AI Drafter 
TaxTMI 
TaxTMI 
Consolidated FDI Policy
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....Investment 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....
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....nterprise (the direct investment enterprise) that is resident in an economy other than that of the direct 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....
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....rpretation, the relevant FEMA notification will prevail. 1.1.9 Reference to any statute or legislation made in this Circular shall include reference to any modifications, amendments or re-enactments 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 FE....
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....ansactions pursuant to the general permission granted under the Regulations. 2.1.11 'Foreign Currency Convertible Bond'(FCCB) means a bond issued by an Indian company expressed in foreign currency, the principal and interest of which is payable in foreign currency. FCCBs are issued in accordance with the Foreign Currency Convertible Bonds and ordinary shares (through depository receipt mechanism) Scheme 1993 and subscribed 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 acc....
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....e ultimately owned and controlled by resident Indian citizens; 2.1.27 An entity is considered as 'Owned' by 'non resident entities', if more than 50% of the capital in it is beneficially owned by non-residents. 2.1.28 'PAB' means Project Approval Board in DIPP, Ministry of Commerce & Industry, Government of India. 2.1.29 'Person' includes (i) an individual (ii) a Hindu undivided family, (iii) a company (iv) a firm (v) an association of persons or a body of individuals whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding sub-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) &nbs....
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.....1.36 'SEBI' means the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992. 2.1.37 'SEZ' means a Special Economic Zone as defined in Special Economic Zone Act, 2005. 2.1.38 'SIA' means Secretariat of Industrial Assistance in DIPP, Ministry of Commerce & Industry, Government of India. 2.1.39 'Transferable Development Rights' (TDR) means certificates issued in respect of category of land acquired for public purposes either by the Central or State Government in consideration of surrender of land by the owner without monetary compensation, which are transferable in part or whole. 2.1.40 'Venture Capital Fund' (VCF) means a Fund established in the form of a Trust, a company including a body corporate and registered under Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996, which (i) has a dedicated pool of capital; (ii) raised in the manner specified under the Regulations; and (iii) invests in accordance with the Regulations CHAPTER 3: ORIGI....
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.... Security by a Person Resident Outside India) Regulations of FEMA 1999, can invest/trade in capital of Indian Companies in the Indian Stock Exchanges directly i.e. through brokers like a Person Resident in India. 3.1.6 A Foreign Venture Capital Investor (FVCI) may contribute upto 100% of the capital of a Venture Capital Fund/Indian Venture Capital Undertaking and may also set up a domestic asset management company to manage the fund. All such investments are allowed under the automatic route subject to SEBI & RBI regulations and FDI Policy. However FVCIs are also allowed to invest as non-resident entities in other companies subject to FDI Policy. 3.2 TYPES OF INSTRUMENTS. 3.2.1 Indian companies can issue equity shares, fully, compulsorily and mandatorily convertible debentures and fully, compulsorily and mandatorily convertible preference shares subject to pricing guidelines/valuation norms prescribed under FEMA Regulations. The pricing of the capital instruments should be decided/determined upfront at the time of issue of the instruments. 3.2.2 Other types of Preference shares/Deben....
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....e funds in:- (a) Deposits, Certificate of Deposits or other instruments offered by banks rated by Standard and Poor, Fitch, IBCA, Moody's, etc. with rating not below the rating stipulated by Reserve Bank from time to time for the purpose; (b) Deposits with branch/es of Indian Authorized Dealers outside India; and (c) Treasury bills and other monetary instruments with a maturity or unexpired maturity of one year or less. (iv) 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. (v) The ADR / GDR proceeds can be utilized 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. (vi) Voting rights on shares issued under the Scheme shall be as ....
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.... be kept in Resident Foreign Currency (Domestic) accounts in India by the resident shareholders who have tendered such shares for conversion into ADRs / GDRs. 3.3 ENTITIES INTO WHICH FDI CAN BE MADE 3.3.1 FDI in an Indian Company (i) Indian companies including those which are micro and small enterprises (MSEs) can issue capital against FDI. 3.3.2 FDI in Partnership Firm / Proprietary Concern: (i) A Non-Resident Indian (NRI) or a Person of Indian Origin (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; (a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers / Authorized banks. (b) The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector. (c) Amount invested s....
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....dia 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 guidelines laid down by the Reserve Bank from time to time, where the issue of shares is on preferential allotment.. 3.4.3 Foreign Currency Account - Indian companies which are eligible to issue shares to persons resident outside India under the FDI Policy may be allowed to retain the share subscription amount in a Foreign Currency Account, with the prior approval of RBI. 3.4.4 Transfer of shares and convertible debentures - (i)  ....
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....oute, 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 funds. In case,....
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....consideration. (ii) The transfer of capital instruments of companies engaged in sectors falling under the Government Route from residents to non-residents by way of sale or otherwise requires Government approval followed by permission from RBI. (iii) A person resident in India, who intends to transfer 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) &nbs....
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....pplicable tax laws. 3.5 ISSUE OF INSTRUMENTS 3.5.1 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 has to be in accordance with other laws/statutes like the Companies Act, 1956, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (in case of listed companies), etc. The offer on right basis to the persons resident outside India shall be: (a) in the case of shares of a company listed on a recognized stock exchange in India, at a price as determined by the company; (b) in the case of shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to resident shareholders. 3.5.2 Prior permission of RBI for Rights issue to erstwhile OCBs- OCBs have been de-recognised as a class of investors from September 16, 2003. Therefore companies....
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....ition 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 non-resident 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. (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. 3.5.6 Share Swap: In cases of investment by way of swap of shares, irrespective of the amount, valuation of the shares will have to be made by a Category I Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory autho....
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....red as indirect foreign investment, Provided that, as an exception, the indirect foreign investment in only the 100% owned subsidiaries of operating-cum-investing/investing companies, will be limited to the foreign investment in the operating-cum-investing/ investing company. This exception is made since the downstream investment of a 100% owned subsidiary of the holding company is akin to investment made by the holding company and the downstream investment should be a mirror image of the holding company. This exception, however, is strictly for those cases where the entire capital of the downstream subsidy is owned by the holding company. Illustration To illustrate, if the indirect foreign investment is being calculated for Company X which has investment through an investing Company Y having foreign investment, the following would be the method of calculation: (A) where Company Y has foreign investment less than 50%- Company X would not be taken as having any indirect foreign investment through Company Y. (B) where Company Y has foreign investment of say 75% and: (I) invests 26% in Company X, the entire 26% investment by Company Y would be treated as indirect foreign investm....
