading
19. The date on which GDRs/ADRs issue was
launched
20. Amount raised (in US $)
21. Amount repatriated (in US $)
Certified that all the conditions laid down by Government of India and Reserve Bank of
India have been complied with.
Sd/-
Chartered Accountant
Sd/-
Authorised Signatory of the Company
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Annex - 11
[Part I, Section I, para 29]
Form DR - Quarterly
[Refer to paragraph 4(3) of Schedule 1]
Quarterly Return
(to be submitted to the Reserve Bank of India, Foreign Investment Division, Central
Office, Mumbai)
1. Name of the Company
2. Address
3. GDR/ADR issue launched on
4. Total No. of GDRs/ADRs issued
5. Total amount raised
6. Total interest earned till end of quarter
7. Issue expenses and commission etc.
8. Amount repatriated
9. Balance kept abroad - Details
(i) Banks Deposits
(ii) Treasury Bills
(iii) Others (please specify)
10. No. of GDRs/ADRs still outstanding
11. Company's share price at the end of the
quarter
12. GDRs/ADRs price quoted on overseas
stock exchange as at the end of the
quarter
Certified that the funds raised through GDRs/ADRs have not been invested in stock
market or real estate.
Sd/-
Chartered Accountant
Sd/-
Authorised Signatory of the Company
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Annex - 12
IPI
(Part II, para 3)
Declaration of immovable property acquired in India
by a person resident outside India
Instructions:
The declaration should be completed in duplicate and submitted directly to the
Chief General Manager-in-Charge, Foreign Exchange Department, (Foreign
Investment Division), Reserve Bank of India, Central Office, Mumbai- 400 001 within
90 days from the date of acquisition of the immovable property.
Documentation:
Certified copies of letter of approval from Reserve Bank obtained under section
6(6) of FEMA, 1999 (42 of 1999).
1 Full name and address of the
acquirer who has acquired the
immovable property
2 (a) Description of immovable
property
(a)
(b) Details of its exact location
stating the name of the state,
town and municipal/survey
number, etc.
(b)
3 (a) Purpose for which the
immovable property has been
acquired
(a)
(b) Number and date of Reserve
Bank’s permission, if any,
(b)
4 Date of acquisition of the
immovable property
5 (a) How the immovable property
was acquired i.e, whether by
way of purchase or lease
(a)
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(b) Name, citizenship and
address of the seller/lessor
(b)
(c) Amount of purchase price and
sources of funds.
(c)
I/We, hereby declare that –
(a) the particulars given above are true and correct to the best of my/our
knowledge and belief ;
(b) no portion of the said property has been leased/rented to, or is otherwise
being allowed to be used by, any other party .
Encls:
(Signature of Authorised official)
Name ………………………………
Stamp ………………………………
Place…………………
Date…………………..
Designation:………………………..
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Annex - 13
FNC 1
(Part III, para 1)
A. General Instructions to Applicants :
The application Form only should be completed and submitted to the Chief General
Manager -in- Charge, Foreign Exchange Department (Foreign Investment Division),
Reserve Bank of India, Central Office, Mumbai-400001.
B. Documentation :
i) English version of the certificate of incorporation/registration or Memorandum
& Articles of Association attested by Indian Embassy/Notary Public in the
country of registration.
ii) Latest Audited Balance Sheet of the applicant company/firm.
iii) In case of Project Office documentary evidence that the Project is funded by
bilateral or multilateral International Financing Agencies OR the project has
been cleared by the concerned regulatory authority OR the Indian company
has been granted term loan for the concerned Project by a Financial
Institution or a Bank in India.
------------------------------------------------------------------------------------------------------------
1. i) Full name and address of the
applicant company/firm [State
whether the applicant is a
proprietary concern or
partnership firm or limited
company or public sector
undertaking or any other
organisation (Please specify).
ii) Date and Place of
incorporation / registration.
2. Details of capital
i) Paid-up capital _________________divided into
________shares of _______ each
ii) Free Reserves as per
last audited Balance Sheet
3. Brief description of the activities
of the applicant.
