TaxTMI 
TaxTMI 
Master Circular on Foreign Investment in India ((Amended upto April 08, 2015)
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....e issued. The date up to which the Master Circular has been updated is suitably indicated. 3. This Master Circular may be referred to for general guidance. The Authorised Persons and the Authorised Dealer Category - I banks may refer to respective circulars/ notifications for detailed information, if so needed. Yours faithfully, (B. P. Kanungo) Principal Chief General Manager INDEX PART - I Foreign Investments in India - Schematic Representation Section - I: Foreign Direct Investment 1. Foreign Direct Investment in India 2. Entry routes for investments in India 3. Eligibility for investment in India 4. Type of instruments 5. Pricing guidelines 6. Mode of payment 7. Foreign investment limits, prohibited sectors and investment n MSEs 8. Modes of investment under Foreign Direct Investment Scheme 8.A Issuance of fresh shares by the company 8.B Acquisition by way of transfer of existing shares by person resident outside India 8.C Issue of Rights /Bonus shares 8.D Issue of shares under Employees Stock Option Scheme (ESOPs) 8.E Conversion of ECB / Lum....
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....Foreign Investments in India as per Section I and II 1. Reporting of FDI for fresh issuance of shares 2. Reporting of FDI for transfer of shares 3. Reporting of conversion of ECB into equity 4. Reporting of ESOPs for allotment of equity shares 5. Reporting of DR issues 6. Reporting of FII investments under PIS 7. Reporting of NRI investments under PIS 8. Reporting of foreign investment by way of issue / transfer of 'participating interest/right' in oil fields PART II Investment in Partnership Firm / Proprietary Concern 1. Investment in partnership firm / proprietary concern 2. Investments with repatriation benefits 3. Investment by non-residents other than NRIs/PIO 4. Restrictions Annexures Annex A - Salient features of Portfolio Investment Scheme (PIS) for investments by a Non Resident Indian (NRI) Annex B - Scheme for Acquisition/ Transfer by a person resident outside India of capital contribution or profit share of Limited Liability Partnerships (LLPs) Annex - 1 Sector-Specific Policy For Foreign Investment Annex - 2 Sectors prohibited for FDI Annex - 3 Terms And Conditions fo....
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....rily and fully convertible debentures and mandatorily and fully convertible preference shares of an Indian company by non-residents through two routes: • Automatic Route: Under the Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment. • Government Route: Under the Government Route, the foreign investor or the Indian company should obtain prior approval of the Government of India (Foreign Investment Promotion Board (FIPB), Department of Economic Affairs (DEA), Ministry of Finance or Department of Industrial Policy & Promotion, as the case may be) for the investment. 3. Eligibility for Investment in India • A person resident outside India or an entity incorporated outside India, can invest in India, subject to the FDI Policy of the Government of India. A person who is a citizen of Bangladesh or an entity incorporated in Bangladesh can invest in India under the FDI Scheme, with the prior approval of the FIPB. Further, a person who is a citizen of Pakistan or an entity incorporated in Pakistan, may, with the prior approval of the FIPB, can inves....
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....nd reporting requirements amongst other requirements as prescribed under FEMA Regulations. ii) As far as debentures are concerned, only those which are fully and mandatorily convertible into equity, within a specified time, would be reckoned as part of equity under the FDI Policy. iii) Prior to December 30, 2013, issue of other types of preference shares such as non-convertible, optionally convertible or partially convertible, were to be in accordance with the guidelines applicable for External Commercial Borrowings (ECBs). On and from December 30, 2013 it has been decided that optionality clauses may henceforth be allowed in equity shares and compulsorily and mandatorily convertible preference shares/debentures to be issued to a person resident outside India under the Foreign Direct Investment (FDI) Scheme. The optionality clause will oblige the buy-back of securities from the investor at the price prevailing/value determined at the time of exercise of the optionality so as to enable the investor to exit without any assured return. The provision of optionality clause shall be subject to the following conditions: (a) There is a minimum lock-in period of one year or a minim....
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....e balance consideration towards fully paid equity shares shall be received within a period of 12 months. The time period for receipt of the balance consideration within 12 months shall not be insisted upon where the issue size exceeds rupees five hundred crore and the issuer complies with Regulation 17 of the SEBI (Issue of Capital and Disclosure Requirements(ICDR)) Regulations regarding monitoring agency. Similarly, in case of an unlisted Indian company, the balance consideration amount can be received after 12 months where the issue size exceeds rupees five hundred crores. However, the investee company shall appoint a monitoring agency on the same lines as required in case of a listed Indian company under the SEBI (ICDR) Regulations. Such monitoring agency (AD Category -1 bank) shall report to the investee company as prescribed by the SEBI regulations, ibid, for the listed companies. The pricing of the warrants and price/ conversion formula shall be determined upfront and 25% of the consideration amount shall also be received upfront. The balance consideration towards fully paid up equity shares shall be received within a period of 18 months; The price at the time of con....
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....rrants get converted into fully paid equity shares. Similarly, the Non-resident investors acquiring partly paid shares or convertible debentures or warrants shall ensure that the sectoral caps are not breached even after the shares get fully paid-up or warrants get converted into fully paid equity shares. (d) The deferment of payment of consideration amount or shortfall in receipt of consideration amount as per applicable pricing guidelines by the foreign investors will not be covered under these guidelines so as to be treated as subscription to partly paid shares and warrants. Thus, the Investee company under these guidelines for issue/transfer of partly-paid shares/warrants, shall require to comply with the requirements under the Companies Act, 2013 for issuance of partly paid shares and warrants; • Issue of shares by SEZs against import of capital goods: In this case, the share valuation has to be done by a Committee consisting of Development Commissioner and the appropriate Customs officials. • Right Shares: The price of shares offered on rights basis by the Indian company to non-resident shareholders shall be: • In the case of shares ....