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...., 1956. The term 'largest Indian shareholder', used in this clause, will include any or a combination of the following: (I) In the case of an individual shareholder, (aa) The individual shareholder, (bb) A relative of the shareholder within the meaning of Section 6 of the Companies Act, 1956. (cc) A company/ group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest. (II) In the case of an Indian company, (aa) The Indian company (bb) A group of Indian companies under the same management and ownership control. (B) For the purpose of this Clause, "Indian company" shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956/ HUF, either singly or in combination holding at least 51% of the shares. (C) Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (i) and (ii) of clause 4.1.3(v)(d)(1) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company. (e) If a declaration is made by persons as per section 187C of the Indian Com....
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....artner where the agreement had been entered on/ prior to January 12, 2005. 4.2.2.2 Where a non-resident investor has an existing joint venture/ technology transfer/ trademark agreement, as on January 12, 2005, new proposals in the same field for investment/technology transfer/technology collaboration/trademark agreement would have to be under the Government approval route through FIPB/ Project Approval Board. The onus to provide requisite justification that the new proposal would not jeopardize the existing joint venture or technology transfer/ trademark partner, would lie equally on the non-resident investor/ technology supplier and the Indian partner. 4.2.2.3 The following investments, however, will be exempt from the requirement of Government approval even though the non-resident investor may be having a joint venture or technology transfer/ trademark agreement in the same field: (a) Investments to be made by Venture Capital Fund registered with the Securities and Exchange Board of India (SEBI); or (b) Investments by Multinational Financial Institutions like Asian Development Bank(ADB), Internation....
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....tizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-resident entities through amalgamation, merger/demerger, acquisition etc. (v) It is clarified that these guidelines will not apply for sectors/activities where there are no foreign investment caps, that is, 100% foreign investment is permitted under the automatic route. 4 NIC Codes are available at http://siadipp.nic.in/policy/nic/nic.htm (vi) It is also clarified that Foreign investment shall include all types of foreign investments i.e. FDI, investment by FIIs, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily & compulsorily convertible preference shares/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. 4.3 CAPS ON INVESTMENTS 4.3.1 Investments can be made by non-residents in the capital of a resident entity only to the extent of the p....
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....iled in Para 4.1 which enables determination of total foreign investment in any/all Indian Companies. 4.6.3 For the purpose of this chapter, (i) 'Operating Company' is an Indian company which is undertaking operations in various economic activities and sectors. (ii) 'Downstream investment' means indirect foreign investment by one Indian company into another Indian company by way of subscription or acquisition in terms of Para 4.1. Para 4.1.3 provides the guidelines for calculation of indirect foreign investment with conditions specified in para 4.1.3 (v). (iv) 'Foreign Investment' would have the same meaning as in Para 4.1 4.6.4 Guidelines for foreign investment into investing companies /downstream investment by Indian Companies 'owned and/or controlled by non resident entities' as per Para 4.1: The Policy on downstream investment comprises policy for (i) only operating companies (ii) operating-cum-investing companies (iii) only investing companies as below: (i) Only o....
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....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 investment, the operating cum investing companies and the investing companies would have to bring in requisite funds from abroad and not leverage funds from domestic market for such investments. This would, however, not preclude downstream operating companies from raising debt in the domestic market. Downstream investments through internal accruals are permissible, subject to provisions of para 4.6.4. 4.7 GUIDELINES FOR CONSIDERATION OF FDI PROPOSALS BY FIPB: 4.7.1 The following g....
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....; 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....
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....T ROUTE 4.9.1 The following approval levels shall operate for proposals involving FDI under the Government route i.e. requiring prior Government approval: (i) The Minister of Finance who is in-charge of FIPB would consider the recommendations of FIPB on proposals with total foreign equity inflow of and below Rs.1200 crore. (ii) The recommendations of FIPB on proposals with total foreign equity inflow of more than Rs. 1200 crore would be placed for consideration of CCEA. The FIPB Secretariat in DEA will process the recommendations of FIPB to obtain the approval of Minister of Finance and CCEA. (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 wh....
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....I In the following sectors/activities, FDI up to the limit indicated against each sector/activity is allowed/permitted subject to other conditions indicated & security conditions where applicable. In sectors/activities not listed below, FDI is permitted upto 100% on the automatic route, subject to applicable laws/sectoral rules/regulations/security conditions. Sl. No. Sector/Activity % of FDI Cap/Equity Entry Route AGRICULTURE 5.2.1 Agriculture & Animal Husbandry Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture and Cultivation of Vegetables & Mushrooms under controlled conditions and services related to agro and allied sectors. Note: Besides the above, FDI is not allowed in any other agricultural sector/activity and Cultivation of Vegetables & Mushrooms under controlled conditions and services related to agro and allied sectors 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 geneti....
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....lture, 'under controlled conditions' includes - • Aquariums • Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. 5.2.2 Tea Plantation 5.2.2.1 Tea sector including tea plantations Note: Besides the above, FDI is not allowed in any other plantation sector/activity 100% Government 5.2.2.2 Other conditions: (i) Compulsory divestment of 26% equity of the company in favour of an Indian partner/Indian public within a period of 5 years. (ii) Prior approval of the State Government concerned in case of any future land use change. INDUSTRY MINING 5.2.3 MINING 5.2.3.1 Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals( Development & Regulation) Act, 1957. 100% Automatic 5.2.3.2 Coal 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 ....
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....transfer of technology; (B) 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. (ii) FDI will not be allowed in mining of "prescribed substances" listed in the Notification No. S.O. 61(E) dated 18.1.2006 issued by the Department of Atomic Energy. Clarification: (1) For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Ilmenite can be processed to produce 'Synthetic Rutile or Titanium Slag as an intermediate value added product. (2) The objective is to ensure that the raw material available in the country is utilized \ for setting up downstream industries and the technology available internationally is available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to befulfilled. MANUFACTURING &nbs....
