RESERVE
BANK OF INDIA
(FOREIGN EXCHANGE DEPARTMENT)
CENTRAL OFFICE
Mumbai 400 001
Notification No. FEMA 20(R)/
2017-RB
November
07, 2017
Foreign
Exchange Management (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2017
In exercise of the powers
conferred by clause (b) of sub-section (3) of section 6 and section 47 of
the Foreign Exchange Management Act, 1999 (42 of 1999) and in supersession
of Notification No. FEMA 20/2000-RB and Notification No.
FEMA 24/2000-RB both dated May 3, 2000, as amended from time to time, the
Reserve Bank makes the following regulations to regulate investment in
India by a Person Resident Outside India, namely:-
1. Short title and commencement
(1) These Regulations may be
called the Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) Regulations, 2017.
(2) They shall come into effect
from the date of their publication in the Official Gazette except proviso
(ii) to sub-regulation 1 of regulation 10 of these Regulations and proviso
(ii) to sub-regulation 2 of regulation 10 of these Regulations which will
come into effect from a date to be notified.
2. Definitions
In these Regulations, unless the
context requires otherwise,-
(i) ‘Act’ means the Foreign
Exchange Management Act, 1999 (42 of 1999);
(ii) ‘Asset Reconstruction
Company’ (ARC) means a company registered with the Reserve Bank under
section 3 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act);
(iii) ‘Authorised bank’ will
have the same meaning as assigned to it in Foreign Exchange Management
(Deposit) Regulations, 2016;
(iv) ‘Authorised dealer’
includes a person authorised under sub-section (1) of section 10 of the
Act;
(v) ‘Capital Instruments’ means
equity shares, debentures, preference shares and share warrants issued by
an Indian company;
Explanation:
a.
Equity
shares issued in accordance with the provisions of the Companies Act, 2013
shall include equity shares that have been partly paid. The expression
‘Debentures’ means fully, compulsorily and mandatorily convertible
debentures. ‘Preference shares’ means fully, compulsorily and mandatorily
convertible preference shares. Share Warrants are those issued by an Indian
Company in accordance with the Regulations issued by the Securities and
Exchange Board of India. Capital instruments can contain an optionality
clause subject to a minimum lock-in period of one year or as prescribed for
the specific sector, whichever is higher, but without any option or right
to exit at an assured price.
b.
Partly
paid shares that have been issued to a person resident outside India shall
be fully called-up within twelve months of such issue. Twenty five percent
of the total consideration amount (including share premium, if any), shall
be received upfront.
c.
In
case of share warrants at least twenty five percent of the consideration
shall be received upfront and the balance amount within eighteen months of
issuance of share warrants.
d.
Capital
instruments shall include non-convertible/ optionally convertible/
partially convertible preference shares issued as on and up to April 30,
2007 and optionally convertible/ partially convertible debentures issued up
to June 7, 2007 till their original maturity. Non-convertible/ optionally
convertible/ partially convertible preference shares issued after April 30,
2007 shall be treated as debt and shall conform to External Commercial Borrowings
guidelines regulated under Foreign Exchange Management (Borrowing and
Lending in Foreign Exchange) Regulations, 2000.
(vi) ‘Convertible Note’ means an
instrument issued by a startup company evidencing receipt of money
initially as debt, which is repayable at the option of the holder, or which
is convertible into such number of equity shares of such startup company,
within a period not exceeding five years from the date of issue of the
convertible note, upon occurrence of specified events as per the other
terms and conditions agreed to and indicated in the instrument;
(vii) ‘Domestic Custodian’ means
a custodian of securities, an Indian Depository, a Depository Participant,
or a bank and having permission from Securities and Exchange Board of India
to provide services as custodian;
(viii) ‘Domestic Depository’
means a custodian of securities registered with the Securities and Exchange
Board of India and authorised by the issuing entity to issue Indian
Depository Receipts;
(ix) ‘Depository Receipt’ means
a foreign currency denominated instrument, whether listed on an
international exchange or not, issued by a foreign depository in a
permissible jurisdiction on the back of eligible securities issued or
transferred to that foreign depository and deposited with a domestic
custodian and includes ‘global depository receipt’ as defined in the
Companies Act, 2013;
(x) ‘Employees’ stock option’
(ESOP) means an ESOP as defined under the Companies Act, 2013 and issued
under the regulations issued by the Securities and Exchange Board of India;
(xi) ‘Escrow account’ means an
Escrow account maintained in accordance with Foreign Exchange Management
(Deposit) Regulations, 2016;
(xii) ‘FDI linked performance
conditions’ means the sector specific conditions stipulated in regulation
16 of these Regulations for companies receiving foreign investment;
(xiii) ‘Foreign Venture Capital
Investor’ (FVCI) means an investor incorporated and established outside
India and registered with Securities and Exchange Board of India under
Securities and Exchange Board of India (Foreign Venture Capital Investors)
Regulations, 2000;
(xiv) ‘Foreign Central Bank’
means an institution/ organisation/ body corporate established in a Country
outside India and entrusted with the responsibility of carrying out central
bank functions under the law for the time being in force in that country;
(xv) ‘FCNR (B) account’ means a
Foreign Currency Non-Resident (Bank) account maintained in accordance with
the Foreign Exchange Management (Deposit) Regulations, 2016;
(xvi) ‘Foreign Currency
Convertible Bond (FCCB)’ means a bond issued under the Issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt
Mechanism) Scheme, 1993;
(xvii) ‘Foreign Direct
Investment’ (FDI) means investment through capital instruments by a person
resident outside India in an unlisted Indian company; or in 10 percent or
more of the post issue paid-up equity capital on a fully diluted basis of a
listed Indian company;
Note: In case an existing
investment by a person resident outside India in capital instruments of a
listed Indian company falls to a level below 10 percent of the post issue
paid-up equity capital on a fully diluted basis, the investment shall
continue to be treated as FDI.
Explanation: Fully diluted basis
means the total number of shares that would be outstanding if all possible
sources of conversion are exercised
(xviii) ‘Foreign Investment’
means any investment made by a person resident outside India on a
repatriable basis in capital instruments of an Indian company or to the
capital of an LLP;
Explanation: If a declaration is
made by persons as per the provisions of the Companies Act, 2013 about a
beneficial interest being held by a person resident outside India, then
even though the investment may be made by a resident Indian citizen, the
same shall be counted as foreign investment.
Note: A person resident outside
India may hold foreign investment either as Foreign Direct Investment or as
Foreign Portfolio Investment in any particular Indian company.
(xix) ‘Foreign Portfolio
Investment’ means any investment made by a person resident outside India
through capital instruments where such investment is less than 10 percent
of the post issue paid-up share capital on a fully diluted basis of a
listed Indian company or less than 10 percent of the paid up value of each
series of capital instruments of a listed Indian company;
Explanation: The 10 percent
limit for foreign portfolio investors shall be applicable to each foreign
portfolio investor or an investor group as referred in Securities and
Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014
(xx) ‘Foreign Portfolio Investor
(FPI)’ means a person registered in accordance with the provisions of
Securities Exchange Board of India (Foreign Portfolio Investors)
Regulations, 2014.
Explanation: Any Foreign
Institutional Investor (FII) or a sub account registered under the
Securities Exchange Board of India (Foreign Institutional Investors)
Regulations, 1995 and holding a valid certificate of registration from
Securities and Exchange Board of India shall be deemed to be a FPI till the
expiry of the block of three years from the enactment of the Securities
Exchange Board of India (FPI) Regulations, 2014.