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....6. Mode of Payment An Indian company issuing shares /convertible debentures under FDI Scheme to a person resident outside India shall receive the amount of consideration required to be paid for such shares /convertible debentures by: (i) inward remittance through normal banking channels. (ii) debit to NRE / FCNR account of a person concerned maintained with an AD category I bank. (iii) conversion of royalty / lump sum / technical know how fee due for payment /import of capital goods by units in SEZ or conversion of ECB, shall be treated as consideration for issue of shares. (iv) conversion of import payables / pre incorporation expenses / share swap can be treated as consideration for issue of shares with the approval of FIPB. (v) debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category - I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration. If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE / FCNR(B) / Escrow account....
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.... the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the Industries (Development and Regulation) Act, 1951, a micro enterprise means where the investment in plant and machinery does not exceed twenty five lakh rupees; a small enterprise means where the investment in plant and machinery is more than twenty five lakh rupees but does not exceed five crore rupees; (ii) in the case of the enterprises engaged in providing or rendering services, a micro enterprise means where the investment in equipment does not exceed ten lakh rupees; a small enterprise means where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees. c) Prohibition on foreign investment in India (i) Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not (such as, Trusts) which is engaged or proposes to engage in the following activities: • Business of chit fund, or • Nidhi company, or • Agricultural or plantation activities, or • Real estate business, or co....
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.... also invest in Indian companies by purchasing / acquiring existing shares from Indian shareholders or from other non-resident shareholders. General permission has been granted to non-residents / NRIs for acquisition of shares by way of transfer in the following manner: 8 B.I Transfer of shares by a Person resident outside India a. Non Resident to Non-Resident (Sale / Gift): A person resident outside India (other than NRI and OCB) may transfer by way of sale or gift, shares or convertible debentures to any person resident outside India (including NRIs but excluding OCBs). Note: Transfer of shares from or by erstwhile OCBs would require prior approval of the Reserve Bank of India. b. NRI to NRI (Sale / Gift): NRIs may transfer by way of sale or gift the shares or convertible debentures held by them to another NRI. c. Non Resident to Resident(Sale / Gift): (i) Gift: A person resident outside India can transfer any security to a person resident in India by way of gift. (ii) Sale under private arrangement: General permission is also available for transfer of shares / convertible debentures, by way of sale under private arrangement by a person resident outside India....
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.... sale, shares / convertible debentures (including transfer of subscriber's shares), of an Indian company under private arrangement to a person resident outside India, subject to the following alongwith pricing, reporting and other guidelines given in Annex - 3. a) where the transfer of shares requires the prior approval of the FIPB as per extant FDI policy provided that; i) the requisite FIPB approval has been obtained; and ii) the transfer of share adheres with the pricing guidelines and documentation requirements as specified by the Reserve Bank of India from time to time. b) where SEBI (SAST) guidelines are attracted, subject to adherence with the pricing guidelines and documentation requirements as specified by the Reserve Bank of India from time to time. c) where the pricing guidelines under FEMA,1999 are not met provided that: i) the resultant FDI is in compliance with the extant FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as minimum capitalization,etc.),reporting requirements, documentation, etc.; ii) The pricing for the transaction is compliant with specific/explicit , extant and relevant SEBI regulations(such a....
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....ents by way of sale requires prior approval of Reserve Bank in case where the non-resident acquirer proposes deferment of payment of the amount of consideration. Further, in case approval is granted for the transaction, the same should be reported in Form FC-TRS to the AD Category - I bank, within 60 days from the date of receipt of the full and final amount of consideration. (ii) A person resident in India, who intends to transfer any security, by way of gift to a person resident outside India, has to obtain prior approval from the Reserve Bank. While forwarding the application to the Reserve Bank for approval for transfer of shares by way of gift, the documents mentioned in Annex - 4 should be enclosed. The Reserve Bank considers the following factors while processing such applications: a) The proposed transferee is eligible to hold such security under Schedules 1, 4 and 5 of Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. b) The gift does not exceed 5 per cent of the paid-up capital of the Indian company / each series of debentures / each mutual fund scheme. c) The applicable sectoral cap limit in the Indian company is not breached. ....
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....dend is established and the dividend amount has been credited to specially designated non -interest bearing rupee account for acquisition of shares on the floor of stock exchange. iii. The pricing for subsequent transfer of shares shall be in accordance with the pricing guidelines under FEMA; iv. The original and resultant investments are in line with the extant FDI policy and FEMA regulations in respect of sectoral cap, entry route, reporting requirement, documentation, etc; 8.B.VII The reporting guidelines are given in Section V of the Master Circular. 8.C. Issue of Rights / Bonus shares An Indian company may issue Rights / Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap, reporting requirements, etc. Further, such issue of bonus / rights shares have to be in accordance with other laws / statutes like the Companies Act, 1956, SEBI (Issue of Capital and Disclosure Requirements), Regulations 2009, etc. • Issue of Right shares to OCBs: OCBs have been de-recognised as a class of investor with effect from September 16, 2003. Therefore, companies desiring to issue rights share to such erstwhile OCBs will have to take s....