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....d Forces, Space and Atomic energy sections and having an established R & D base. (vii) There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the non-resident investor taking into account the category of weapons and equipment that are proposed to be manufactured. (viii) There would be a three-year lock-in period for transfer of equity from one non-resident investor to another non-resident investor (including NRIs & erstwhile OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the FIPB and the Government. (ix) The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipment and overall requirements would be made available to the extent possible. (x) The capacity norms for production will be provided in the licence based on the application as well as the recommendations of the Ministry of Defence, which will look into existin....
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....p; 5.2.6.1 i) Generation and transmission of electric energy produced in-hydro electric, coal/lignite based thermal, oil based thermal and gas based thermal power plants. ii) Non-Conventional Energy Generation and Distribution. iii) Distribution of electric energy to households, industrial, commercial and other users and iv) Power Trading Note 1: All the above would be subject to the provisions of the Electricity Act 2003. Note 2: (i) to (iii) above do not include generation, transmission and distribution of electricity produced in atomic power plant/atomic energy since private investment in this sector/activity is prohibited and is reserved for public sector. 100% Automatic SERVICES SECTOR 5.2.7 Civil Aviation Sector The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services / Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. For the purposes of the Civil Aviation sector: (i) "Airport" means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenge....
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....rom time to time, Civil Aviation Requirements, and Aeronautical Information Circulars as notified by the Ministry of Civil Aviation 5.2.7.2.1 Airports (a) Greenfield projects 100% Automatic (b) Existing projects 100% Automatic up to 74% Government route beyond 74% 5.2.7.2.2 Air Transport Services (a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Airlines; Chartered Airlines; Cargo Airlines; helicopter and seaplane services. (b) No foreign airlines would be allowed to participate directly or indirectly in the equity of an Air Transport Undertaking engaged in operating Scheduled, Non-Scheduled, and Chartered airlines. (c) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services. (1) Scheduled Air Transport Service/Domestic Scheduled Passenger Airline 49% FDI (100% for RIs) Automatic (2) Non-Scheduled Air Transport Service/ Non-Scheduled airlines, Chartered airlines, and Cargo airlines 74% FDI (100% for NRIs) Automatic up to 49% Government route beyond 49% and up to 74% (3) Helicopte....
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....ill be applicable to all investments in existing private sector banks also. (4) The permissible limits under portfolio investment schemes through stock exchanges for FIIs and NRIs will be as follows: (i) In the case of FIIs, as hitherto, individual FII holding is restricted to 10 per cent of the total paid-up capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital, which can be raised to 49 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body. (a) Thus, the FII investment limit will continue to be within 49 per cent of the total paid-up capital. (b) In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and nonrepatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-up capital both on repatriation and non-repatriation basis. However, NRI holding can be allowed up to 24 per cent of the total paid-up capital both on repatriation and non-repatriation basis provided the banking company passes a special resolution to that effe....
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....oreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI. (iii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals. 5.2.10 Banking- Public Sector 5.2.10.1 Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks. 20% (FDI and Portfolio Investment) Government 5.2.11 Broadcasting 5.2.11.1 Terrestrial Broadcasting FM (FM Radio) subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations 20% (FDI, NRI & PIO investments and portfolio investment) Government 5.2.11.2 Cable Network subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting 49% (FDI, NRI &....
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....ock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges. 2. For the purposes of this chapter, (i) "Commodity Exchange" is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities. (ii) "recognized association" means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952. (iii) "Association" means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative. (iv) "Forward contract" means a contract for the delivery of goods and which is not a ready delivery contract. (v) "Commodity derivative" means- • a contract for delivery of goods, which is not a ready delivery contract; or • a contract for differences wh....
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....aining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots. For the purpose of these guidelines, "undeveloped plots" will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. (5) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned. (6) The investor/investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescr....
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....ion and distribution of power, air conditioning. (iii)"Common Facilities" refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. (iv) "Allocable area" in the Industrial Park means- (a) in the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common facilities. (b) in the case of built up space- the floor area and built up space utilized for providing common facilities. (c) in the case of a combination of developed land and built-up space the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities. (v) "Industrial Activity" means manufacturing, ele....
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....matic 5.2.18.2 Other Conditions: (1) Investment would be subject to the following minimum capitalisation norms: (i) US $0.5 million for foreign capital upto 51% to be brought upfront (ii) US $ 5 million for foreign capital more than 51% and upto 75% to be brought upfront (iii) US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought upfront and the balance in 24 months. (iv) 100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 4.6.4 (iii) (b), therefore, shall not apply to downstream subsidiaries. (v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below. (vi) Non- Fund based activities : US $0.5 million to be brought upfront for all p....
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....estic equity in the existing PSUs. 49% Government 5.2.20 Print Media 5.2.20.1 Publishing of Newspaper and periodicals dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) Government 5.2.20.2 Publication of Indian editions of foreign magazines dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) Government 5.2.20.2.1 Other Conditions: (i) 'Magazine', for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. (ii) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008. 5.2.20.3 Publishing/printing of Scientific and Technical Magazines/specialty journals/ periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting 100% Government 5.2.20.4 Publication of facsimile edition of foreign newspapers 100% Government 5.2.20.4.1 Ot....
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....lobal Mobile Personal Communications Services (GMPCS) and other value added Services. (ii) Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include investment by Foreign Institutional Investors (FIIs), Nonresident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entity. In any case, the `Indian' shareholding will not be less than 26 percent. (iii) FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. (iv) The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. (v) FDI shall be subject to laws of India and not the laws of the foreign country/countries. (2) Security Conditions: (i) T....
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.... be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Ministry of Home Affairs. (xii) Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time. (xiii) The licensee company is not allowed to use remote access facility for monitoring of content. (xiv) Suitable technical device should be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes. (xv) Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. (xvi) The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for ....
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....f their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. 100% Automatic up to 49% Government route beyond 49% 5.2.24 Trading 5.2.2 4.1 (i) Cash & Carry trading Wholesale Trading/ Wholesale Trading 100% Automatic 5.2.24.1.1 Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce. 5.2.24.1.2 Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT): (a) For undertaking WT, requisite licenses/registration/ permits, ....