(xxi) ‘Government approval’
means approval from the erstwhile Secretariat for Industrial Assistance
(SIA), Department of Industrial Policy and Promotion, Government of India
and/ or the erstwhile Foreign Investment Promotion Board (FIPB) and/ or any
of the ministry/ department of the Government of India as the case may be;
(xxii) ‘Group company’ means two
or more enterprises which, directly or indirectly, are in a position to (a)
exercise 26 percent, or more of voting rights in other enterprise; or (b)
appoint more than 50 percent, of members of board of directors in the other
enterprise;
(xxiii) ‘Indian company’ means a
company incorporated in India and registered under the Companies Act, 2013;
(xxiv) ‘Indian Depository
Receipts (IDRs)’ means any instrument in the form of a depository receipt
created by a Domestic Depository in India and authorised by a company
incorporated outside India making an issue of such depository receipts;
(xxv) ‘Indian entity’shall mean
an Indian company or an LLP;
(xxvi) ‘Investing company’ means
an Indian company holding only investments in other Indian company/ies
directly or indirectly, other than for trading of such holdings/
securities;
(xxvii) ‘Investment’ means to
subscribe, acquire, hold or transfer any security or unit issued by a
person resident in India;
Explanation:
a.
This
will include to acquire, hold or transfer depository receipts issued
outside India, the underlying of which is a security issued by a person
resident in India.
b.
For
the purpose of LLP, investment shall mean capital contribution or
acquisition/ transfer of profit shares.
(xxviii) ‘Investment on
repatriation basis’ means an investment, the sale/ maturity proceeds of
which are, net of taxes, eligible to be repatriated out of India, and the
expression ‘Investment on nonrepatriation basis’, shall be construed
accordingly;
(xxix) ‘Investment Vehicle’
means an entity registered and regulated under relevant regulations framed
by Securities and Exchange Board of India or any other authority designated
for the purpose and shall include Real Estate Investment Trusts (REITs)
governed by the Securities and Exchange Board of India (REITs) Regulations,
2014, Infrastructure Investment Trusts (InvIts) governed by the Securities
and Exchange Board of India (InvIts) Regulations, 2014 and Alternative
Investment Funds (AIFs) governed by the Securities and Exchange Board of
India (AIFs) Regulations, 2012;
(xxx) ‘Limited Liability
Partnership (LLP)’ means a partnership formed and registered under the
Limited Liability Partnership Act, 2008;
(xxxi) ‘Listed Indian Company’
means an Indian company which has any of its capital instruments listed on
a recognized stock exchange in India and the expression ‘Unlisted Indian
Company’ shall be construed accordingly;
(xxxii) ‘Manufacture’, with its
grammatical variations, means a change in a non-living physical object or
article or thing, (a) resulting in transformation of the object or article
or thing into a new and distinct object or article or thing having a
different name, character and use; or (b) bringing into existence of a new
and distinct object or article or thing with a different chemical
composition or integral structure.
(xxxiii) ‘NRE account’ means a
Non-Resident External account maintained in accordance with the Foreign
Exchange Management (Deposit) Regulations, 2016;
(xxxiv) ‘NRO account’ means a
Non-Resident Ordinary account maintained in accordance with the Foreign
Exchange Management (Deposit) Regulations, 2016;
(xxxv) ‘Non-Resident Indian
(NRI)’ means an individual resident outside India who is citizen of India;
(xxxvi) ‘Overseas Citizen of
India (OCI)’ means an individual resident outside India who is registered
as an Overseas Citizen of India Cardholder under Section 7(A) of the
Citizenship Act, 1955;
(xxxvii) ‘Resident Indian
citizen’ means an individual who is a person resident in India and is
citizen of India by virtue of the Constitution of India or the Citizenship
Act, 1955;
(xxxviii) 'Secretariat for
Industrial Assistance' means Secretariat for Industrial Assistance in the
Department of Industrial Policy and Promotion, Ministry of Commerce and
Industry, Government of India;
(xxxix) ‘Sectoral cap’ means the
maximum investment including both foreign investment on a repatriation
basis by persons resident outside India in capital instruments of a company
or the capital of an LLP, as the case may be, and indirect foreign
investment, unless provided otherwise. This shall be the composite limit
for the Indian investee entity;
Explanation:
a.
FCCBs
and DRs having underlying of instruments being in the nature of debt shall
not be included in the sectoral cap.
b.
Any
equity holding by a person resident outside India resulting from conversion
of any debt instrument under any arrangement shall be reckoned under the
sectoral cap.
(xl) 'SNRR account' means a
Special Non-Resident Rupee account maintained in accordance with the
Foreign Exchange Management (Deposit) Regulations, 2016;
(xli) ‘Startup’ means an entity
which complies with the conditions laid down in Notification No. G.S.R
180(E) dated February 17, 2016 issued by Department of Industrial Policy
and Promotion, Ministry of Commerce and Industry, Government of India;
(xlii) ‘Startup company’ means a
private company incorporated under the Companies Act, 2013 and recognised
as such in accordance with notification number G.S.R. 180(E) dated February
17, 2016 issued by the Department of Industrial Policy and Promotion,
Ministry of Commerce and Industry, Government of India and complies with
the conditions laid down by it;
(xliii) ‘Sweat equity shares’
means sweat equity shares as defined under the Companies Act, 2013;
(xliv) ‘Transferable Development
Rights (TDR)' shall have the same meaning as assigned to it in the
Regulations made under sub-section (2) of section 6 of the Act;
(xlv) ‘Unit’ means beneficial
interest of an investor in an investment vehicle.
(xlvi) 'Venture Capital Fund'
means a fund established in the form of a trust, a company including a body
corporate and registered under the Securities and Exchange Board of India
(Venture Capital Fund) Regulations, 1996;
(xlvii) The words and
expressions used but not defined in these Regulations shall have the same meanings
respectively assigned to them in the Act.
3. Restriction on investment by
a person resident outside India
Save as otherwise provided in
the Act, or rules or regulations made thereunder, no person resident
outside India shall make any investment in India.
Provided that an investment made in accordance with the Act
or the rules or the regulations framed thereunder and held on the date of
commencement of these Regulations, shall be deemed to have been made under
these Regulations and shall accordingly be governed by these Regulations.
Provided further that the Reserve Bank may, on an application made
to it and for sufficient reasons, permit a person resident outside India to
make any investment in India subject to such conditions as may be
considered necessary.
4. Restriction on receiving
investment
Save as otherwise provided in
the Act, or rules or regulations made thereunder, an Indian entity or an
investment vehicle, or a venture capital fund or a Firm or an Association
of Persons or a proprietary concern shall not receive any investment in
India from a person resident outside India or record such investment in its
books.
Provided that the Reserve Bank may, on an application made
to it and for sufficient reasons, permit an Indian entity or an investment
vehicle, or a venture capital fund or a Firm or an Association of Persons
or a proprietary concern to receive any investment in India from a person
resident outside India or to record such investment subject to such
conditions as may be considered necessary.
5. Permission for making
investment by a person resident outside India
Unless otherwise specified in
these Regulations or the relevant Schedules, any investment made by a
person resident outside India shall be subject to the entry routes,
sectoral caps or the investment limits, as the case may be, and the
attendant conditionalities for such investment as laid down in these
Regulations. A person resident outside India may make investment as under:
(1) A person resident outside
India may subscribe, purchase or sell capital instruments of an Indian company
in the manner and subject to the terms and conditions specified in Schedule
1.
