TaxTMI 
TaxTMI 
Consolidated FDI Policy
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....nt besides entry conditions 4.6 Downstream Investment by Indian Companies 4.7 Guidelines for consideration of FDI Proposals by FIPB 4.8 Constitution of FIPB 4.9 Approval Levels for cases under Government Route 4.10 Cases which do not require fresh Approval CHAPTER-5 POLICY ON ROUTE, CAPS AND ENTRY CONDITIONS 5.1 PROHIBITION ON INVESTMENT IN INDIA 5.2 SECTOR-SPECIFIC POLICY FOR FDI AGRICULTURE 5.2.1 Agriculture & Animal Husbandry 5.2.2 Tea plantation INDUSTRY MINING 5.2.3 Mining MANUFACTURING 5.2.4 Manufacture of items reserved for production in Micro and Small Enterprises (MSEs) 5.2.5 Defence Industry POWER 5.2.6 Electric Generation, Transmission, Distribution and Trading SERVICES SECTOR 5.2.7 Civil Aviation Sector 5.2.8 Asset Reconstruction Companies 5.2.9 Banking -Private sector 5.2.10 Banking- Public Sector 5.2.11 Broadcasting 5.2.12 Commodity Exchanges 5.2.13 Development of Townships, Housing, Built-up infrastructure and Construction-development projects 5.2.14 Credit Information Companies (CIC) 5.2.15 Industrial Parks both setting up and in established Industrial Parks 5.2.16 Insurance 5.2.17 Infrastructure Company in the Securities Market 5.2.18....
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....investor. The motivation of the direct investor is a strategic long term relationship with the direct investment enterprise to ensure the significant degree of influence by the direct investor in the management of the direct investment enterprise. Direct investment allows the direct investor to gain access to the direct investment enterprise which it might otherwise be unable to do. The objectives of direct investment are different from those of portfolio investment whereby investors do not generally expect to influence the management of the enterprise. In the Indian context, FDI is defined in Para 2.1.12 of this Circular. 1.1.4 It is the policy of the Government of India to attract and promote productive FDI in activities which significantly contribute to industrialization and socio-economic development. FDI supplements domestic capital and technology. 1.1.5 The Legal basis: Foreign Direct Investment by non-resident in resident entities through transfer or issue of security to person resident outside India is a 'Capital account transaction' and is regulated under FEMA, 1999 and its regulations. Keeping in view the current requirements, the Government from time to time comes up w....
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....nts thereof. CHAPTER 2: DEFINITIONS 2.1 DEFINITIONS: The definitions of terms used in this circular are as follows:- 2.1.1 'AD Category-I Bank' means a bank( Scheduled Commercial, State or Urban Cooperative) which is authorized under Section 10(1) of FEMA to undertake all current and capital account transactions according to the directions issued by the RBI from time to time. 2.1.2 'Authorized Bank' means a bank including a co-operative bank (other than an authorized dealer) authorized by the Reserve Bank to maintain an account of a person resident outside India 2.1.3 'Authorized Dealer' means a person authorized as an authorized dealer under sub-section (1) of section 10 of FEMA. 2.1.4 'Authorized Person' means an authorized dealer, money changer, offshore banking unit or any other person for the time being authorized under Sub-section (a) of Section 10 of FEMA to deal in foreign exchange or foreign securities. 2.1.5 'Capital' means equity shares; fully, compulsorily & mandatorily convertible preference shares; fully, compulsorily & mandatorily convertible debentures. Note : Any other type of instruments like warrants, partly paid shares etc. are not considered as capital.....