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....ares for unlisted company; • Compliance with the requirements prescribed under any other statute and regulation in force; • The conversion facility is available for ECBs availed under the Automatic or Approval Route and is applicable to ECBs, due for payment or not, as well as secured / unsecured loans availed from non-resident collaborators. (ii) General permission is also available for issue of shares / preference shares against lump-sum technical know-how fee, royalty due for payment/repayment, under automatic route or SIA / FIPB route, subject to pricing guidelines of RBI/SEBI and compliance with applicable tax laws. (iii) Units in Special Economic Zones (SEZs) are permitted to issue equity shares to non-residents against import of capital goods subject to the valuation done by a Committee consisting of Development Commissioner and the appropriate Customs officials. (iv) Issue of equity shares against Import of capital goods / machinery / equipment (excluding second-hand machinery), is allowed under the Government route, subject to the compliance with the following conditions: (a) The import of capital goods, machineries, etc., made by a re....
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....of which does not require prior permission of the Government of India or Reserve Bank of India under FEMA ,1999 or any rules/ regulations framed or directions issued thereunder, provided that: (a) The equity shares shall be issued in accordance with the extant FDI guidelines on sectoral caps, pricing guidelines etc. as amended by Reserve Bank of India, from time to time; (b) The issue of equity shares under this provision shall be subject to tax laws as applicable to the funds payable and the conversion to equity should be net of applicable taxes. (viii) The reporting guidelines are given in Section V of the Master Circular. 8.F.Issue of eligible securities under DR Scheme 2014 Depository Receipts (DRs) are foreign currency denominated instruments issued by a foreign Depository in a permissible jurisdiction against a pool of permissible securities issued or transferred to that foreign depository and deposited with a domestic custodian. DRs may or may not be traded in an international exchange. • In terms of Schedule 10 to Notification No. FEMA.20/2000-RB dated May 3, 2000, a person will be eligible to issue or transfer eligible securities to a foreign de....
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....orm FC-GPR. 9. Foreign Currency Account and Escrow Account a) Indian companies which are eligible to issue shares to persons resident outside India under the FDI Scheme will be allowed to retain the share subscription amount in a Foreign Currency Account for bonafide business purpose only with the prior approval of the Reserve Bank. b) AD Category - I banks have been given general permission to open and maintain non-interest bearing Escrow account in Indian Rupees in India on behalf of residents and non-residents, towards payment of share purchase consideration and / or provide Escrow facilities for keeping securities to facilitate FDI transactions. It has also been decided to permit SEBI authorised Depository Participant, to open and maintain, without approval of the Reserve Bank, Escrow account for securities. The Escrow account would also be subject to the terms and conditions as stipulated in A.P. (DIR Series) Circular No. 58 dated May 2, 2011. Further, the Escrow account would be maintained with AD Category I bank or SEBI Authorised Depository Participant (in case of securities account). These facilities will be applicable to both, issue of fresh shares to the non-res....
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....ng in any court in India against the applicant or the company under liquidation and there is no legal impediment in permitting the remittance. 13. Pledge of Shares a) A person being a promoter of a company registered in India (borrowing company), which has raised external commercial borrowings, may pledge the shares of the borrowing company or that of its associate resident companies for the purpose of securing the ECB raised by the borrowing company, provided that a no objection for the same is obtained from a bank which is an authorised dealer. The authorized dealer, shall issue the no objection for such a pledge after having satisfied itself that the external commercial borrowing is in line with the extant FEMA regulations for ECBs and that : i). the loan agreement has been signed by both the lender and the borrower, ii) there exists a security clause in the Loan Agreement requiring the borrower to create charge on financial securities, and iii) the borrower has obtained Loan Registration Number (LRN) from the Reserve Bank: and the said pledge would be subject to the following conditions : i). the period of such pledge shall be co-terminus with the maturity of ....
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....es extended to the resident investee company for bona-fide business purposes / operations, subject to compliance with the conditions indicated below: • only the equity shares listed on a recognised stock exchange/s in India can be pledged in favour of the NBFCs ; • in case of invocation of pledge, transfer of shares should be in accordance with the credit concentration norm as stated in the Master Circular DNBS(PD).DNBS.(PD). CC.No.333/03.02.001/2013-14 dated July 01, 2013 as amended from time to time; • (i) The AD may obtain a board resolution 'ex ante', passed by the Board of Directors of the investee company, that the loan proceeds received consequent to pledge of shares will be utilised by the investee company for the declared purpose; (ii) The AD may also obtain a certificate 'ex post', from the statutory auditor of investee company, that the loan proceeds received consequent to pledge of shares, have been utilised by the investee company for the declared purpose; • the Indian company has to follow the relevant SEBI disclosure norms, as applicable; • under no circumstances, the credit concentration norms should b....
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....dent entities regardless of whether the said investments have been made under Schedule 1, 2, 2A, 3, 6 and 8 of the Notification No. FEMA. 20/2000-RB dated May 3, 2000, as amended from time to time; (iii) 'Downstream investment' means indirect foreign investment, by one Indian company into another Indian company, by way of subscription or acquisition; (iv) 'Holding Company' would have the same meaning as defined in Companies Act 1956; (v) 'Indian Company' means a company incorporated in India under the Companies Act, 1956; (vi) 'Indirect foreign investment' means entire investment in other Indian companies by an Indian company (IC), having foreign investment in it provided IC is not 'owned and controlled' by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens or where the IC is owned or controlled by non-residents. However, as an exception, the indirect foreign investment in the 100% owned subsidiaries of operating-cum-investing/investing companies will be limited to the foreign investment in the operating-cum-investing/ investing company. (vii) 'Investing Company' means an Indian Company holding only inv....