Provided that a person who is a
citizen of Bangladesh or Pakistan or is an entity incorporated in
Bangladesh or Pakistan cannot purchase capital instruments without the
prior Government approval.
Provided further, a person who
is a citizen of Pakistan or an entity incorporated in Pakistan can invest,
only under the Government route, in sectors/ activities other than defence,
space, atomic energy and sectors/ activities prohibited for foreign
investment.
Note: Issue/ transfer of
‘participating interest/ right’ in oil fields by Indian companies to a
person resident outside India would be treated as foreign investment and
shall comply with the conditions laid down in Schedule 1.
(2) A Foreign Portfolio Investor
(FPI) may purchase or sell capital instruments of a listed Indian company
on a recognised stock exchange in India in the manner and subject to the
terms and conditions specified in Schedule 2.
(3) A Non- Resident Indian or an
Overseas Citizen of India may on repatriation basis purchase or sell
capital instruments of a listed Indian company on a recognised stock
exchange in India, in the manner and subject to the terms and conditions
specified in Schedule 3.
(4) A Non- Resident Indian or an
Overseas Citizen of India may, on non-repatriation basis, purchase or sell
capital instruments of an Indian company or purchase or sell units or
contribute to the capital of a LLP or a firm or proprietary concern, in the
manner and subject to the terms and conditions specified in Schedule 4.
(5) A person resident outside
India, permitted for the purpose by the Reserve Bank in consultation with
Central Government, may purchase or sell securities other than capital
instruments in the manner and subject to the terms and conditions specified
in Schedule 5.
Note: A Foreign Portfolio
Investor or a Non-Resident Indian (NRI) or an Overseas Citizen of India
(OCI) may trade or invest in all exchange traded derivative contracts
approved by Securities and Exchange Board of India from time to time
subject to the limits prescribed by Securities and Exchange Board of India
and conditions specified in Schedule 5
(6) A person resident outside
India, other than a citizen of Bangladesh or Pakistan or an entity
incorporated in Bangladesh or Pakistan, may invest, either by way of
capital contribution or by way of acquisition/ transfer of profit shares of
an LLP, in the manner and subject to the terms and conditions as specified
in Schedule 6.
(7) A Foreign Venture Capital
Investor may make investment in the manner and subject to the terms and
conditions specified in Schedule 7.
(8) A person resident outside
India, other than a citizen of Bangladesh or Pakistan or an entity
incorporated in Bangladesh or Pakistan, may invest in units of an
Investment Vehicle, in the manner and subject to the terms and conditions
specified in Schedule 8.
(9) A person resident outside
India may invest in the Depository Receipts (DRs) issued by foreign
depositories against eligible securities in the manner and subject to the
terms and conditions as specified in Schedule 9.
(10) A Foreign Portfolio
Investor or Non- Resident Indian or an Overseas Citizen of India may
purchase, hold or sell Indian Depository Receipts (IDRs) of companies
resident outside India and issued in the Indian capital market, in the
manner and subject to the terms and conditions specified in Schedule
10.
6. Acquisition through a rights
issue or a bonus issue
A person resident outside India
and having investment in an Indian company may make investment in capital
instruments (other than share warrants) issued by such company as a rights
issue or a bonus issue provided that:
1.
The
offer made by the Indian company is in compliance with the provisions of
the Companies Act, 2013;
2.
Such
issue shall not result in a breach of the sectoral cap applicable to the
company;
3.
The
shareholding on the basis of which the rights issue or the bonus issue has
been made must have been acquired and held as per the provisions of these
Regulations;
4.
In
case of a listed Indian company, the rights issue to persons resident
outside India shall be at a price determined by the company;
5.
In
case of an unlisted Indian company, the rights issue to persons resident
outside India shall not be at a price less than the price offered to
persons resident in India.
6.
Such
investment made through rights issue or bonus issue shall be subject to the
conditions as are applicable at the time of such issue.
7.
The
amount of consideration shall be paid as inward remittance from abroad
through banking channels or out of funds held in NRE/ FCNR(B) account
maintained in accordance with the Foreign Exchange Management (Deposit)
Regulations, 2016.
Note: Where the original
investment has been made on a non-repatriation basis, the amount of
consideration may also be paid by debit to the NRO account maintained in
accordance with the Foreign Exchange Management (Deposit) Regulations, 2016
Provided an individual who is a
person resident outside India exercising a right which was issued when he/
she was a person resident in India shall hold the capital instruments
(other than share warrants) so acquired on exercising the option on a
non-repatriation basis.
Explanation: The above
conditions shall also be applicable in case a person resident outside India
makes investment in capital instruments (other than share warrants) issued
by an Indian company as a rights issue that are renounced by the person to
whom it was offered.
7. Issue of shares under
Employees Stock Options Scheme to persons resident outside India
An Indian company may issue
“employees’ stock option” and/ or “sweat equity shares” to its employees/
directors or employees/ directors of its holding company or joint venture
or wholly owned overseas subsidiary/ subsidiaries who are resident outside
India, provided that:
1.
The
scheme has been drawn either in terms of regulations issued under the
Securities and Exchange Board of India Act, 1992 or the Companies (Share
Capital and Debentures) Rules, 2014 notified by the Central Government
under the Companies Act 2013, as the case may be;
2.
The
“employee’s stock option”/ “sweat equity shares” so issued under the
applicable rules/ regulations are in compliance with the sectoral cap
applicable to the said company;
3.
Issue
of “employee’s stock option”/ “sweat equity shares” in a company where
investment by a person resident outside India is under the approval route
shall require prior Government approval. Issue of “employee’s stock option”/
“sweat equity shares” to a citizen of Bangladesh/ Pakistan shall require
prior Government approval.
Provided an individual who is a
person resident outside India exercising an option which was issued when
he/ she was a person resident in India shall hold the shares so acquired on
exercising the option on a non-repatriation basis.
8. Issue of Convertible Notes by
an Indian startup company
1.
A
person resident outside India (other than an individual who is citizen of
Pakistan or Bangladesh or an entity which is registered/ incorporated in
Pakistan or Bangladesh), may purchase convertible notes issued by an Indian
startup company for an amount of twenty five lakh rupees or more in a
single tranche.
2.
A
startup company, engaged in a sector where investment by a person resident
outside India requires Government approval, may issue convertible notes to
a person resident outside India only with such approval. Further, issue of
equity shares against such convertible notes shall be in compliance with
the entry route, sectoral caps, pricing guidelines and other attendant
conditions for foreign investment.
3.
A
startup company issuing convertible notes to a person resident outside
India shall receive the amount of consideration by inward remittance
through banking channels or by debit to the NRE/ FCNR (B)/ Escrow account
maintained by the person concerned in accordance with the Foreign Exchange
Management (Deposit) Regulations, 2016. Repayment or sale proceeds may be
remitted outside India or credited to NRE/ FCNR (B) account maintained by
the person concerned in accordance with the Foreign Exchange Management
(Deposit) Regulations, 2016.
4.
A NRI
or an OCI may acquire convertible notes on non-repatriation basis in
accordance with Schedule 4 of these Regulations.
5.