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....ubscribed by a non-resident entity in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part. 2.1.12 'FDI' means investment by non-resident entity/person resident outside India in the capital of the Indian company under Schedule 1 of FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000. 2.1.13 'FEMA' means the Foreign Exchange Management Act 1999 (42 of 1999). 2.1.14 'FIPB' means the Foreign Investment Promotion Board constituted by the Government of India. 2.1.15 'Foreign Institutional Investor'(FII) means an entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the SEBI (FII) Regulations 1995. 2.1.16 'Foreign Venture Capital Investor' (FVCI) means an investor incorporated and established outside India, which is registered under the Securities and Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000 {SEBI(FVCI) Regulations} and proposes to make investment in accordance with these Regulations 2.1.17 'Government route' means that investment in the capital of residen....
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....ub-clauses, and (vii) any agency, office, or branch owned or controlled by such person. 2.1.30 'Person of Indian Origin' (PIO) means a citizen of any country other than Bangladesh or Pakistan, if (i) he at any time held Indian Passport (ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (iii) the person is a spouse of an Indian citizen or a person referred to in sub-clause (i) or (ii). 2.1.31 'Person resident in India' means - (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....
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....Nepal and Bhutan are permitted to invest in the capital of Indian companies 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. 3.1.3 OCBs have been derecognized as a class of Investors in India with effect from September 16, 2003. Erstwhile OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh investments under FDI Policy 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 RBI if the investment is through Automatic route. 3.1.4 (i) An FII may invest in the capital of an Indian company either under the FDI Scheme/Policy or the Portfolio Investment Scheme. 10% individual limit and 24% aggregate limit for FII investment would still be applicable even when FIIs invest under the FDI scheme/policy (ii) The Indian company which has issued shares to FIIs under the FDI Policy for which the payment has been received directly into company's account should report these figures separ....
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.... Indian companies can raise foreign currency resources abroad through the issue of FCCB/DR (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 there under from time to time. (ii) A company can issue ADRs / GDRs if it is eligible to issue shares to persons resident outside India under the FDI Policy. 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. (iii) 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 / G....
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....hares (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. 3.2.5 (i) Two-way Fungibility 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. Re-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. (ii) 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 are 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 ....
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..../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. Non-compliance with the above provision would be reckoned as a contravention under FEMA and would 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 RBI, on the merits of the case. 3.4.2 Issue price of shares - Price of shares issued to persons resident outside India under the FDI Policy, shall not be less than - a. the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company is listed on any recognised stock exchange in India; b. the fair valuation of shares done by a SEBI registered Category - I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method, where the shares of the company is not listed on any recognised stock exchange in India ; and c. the price as applicable to transfer of shares from resident to non-resident as per the pricing guidel....
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....ngaged in an activity earlier covered under the Government Route but now falling under Automatic Route, 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.). (h) 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. (ii) 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 Know Your Customer (KYC) check by the remittance receiving AD Category - I bank at the time of receipt of f....
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....ansfer any capital instrument, by way of gift to a person resident outside India, has to obtain prior approval from Reserve Bank. While forwarding applications to Reserve Bank for approval for transfer of capital instruments by way of gift, the documents mentioned in Annex-3 should be enclosed. Reserve Bank considers the following factors while processing such applications: (a) The proposed transferee (donee) is eligible to hold such capital instruments 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-4 . (e) The value of capital instruments to be transferred together with any capital instruments already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee....
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....have been de-recognised as a class of investors from September 16, 2003. Therefore companies desiring to issue rights share to such erstwhile OCBs will have to take specific prior permission from RBI. As such, entitlement of rights share is not automatically available to erstwhile OCBs. However bonus shares can be issued to erstwhile OCBs without the approval of RBI. 3.5.3 Additional allocation of rights share by residents to non-residents - Existing non-resident shareholders are allowed to apply for issue of additional shares/ fully, compulsorily and mandatorily convertible debentures/ fully, compulsorily and mandatorily convertible preference shares over and above their rights share entitlements. The investee company can allot the additional rights share out of unsubscribed portion, subject to the condition that the overall issue of shares to non-residents in the total paid-up capital of the company does not exceed the sectoral cap. 3.5.4 Acquisition of shares under Scheme of Merger/Demerger/Amalgamation - Mergers/demergers/ 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 unde....