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....est marketing. 100% Government 5.2.24.6 Single Brand product trading6 51% Government (1) Foreign Investment in Single Brand product trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. (2) FDI in Single Brand products retail trade would be subject to the following conditions: (a) Products to be sold should be of a 'Single Brand' only. (b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. (c) 'Single Brand' product-retailing would cover only products which are branded during manufacturing. (3) Application seeking permission of the Government for FDI in retail trade of 'Single Brand' products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The application would specifically indicate the product/ product categories which are proposed to be sold....
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....Act, 1956. d. In case of winding up otherwise than by a court, an auditor's certificate to the effect that there are 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. 6.1.2 Repatriation of Dividend: Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time. 6.1.3 Repatriation of Interest: Interest on fully, mandatorily & compulsorily convertible debentures is also freely repatriable without any restrictions (net of applicable taxes). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time. 6.2. REPORTING OF FDI 6.2.1 Reporting of Inflow (i) An Indian company receiving investment from outside India for issuing shares / convertible deben....
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....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 Category-I 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 Bank. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/reinvested earnings/other capital in the Indian company made during the previous years (i.e. the information in Part B submitted by 31st July will pertain to all the investments made in the previous years up to March 31). 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 / portfol....
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....s has to furnish to the Reserve Bank, full details of such issue in the Form enclosed as Annex-8, within 30 days from the date of closing of the issue. The company should also furnish a quarterly return in the Form enclosed as Annex - 9, 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. 6.3 ADHERENCE TO GUIDELINES/ORDERS AND CONSEQUENCES OF VIOLATION FDI is a capital account transaction and thus any violation of FDI regulations are covered by the penal provisions of the FEMA. Reserve Bank of India administers the FEMA and Directorate of Enforcement under the Ministry of Finance is the authority for the enforcement of FEMA. The Directorate takes up investigation in any contravention of FEMA. 6.3.1 Penalties (i) If a person violates/contravenes any FDI Regulations, by way of breach/nonadherence/ non-compliance/contravention of any rule, regulation, notification, press note, press release, circular, direction or order ....
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.... 6.3.3 Compounding Proceedings Under the Foreign Exchange (Compounding Proceedings) Rules 2000, the Central Government may appoint 'Compounding Authority' an officer either from Enforcement Directorate or Reserve Bank of India for any person contravening any provisions of the FEMA. The Compounding Authorities are authorized to compound the amount involved in the contravention to the Act made by the person. No contravention shall be compounded unless the amount involved in such contravention is quantifiable. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerns as expeditiously and not later than 180 days from the date of application made to the Compounding Authority. Compounding Authority shall issue order specifying the provisions of the Act or of the rules, directions, requisitions....
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....tion of FIPB 4.9 Approval Levels for cases under Government Route 32 35 37 37 4.10 Cases which do not require fresh Approval 38 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 39 39 33 39 39 37 39 41 2 INDUSTRY MINING 42 42 5.2.3 Mining 42 MANUFACTURING 5.2.4 Manufacture of items reserved for production in Micro and Small Enterprises (MSES) 44 44 5.2.5 Defence Industry 44 POWER 47 5.2.6 Electric Generation, Transmission, Distribution and Trading 47 SERVICES SECTOR 5.2.7 Civil Aviation Sector 48 48 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 Non-Banking Finance Companies (NBFC) 5.2.19 P....
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.... establishing a 'lasting interest' in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct 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 a....
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....ion, the relevant FEMA notification will prevail. 6 1.1.9 Reference to any statute or legislation made in this Circular shall include reference to any modifications, amendments or re-enactments thereof. 7 CHAPTER 2: DEFINITIONS 2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7 2.1.8 DEFINITIONS: The definitions of terms used in this circular are as follows:- '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. '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 'Authorized Dealer' means a person authorized as an authorized dealer under sub-section (1) of section 10 of FEMA. '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. “Capital' means equit....
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....ns a bond issued by an Indian company expressed in foreign currency, the principal and interest of which is payable in foreign currency. FCCBs are issued in accordance with the Foreign Currency Convertible Bonds and ordinary shares (through depository receipt mechanism) Scheme 1993 and subscribed 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. 'FDI' means investment by non-resident entity/person resident outside India in the capital of the Indian company under Schedule 1 of FEM(Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000. 'FEMA' means the Foreign Exchange Management Act 1999 (42 of 1999). 'FIPB' means the Foreign Investment Promotion Board constituted by the Government of India. 9 2.1.15 2.1.16 2.1.17 2.1.18 2.1.19 2.1.20 2.1.21 2.1.22 2.1.23 '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. 'Foreign Venture Capital Investor' (FVCI) means an inves....
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....n DIPP, Ministry of Commerce & Industry, Government of India. 2.1.29 'Person' includes 2.1.30 (i) an individual (ii) a Hindu undivided family, (iii) a company (iv) a firm (v) an association of persons or a body of individuals whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) any agency, office, or branch owned or controlled by such person. '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 11 2.1.31 2.1.32 2.1.33 2.1.34 2.1.35 2.1.36 sub-clause (i) or (ii). '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 taki....
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....UE/TRANSFER OF INVESTMENT 3.1 WHO CAN INVEST IN INDIA? 3.1.1 A non-resident entity (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy. A citizen of Bangladesh or an entity incorporated in Bangladesh can invest in India under the FDI Policy, only under the Government route. 3.1.2 NRIs resident in Nepal and Bhutan as well as citizens of 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 ca....
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....lations, etc. shall apply. Since these instruments would be denominated in rupees, the rupee interest rate will be based on the swap equivalent of London Interbank Offered Rate (LIBOR) plus the spread as permissible for ECBs of corresponding maturity 3.2.3 The inward remittance received by the Indian company vide issuance of DRs and FCCBs are treated as FDI and counted towards FDI. 3.2.4 Issue of shares by Indian Companies under FCCB/ADR/GDR (i) 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 15 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 ....
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.... 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. (ix) 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. 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:....