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4. FOR LIAISON / BRANCH OFFFICE
i) Value of goods imported from
and / or exported to India by
the applicant during each of
the last three years:
a) Imports from India
b) Exports to India
ii) Particulars of existing arrangements
if any, for representing the company
in India.
iii) Particulars of the proposed Branch/
Liaison Office
a) Details of the activities/services
proposed to be undertaken/
rendered by the office.
b) Place where the office will be
located.
5. FOR PROJECT OFFICE
If the office is to be opened on a temporary basis in
connection with any specific project or contract to be
executed in India by the applicant :
i) Brief description of the project /
contract, including terms of
payment / duration, etc.
ii) Place where the office will be located
iii) Whether the project office is
funded entirely by inward
remittances or by any other source
specified at B (iii)
6. Any other information which the
applicant company wishes to furnish
in support of this application.
------------------------------------------------------------------------------------------------------------
We hereby declare that :
i) The particulars given above are true and correct to the best of our knowledge
and belief;
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ii) Our activities in India would be confined to the fields indicated in column 4(iii)(a)
or 5(i)above;
iii) If we shift the office to another place, we shall intimate the Reserve Bank of
India; and
iv) We will abide by the terms and conditions that may be stipulated by Reserve
Bank of India if approval is given.
Place : (Signature of Authorised Official
of the Applicant Company)
Name:
Date: Designation:
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Appendix
List of Important Circulars/Notifications which have been consolidated in the Master
Circular on Foreign Investments / Acquisition of Immovable property in India/
Establishment of Branch, Liaison and Project Offices in India
and investments in proprietary / partnership firms
Notifications
Sl.No. Notification Date
1. No. FEMA 32/2000-RB December 26, 2000
2. No. FEMA 35/2001-RB February 16, 2001
3. No. FEMA 41/2001-RB March 2, 2001
4. No. FEMA 45/2001-RB September 20, 2001
5. No. FEMA 46/2001-RB November 29, 2001
6. No. FEMA 50/2002-RB February 20, 2002
7. No. FEMA 55/2002-RB March 7, 2002
8. No. FEMA 62/2002-RB May 13, 2002
9. No. FEMA 64/2002-RB June 29, 2002
10. No. FEMA 65/2002-RB June 29, 2002
11. No. FEMA 76/2002-RB November 12, 2002
12. No. FEMA 85/2003-RB January 17, 2003
13. No. FEMA 93/2003-RB June 9, 2003
14. No. FEMA 94/2003-RB June 18, 2003
15. No. FEMA 100/2003-RB October 3, 2003
16. No. FEMA 101/2003-RB October 3, 2003
17. No. FEMA 106/2003-RB October 27, 2003
18. No. FEMA 108/2003-RB January 1, 2004
19. No. FEMA 111/2004-RB March 6 , 2004
20. No.FEMA.118/2004-RB June 29, 2004
21. No.FEMA.122/2004-RB August 30, 2004
22. No.FEMA.125./2004-RB November 27, 2004
23. No.FEMA.130/2005-RB March 17, 2005
24. No.FEMA.131/2005-RB March 17, 2005
25. No.FEMA.138/2005-RB July 22, 2005
26. No. FEMA.136 /2005-RB July 19, 2005
27. No. FEMA.137/2005- RB July 22, 2005
28. No.FEMA.138/2005-RB July 22, 2005
29. No. FEMA.149/2006-RB June 9, 2006
30. No. FEMA.153/2006-RB May 31, 2007
31. No. FEMA.167/2007-RB October 23, 2007
32. No. FEMA.170/2007-RB November 13, 2007
33. No. FEMA.179/2008-RB August 22, 2008
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Circulars
Sl.No. Circulars Date
1. A.P.DIR(Series) Circular No.14 September 26, 2000
2. A.P.DIR(Series) Circular No.24 January 6, 2001