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....ECT AND INDIRECT FOREIGN INVESTMENT IN INDIAN COMPANIES. 4.1.1 Investment in Indian companies can be made both by non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign investment. Investment by resident Indian entities could again comprise of both resident and non-resident investment. Thus, such an Indian company would have indirect foreign investment if the Indian investing company has foreign investment in it. The indirect investment can also be a cascading investment i.e. through multi-layered structure. 4.1.2 For the purpose of computation of indirect Foreign investment, Foreign Investment in Indian company shall include all types of foreign investments i.e. FDI; investment by FIIs(holding as on March 31); NRIs; ADRs; GDRs; Foreign Currency Convertible Bonds (FCCB); fully, compulsorily and mandatorily convertible preference shares and fully,compulsorily and mandatorily convertible Debentures regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. 4.1.3 Guidelines for calculation of total foreign i....
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.... equity in Company X would be computed in the ratio of 75: 25 in the total investment of Company Y in Company X. (iii)The total foreign investment would be the sum total of direct and indirect foreign investment. (iv) The above methodology of calculation would apply at every stage of investment in Indian Companies and thus to each and every Indian Company. (v) Additional conditions: (a) The full details about the foreign investment including ownership details etc. in Indian company(s) and information about the control of the company(s) would be furnished by the Company(s) to the Government of India at the time of seeking approval. (b) In any sector/activity, where Government approval is required for foreign investment and in cases where there are any inter-se agreements between/amongst share-holders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider such inter-se agreements for determining ownership and control when considering....
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....erned specifically under any statutes or rules there under. The above methodology of determining direct and indirect foreign investment therefore does not apply to the Insurance Sector which will continue to be governed by the relevant Regulation. 4.1.5 Any foreign investment already made in accordance with the guidelines in existence prior to February 13, 2009 (date of issue of Press Note 2 of 2009) would not require any modification to conform to these guidelines. All other investments, past and future, would come under the ambit of these new guidelines. 4.2 ENTRY ROUTES FOR INVESTMENT: 4.2.1 Investments can be made by non-residents in the equity shares/fully, compulsorily and mandatorily convertible debentures/ fully, compulsorily and mandatorily convertible preference shares of an Indian company, through two routes; the Automatic Route and the Government Route. Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from the RBI or Government of India for the investment. Under the Government Route, prior approval of the Government of India through Foreign Investment Promotion Board (FIPB) is required. Proposals for foreign inv....
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....Information Technology sector or in the mining sector for same area/mineral. 4.2.2.4 For the purpose of 'same' field 4 digit NIC, 1987 Code 4 will be relevant. 4.2.3 Guidelines for establishment of Indian companies/ transfer of ownership or control of Indian companies, from resident Indian citizens to non-resident entities, in sectors with caps: In sectors/activities with caps, including inter-alia defence production, air transport services, ground handling services, asset reconstruction companies, private sector banking, broadcasting, commodity exchanges, credit information companies, insurance, print media, telecommunications and satellites, Government approval/FIPB approval would be required in all cases where: (i) An Indian company is being established with foreign investment and is owned by a non-resident entity or (ii) An Indian company is being established with foreign investment and is controlled by a non-resident entity or (iii) The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident ent....
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.... The national security/internal security related conditions as contained in relevant statutes or notifications of the Government will also have to be complied with. 4.5.3 The State Governments/Union Territories have regulations in relations to the subjects in their legislative domain. These conditions also have to be met/complied with. 4.6 DOWNSTREAM INVESTMENT BY INDIAN COMPANIES 4.6.1 The Policy for downstream investment by Indian companies seeks to lay down and clarify about compliance with the Foreign investment norms on entry route, conditionalities and sectoral caps. The 'guiding principle' is that downstream investment by companies 'owned' or 'controlled' by non resident entities would require to follow the same norms as a direct foreign investment i.e. only as much can be done by way of indirect foreign investment through downstream investment in Para 4.1 as can be done through direct foreign investment and what can be done directly can be done indirectly under same norms. 4.6.2 The Guidelines for calculation of total foreign investment, both direct and indirect in an Indian company, at every stage of investment, including downstream investment, have been detailed in Pa....