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.... in Trusts other than VCF is not permitted. 3.3.4 FDI in other Entities¹: FDI in resident entities other than those mentioned above is not permitted. 3.4 CONDITIONS ON ISSUE/TRANSFER OF SHARES 3.4.1 The capital 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 capital 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 1 DIPP has released a Discussion paper towards allowing FDI in Limited Liability Partnership firms,calling for views/suggestions from the stakeholders to review the extant policy 18 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 rece....
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....subscriber's shares), of an Indian company in sectors other than financial services sectors (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-2. (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-2. (g) The above General Permission also covers transfer by a resident to a non- resident of shares/convertible debentures of an Indian company, engaged 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 ....
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.... which falls outside the pricing guidelines specified by the Reserve Bank from time to time. (e) Transfer of capital instruments where the non-resident acquirer proposes deferment of payment of the amount of consideration, prior approval of the Reserve Bank would be required, as hitherto. Further, in case approval is granted for a transaction, the same should be reported in Form FC-TRS, to an 21 AD Category - I bank for necessary due diligence, within 60 days from the date of receipt of the full and final amount of consideration. (ii) The transfer of capital instruments of companies engaged in sectors falling under the Government Route from residents to non-residents by way of sale or otherwise requires Government approval followed by permission from RBI. (iii) A person resident in India, who intends to transfer 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 ap....
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....bject to pricing guidelines as per the provision of para 3.4.2 above and compliance with applicable tax laws. 3.5 ISSUE OF INSTRUMENTS - 3.5.1 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 has to be in accordance with other laws/statutes like the Companies Act, 1956, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (in case of listed companies), etc. The offer on right basis to the persons resident outside India shall be: (a) in the case of shares of a company listed on a recognized stock exchange in India, at a price as determined by the company; (b) in the case of shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to resident shareholders. 3.5.2 Prior permission of RBI for Rights issue to erstwhile OCBs- OCBs have been de-recognised as a class of investors from September 16, 2003. Therefore companies desiring to issue rights share to such erstw....
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....ot exceed 5 per cent of the paid-up capital of the issuing company. 24 (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. (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. 3.5.6 Share Swap: In cases of investment by way of swap of shares, irrespective of the amount, valuation of the shares will have to be made by a Category I Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the host country. Approval of the Foreign Investment Promotion Board (FIPB) will also be a prerequisite for investment by swap of shares. 25 CHAPTER 4: CALCULATION, ENTRY ROUTE, CAPS, ENTRY CONDITIONS, ETC. OF INVESTMENT 4.1 CALCULATION OF TOTAL FOREIGN INVESTMENT I.E. DIRECT AND INDIRECT FOREIGN INVESTMENT IN INDIAN COMPANIES. 4.1.1 Investment in Indian....
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....y the holding company and the downstream investment should be a mirror image of the holding company. This exception, however, is strictly for those cases where the entire capital of the downstream subsidy is owned by the holding company. Illustration To illustrate, if the indirect foreign investment is being calculated for Company X which has investment through an investing Company Y having foreign investment, the following would be the method of calculation: (A) where Company Y has foreign investment less than 50%- Company X would not be taken as having any indirect foreign investment through Company Y. (B) where Company Y has foreign investment of say 75% and: (I) invests 26% in Company X, the entire 26% investment by Company Y would be treated as indirect foreign investment in Company X; (II) Invests 80% in Company X, the indirect foreign investment in Company X would be taken as 80% (III) where Company X is a wholly owned subsidiary of Company Y (i.e. Company Y owns 100% shares of Company X), then only 75% would be treated as indirect foreign equity and the balance 25% would be treated as resident held equity. The indirect foreign equity in Company X would be ....
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....der/HUF to which he belongs has management and controlling interest. (II) In the case of an Indian company, (aa) The Indian company (bb) A group of Indian companies under the same management and ownership control. 28 (B) For the purpose of this Clause, “Indian company" shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956/ HUF, either singly or in combination holding at least 51% of the shares. (C) Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (i) and (ii) of clause 4.1.3(v)(d)(1) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company. (e) If a declaration is made by persons as per section 187C of the Indian Companies Act about a beneficial interest being held by a non resident entity, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment. 4.1.4 The above mentioned policy and the methodology would be applicable for determining the total foreign investment in all sectors, excepting....
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....e onus to provide requisite justification that the new proposal would not jeopardize the existing joint venture or technology transfer/ trademark partner, would lie equally on the non-resident investor/ technology supplier and the Indian partner. 4.2.2.3 The following investments, however, will be exempt from the requirement of Government approval even though the non-resident investor may be having a joint venture or technology transfer/ trademark agreement in the same field: 3 (a) Investments to be made by Venture Capital Fund registered with the Securities and Exchange Board of India (SEBI); or (b) Investments by Multinational Financial Institutions like Asian Development Bank(ADB), International Finance Corporation(IFC), Commonwealth Finance Corporation (CDC), Deutsche Entwicklungs Gescelschaft (DEG) etc.; or (c) where in the existing joint venture, investment by either of the parties is less than 3 per cent; or (d) where the existing joint venture / collaboration is defunct or sick; or DIPP has released a Discussion paper calling for views/suggestions from the stakeholders to review the extant policy on subjecting investment to the ‘Existing Venture/ tie....
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....de all types of foreign investments i.e. FDI, investment by FIIS, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily & compulsorily convertible preference shares/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. 4.3 CAPS ON INVESTMENTS 4.3.1 Investments can be made by non-residents in the capital of a resident entity only to the extent of the percentage of the total capital as provided/permitted in the FDI policy. Thus while investment are prohibited in some sectors/activities, there are restrictions/conditions/caps on the investment in certain other sector/activities. The caps in various sector(s)/activity are detailed out in Chapter 5 of this circular. 4.4 ENTRY CONDITIONS ON INVESTMENT 4.4.1 Investments can be permitted to be made by non-residents in the capital of a resident entity in certain sectors/activity with entry conditions. These entry conditions would be applicable for investment only by non-resident entities. Such conditions may include norms for minimum capitalization, lock-in period, ....