A
person resident outside India may acquire or transfer by way of sale,
convertible notes, from or to, a person resident in or outside India,
provided the transfer takes place in accordance with the entry routes and
pricing guidelines as prescribed for capital instruments.
9. Merger or demerger or
amalgamation of Indian companies
(1) Where a Scheme of merger or
amalgamation of two or more Indian companies or a reconstruction by way of
demerger or otherwise of an Indian company, has been approved by National
Company Law Tribunal (NCLT)/ Competent Authority, the transferee company or
the new company, as the case may be, may issue capital instruments to the
existing holders of the transferor company resident outside India, subject
to the following conditions, namely:
(a) The transfer or issue is in
compliance with the entry routes, sectoral caps or investment limits, as
the case may be, and the attendant conditionalities of investment by a
person resident outside India;
Provided that where the percentage is likely to breach the
Sectoral caps or the attendant conditionalities, the transferor company or
the transferee or new company may obtain necessary approvals from the
Central Government.
(b) The transferor company or
the transferee company or the new company shall not engage in any sector
prohibited for investment by a person resident outside India; and
(2) Where a Scheme of
Arrangement for an Indian company has been approved by National Company Law
Tribunal (NCLT)/ Competent Authority , the Indian company may issue
non-convertible redeemable preference shares or non-convertible redeemable
debentures out of its general reserves by way of distribution as bonus to
the shareholders resident outside India, subject to the following
conditions, namely:
a.
the
original investment made in the Indian company by a person resident outside
India is in accordance with these Regulations and the conditions specified
in the relevant Schedule;
b.
the
said issue is in accordance with the provisions of the Companies Act, 2013
and the terms and conditions, if any, stipulated in the scheme approved by
National Company Law Tribunal (NCLT)/ Competent Authority have been
complied with;
c.
the
Indian company shall not engage in any activity/ sector in which investment
by a person resident outside India is prohibited.
10. Transfer of capital
instruments of an Indian company by or to a person resident outside India
A person resident outside India
holding capital instruments of an Indian company or units in accordance
with these Regulations or a person resident in India, may transfer such
capital instruments or units so held by him in compliance with the
conditions, if any, specified in the respective Schedules of these
Regulations and subject to the terms and conditions specified hereunder;
(1) A person resident outside
India, not being a non-resident Indian or an overseas citizen of India or
an erstwhile overseas corporate body may transfer by way of sale or gift
the capital instruments of an Indian company or units held by him to any
person resident outside India;
Explanation: It shall also
include transfer of capital instruments of an Indian company pursuant to
liquidation, merger, de-merger and amalgamation of entities/ companies
incorporated or registered outside India
Provided that
(i) prior Government approval
shall be obtained for any transfer in case the company is engaged in a
sector which requires Government approval.
(ii) where the person resident
outside India is an FPI and the acquisition of capital instruments made under Schedule
2 of these regulations has resulted in a breach of the applicable
aggregate FPI limits or sectoral limits, the FPI shall sell such capital
instruments to a person resident in India eligible to hold such instruments
within the time stipulated by Reserve Bank in consultation with the Central
Government. The breach of the said aggregate or sectoral limit on account
of such acquisition for the period between the acquisition and sale,
provided the sale is within the prescribed time limit, shall not be
reckoned as a contravention under these Regulations. The guidelines issued
by Securities and Exchange Board of India in this regard shall be
applicable.
(2) An NRI or an OCI holding
capital instruments of an Indian company or units on repatriation basis may
transfer the same by way of sale or gift to any person resident outside
India;
Provided that
(i) prior Government approval
shall be obtained for any transfer in case the company is engaged in a
sector which requires Government approval.
(ii) where the acquisition of
capital instruments by an NRI or an OCI under the provisions of Schedule
3 of these regulations has resulted in a breach of the applicable
aggregate NRI/ OCI limit or sectoral limits, the NRI or the OCI shall sell
such capital instruments to a person resident in India eligible to hold
such instruments within the time stipulated by Reserve Bank in consultation
with the Central Government. The breach of the said aggregate or sectoral
limit on account of such acquisition for the period between the acquisition
and sale, provided the sale is within the prescribed time, shall not be
reckoned as a contravention under these Regulations.
(3) A person resident outside
India, holding capital instruments of an Indian company or units in
accordance with these Regulations may transfer the same to a person
resident in India by way of sale/ gift or may sell the same on a recognised
stock exchange in India in the manner prescribed by Securities and Exchange
Board of India;
Provided that
(i) the transfer by way of sale
shall be in compliance with and subject to the adherence to pricing
guidelines, documentation and reporting requirements for such transfers as
may be specified by Reserve Bank from time to time;
(ii) where the capital
instruments are held by the person resident outside India on a
non-repatriable basis, conditions at proviso (i) above shall not apply
(4) A person resident in India
holding capital instruments of an Indian company or units, or an NRI or an
OCI or an eligible investor under Schedule 4 of these
Regulations, holding capital instruments of an Indian company or units on a
non-repatriation basis, may transfer the same to a person resident outside
India by way of sale, subject to the adherence to entry routes, sectoral
caps/ investment limits, pricing guidelines and other attendant conditions
as applicable for investment by a person resident outside India and
documentation and reporting requirements for such transfers as may be
specified by Reserve Bank from time to time;
Provided the entry routes,
sectoral caps/ investment limits, pricing guidelines and other attendant
conditions shall not apply in case the transfer is to an NRI or an OCI or
an eligible investor under Schedule 4 of these Regulations
acquiring such investment on non-repatriation basis.
(5) A person resident in India
holding capital instruments or units of an Indian company or an NRI or an
OCI an eligible investor under Schedule 4 of these Regulations
holding capital instruments or units of an Indian company on a
non-repatriation basis may transfer the same to a person resident outside
India by way of gift with the prior approval of the Reserve Bank, in the
manner prescribed, and subject to the following conditions:
(a) The donee is eligible to
hold such a security under relevant schedules of these Regulations;
(b) The gift does not exceed 5
percent of the paid up capital of the Indian company/ each series of
debentures/ each mutual fund scheme;
Explanation: The 5 percent will
be on cumulative basis by a single person to another single person
(c) The applicable sectoral cap
in the Indian company is not breached;
(d) The donor and the donee
shall be ‘relatives’ within the meaning in section 2(77) of the Companies
Act, 2013;
(e) The value of security to be
transferred by the donor together with any security transferred to any
person residing outside India as gift during the financial year does not
exceed the rupee equivalent of USD50,000;
(f) Such other conditions as
considered necessary in public interest by the Reserve Bank;
(6) An NRI or an OCI or an
eligible investor under Schedule 4 of these Regulations holding
capital instruments of an Indian company or units on a non-repatriation
basis, may transfer the same by way of gift to an NRI or an OCI or an
eligible investor under Schedule 4 of these Regulations who shall
hold it on a non-repatriable basis;
(7) A person resident outside
India holding capital instruments of an Indian company containing an
optionality clause in accordance with these Regulations and exercising the
option/ right, may exit without any assured return, subject to the pricing
guidelines prescribed in these Regulations and a minimum lock-in period of
one year or minimum lock-in period as prescribed in these Regulations,
whichever is higher;
(8) An erstwhile OCB may
transfer capital instruments subject to directions issued by the Reserve
Bank from time to time in this regard.