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....g company. (iii) The methodology for calculation of total foreign investment would apply at every stage of investment in Indian companies and thus in each and every Indian company. (iv) Additional requirements (A) The full details about the foreign investment including ownership details etc. in Indian company /ies and information about the control of the company /ies would be furnished by the Company /ies to the Government of India at the time of seeking approval. (B) In any sector/activity, where Government approval is required for foreign investment and in cases where there are any inter-se agreements between/amongst share-holders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider such inter-se agreements for determining ownership and control when considering the case for approval of foreign investment. (C) In all sectors attracting sectoral caps, the balance equity i.e. beyond the sectoral foreign investment cap, w....
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....o be governed by the relevant Regulation. D. Guidelines for establishment of Indian companies/ transfer of ownership or control of Indian companies, from resident Indian citizens and Indian companies to non-resident entities, in sectors with caps. 5. In sectors/activities with caps, including, inter-alia, defence production, air transport services, ground handling services, asset reconstruction companies, private sector banking, broadcasting, commodity exchanges, credit information companies, insurance, print media, telecommunications and satellites, Government approval/FIPB approval would be required in all cases where: (i) An Indian company is being established with foreign investment and is not owned by a resident entity or (ii) An Indian company is being established with foreign investment and is not controlled by a resident entity or (iii) The control of an existing Indian company, currently owned or controlled by resident Indian citizens and Indian companies, which are owned or controlled by resident Indian citizens, will be/is being transferred/passed on to a non-resident entity as a consequence of transfer of shares and/or fresh issue of shares to non-residen....
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....oks, or for acquisition of shares due to defaults in loans, shall not count towards indirect foreign investment. However, their 'strategic downstream investment' shall count towards indirect foreign investment. For this purpose, 'strategic downstream investments' would mean investment by these banking companies in their subsidiaries, joint ventures and associates. (ii) Downstream investments by Indian companies will be subject to the following conditions: (a) Such a company has to notify Secretariat for Industrial Assistance, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.com within 30 days of such investment, even if capital instruments have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme); (b) downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of its Board of Directors as also a Shareholders' Agreement, if any; (c) issue/transfer/pricing/valuation of shares shall continue to be in accordance with extant SEBI/RBI guidelines; (d) For the purpose of downstream investment....
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....ctor's report in the Annual Report of the Indian company. In case statutory auditor has given a qualified report, the same shall be immediately brought to the notice of the Reserve Bank of India, Foreign Exchange Department (FED), Regional Office (RO) of the Reserve Bank in whose jurisdiction the Registered Office of the company is located and shall also obtain acknowledgement from the RO of having intimated it of the qualified auditor report. RO shall file the action taken report to the Principal Chief General Manager, Foreign Exchange Department, Reserve Bank of India, Central Office, Central Office Building, Shahid Bhagat Singh Road, Mumbai 400001. 15. Issue of Non convertible/ redeemable bonus preference shares or debentures To rationalise and simplify the procedures, an Indian company may issue non-convertible/redeemable preference shares or debentures to non-resident shareholders, including the depositories that act as trustees for the ADR/GDR holders, by way of distribution as bonus from its general reserves under a Scheme of Arrangement approved by a Court in India under the provisions of the Companies Act, as applicable, subject to no-objection from the Income Tax Au....
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....onal facilities, city and regional level infrastructure, townships), construction of farm houses, manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes and trading in Transferable Development Rights (TDRs) and in sectors/ activities as specified in terms of Notification No. FEMA.1/2000-RB dated May 3, 2000, as amended from time to time; and d) ensure compliance with instructions issued through A.D.(M.A. Series) Circulars, EC.CO.FID circulars and the regulatory requirements under FEMA, 1999. (iii) SEBI approved sub accounts of FIIs (sub accounts) have general permission to invest under the PIS. (iv) OCBs are not permitted to invest under the PIS with effect from November 29, 2001, in India. Further, the OCBs which have already made investments under the PIS are allowed to continue holding such shares / convertible debentures till such time these are sold on the stock exchange. Any foreign institutional investor who holds a valid certificate of registration from SEBI shall be deemed to be a registered foreign portfolio investor (RFPI) till the expiry of the block of three years for which fees have been paid as per the SEBI (For....
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....d to 24 per cent by passing of a resolution by its Board of Directors followed by a special resolution to that effect by its General Body which should necessarily be intimated to the Reserve Bank of India immediately as hitherto, along with Certificate from the Company Secretary stating that all the relevant provisions of the extant Foreign Exchange Management Act, 1999 regulations and the Foreign Direct Investment Policy, as amended from time to time have been complied with. C. Prohibition on investments by FIIs and NRIs FIIs are not permitted to invest in the capital of a company in Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951 Both FIIs and NRIs are not allowed to invest in any company which is engaged or proposes to engage in the following activities: • Business of chit fund, or • Nidhi company, or • Agricultural or plantation activities, or • Real estate business* or construction of farm houses, or • Trading in Transferable Development Rights (TDRs). * Real estate business" does not include construction of housing / commercial premises, educat....
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....ject to the position limits and margin requirements as prescribed by RBI / SEBI from time to time as well as the stipulations regarding collateral securities as directed by the Reserve Bank from time to time. • The SEBI registered FII / sub-account may open a separate account under their SNRR A/c through which all receipts and payments pertaining to trading / investment in exchange traded derivative contracts will be made (including initial margin and mark to market settlement, transaction charges, brokerage, etc.). • Further, transfer of funds between the SNRR A/c and the separate account maintained for the purpose of trading in exchange traded derivative contracts can be freely made. • However, repatriation of the Rupee amount will be made only through their SNRR A/c subject to payment of relevant taxes. The AD Category - I banks have to keep proper records of the above mentioned separate account and submit them to the Reserve Bank as and when required. B. NRIs NRIs are allowed to invest in Exchange Traded Derivative Contracts approved by SEBI from time to time out of Rupee funds held in India on non-repatriation basis, subject to the ....