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.... amount or extent of foreign investment. Further, as and when such company commences business(s) or makes downstream investment it will have to comply with the relevant sectoral conditions on entry route, conditionalities and caps. 4.6.6. For Operating-cum- investing companies and investing companies (Para 4.6.4) and for companies as per para 4.6.5 above, downstream investments can be made subject to the following conditions: (i) Such company is to notify SIA, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.com/portal/forms/FIPB%20Application%20Form%20for%20 Press%20Note%204%20of%202009.doc within 30 days of such investment even if capital instruments have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme); (ii) downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of the Board of Directors supporting the said induction as also a shareholders Agreement if any; (iii) issue/transfer/pricing/valuation of shares shall be in accordance with applicable SEBI/RBI guidelines; (iv) For the purpose of downstream....
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....7.9 The following should be especially considered during the scrutiny and consideration of proposals. (i) The extent of foreign equity proposed to be held (keeping in view sectoral caps if any (ii) Extent of equity from the point of view whether the proposed project would amount to a holding company/wholly owned subsidiary/a company with dominant foreign investment (i.e. 76% or more) joint venture. (iii) Whether the proposed foreign equity is for setting up a new project (joint venture or otherwise) or whether it is for enlargement of foreign/NRI equity or whether it is for fresh induction of foreign equity/NRI equity in an existing Indian company. (iv) In the case of fresh induction offerings/NRI equity and/or in cases of enlargement of foreign/NRI equity, in existing Indian companies whether there is a resolution of the Board of Directors supporting the said induction/enlargement of foreign/NRI equity and whether there is a shareholders agreement or not. (v) In the case of induction of fresh equity in the existing Indian companies and/or enlargement of foreign equity in existing Indian companies, the reason why the proposal has been made and the modality for induction/enhanc....
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....(iii) The CCEA would also consider the proposals which may be referred to it by the FIPB/ the Minister of Finance (in-charge of FIPB). 4.10 CASES WHICH DO NOT REQUIRE FRESH APPROVAL 4.10.1 Companies may not require fresh prior approval of the Government i.e. Minister in-charge of FIPB/CCEA for bringing in additional foreign investment into the same entity, in the following cases: (i) Cases of entities whose activities had earlier required prior approval of FIPB/CCFI/CCEA and who had, accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such activities/sectors have been placed under automatic route; (ii) Cases of entities whose activities had sectoral caps earlier and who had, accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such caps were removed/increased and the activities placed under the automatic route; provided that such additional investment alongwith the initial/original investment does not exceed the sectoral caps; and (iii) The cases of additional foreign investment into the same entity where prior approval of FIPB/CCFI/CCEA had been obt....
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....rs Note: Besides the above, FDI is not allowed in any other agricultural sector/activity 100% Automatic 5.2.1.1 Other conditions: For companies dealing with development of transgenic seeds/vegetables, the following conditions apply: (i) When dealing with genetically modified seeds or planting material the company shall comply with safety requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms. (ii) Any import of genetically modified materials if required shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992. (iii) The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time. (iv) Undertaking of business activities involving the use of genetically engineered cells and material shall be subject to the receipt of approvals from Genetic Engineering Approval Committee (GEAC) and Review Committee on Genetic Manipulation (RCGM). (v) Import of materials shall be in accordance with National Seeds Policy. (vi) The term "under controlled conditions" covers the followin....
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.... and Lignite (1) Coal & Lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973. 100% Automatic (2) Setting up coal processing plants like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. 100% Automatic 5.2.3.3 Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities 100% Automatic 5.2.3.3.1 Mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectoral regulations and the Mines and Minerals (Development and Regulation Act 1957) 100% Automatic 5.2.3.3.2 Other conditions: India has large reserves of beach sand minerals in the coastal stretches around the country. Titanium bearing minerals viz. Ilmenite, rutile and leucoxene, and Zirconium be....