Explanation: 'Overseas Corporate
Body (OCB)’ means an entity derecognized through Foreign Exchange
Management [Withdrawal of General Permission to Overseas Corporate Bodies
(OCBs)] Regulations, 2003;
(9) In case of transfer of
capital instruments between a person resident in India and a person
resident outside India, an amount not exceeding twenty five percent of the
total consideration
a.
can be
paid by the buyer on a deferred basis within a period not exceeding
eighteen months from the date of the transfer agreement; or
b.
can be
settled through an escrow arrangement between the buyer and the seller for
a period not exceeding eighteen months from the date of the transfer
agreement; or
c.
can be
indemnified by the seller for a period not exceeding eighteen months from
the date of the payment of the full consideration, if the total
consideration has been paid by the buyer to the seller.
Provided the total consideration
finally paid for the shares shall be compliant with the applicable pricing
guidelines.
(10) In case of transfer of
capital instruments between a person resident in India and a person
resident outside India, a person resident outside India may open an Escrow
account in accordance with the Foreign Exchange Management (Deposit)
Regulations, 2016. Such Escrow account may be funded by way of inward
remittance through banking channels and/ or by way of guarantee issued by an
authorized dealer bank, subject to terms and conditions as specified in the
Foreign Exchange Management (Guarantees) Regulations, 2000.
(11) The pricing guidelines
prescribed in these Regulations shall not be applicable for any transfer by
way of sale done in accordance with Securities and Exchange Board of India
regulations where the pricing is prescribed by Securities and Exchange
Board of India.
(12) The transfer of capital
instruments of an Indian company or units of an Investment Vehicle by way
of pledge is subject to the following terms and conditions:
(a) Any person being a promoter
of a company registered in India (borrowing company), which has raised
external commercial borrowing (ECB) in compliance with the Foreign Exchange
Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000
may pledge the shares of the borrowing company or that of its associate
resident companies for the purpose of securing the external commercial
borrowing (ECB) raised by the borrowing company subject to the following
conditions:
i.
the
period of such pledge shall be co-terminus with the maturity of the
underlying external commercial borrowing;
ii.
in
case of invocation of pledge, transfer shall be in accordance with these
Regulations and directions issued by the Reserve Bank;
iii.
the
Statutory Auditor has certified that the borrowing company will utilise/
has utilised the proceeds of the external commercial borrowing for the
permitted enduse/s only;
iv.
no
person shall pledge any such share unless a no-objection has been obtained
from an Authorised Dealer bank that the above conditions have been complied
with.
(b) Any person resident outside
India holding capital instruments in an Indian company or units of an
investment vehicle may pledge the capital instruments or units, as the case
may be:
i.
in
favour of a bank in India to secure the credit facilities being extended to
such Indian company for bona fide purposes,
ii.
in
favour of an overseas bank to secure the credit facilities being extended
to such person or a person resident outside India who is the promoter of
such Indian company or the overseas group company of such Indian company,
iii.
in
favour of a Non-Banking Financial Company registered with the Reserve Bank
to secure the credit facilities being extended to such Indian company for
bona fide purposes,
iv.
subject
to the Authorised Dealer bank satisfying itself of the compliance of the
conditions stipulated by the Reserve Bank in this regard.
(c) In case of invocation of
pledge, transfer of capital instruments of an Indian company or units shall
be in accordance with entry routes, sectoral caps/ investment limits,
pricing guidelines and other attendant conditions at the time of creation
of pledge.
11. Pricing Guidelines
Unless otherwise specified in
these Regulations or the relevant Schedules, the price of capital
instruments of an Indian company -
(1) issued by such company to a
person resident outside India shall not be less than:
a.
the
price worked out in accordance with the relevant Securities and Exchange
Board of India guidelines in case of a listed Indian company or in case of
a company going through a delisting process as per the Securities and
Exchange Board of India (Delisting of Equity Shares) Regulations, 2009;
b.
the
valuation of capital instruments done as per any internationally accepted
pricing methodology for valuation on an arm’s length basis duly certified
by a Chartered Accountant or a Securities and Exchange Board of India
registered Merchant Banker or a practicing Cost Accountant, in case of an
unlisted Indian Company.
Explanation: in case of
convertible capital instruments, the price/ conversion formula of the
instrument should be determined upfront at the time of issue of the
instrument. The price at the time of conversion should not in any case be
lower than the fair value worked out, at the time of issuance of such
instruments, in accordance with these Regulations.
(2) transferred from a person
resident in India to a person resident outside India shall not be less
than:
a.
the
price worked out in accordance with the relevant Securities and Exchange
Board of India guidelines in case of a listed Indian company;
b.
the
price at which a preferential allotment of shares can be made under the
Securities and Exchange Board of India Guidelines, as applicable, in case
of a listed Indian company or in case of a company going through a
delisting process as per the Securities and Exchange Board of India
(Delisting of Equity Shares) regulations, 2009;
c.
the
valuation of capital instruments done as per any internationally accepted
pricing methodology for valuation on an arm’s length basis duly certified
by a Chartered Accountant or a Securities and Exchange Board of India
registered Merchant Banker or a practicing Cost Accountant, in case of an
unlisted Indian Company.
(3) transferred by a person
resident outside India to a person resident in India shall not exceed:
(a) the price worked out in
accordance with the relevant Securities and Exchange Board of India
guidelines in case of a listed Indian company;
(b) the price at which a
preferential allotment of shares can be made under the Securities and
Exchange Board of India Guidelines, as applicable, in case of a listed
Indian company or in case of a company going through a delisting process as
per the Securities and Exchange Board of India (Delisting of Equity Shares)
regulations, 2009;
Provided that the price is
determined for such duration as specified in the Securities and Exchange
Board of India Guidelines, preceding the relevant date, which shall be the
date of purchase or sale of shares;
(c) the valuation of capital
instruments done as per any internationally accepted pricing methodology
for valuation on an arm’s length basis duly certified by a Chartered
Accountant or a Securities and Exchange Board of India registered Merchant
Banker or a practicing Cost Accountant, in case of an unlisted Indian
Company.
Explanation: The guiding
principle would be that the person resident outside India is not guaranteed
any assured exit price at the time of making such investment/ agreement and
shall exit at the price prevailing at the time of exit.
(4) in case of swap of capital
instruments, subject to the condition that irrespective of the amount,
valuation involved in the swap arrangement will have to be made by a
Merchant Banker registered with Securities and Exchange Board of India or
an Investment Banker outside India registered with the appropriate
regulatory authority in the host country.
(5) where shares in an Indian
company are issued to a person resident outside India in compliance with
the provisions of the Companies Act, 2013, by way of subscription to
Memorandum of Association, such investments shall be made at face value
subject to entry route and sectoral caps.
(6) in case of share warrants,
their pricing and the price/ conversion formula shall be determined
upfront.
Provided these pricing
guidelines shall not be applicable for investment in capital instruments by
a person resident outside India on non-repatriation basis.
12. Taxes and Remittance of sale
proceeds
12.1 Taxes
All transaction under these
regulations shall be undertaken through banking channels in India and
subject to payment of applicable taxes and other duties/ levies in India.
12.2 Remittance of sale proceeds
(1) No remittance of sale
proceeds of an Indian security held by a person resident outside India
shall be made otherwise than in accordance with these Regulations and the
conditions specified in the relevant Schedule.