3. A.P.DIR(Series) Circular No.26 February 22, 2001
4. A.P.DIR(Series) Circular No.32 April 28, 2001
5. A.P.DIR(Series) Circular No.13 November 29, 2001
6. A.P.DIR(Series) Circular No.21 February 13, 2002
7. A.P.DIR(Series) Circular No.29 March 11, 2002
8. A.P.DIR(Series) Circular No.1 July 2, 2002
9. A.P.DIR(Series) Circular No.5 July 15, 2002
10. A.P.DIR(Series) Circular No.19 September 12, 2002
11. A.P.DIR(Series) Circular No.35 November 1, 2002
12. A.P.DIR(Series) Circular No.45 November 12, 2002
13. A.P.DIR(Series) Circular No.46 November 12, 2002
14. A.P.DIR(Series) Circular No.52 November 23, 2002
15. A.P.DIR(Series) Circular No.56 November 26, 2002
16. A.P.DIR(Series) Circular No.67 January 13, 2003
17. A.P.DIR(Series) Circular No.68 January 13, 2003
18. A.P.DIR(Series) Circular No.69 January 13, 2003
19. A.P.DIR(Series) Circular No.75 February 3, 2003
20. A.P.DIR(Series) Circular No.88 March 27, 2003
21. A.P.DIR(Series) Circular No.101 May 5, 2003
22. A.P.DIR(Series) Circular No.10 August 20, 2003
23. A.P.DIR(Series) Circular No.13 September 1, 2003
24. A.P.DIR(Series) Circular No.14 September 16, 2003
25. A.P.DIR(Series) Circular No.19 September 23, 2003
26. A.P.DIR(Series) Circular No.28 October 17, 2003
27. A.P.DIR(Series) Circular No.35 November 14, 2003
28. A.P.DIR(Series) Circular No.38 December 3, 2003
29. A.P.DIR(Series) Circular No.39 December 3, 2003
30. A.P.DIR(Series) Circular No.43 December 8, 2003
31. A.P.DIR(Series) Circular No.44 December 8, 2003
32. AP (DIR Series) Circular No.53 December 17, 2003
33. A.P.DIR(Series) Circular No.54 December 20, 2003
34. A.P.DIR(Series) Circular No.63 February 3, 2004
35. A.P.DIR(Series) Circular No.67 February 6, 2004
36. A.P.DIR(Series) Circular No.89 April 24, 2004
37. A.P.DIR(Series) Circular No.11 September 13, 2004
38. A.P.DIR(Series) Circular No.13 October 1, 2004
39. A.P.DIR(Series) Circular No.15
October 1, 2004
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40 A.P.DIR(Series) Circular No.16
October 4, 2004
41. A.P.DIR(Series) Circular No.39 April 25, 2005
42. A.P.DIR(Series) Circular No.44 May 17, 2005
43. AP (DIR Series) Circular No. 04 July 29, 2005
44. A.P. (DIR Series) Circular No. 06 August 11, 2005
45. A.P. (DIR Series) Circular No. 07 August 17, 2005
46. A.P. (DIR Series) Circular No. 08 August 25, 2005
47. A. P. (DIR Series) Circular No. 10 August 30, 2005
48. A.P. (DIR Series) Circular No. 11 September 05, 2005
49. A.P. (DIR Series) Circular No.16 November 11, 2005
50. A.P.( DIR Series) Circular No. 24 January 25, 2006
51. A.P.( DIR Series) Circular No. 4 July 28, 2006
52. A.P.( DIR Series) Circular No. 5 August 16, 2006
53. A.P.( DIR Series) Circular No. 12 November 16, 2006
54. A.P.( DIR Series) Circular No. 25 December 22, 2006
55. A.P.( DIR Series) Circular No. 32 February 8, 2007
56. A.P.( DIR Series) Circular No. 40 April 20, 2007
57. A.P.( DIR Series) Circular No. 62 May 24, 2007
58. A.P.( DIR Series) Circular No. 65 May 31, 2007
59. A.P.( DIR Series) Circular No. 73 June 8, 2007
60. A.P.( DIR Series) Circular No. 74 June 8, 2007
61. A.P.( DIR Series) Circular No. 2 July 19, 2007
62. A.P.( DIR Series) Circular No. 20 December 14, 2007
63. A.P.( DIR Series) Circular No. 22 December 19, 2007
64. A.P.( DIR Series) Circular No. 23 December 31, 2007
65. A.P.( DIR Series) Circular No. 40 April 28, 2008
66. A.P.( DIR Series) Circular No. 41 April 28, 2008
67. A.P.( DIR Series) Circular No. 44 May 30, 2008
68. A.P.( DIR Series) Circular No. 02 July 31, 2008
69. A.P.( DIR Series) Circular No. 25 October 17, 2008
70. A.P.( DIR Series) Circular No. 63 April 22, 200