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.... objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to befulfilled. MANUFACTURING 5.2.4 Manufacture of items reserved for production in Micro and Small Enterprises (MSEs) 5.2.4.1 FDI in MSEs will be subject to the sectoral caps, entry routes and other relevant sectoral regulations. Any industrial undertaking which is not a Micro or Small Scale Enterprise, but manufactures items reserved for the MSE sector would require Government route where foreign investment is more than 24% in the capital. Such an undertaking would also require an Industrial License under the Industries (Development & Regulation) Act 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production and in accordance with the provisions of section 11 of the Micro, Small and Medium Enterprises Development A....
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.... as well as the recommendations of the Ministry of Defence, which will look into existing capacities of similar and allied products. (xi) Import of equipment for pre-production activity including development of prototype by the applicant company would be permitted. (xii) Adequate safety and security procedures would need to be put in place by the licensee once the licence is granted and production commences. These would be subject to verification by authorized Government agencies. (xiii) The standards and testing procedures for equipment to be produced under licence from foreign collaborators or from indigenous R & D will have to be provided by the licensee to the Government nominated quality assurance agency under appropriate confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Self-certification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals. (xiv) Purchase pref....
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....ys and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934; (ii) "Aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto; (iii)"Air transport service" means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights. (iv)"Air Transport Undertaking" means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward. (v) "Aircraft component" means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment; (vi)"Helicopter" means a heavier-than -air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis; (vii) "Scheduled air t....
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....ices requiring DGCA approval 100% Automatic 5.2.7.2.3 Other services under Civil Aviation sector (1) Ground Handling Services subject to sectoral regulations and security clearance 74% FDI (100% for NRIs) Automatic up to 49% Government route beyond 49% and up to 74% 5.2.8 Asset Reconstruction Companies 5.2.8.1 'Asset Reconstruction Company' (ARC) means a company registered with the Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). 5.2.8.2 FDI limit 49% of paid-up capital of ARC Government 5.2.8.3 Other conditions: (i) Persons resident outside India, other than Foreign Institutional Investors (FIIs), can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank only under the Government Route. Such investments have to be strictly in the nature of FDI. Investments by FIIs are not permitted in the equity capital of ARCs. (ii) However, FIIs registered with SEBI can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs can invest upto 49 per cent of each tranche of scheme of SRs, subject to ....
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....estment (FDI route) in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority (IRDA) in order to ensure that the 26 per cent limit of foreign shareholding applicable for the insurance sector is not being breached. (d) Transfer of shares under FDI from residents to non-residents will continue to require approval of RBI and Government as per para 4.2.3 above as applicable. (e) The policies and procedures prescribed from time to time by RBI and other institutions such as SEBI, D/o Company Affairs and IRDA on these matters will continue to apply. (f) RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank, if such acquisition results in any person owning or controlling 5 per cent or more of the paid up capital of the private bank will apply to non-resident investors as well. (ii) Setting up of a subsidiary by foreign banks (a) Foreign banks will be permitted to either have branches or subsidiaries but not both. (b) Foreign banks regulated by banking supervisory authority in the home country and....
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.... Direct to-Home subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting 49% (FDI, NRI & PIO investments and portfolio investment) Within this limit, FDI component not to exceed 20% Government 5.2.11.4 Headend-In-The-Sky (HITS) Broadcasting Service refers to the Multi channel down linking and distribution of television programme in C Band or Ku Band wherein all the pay channels are downlinked at a central facility (Hub/teleport) and again uplinked to a satellite after encryption of channel. At the cable headend these encrypted pay channels are downlinked using a single satellite antenna, transmodulated and sent to the subscribers by using a land based transmission system comprising of infrastructure of cable/optical fibres network. 5.2.11.4.1 FDI limit in (HITS) Broadcasting Service is subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting. 74% (total direct and indirect foreign investment including portfolio and FDI) Automatic up to 49% Government route beyond 49% and up to 74% 5.2.11.5 Setting up hardware facilities such as up-linking, ....