(2) An authorised dealer may
allow the remittance of sale proceeds of a security (net of applicable
taxes) to the seller of shares resident outside India -
Provided -
(i) the security was held by the
seller on repatriation basis; and
(ii) either the security has
been sold in compliance with the pricing guidelines or the Reserve Bank's
approval has been obtained in other cases for sale of the security and
remittance of the sale proceeds thereof;
13. Reporting requirements
13.1 The reporting requirement
for any Investment in India by a person resident outside India shall be as
follows:
(1) Advance Remittance Form
(ARF): An Indian company which
has received amount of consideration for issue of capital instruments and
where such issue is reckoned as Foreign Direct Investment for the purpose
of these regulations, shall report such receipt (including each upfront/
call payment) in ARF to the Regional Office concerned of the Reserve Bank,
not later than 30 days from the date of receipt.
(2) Form Foreign Currency-Gross
Provisional Return (FC-GPR): An
Indian company issuing capital instruments to a person resident outside
India and where such issue is reckoned as Foreign Direct Investment, for
the purpose of these regulations, shall report such issue in Form FC-GPR to
the Regional Office concerned of the Reserve Bank under whose jurisdiction
the Registered office of the company operates, not later than thirty days
from the date of issue of capital instruments. Issue of ‘participating
interest/ rights’ in oil fields shall be reported Form FC-GPR.
(3) Annual Return on Foreign
Liabilities and Assets (FLA): An
Indian company which has received FDI or an LLP which has received
investment by way of capital contribution in the previous year(s) including
the current year, should submit form FLA to the Reserve Bank on or before
the 15th day of July of each year.
Explanation: Year for this
purpose shall be reckoned as April to March.
(4) Form Foreign
Currency-Transfer of Shares (FC-TRS):
(a) Form FCTRS shall be filed
for transfer of capital instruments in accordance with these Regulations
between:
1.
a
person resident outside India holding capital instruments in an Indian
company on a repatriable basis and person resident outside India holding
capital instruments on a non-repatriable basis; and
2.
a
person resident outside India holding capital instruments in an Indian
company on a repatriable basis and a person resident in India,
The onus of reporting shall be
on the resident transferor/ transferee or the person resident outside India
holding capital instruments on a non-repatriable basis, as the case may be.
Note: Transfer of capital
instruments in accordance with these Regulations by way of sale between a
person resident outside India holding capital instruments on a
non-repatriable basis and person resident in India is not required to be
reported in Form FC-TRS.
(b) Transfer of capital
instruments on a recognised stock exchange by a person resident outside
India shall be reported by such person in Form FC-TRS to the Authorised
Dealer bank.
(c) Transfer of capital instruments
prescribed in regulation 10(9), shall be reported in Form FC-TRS to the
Authorised Dealer on receipt of every tranche of payment. The onus of
reporting shall be on the resident transferor/ transferee.
(d) Transfer of ‘participating
interest/ rights’ in oil fields shall be reported Form FC-TRS
The form FCTRS shall be filed
with the Authorised Dealer bank within sixty days of transfer of capital
instruments or receipt/ remittance of funds whichever is earlier.
(5) Form Employees’ Stock Option
(ESOP): An Indian company issuing
employees’ stock option to persons resident outside India who are its
employees/ directors or employees/ directors of its holding company/ joint
venture/ wholly owned overseas subsidiary/ subsidiaries shall submit
Form-ESOP to the Regional Office concerned of the Reserve Bank under whose
jurisdiction the registered office of the company operates, within 30 days
from the date of issue of employees’ stock option.
(6) Form Depository Receipt
Return (DRR): The Domestic Custodian
shall report in Form DRR, to the Reserve Bank, the issue/ transfer of
depository receipts issued in accordance with the Depository Receipt
Scheme, 2014 within 30 days of close of the issue.
(7) Form LLP (I): A Limited Liability Partnerships (LLP) receiving
amount of consideration for capital contribution and acquisition of profit
shares shall submit Form LLP (I) to the Regional Office of the Reserve Bank
under whose jurisdiction the Registered Office of the Limited Liability
Partnership is situated, within 30 days from the date of receipt of the
amount of consideration
(8) Form LLP (II): The disinvestment/ transfer of capital
contribution or profit share between a resident and a non-resident (or vice
versa) shall be reported in Form LLP(II) to the Authorised Dealer Bank
within 60 days from the date of receipt of funds.
(9) LEC(FII): The Authorised Dealer Category I banks shall
report to the Reserve Bank in Form LEC (FII) the purchase/ transfer of
capital instruments by FPIs on the stock exchanges in India.
(10) LEC(NRI): The Authorised Dealer Category I banks shall
report to the Reserve Bank in Form LEC (NRI) the purchase/ transfer of
capital instruments by Non-Resident Indians or Overseas Citizens of India
stock exchanges in India.
(11) Downstream Investment: An Indian company making downstream investment in
another Indian company which is considered as indirect foreign investment
for the investee company in terms of these Regulations, shall notify the
Secretariat for Industrial Assistance, DIPP and file Form DI within 30 days
of such investment and, even if capital instruments have not been allotted
along with the modality of investment in new/existing ventures
(with/without expansion programme);
(12) Form Convertible Notes
(CN):
a.
The
Indian startup company issuing Convertible Notes to a person resident
outside India shall report such inflows to the Authorised Dealer bank in
Form CN within 30 days of such issue.
b.
A
person resident in India, who may be a transferor or transferee of
Convertible Notes issued by an Indian startup company shall report such
transfers to or from a person resident outside India, as the case may be,
in Form CN to the Authorised Dealer bank within 30 days of such transfer.
c.
The
Authorised Dealer bank shall submit consolidated statements to the Reserve
Bank.
Provided, the format,
periodicity and manner of submission of such reporting shall be as
prescribed by Reserve Bank in this regard.
Provided further that unless
otherwise specifically stated in these regulations all reporting shall be
made through or by an Authorised Dealer bank, as the case may be.
13.2 Delays in reporting
The person/ entity responsible
for filing the reports provided in regulation 13.1 above shall be liable
for payment of late submission fee, as may be decided by the Reserve Bank,
in consultation with the Central Government, for any delays in reporting.
14. Downstream Investment
(1) For the purpose of this
regulation:
(a) ‘Ownership of an Indian
company’ shall mean beneficial holding of more than 50 percent of the
capital instruments of such company. ‘Ownership of an LLP’ shall mean
contribution of more than 50 percent in its capital and having majority
profit share.
(b) ‘Company owned by resident
Indian citizens’ shall mean an Indian company where ownership is vested in
resident Indian citizens and/ or Indian companies, which are ultimately
owned and controlled by resident Indian citizens. An ‘LLP owned by resident
Indian citizens’ shall mean an LLP where ownership is vested in resident
Indian citizens and/ or Indian entities, which are ultimately owned and
controlled by resident Indian citizens.
(c) ‘Company owned by persons
resident outside India’ shall mean an Indian company that is owned by
persons resident outside India. An ‘LLP owned by persons resident outside
India’ shall mean an LLP that is owned by persons resident outside India.
(d) ‘Control’ shall mean the
right to appoint majority of the directors or to control the management or
policy decisions including by virtue of their shareholding or management
rights or shareholders agreement or voting agreement. For the purpose of
LLP, ‘Control’ shall mean the right to appoint majority of the designated
partners, where such designated partners, with specific exclusion to
others, have control over all the policies of an LLP.