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....ated September 30, 2010. 6. Short Selling by FIIs A. FIIs FIIs registered with SEBI and SEBI approved sub-accounts of FIIs are permitted to short sell, lend and borrow equity shares of Indian companies. Short selling, lending and borrowing of equity shares of Indian companies shall be subject to such conditions as may be prescribed by the Reserve Bank and the SEBI / other regulatory agencies from time to time. The permission is subject to the following conditions: • Short selling of equity shares by FIIs shall not be permitted for equity shares of Indian companies which are in the ban list and / or caution list of the Reserve Bank. • Borrowing of equity shares by FIIs shall only be for the purpose of delivery into short sales. • The margin / collateral shall be maintained by FIIs only in the form of cash. No interest shall be paid to the FII on such margin/collateral. B. NRIs The NRI investor has to take delivery of the shares purchased and give delivery of shares sold. Short Selling is not permitted. 7. Private placement with FIIs SEBI registered FIIs have been permitted to purchase shares, convertible debentures and warr....
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....s and the Foreign Direct Policy, as amended from time to time, have been complied with. 11. Caution List When the aggregate net purchases of equity shares of the Indian company by FIIs/NRIs/PIOs reaches the cut-off point of 2 per cent below the overall limit, the Reserve Bank cautions all the designated bank branches not to purchase any more equity shares of the respective company on behalf of any RFPIs/ FIIs/ NRIs/ PIOs without prior approval of the Reserve Bank. The link offices are then required to intimate the Reserve Bank about the total number and value of equity shares/ convertible debentures of the company proposed to be bought on behalf of their RFPIs/FIIs /NRIs /PIOs clients. On receipt of such proposals, the Reserve Bank gives clearances on a first-come-first serve basis till such investments in companies reaches the respective limits (such as 10 / 24 / 30 / 40/ 49 per cent limit or the sectoral caps/statutory ceilings), as applicable. 12. Ban List Once the shareholding by FIIs/NRIs/PIO reaches the overall ceiling / sectoral cap / statutory limit, the Reserve Bank places the company in the Ban List and advises all designated bank branches to stop purchases on....
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....QDPs defined as per the extant SEBI regulations) only in equity shares of listed Indian companies through registered brokers on recognized stock exchanges in India as well as in equity shares of Indian companies which are offered to public in India in terms of the relevant and applicable SEBI guidelines/regulations. QFIs shall also be permitted to acquire equity shares by way of rights shares, bonus shares or equity shares on account of stock split / consolidation or equity shares on account of amalgamation, demerger or such corporate actions subject to the investment limits as prescribed in para (v) below. QFIs shall be allowed to sell the equity shares so acquired by way of sale (a) Through recognized brokers on recognized stock exchanges in India; or (b) In an open offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or (c) In an open offer in accordance with the SEBI (Delisting of Securities) Guidelines, 2009; or (d) Through buyback of shares by a listed Indian company in accordance with the SEBI (Buyback) Regulations, 1998. (iii) Mode of payment / repatriation - For QFI investments in eligible securities, a si....
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....o ensure reporting to the Reserve Bank of India in a manner and format as prescribed by the Reserve Bank of India from time to time. (x) Hedging - QFIs would be permitted to hedge their currency risk on account of their permissible investments (in equity and debt instruments) in terms of the guidelines issued by the Reserve Bank from time to time. A QFI may continue to buy, sell or otherwise deal in securities subject to SEBI (FPI) Regulations 2014, for a period of one year from the date of commencement of the said regulations, or until he obtains a certificate of registration as a foreign portfolio investor, whichever is earlier. Further, a QFI after registering as a RFPI, shall not be eligible to invest as QFI. However, all investments made by QFI, in accordance with the regulations prior to registration as RFPI shall continue to be valid and taken into account for computation of aggregate limit. 15. Foreign Portfolio Investor Scheme (FPI) (i) The extant guidelines for Portfolio Investment Scheme for Foreign Institutional Investor (FII) and Qualified Foreign Investor (QFI) have since been reviewed and it has been decided to put in place a framework for investments und....
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....om foreign currency account to SNRR account at the prevailing market rate for making genuine investments in securities. The Authorised Dealer bank may transfer repatriable proceeds (after payment of applicable taxes) from SNRR account to foreign currency account ; • RFPI shall be eligible to invest in government securities and corporate debt subject to limits specified by the RBI and SEBI from time to time; • The investment by RFPI will be made subject to the SEBI (FPI) Regulations 2014, modified by SEBI/Government of India from time to time; • RFPI shall be permitted to trade in all exchange traded derivative contracts on the stock exchanges in India subject to the position limits as specified by SEBI from time to time; • RFPI may offer cash or foreign sovereign securities with AAA rating or corporate bonds or domestic Government Securities, as collateral to the recognized Stock Exchanges for their transactions in the cash as well as derivative segment of the market. (ii). Any foreign institutional investor who holds a valid certificate of registration from SEBI shall be deemed to be a registered foreign portfolio investor (RF....
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....e to time. (iv) At the time of granting approval, the Reserve Bank permits the FVCI to open a non-interest bearing Foreign Currency Account and/or a non-interest bearing Special Non-Resident Rupee Account with a designated branch of an AD Category - I bank, subject to certain terms and conditions. (v) A SEBI registered FVCI can acquire / sale securities (as given in (iii) above) by way of public offer or private placement by the issuer of such securities and /or by way of private arrangement with a third party at a price that is mutually acceptable to the buyer and the seller. (vi) AD Category - I banks can offer forward cover to FVCIs to the extent of total inward remittance. In case the FVCI has made any remittance by liquidating some investments, original cost of the investments has to be deducted from the eligible cover to arrive at the actual cover that can be offered. (vii) The investments made by FVCI under Schedule I of Notification No. FEMA 20 / 2000- RB dated May 3, 2000, as amended from time to time, would be governed by the norms as stated therein. Section - IV: Other Foreign Investments 1. Purchase of other securities by NRIs (i) On non-repatriatio....