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.... interests and events, as may be notified in consultation with the Forward Markets Commission by the Central Government, but does not include securities. 5.2.12.2 Policy for FDI in Commodity Exchange 49% (FDI & FII) [Investment by Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26% ] Government 5.2.12.3 Other conditions: (i) FII purchases shall be restricted to secondary market only and (ii) No non-resident investor/ entity, including persons acting in concert, will hold more than 5% of the equity in these companies. 5.2.13 Development of Townships, Housing, Built-up infrastructure and Construction-development projects 5.2.13.1 Townships, housing, built-up infrastructure and construction development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure) 100% Automatic 5.2.13.2 Investment to be made will be subject to the following conditions: (1) Minimum area to be developed under each project would be as under: (i) In case of development of s....
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..../ Local Body concerned, which approves the building / development plans, would monitor compliance of the above conditions by the developer. Note: (i) The conditions at (1) to (4) above would not apply to Hotels & Tourism, Hospitals and SEZ's. (ii) For investment by NRIs, the conditions at (1) to (4) above would not apply. (iii) 100% FDI is allowed under the automatic route in development of Special Economic Zones (SEZ) without the conditionalities at (1) to (4) above. This will be subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce. (iv) FDI is not allowed in Real Estate Business. 5.2.14 Credit Information Companies (CIC) 5.2.14.1 Credit Information Companies 49% (FDI & FII) Government 5.2.14.2 Other Conditions: (1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. (2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI. (3) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall li....
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....c content, other computer related activities, Research and experimental development on natural sciences and engineering, Business and management consultancy activities and Architectural, engineering and other technical activities. 5.2.15.2 FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 5.2.13 above, provided the Industrial Parks meet with the under-mentioned conditions: (i) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area; the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area. 5.2.16 Insurance 5.2.16.1 Insurance 26% Automatic 5.2.16.2 Other Conditions: (1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1999, is allowed under the automatic route. (2) This will be subject to the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority for undertaking insurance activities 5.2.17 Infrastructure Company in the Securities Market 5.2.17.1 Infrastructure comp....
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....perating company. Note: The following activities would be classified as Non-Fund Based activities: (a) Investment Advisory Services (b) Financial Consultancy (c) Forex Broking (d) Money Changing Business (e) Credit Rating Agencies (vii) This will be subject to compliance with the guidelines of RBI. Note: Credit Card business includes issuance, sales, marketing & design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc. (2) Venture Capital Fund (VCF) A Foreign Venture Capital Investor (FVCI) may contribute upto 100% of the capital of an Indian Venture Capital Undertaking and may also set up a domestic asset management company to manage the fund. All such investments can be made under automatic route in terms of Schedule 6 to Notification No. FEMA 20. A SEBI registered FVCI can also invest in domestic venture capital fund registered under the SEBI (Venture Capital Fund) Regulations, 1996. Such investments would also be subject to RBI regulations and FDI policy. However, in case the entity undertaking venture capital fund activity is a Trust registered under the Indian Trust Act, 1882, FDI would....
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....ia under the provisions of the Companies Act, 1956. (iii) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time. 5.2.21 Security Agencies in Private sector 5.2.21.1 The 'Private Security Agencies (Regulation) Act, 2005' regulates the operations of private security agencies. Under Section 6(2) of the above Act, "A company, firm or an association of persons shall not be considered for issue of a licence under this Act, if, it is not registered in India, or is having a proprietor or a majority shareholder, partner or director, who is not a citizen of India". As such, under the provisions of this Act: • a foreign company cannot be considered for a license under the Act • only a firm registered in India can be eligible for a license • to be eligible for a license under the Act, a firm cannot have a foreigndirector/partner • majority shareholder cannot be a foreigner-i.e. foreign shareholding would be ....