(e) ‘Company controlled by
resident Indian citizens’ means an Indian company, the control of which is
vested in resident Indian citizens and/ or Indian companies which are
ultimately owned and controlled by resident Indian citizens. An ‘LLP
controlled by resident Indian citizens’ shall mean an LLP, the control of
which is vested in resident Indian citizens and/ or Indian entities, which
are ultimately owned and controlled by resident Indian citizens.
(f) ‘Company controlled by
persons resident outside India’ shall mean an Indian company that is
controlled by persons resident outside India. An ‘LLP controlled by persons
resident outside India’ shall mean an LLP that is controlled by persons
resident outside India.
(g) ‘Downstream Investment’
shall mean investment made by an Indian entity or an Investment Vehicle in
the capital instruments or the capital, as the case may be, of another
Indian entity:
(h) ‘Holding Company’ shall have
the same meaning as assigned to it under Companies Act, 2013;
(i) ‘Indirect Foreign
Investment’ means downstream investment received by an Indian entity from:
i.
another
Indian entity (IE) which has received foreign investment and (i) the IE is
not owned and not controlled by resident Indian citizens or (ii) is owned
or controlled by persons resident outside India; or
ii.
an
investment vehicle whose sponsor or manager or investment manager (i) is
not owned and not controlled by resident Indian citizens or (ii) is owned
or controlled by persons resident outside India
Provided no person resident in
India other than an Indian entity can receive Indirect Foreign Investment.
(j) ‘Total Foreign Investment’
means the total of foreign investment and indirect foreign investment and
the same will be reckoned on a fully diluted basis;
(k) ‘Strategic downstream
investment’ means investment by banking companies incorporated in India in
their subsidiaries, joint ventures and associates.
(2) Indian entity which has
received indirect foreign investment shall comply with the entry route,
sectoral caps, pricing guidelines and other attendant conditions as
applicable for foreign investment.
Explanation: Downstream
investment by an LLP not owned and not controlled by resident Indian
citizens or owned or controlled by persons resident outside India is
allowed in an Indian company operating in sectors where foreign investment
up to 100 percent is permitted under automatic route and there are no FDI
linked performance conditions.
(3) With effect from 31st day of
July, 2012, downstream investment/s made under Corporate Debt Restructuring
(CDR), or other loan restructuring mechanism, or in trading book, or for
acquisition of shares due to defaults in loans, by a banking company, as
defined in clause (c) of section 5 of the Banking Regulation Act, 1949,
incorporated in India, which is not owned and not controlled by resident
Indian citizens or owned or controlled by persons resident outside India,
shall not count towards indirect foreign investment. However, their
strategic downstream investment shall be counted towards indirect foreign
investment for the company in which such investment is being made.
(4) Guidelines for calculating
total foreign investment in Indian companies:
a.
Any
equity holding by a person resident outside India resulting from conversion
of any debt instrument under any arrangement shall be reckoned for total
foreign investment;
b.
FCCBs
and DRs having underlying of instruments in the nature of debt, shall not
be reckoned for total foreign investment;
c.
The
methodology for calculating total foreign investment would apply at every
stage of investment in Indian companies and thus in each and every Indian
company;
d.
For
the purpose of downstream investment, the portfolio investment held as on
March 31 of the previous financial year in the Indian company making the
downstream investment shall be considered for computing its total foreign
investment;
e.
The
indirect foreign investment received by a wholly owned subsidiary of an
Indian company will be limited to the total foreign investment received by
the company making the downstream investment;
(5) Downstream investment made
into Indian companies will be subject to the following conditions:
(a) The downstream investment
should have the approval of the Board of Directors as also a Shareholders'
Agreement, if any;
(b) For the purpose of
downstream investment, the Indian entity making the downstream investment
shall bring in requisite funds from abroad and not use funds borrowed in
the domestic markets. Downstream investments can be made through internal
accruals. For this purpose, internal accruals will mean profits transferred
to reserve account after payment of taxes.
Further raising of debt and its
utilisation shall be in compliance with the Act, rules or regulations made
thereunder.
(c) Capital instrument of an
Indian company held by another Indian company which has received foreign
investment and is not owned and not controlled by resident Indian citizens
or is owned or controlled by persons resident outside India may be
transferred to:
i.
A
person resident outside India, subject to reporting requirements in Form
FCTRS;
ii.
A
person resident in India subject to adherence to pricing guidelines.
iii.
An
Indian company which has received foreign investment and is not owned and
not controlled by resident Indian citizens or owned or controlled by
persons resident outside India.
(d) The first level Indian
company making downstream investment shall be responsible for ensuring
compliance with the provisions of these regulations for the downstream
investment made by it at second level and so on and so forth. Such first
level company shall obtain a certificate to this effect from its statutory
auditor on an annual basis. Such compliance of these regulations shall be
mentioned in the Director'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 Regional Office of the
Reserve Bank in whose jurisdiction the Registered Office of the company is
located and shall also obtain acknowledgement from the RO.
(e) The provisions at (c) and
(d) above shall be construed accordingly for an LLP.
Note: Downstream investment made
in accordance with the guidelines in existence prior to February 13, 2009
would not require any modification to conform to these regulations. All
other investments, after the said date, would come under the ambit of these
regulations. Downstream investments made between February 13, 2009 and June
21, 2013 which is not in conformity with these regulations should have been
intimated to the Reserve Bank by October 3, 2013 for treating such cases as
compliant with these regulations.
15. Prohibited activities for investment
by a person resident outside India
Unless otherwise specifically
stated in the Act or the rules or regulations framed thereunder, investment
by a person resident outside India is prohibited in:
(1) Lottery Business including
Government/ private lottery, online lotteries
(2) Gambling and betting
including casinos
(3) Chit funds.
Explanation: The Registrar of
Chits or an officer authorised by the state government in this behalf, may,
in consultation with the State Government concerned, permit any chit fund
to accept subscription from Non-resident Indians and Oveseas Citizens of India
who shall be eligible to subscribe, through banking channel and on non-
repatriation basis, to such chit funds, without limit subject to the
conditions stipulated by the Reserve Bank of India from time to time
(4) Nidhi company
(5) Trading in Transferable
Development Rights (TDRs)
(6) Real Estate Business or
Construction of Farm Houses.
Explanation: For the purpose of
this regulation, “real estate business” shall not include development of
townships, construction of residential /commercial premises, roads or
bridges and Real Estate Investment Trusts (REITs) registered and regulated
under the SEBI (REITs) Regulations 2014.
(7) Manufacturing of Cigars,
cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
(8) Activities/ sectors not open
to private sector investment e.g. (I) Atomic energy and (II) Railway
operations
(9) Foreign technology
collaboration in any form including licensing for franchise, trademark,
brand name, management contract is also prohibited for Lottery Business and
Gambling and Betting activities
16. Permitted sectors, entry
routes and sectoral caps for total foreign investment
Unless otherwise specified in
these Regulations or the relevant Schedules the entry routes and sectoral
caps for the total foreign investment in an Indian entity shall be as
follows:
A. Entry Routes
1.
Automatic
Route means the entry route through which investment by a person resident
outside India does not require the prior Reserve Bank approval or
Government approval.
2.
Government
Route means the entry route through which investment by a person resident
outside India requires prior Government approval. Foreign investment
received under this route shall be in accordance with the conditions
stipulated by the Government in its approval.
3.