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....IDRs by financial / banking companies having presence in India, either through a branch or subsidiary, the approval of the sectoral regulator(s) should be obtained before the issuance of IDRs. a) The FEMA Regulations shall not be applicable to persons resident in India as defined under Section 2(v) of FEMA,1999, for investing in IDRs and subsequent transfer arising out of transaction on a recognized stock exchange in India. b) RFPIs, Foreign Institutional Investors (FIIs) including SEBI approved sub-accounts of the FIIs, registered with SEBI and Non-Resident Indians (NRIs) may invest, purchase, hold and transfer IDRs of eligible companies resident outside India and issued in the Indian capital market, subject to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 notified vide Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. Further, NRIs are allowed to invest in the IDRs out of funds held in their NRE / FCNR (B) account, maintained with an Authorised Dealer / Authorised bank. c) A limited two way fungibility for IDRs (similar to the limited two way fungibility facility availa....
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...., to be listed NCDs/ bonds only if listing of such NCDs/bonds is committed to be done within 15 days of such investment, Security receipts issued by Asset Reconstruction Companies and Perpetual Debt Instruments eligible for inclusion in as Tier I capital (as defined by DBOD, RBI) and Debt capital instruments as upper Tier II Capital (as defined by DBOD, RBI) issued by banks in India to augment their capital in any manner as per the prevalent/approved market practice subject to the following terms and conditions: a) The total holding all eligible investors put together shall not exceed 74% of the paid up value of each tranche of scheme / issue of Security Receipts issued by the ARCs. Further, Sub -account of FIIs are not allowed to invest in the Security Receipts issued by ARCs. b) The total holding by a single FII / sub-account in each issue of Perpetual Debt Instruments (Tier I) shall not exceed 10% of the issue and total holdings of all FIIs / sub-account put together shall not exceed 49% of the paid up value of each issue of Perpetual Debt Instruments. c) Purchase of debt instruments including Upper Tier II instruments by FIIs are subject to limits notified by SEBI and ....
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....y 23, 2014 the investment limit in government securities available to FIIs/QFIs/FPIs has been enhanced by USD 5 billion by correspondingly reducing the amount available to long term investor from USD 10 billion to USD 5 billion within the overall limit of USD 30 billion. The incremental investment limit of USD 5 billion shall be required to be invested in government bonds with a minimum residual maturity of three years. Further, all future investment against the limit vacated when the current investment by an FII/QFI/FPI runs off either through sale or redemption shall also be required to be made in government bonds with a minimum residual maturity of three years. It is, however, clarified that there will be no lock-in period and FIIs/QFIs/FPIs shall be free to sell the securities (including that are presently held with less than three years of residual maturity) to the domestic investors. Further, w.e.f. February 05, 2015, eligible investors shall be permitted to invest in government securities, the coupons received on their existing investments in government securities. These investments shall be kept outside the applicable limit (currently USD 30 billion) for investments by F....
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.... secondary market sales / purchases by RFPIs, FIIs and the NRIs in these instruments on the floor of the stock exchange are to be reported by the custodians and designated banks respectively, to the Reserve Bank through the soft copy of the Forms LEC (FII) and LEC (NRI). 6. Qualified Foreign Investors (QFIs) investment in the units of Domestic Mutual funds Non- resident investors (other than SEBI registered FIIs/FVCIs) who meet the KYC requirements of SEBI, were permitted to purchase on repatriation basis rupee denominated units of equity schemes of SEBI registered domestic MFs as Qualified Foreign Investors' (QFIs), in accordance with the terms and conditions as stipulated by the SEBI and the RBI from time to time in this regard. QFIs may invest in rupee denominated units of equity schemes of SEBI registered domestic MFs under the two routes, namely: (i) Direct Route - SEBI registered Qualified Depository Participant (QDP) route - • The QDP route will be operated through single non-interest bearing Rupee account to be maintained with an AD Category I Bank in India. The foreign inward remittances in to the single non-interest bearing Rupee account shall be ....
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....ting of "to be listed" corporate bonds, the provisions relating to FIIs would be applicable. Further, QFIs shall also be permitted to sell 'eligible debt securities' so acquired by way of sale through registered stock broker on a recognized stock exchange in India or by way of buyback or redemption by the issuer. Further, QFIs can also invest in Security Receipts issued by Asset Reconstruction Companies provided that the total holding by an individual QFI in each tranche of scheme of Security Receipts shall not exceed 10 per cent of the issue and the total holdings of all eligible investors put together shall not exceed 49 per cent of the paid up value of each tranche of scheme of Security Receipts issued by the Asset Reconstruction Companies; Perpetual Debt instruments eligible for inclusion as Tier I capital and Debt capital instruments as upper Tier II capital issued by banks in India to augment their capital (Tier I capital and Tier II capital as defined by Reserve Bank, and modified from time to time) provided that the investment by eligible investors in Perpetual Debt instruments (Tier I) shall not exceed an aggregate ceiling of 49 per cent of each issue, and investment by....