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.... of Telecommunications) would be required if such information is to be provided to anybody else. (iii)For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled/routed to any place outside India. (iv)The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected. (v) The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. (vi)The majority Directors on the Board of the company shall be Indian citizens. (vii) The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee. (viii) The Company shall not transfer the following to any person/place outside India:- (a) Any accounting information relating to subscr....
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....National Security angle. (xix) In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories. (xx) For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies. (xxi) The aforesaid Security Conditions shall be applicable to all the licensee companies operating telecom services covered under this circular irrespective of the level of FDI. (xxii)Other Service Providers (OSPs), providing services like Call Centres, Business Process Outsourcing (BPO), tele-marketing, teleeducation, etc, and are registered with DoT as OSP. Such OSPs operate the service using the telecom infrastructure provided by licensed telecom service providers and 100% FDI is permitted for OSPs. As the security conditions are applicable to all licensed telecom service providers, the security conditions mentioned above shall not be separately enforced on OSPs. (3) The above General Conditions and Security Conditions shall also be applicable to the companies operating telecom service(s) with the FDI cap....
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....: (I) Entities holding sales tax/ VAT registration/service tax/excise duty registration; or (II) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/ Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial activity; or (III)Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies; or (IV) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self consumption. Note: An Entity to whom WT is made, may fulfill any one of the 4 conditions. (c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. (d) WT of goods would be permitted among companies of the....
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...., parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898. 5.2.25.1 100% FDI is allowed under the Government route. 5.2.25.2 This will be subject to existing Law i.e Indian Post Office Act 1898 and exclusion of activity relating to the distribution of letters. CHAPTER 6: REMITTANCE, REPORTING AND VIOLATION 6.1 REMITTANCE AND REPATRIATION 6.1.1 Remittance of sale proceeds/Remittance on winding up/Liquidation of Companies: (i) Sale proceeds of shares and securities and their remittance is 'remittance of asset' governed by The Foreign Exchange Management (Remittance of Assets) Regulations 2000 under FEMA. (ii) 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. (iii) 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 u....
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....tting the amount. The report would be acknowledged by the Regional Office concerned, which will allot a Unique Identification Number (UIN) for the amount reported. 6.2.2 Reporting of issue of shares (i) After issue of shares (including bonus and shares issued on rights basis and shares issued under ESOP)/fully, mandatorily & compulsorily convertible debentures / fully, mandatorily & compulsorily convertible preference shares, the Indian company has to file Form FC-GPR, enclosed in Annex-1, not later than 30 days from the date of issue of shares. (ii) 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 Authorized Dealer of the company, who will forward it to the Reserve Bank. The following documents have to be submitted along with Part A: (a) 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 i....
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....st conversion of ECB has to be reported to the Regional Office concerned of the RBI, as indicated below: (i) 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. (ii) 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 non-converted 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. 6.2.5 Reporting of FCCB/ADR/GDR Issues The Indian company issuing ADRs / GDRs has to furnish to the ....
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....mpose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Central Government. 6.3.2 Adjudication and Appeals (i) For the purpose of adjudication of any contravention of FEMA, the Ministry of Finance as per the provisions contained in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 appoints officers of the Central Government as the Adjudicating Authorities for holding an enquiry in the manner prescribed. A reasonable opportunity has to be given to the person alleged 80 to have committed contraventions against whom a complaint has been made for being heard before imposing any penalty. (ii) The Central Government may appoint as per the provisions contained in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, an Appellate Authority/ Appellate Tribunal to hear appeals against the orders of the adjudicating authority. 6.3.3 Compounding Proceedings Under the Foreign Exchange (Compounding Proceedings) Rules 2000, the Central Government may appoint 'Compounding Authority' an officer either from Enforce....