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....ses policy for (i) only operating companies (ii) operating-cum-investing companies (iii) only investing companies as below: (i) Only operating companies: Foreign investment in such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. (ii) Operating-cum-investing companies: (a) Foreign investment into such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. 33 33 (b) Further, the subject Indian companies into which downstream investments are made by such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps in regard of the sector in which the subject Indian companies are operating. (iii) Investing companies: (a) Foreign Investment in Investing Companies will require the prior Government/FIPB approval, regardless of the amount or extent of foreign investment. (b) The Indian companies into which downstream investments are made by such investing companies would ha....
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.... either prior to/or in the meeting of the Board. 4.7.3 Proposals should be considered by the Board keeping in view the time frame of thirty (30) days for communicating Government decision. 4.7.4 In cases in which either the proposal is not cleared or further information is required in order to obviate delays presentation by applicant in the meeting of the FIPB should be resorted to. 4.7.5 While considering cases and making recommendations, FIPB should keep in mind the sectoral requirements and the sectoral policies vis-Ã -vis the proposal (s). 4.7.6 FIPB would consider each proposal in its totality 4.7.7 The Board should examine the following while considering proposals submitted to it for consideration. (i) whether the items of activity involve industrial licence or not and if so the considerations for grant of industrial licence must be gone into; (ii) whether the proposal involves any export projection and if so the items of export and the projected destinations. (iii)Whether the proposal has any strategic or defence related considerations. 4.7.8 While considering proposals the following may be prioritised. (i) Items falling in infrastructure sector. (ii) Ite....
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....ssued to a investor would be changed or additional condition imposed subsequent to the issue of a letter of approval. This would not prohibit changes in general policies and, regulations applicable to the industrial sector. 36 4.8 4.8.1 CONSTITUTION OF FIPB : FIPB comprises of the following Core Group of Secretaries to the Government of India: (i) Secretary to Government, Department of Economic Affairs, Ministry of Finance - Chairperson (ii) Secretary to Government, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry (iii)Secretary to Government, Department of Commerce, Ministry of Commerce & Industry (iv) Secretary to Government, Economic Relations, Ministry of External Affairs (v) Affairs. Secretary to Government, Ministry of Overseas Indian 4.8.2 The Board would be able to co-opt other Secretaries to the Central Government and top officials of financial institutions, banks and professional experts of Industry and Commerce, as and when necessary. 4.9 APPROVAL LEVELS FOR CASES UNDER GOVERNMENT ROUTE 4.9.1 The following approval levels shall operate for proposals involving FDI under the Government route i.e. requiring prior Gover....
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....luding Government /private lottery, online lotteries, etc. (c) Gambling and Betting including casinos etc. (d) Business of chit fund (e) Nidhi company (f) Trading in Transferable Development Rights (TDRs) (g) Real Estate Business or Construction of Farm Houses (h) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes (i) Activities / sectors not opened to private sector investment including Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems). Besides foreign investment in any form, foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also completely prohibited for Lottery Business and Gambling and Betting activities. 5.2 SECTOR-SPECIFIC POLICY FOR FDI In the following sectors/activities, FDI up to the limit indicated against each sector/activity is allowed/permitted subject to other conditions indicated & security conditions where applicable. In sectors/activities not listed below, FDI is permitted upto 100% on the automatic route, subject to applicable laws/sectoral rules/regulations/security conditions. % of FDI Entry R....
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.... seeds/planting material. Seed development in the case of anthuriums, orchids and other ornamental crops in green houses/net houses/poly houses is also be included in this category. ■In case of Animal Husbandry, scope of the term 'under controlled conditions' includes - • • Rearing of animals under intensive farming systems with stall-feeding. Intensive farming system will (ventilation, require climate systems temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems. Poultry breeding farms and hatcheries where micro- climate is controlled through advanced technologies like incubators, ventilation systems etc. ■In the case of pisciculture and aquaculture, ‘under controlled conditions' includes - • Aquariums • Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. 5.2.2 Tea Plantation 5.2.2.1 Tea sector including tea plantations 100% Government Note: Besides the above, FDI is not allowed in any other plantation sector/activity Other co....
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....issued by the Department of Atomic Energy laying down the policy for exploitation of beach sand minerals, private participation including Foreign Direct Investment (FDI), was permitted in mining and production of Titanium ores (Ilmenite, Rutile and Leucoxene) and Zirconium minerals (Zircon). Vide Notification No. S.O.61(E) dated 18.1.2006, the Department of Atomic Energy re-notified the list of “prescribed substances†under the Atomic Energy Act 1962. Titanium bearing ores and concentrates (Ilmenite, Rutile and Leucoxene) and Zirconium, its alloys and compounds and minerals/concentrates including Zircon, were removed from the list of "prescribed substances". (i) FDI for separation of titanium bearing minerals & ores will be subject to the following additional conditions viz.: (A) value addition facilities are set up within India along with transfer of technology; (B) 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. (ii) FDI wi....
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.... for views/suggestions from the stakeholders to review the extant policy on FDI in Defence sector 44 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity & Industry, in consultation with Ministry of Defence. (ii) Cases involving FDI will be considered by the FIPB and licences given by the Department of Industrial Policy & Promotion in consultation with Ministry of Defence. (iii)The applicant should be an Indian company / partnership firm. (iv) The management of the applicant company / partnership should be in Indian hands with majority representation on the Board as well as the Chief Executives of the company / partnership firm being resident Indians. (v) Full particulars of the Directors and the Chief Executives should be furnished along with the applications. (vi) The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an est....
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.... Sector organizations as per guidelines of the Department of Public Enterprises. (xv) Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence. These items may also be sold to other Government entities under the control of the Ministry of Home Affairs and State Governments with the prior approval of the Ministry of Defence. No such item should be sold within the country to any other person or entity. The export of manufactured items would 46 46 Sl.No. Sector/Activity 5.2.6 % of FDI Entry Route Cap/Equity be subject to policy and guidelines as applicable to Ordnance Factories and Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons / entities other than the Central of State Governments with the prior approval of the Ministry of Defence. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence. (xvi) Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date ....