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.... Reserve Bank, Department of Statistics and Information Management, Mumbai by July 15 every year. In order to collect information on Indian companies' Outward Foreign Affiliated Trade Statistics (FATS) as per the multi-agency global 'Manual on Statistics of International Trade in Services', the FLA return has been modified in June 2014 and the same is available on the RBI website (www.rbi.org.in → Forms category → FEMA Forms) along with the related FAQs (www.rbi.org.in → FAQs category → Foreign Exchange). (iii) Time frame within which shares have to be issued The equity instruments should be issued within 180 days from the date of receipt of the inward remittance or by debit to the NRE/FCNR (B) /Escrow account of the non-resident investor. In case, the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B)/Escrow account, as the case may be. Non-compliance with the above provision wo....
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....dia directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs has to be reported in Form FC-GPR. 2. Reporting of FDI for Transfer of shares (i) 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. (ii) Reporting of transfer of shares/ convertible debentures and partly paid shares and warrants to the extent the equity shares are called up between residents and non-residents and vice- versa is to be made in Form FC-TRS (enclosed in Annex - 9-i). 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. However, the onus of reporting the purchase of shares by non-residents/NRIs on the recognised stock exchanges in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations shall be on the investee company. AD Cat....
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....statements from the AD bank , the Reserve Bank may call for such additional details or give such directions as required from the transferor/transferee or their agents, if need be. 3. Reporting of conversion of ECB into equity Details of issue of shares against conversion of ECB have to be reported to the Regional Office concerned of the Reserve Bank, as indicated below: • In case of full conversion of ECB into equity, the company shall report the conversion in Form FC-GPR to the Regional Office concerned of the Reserve Bank as well as in Form ECB-2 to the Department of Statistics and Information Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex, Mumbai - 400 051, within seven working days from the close of month to which it relates. The words "ECB wholly converted to equity" shall be clearly indicated on top of the Form ECB-2. Once reported, filing of Form ECB-2 in the subsequent months is not necessary. • In case of partial conversion of ECB, the company shall report the converted portion in Form FC-GPR to the Regional Office concerned as well as in Form ECB-2 clearly differentiating the converted portion from the non-converted portion.....
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....hall furnish to the Reserve Bank, a report on a daily basis on PIS transactions undertaken on behalf of NRIs for their entire bank. This report can be uploaded directly on the ORFS web site (https://secweb.rbi.org.in/ORFSMainWeb/Login.jsp). It would be the banks responsibility to ensure that the data submitted to RBI is reconciled by periodically taking a NRI holding report for their bank. 8. Reporting of foreign investment by way of issue / transfer of 'participating interest/right' in oil fields Foreign investment by way of issue / transfer of 'participating interest/right' in oil fields by Indian companies to a non resident would be treated as an FDI transaction under the extant FDI policy and the FEMA regulations.Accordingly, transfer of 'participating interest/ rights' will be reported as 'other' category under Para 7 of revised Form FC-TRS as given in the Annex-8 and issuance of 'participating interest/ rights' will be reported as 'other' category of instruments under Para 4 of Form FC-GPR as given in the Annex-9. Part II Investment in Partnership Firm / Proprietary Concern 1. Investment in Partnership Firm / Proprietary Concern A Non-Resident Indian (NRI) o....
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.... Indian company at no time shall exceed 5 per cent of the paid up capital/ paid up value of each series of convertible debentures of that company. c) The designated branch of the AD bank will grant one time permission to the NRI applicant for purchase and sale of shares / convertible debentures of an Indian company. Two distinct permission letters (for repatriation basis and non-repatriation basis) shall be issued as per the prescribed format. d) Designated branch shall open a separate sub account of NRE/NRO account (opened and maintained by an NRI in terms of the Foreign Exchange Management (Deposit) Regulations, 2000 for the exclusive purpose of routing the transactions under PIS on behalf of an NRI. NRE (PIS) account for investment made by the NRI on repatriation basis and NRO (PIS) account for investment made on non-repatriation basis under the Scheme. The designated branch shall ensure that amounts due to sale proceeds of shares / convertible debentures which have been acquired by modes other than PIS, such as underlying shares acquired on conversion of ADRs/GDRs, shares/ convertible debentures acquired under FDI Scheme, shares/ convertible debentures purchased outside I....
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....all ceiling of 10 per cent of the total paid-up capital of the company concerned by all NRIs both on repatriation and non-repatriation basis taken together. h) The purchase of convertible debentures of each series of an Indian company both repatriation and non-repatriation basis by each NRI shall not exceed 5 per cent of the total paid -up value of convertible debentures subject to an overall ceiling of 10 per cent of the total paid -up value of each series of the convertible debentures issued by the Indian company concerned by all NRIs both on repatriation and non-repatriation basis taken together. i) Shares /convertible debentures purchased shall be held and registered in the name of the NRI. j) Shares /convertible debentures acquired by the NRI under this permission can be sold on recognized stock exchange in India through registered broker without any lock in period. NRI shall not engage in short selling and shall take delivery of the shares and convertible debentures purchased and give the delivery of the shares and debentures sold. k) Shares /convertible debentures acquired by the NRI under the Scheme shall not be transferred out of his name by way of gift except ....
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....ange Board of India(Foreign Portfolio Investors) Regulations, 2014 (RFPI). 2. Eligibility of LLP for accepting foreign Investment: (i) An LLP, existing or new, operating in sectors/activities where 100% FDI is allowed under the automatic route of FDI Scheme would be eligible to receive FDI. For ascertaining such sectors, reference shall be made to Annex-B to Schedule 1 of Notification No. FEMA 20/ 2000-RB dated 3rd May 2000, as amended from time to time. (ii) An LLP engaged in the following sectors/activities shall not be eligible to accept FDI: a) Sectors eligible to accept 100% FDI under automatic route but are subject to FDI-linked performance related conditions (for example minimum capitalisation norms applicable to 'Non-Banking Finance Companies' or 'Development of Townships, Housing, Built-up infrastructure and Construction-development projects', etc.); or b) Sectors eligible to accept less than 100% FDI under automatic route; or c) Sectors eligible to accept FDI under Government Approval route; or d) Agricultural/plantation activity and print media; or e) Sectors not eligible to accept FDI i.e. any sector which is prohibited under the ....