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.... supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis; (vii) "Scheduled air transport service", means an air transport service undertaken between the same two or more places and operated 48 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public. (viii) “Non-Scheduled Air Transport service†means any service which is not a scheduled air transport service and will include Chartered and Cargo airlines. (ix) "Chartered" and "Cargo" airlines would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation. (x) "Seaplane" means an aeroplane capable normally of taking off from and alighting solely on water; (xi)"Ground Handling†means (i) ramp handling, (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (ii....
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....n 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. 50 50 Sl.No. Sector/Activity % of Cap/Equity FDI Entry Route (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 the condition that investment by a single FII in each tranche of SRs shall not exceed 10 per cent of the issue. (iii) Any individual investment of more than 10% would be subject to provisions of section 3(3) (f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 5.2.9 Banking -Private sector 5.2.9.1 Banking -Private sector 74% including Automatic up investment by FIIS to 49% Government route beyond 49% and up to 74% 5.2.9.2 Other conditions: (1) This 74% limit will include investment under the Portfolio Investment Scheme (PIS) by FIIS, NRIs and shares acquired prior to September 16, 20....
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....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. 52 52 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity 5.2.10 (b) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank's licensing criteria will be allowed to hold 100 per cent paid up capital to enable them to set up a wholly-owned subsidiary in India. (c) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 per cent in a private bank. (d) A foreign bank will be permitted to establish a wholly-owned subsidiary e....
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....ng 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. to 49% FDI limit in (HITS) Broadcasting 74% (total direct and Automatic up Service is subject to such indirect foreign guidelines/terms and conditions as investment including specified from time to time by portfolio and FDI) Ministry of Information and Broadcasting. Government route beyond 49% and up to 74% 5.2.11.5 Setting up hardware facilities such as up-linking, HUB etc. (1) Setting up of Up-linking HUB/ | 49% (FDI & FII) Government Teleports (2) Up-linking a Non-News & 100% Government Current Affairs TV Channel (3) Up-linking a News & Current 26% (FDI & FII) Affairs TV Channel subject to the Government 54 Sl.No. Sector/Activity condition that the portfolio investment from FII/ NRI shall not be ....
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..... Policy for FDI in Commodity 49% (FDI & FII) Government Exchange by 5.2.12.2 [Investment Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26% ] 5.2.12.3 Other conditions: (i) (ii) 5.2.13 5.2.13.1 FII purchases shall be restricted to secondary market only and No non-resident investor/ entity, including persons acting in concert, will hold more than 5% of the equity in these companies. Development of Townships, Housing, Built-up infrastructure and Construction-development projects Townships, housing, built-up 100% 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) Automatic 56 56 Sl.No. 5.2.13.2 Sector/Activity % of FDI Entry Route Cap/Equity 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 serviced housing plots, a minimum land area of 10 hectares (i....
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....rned. (7) The State Government/ Municipal/ 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. Credit Information Companies 5.2.14 (CIC) 5.2.14.1 Credit Information Companies 5.2.14.2 Other Conditions: 49% (FDI & FII) Government (1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. 58 Sl.No. 5.2.15 5.2.15.1 Sector/Activity % of FDI Entry Route Cap/Equity (2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI. (3) Investment by a registered FII under....
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....v) “Industrial Activity†means manufacturing, electricity, gas and water supply, post and telecommunications, software publishing, consultancy and supply, data processing, database activities and distribution of electronic 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. 60 60 Sector/Activity % Sl.No. Insurance 5.2.16 5.2.16.1 Insurance 5.2.16.2 Other Conditions: of FDI Entry Route Cap/Equity 26% Automatic 5.2.17 5.2.17.1 5.2.17.2 5.2.17.2.1 5.2.18 (1) FDI in the Insurance sector, as p....
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....mentioned in (i), (ii) and (iii) above and (vi) below. 62 62 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity (vi)Non- Fund based activities: US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition: It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating 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 comp....
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.... of FDI Entry Route Sl.No. Sector/Activity Technical 5.2.20.4 Magazines/specialty journals/ periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. % Cap/Equity Publication of facsimile edition of 100% foreign newspapers 5.2.20.4.1 Other Conditions: Government 5.2.21 5.2.21.1 (i) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. (ii) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India 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. Security Agencies in Private sector The ‘Private Security Agencies (Regulation) Act, 2005' regulates the operati....
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....g of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from 66 66 Sl.No. Sector/Activity % of FDI Entry Route Cap/Equity countries of concern and/or unfriendly entities. (iv) The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. (v) FDI shall be subject to laws of India and not the laws of the foreign country/countries. (2) Security Conditions: (i) The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. (ii) Details of infrastructure/network diagram (technical details of the network) could be provided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee Clearance from the licensor (Department of Telecommunications) would be required if such information is to be provided to anybody else. company. (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 measu....
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....l.No. Sector/Activity % of FDI Entry Route Cap/Equity (xiv) Suitable technical device should be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes. (xv) Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. (xvi) The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location. (xvii) The telecom service providers should familiarize/train Vigilance Technical Monitoring (VTM)/security agency officers/officials in respect of relevant operations/features of their systems. (xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix) In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Sec....
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.... goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce. 5.2.24.1.2 Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT): (a) For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be (b) obtained. Except in case of sales to Government, sales made by the wholesaler would be considered as 'cash & carry wholesale trading/wholesale trading' with valid business customers, only when WT ....
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....lity commences simultaneously with test Government Government 72 Sl.No. 5.2.24.6 Sector/Activity marketing. Single Brand product tradingʻ % of FDI Entry Route Cap/Equity 51% Government (1) Foreign Investment in Single Brand product trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. (2) FDI in Single Brand products retail trade would be subject to the following conditions: (a) Products to be sold should be of a ‘Single Brand' only. (b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. (c) 'Single Brand' product-retailing would cover only products which are branded during manufacturing. (3) Application seeking permission of the Government for FDI in retail trade of 'Single Brand' products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy ....
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....a, 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: - a. No objection or Tax clearance certificate from Income Tax Department for the remittance. b. Auditor's certificate confirming that all liabilities in India have been either fully paid or adequately provided for. C. Auditor's certificate to the effect that the winding up is in accordance with the provisions of the Companies Act, 1956. d. In case of winding up otherwise than by a court, an auditor's certificate to the effect that there are 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. 75 6.1.2 Repatriation of Dividend: Dividends are freely repatriable without any restrictions (net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may be). The repatriation is govern....
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....e Regulations; and (D) the company has all original certificates issued by authorized dealers in India evidencing receipt of amount of consideration. Note: For companies with paid up capital with less than Rs.5 crore, the above mentioned certificate can be given by a practicing company secretary. (b) 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 Category-I 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 Bank. This is an annual return to be submitted by 31st of July every year, pertaining to all investments by way of direct/portfolio investments/reinvested earnings/other capital in the Indian company made during the previous years (i.e. the information in Part B submitted by 31st July will pertain to all the investments made in the previous years up to Mar....
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....-2 to DSIM. 6.2.5 Reporting of FCCB/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 as Annex-8, within 30 days from the date of closing of the issue. The company should also furnish a quarterly return in the Form enclosed as Annex - 9, 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. 6.3 ADHERENCE TO GUIDELINES/ORDERS AND CONSEQUENCES OF VIOLATION FDI is a capital account transaction and thus any violation of FDI regulations are covered by the penal provisions of the FEMA. Reserve Bank of India administers the 78 FEMA and Directorate of Enforcement under the Ministry of Finance is the authority for the enforcement of FEMA. The Directorate takes up investigation in any contravention of FEMA. 6.3.1 Penalties (i) If a person violates/contravenes any FDI Regulations, by way of breach/non- adherence/non-compliance/contravention of any rule, regulation, notification, p....
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....ceedings Under the Foreign Exchange (Compounding Proceedings) Rules 2000, the Central Government may appoint ‘Compounding Authority' an officer either from Enforcement Directorate or Reserve Bank of India for any person contravening any provisions of the FEMA. The Compounding Authorities are authorized to compound the amount involved in the contravention to the Act made by the person. No contravention shall be compounded unless the amount involved in such contravention is quantifiable. Any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention. The Compounding Authority may call for any information, record or any other documents relevant to the compounding proceedings. The Compounding Authority shall pass an order of compounding after affording an opportunity of being heard to all the concerns as expeditiously and not later than 180 days from the date of application made to the Compounding Authority. Compounding Authority shall issue order specifying the provisions of the Act or of the rules, directions, requisitions or....
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....mp sum payments) Conversion against import of capital goods by units in SEZ 08 ESOPS 09 Share Swap 10 Total (b) Others (please specify) Type of security issued No. Nature of security 01 Equity 02 Compulsorily Convertible Debentures 03 Compulsorily Convertible Preference shares 04 Others (please specify) Total Date of issue Number of shares/ convertible debentures Number Maturity Face value Premium Issue Price per share Amount of inflow* 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 (á) Break up of premium Control Premium Non competition fee Others@ Total Amount @ 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 83 Bank (iii) Others (please specify) Date of reporting of (i) and ....
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....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 85 55 3. Shares have been issued in terms of SIA/FIPB approval No. dated 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) (ii) A certificate from our Company Secretary certifying that (a) (b) (c) (d) all the requirements of the Companies Act, 1956 have been complied with; terms and conditions of the Government approval, if any, have been complied with; the company is eligible to issue shares under these Regulations; and the company has all original certificates issued by authorised dealers in Indi....
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.... 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. 1. Name Address Particulars State Registration No. given by the (In Block Letters) 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.) Whether listed company or 5. unlisted company Listed/Unlisted 88 5.1 If listed, i) Market value per sh....
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....curities 7.1 7.2 Debt Securities 7.1.1 Bonds and Notes 7.1.2 Money Market Instruments 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 00 Loans 9.3 Others 9.3.1 Short Term 9.3.2 Long Term Please see the note below 00 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". 90 06 10. Shareholding pattern as at end- March Equity Investor category / Nature of investing entity a) Non-Resident Individuals 01 02 Companies 03 Fils 04 FVCIS 05 Foreign Trusts 06 Private Equity Funds 07 No. of shares Amount (Face Value) Rs. 09 Pension/ Provident Funds 08 Sovereign Wealth Fund (SWF)â¹ Partnership / Proprietorship Firms 10 Financial Institutions 11 NRIS/PIO 12 Other....
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....d on a recognized stock exchange in India, shall not be less than the price at which the preferential allotment of shares can be made under the SEBI guidelines ' as applicable, provided the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date of purchase or sale of shares, (b) not listed on a recognized stock exchange in India, shall not be less than the fair value to be determined by a SEBI registered Category | Merchant Banker or a Chartered Accountant as per the discounted free cash flow method. The price per share arrived at should be certified by a SEBI registered Category I Merchant Banker or a Chartered Accountant. 92 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 shall not be more than the minimum price at which the transfer of shares can be made from a resident to a non-resident as given at para 2.2 above. 3. Responsibilities / Obligations of the parties All the par....
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....e 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. 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. The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India showing equity participation of residents and non-residents category-wise (i.e. NRIS/OCBs/foreign nationals/incorporated non-resident entities/FIls) 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. Certificate indicating fair value of shares from a Chartered Accountant. Copy of Broker's note if sale is made on Stock Exchange 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. Undertaking from the FII/sub account to ....
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.... 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 10 To the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment Division, Central Office, Mumbai 95 enclosed proforma (which is to be prepared in MS-Excel format). The IBD/FED or the nodal office of the bank will in turn 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....
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....ing a calendar year. 97 97 Annex - 4 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 (Para) (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. ***************************** 96 98 Annex - 5 Report by the Indian company receiving amount of consideration for issue of shares/Convertible debentures under the FDI Scheme [Para ] ( To be filed by the company through its Authorised Dealer Category - I bank,....
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....uadruplicate 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. ii. iii. iv. V. vi. vii. viii. Consent Letter duly signed by the seller and buyer or their duly appointed agent and in the latter case the Power of Attorney Document. The shareholding pattern of the investee company after the acquisition of shares by a person resident outside India. Certificate indicating fair value of shares from a Chartered Accountant. Copy of Broker's note if sale is made on Stock Exchange. 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. 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 out....
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.... the Stock 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) After the transfer 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. iii. iv. 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. 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. 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 / compu....