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...., together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report on the non-resident investor in Annex 9-II, through an AD Category - I bank, and valuation certificate (as per paragraph 5 above) as regards pricing at the earliest but not later than 30 days from the date of receipt of the amount of consideration. The report would be acknowledged by the Regional Office concerned, which would allot a Unique Identification Number (UIN) for the amount reported. (ii) The AD Category - I bank in India, receiving the remittance should obtain a KYC report in respect of the foreign investor from the overseas bank remitting the amount. (iii) Disinvestment / transfer of capital contribution or profit share between a resident and a non-resident (or vice versa) shall require to be reported within 60 days from the date of receipt of funds in Form FOREIGN DIRECT INVESTMENT-LLP(II) as given in Annex 12. 8. Downstream investment: a) An Indian company, having foreign investment (direct or indirect, irrespective of percentage of such foreign investment), will be permitted to make downstream investment in an LLP only if both, the company as well as....
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....10. No. FEMA 94/2003-RB June 18, 2003 11. No. FEMA 100/2003-RB October 3, 2003 12. No. FEMA 101/2003-RB October 3, 2003 13. No. FEMA 106/2003-RB October 27, 2003 14. No. FEMA 108/2003-RB January 1, 2004 15. No. FEMA 111/2004-RB March 6 , 2004 16. No.FEMA.118/2004-RB June 29, 2004 17. No.FEMA.122/2004-RB August 30, 2004 18. No.FEMA.125/2004-RB November 27, 2004 19. No.FEMA.130/2005-RB March 17, 2005 20. No.FEMA.131/2005-RB March 17, 2005 21. No.FEMA.138/2005-RB July 22, 2005 22. No. FEMA.136 /2005-RB July 19, 2005 23. No. FEMA.137/2005- RB July 22, 2005 24. No.FEMA.138/2005-RB July 22, 2005 25. No. FEMA.149/2006-RB June 9, 2006 26. No. FEMA.153/2006-RB May 31, 2007 27. No. FEMA.167/2007-RB October 23, 2007 28. No. FEMA.170/2007-RB November 13, 2007 29. No. FEMA.179/2008-RB August 22, 2008 30. No. FEMA.202/2009-RB November 10,2009 31 No. FEMA.205/2010-RB April 7,2010 32. No. FEMA.224/2012-RB March 07, 2012 33. No. FEMA.229/2012-RB April 23, 2012 34. No. FEMA.230/2012-R....
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....s) Circular No.44 December 8, 2003 24. AP (DIR Series) Circular No.53 December 17, 2003 25. A.P.DIR(Series) Circular No.54 December 20, 2003 26. A.P.DIR(Series) Circular No.63 February 3, 2004 27. A.P.DIR(Series) Circular No.67 February 6, 2004 28. A.P.DIR(Series) Circular No.89 April 24, 2004 29. A.P.DIR(Series) Circular No.11 September 13, 2004 30. A.P.DIR(Series) Circular No.13 October 1, 2004 31. A.P.DIR(Series) Circular No.15 October 1, 2004 32 A.P.DIR(Series) Circular No.16 October 4, 2004 33. AP (DIR Series) Circular No. 04 July 29, 2005 34. A.P. (DIR Series) Circular No. 06 August 11, 2005 35. A.P. (DIR Series) Circular No. 07 August 17, 2005 36. A.P. (DIR Series) Circular No. 08 August 25, 2005 37. A. P. (DIR Series) Circular No. 10 August 30, 2005 38. A.P. (DIR Series) Circular No. 11 September 05, 2005 39. A.P. (DIR Series) Circular No.16 November 11, 2005 40. A.P.( DIR Series) Circular No. 24 January 25, 2006 41. A.P.( DIR Series) Circular No. 4 July 28, 2006 42. A.P.( DIR Series) Circular No. 12 No....
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....P. (DIR Series) Circular No. 94 March 19, 2012 82. A.P. (DIR Series) Circular No. 120 May 8, 2012 83. A.P. (DIR Series) Circular No. 121 May 8, 2012 84. A.P. (DIR Series) Circular No. 127 May 15, 2012 85. A.P. (DIR Series) Circular No. 133 June 20, 2012 86. A.P. (DIR Series) Circular No. 135 June 25, 2012 87. A.P. (DIR Series) Circular No. 137 June 28, 2012 88. A.P. (DIR Series) Circular No. 7 July 16, 2012 89. A.P. (DIR Series) Circular No. 16 August 22, 2012 90. A.P. (DIR Series) Circular No.19 August 28, 2012 91. A.P. (DIR Series) Circular No. 32 September 21, 2012 92. A.P. (DIR Series) Circular No. 36 September 26, 2012 93 A.P. (DIR Series) Circular No. 41 October 10, 2012 94. A.P. (DIR Series) Circular No. 74 January 10, 2013 95. A.P. (DIR Series) Circular No. 80 January 24, 2013 96. A.P. (DIR Series) Circular No. 90 March 14, 2013 97. A.P. (DIR Series) Circular No. 94 April 01, 2013 98. A.P. (DIR Series) Circular No. 104 May 17, 2013 99. A.P. (DIR Series) Circular No. 110 June 12, 2013 100. A.P. (DIR Series)....