Aggregate
Foreign Portfolio Investment up to 49 percent of the paid-up capital on a
fully diluted basis or the sectoral/ statutory cap, whichever is lower,
will not require Government approval or compliance of sectoral conditions
as the case may be, if such investment does not result in transfer of
ownership and control of the resident Indian company from resident Indian
citizens or transfer of ownership or control to persons resident outside
India. Other investments by a person resident outside India will be subject
to conditions of Government approval and compliance of sectoral conditions
as laid down in these regulations.
B. Sectoral Caps
SECTOR-SPECIFIC
POLICY FOR TOTAL FOREIGN INVESTMENT
(1) Sectoral cap for the
following sectors/ activities is the limit indicated against each sector.
The total foreign investment shall not exceed the sectoral/ statutory cap.
(2) Foreign investment in the
following sectors/ activities is, subject to applicable laws/ regulations,
security and other conditionalities
(3) In sectors/ activities not
listed below or not prohibited under regulation 15 of these Regulations,
foreign investment is permitted up to 100 percent on the automatic route,
subject to applicable laws/ regulations, security and other
conditionalities.
Provided foreign investment in
financial services other than those indicated under serial number “F” below
would require prior Government approval.
(4) Wherever there is a
requirement of minimum capitalization, it shall include premium received
along with the face value of the capital instrument, only when it is
received by the company upon issue of such instruments to the person
resident outside India. Amount paid by the transferee during post-issue
transfer beyond the issue price of the capital instrument, cannot be taken
into account while calculating minimum capitalization requirement.
(5) Foreign investment into an
Indian company, engaged only in the activity of investing in the capital of
other Indian company/ies, will require prior approval of the Government. A
core investment company (CIC) will have to additionally follow the Reserve
Bank’s regulatory framework for CICs.
(6) For undertaking activities
which are under automatic route and without FDI linked performance
conditions, an Indian company which does not have any operations and also
has not made any downstream investment, may receive investment in its
capital instruments from persons resident outside India under automatic
route. However, approval of the Government will be required for such
companies for undertaking activities which are under Government route. As
and when such a company commences business or makes downstream investment,
it will have to comply with the relevant sectoral conditions on entry
route, conditionalities and caps.
(7) The onus of compliance with
the sectoral/ statutory caps on such foreign investment and attendant
conditions, if any, shall be on the company receiving foreign investment.
SL.
No
|
Sector/
Activity
|
Sectoral
Cap
|
Entry
Route
|
1.
|
Agriculture & Animal
Husbandry
|
|
|
1.1
|
(a) Floriculture, Horticulture
and Cultivation of vegetables & mushrooms under controlled
conditions;
(b) Development and production
of seeds and planting material;
(c) Animal Husbandry
(including breeding of dogs), Pisciculture, Aquaculture and Apiculture;
and
(d) Services related to agro
and allied sectors.
Note:
Other than the above, foreign investment is not allowed in any other
agricultural sector/ activity.
|
100%
|
Automatic
|
1.2
|
Other Conditions
|
|
|
|
The term ‘under controlled
conditions’ covers the following:
‘Cultivation under controlled
conditions’ for the categories of Floriculture, Horticulture, Cultivation
of vegetables and Mushrooms is the practice of cultivation wherein
rainfall, temperature, solar radiation, air humidity and culture medium
are controlled artificially. Control in these parameters may be effected
through protected cultivation under green houses, net houses, poly houses
or any other improved infrastructure facilities where micro-climatic
conditions are regulated anthropogenically.
|
2.
|
Plantation
|
|
|
2.1
|
(a) Tea sector including tea
plantations
(b) Coffee plantations
(c) Rubber plantations
(d) Cardamom plantations
(e) Palm oil tree plantations
(f) Olive oil tree plantation
Note:
Foreign investment is not allowed in any plantation sector/ activity
other than those listed above.
|
100%
|
Automatic
|
2.2
|
Other Conditions
|
|
|
|
Prior approval of the State
Government concerned is required in case of any future land use change.
|
3.
|
Mining
|
|
|
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
|
3.2
|
Coal and Lignite
|
|
|
|
(a) Coal & Lignite mining
for captive consumption by power projects, iron & steel and cement
units and other eligible activities permitted under and subject to the
provisions of Coal Mines (Nationalization) Act, 1973.
(b) Setting up coal processing
plants like washeries, subject to the condition that the company shall
not do coal mining and shall not sell washed coal or sized coal from its
coal processing plants in the open market and shall supply the washed or
sized coal to those parties who are supplying raw coal to coal processing
plants for washing or sizing.
|
100%
|
Automatic
|
3.3
|
Mining and mineral separation
of titanium bearing minerals and ores, its value addition and integrated
activities
|
|
(a) Mining and mineral
separation of titanium bearing minerals & ores, its value addition
and integrated activities subject to sectoral regulations and the Mines
and Minerals (Development and Regulation) Act, 1957.
|
100%
|
Government
|
3.4
|
Other Conditions
|
|
|
|
(a)
Foreign investment for separation of titanium bearing minerals & ores
will be subject to the following conditions:
(i)
Value addition facilities are set up within India along with transfer of
technology;
(ii)
Disposal of tailings during the mineral separation shall be carried out
in accordance with regulations framed by the Atomic Energy Regulatory
Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the
Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987.
(b)
Foreign investment 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:
(i)
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.
(ii)
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 also made available for setting up such
industries within the country. Thus, if with the technology transfer, the
objective of this regulation can be achieved, the conditions prescribed
at (a)(i) above shall be deemed to be fulfilled.
|
4.
|
Petroleum & Natural Gas
|
4.1
|
Exploration activities of oil
and natural gas fields, infrastructure related to marketing of petroleum
products and natural gas, marketing of natural gas and petroleum
products, petroleum product pipelines, natural gas/ pipelines, LNG
Regasification infrastructure, market study and formulation and Petroleum
refining in the private sector, subject to the existing sectoral policy
and regulatory framework in the oil marketing sector and the policy of
the Government on private participation in exploration of oil and the
discovered fields of national oil companies.
|
100%
|
Automatic
|
4.2
|
Petroleum refining by the
Public Sector Undertakings (PSUs), without any disinvestment or dilution
of domestic equity in the existing PSUs.
|
49%
|
Automatic
|
5.
|
Manufacturing
|
100%
|
Automatic
|
5.1
|
A manufacturer is permitted to
sell its products manufactured in India through wholesale and/ or retail,
including through e-commerce without Government approval.
Notwithstanding the provisions
of these regulations on trading sector, 100 percent foreign investment
under Government approval route is allowed for trading, including through
e-commerce, in respect of food products manufactured and/ or produced in
India. Applications for foreign investment in food products retail
trading would be processed in the Department of Industrial Policy &
Promotion before being considered by the Government for approval.
|
6.
|
Defence
|
|
|
6.1
|
Defence Industry subject to
Industrial license under the Industries (Development & Regulation)
Act, 1951; and Manufacturing of small arms and ammunition under the Arms
Act, 1959
|
100%
|
Automatic route up to 49% Government route beyond 49%
wherever it is likely to result in access to modern technology or for
other reasons to be recorded.
|
6.2
|
Other Conditions
|
|
(a) Fresh foreign investment
within the permitted automatic route, in a company not seeking industrial
license, resulting in change in the ownership pattern or transfer of
stake by existing investor to new foreign investor, will require
Government approval.
(b) Licence applications will
be considered and licences will be given by the Department of Industrial
Policy & Promotion, Ministry of Commerce & Industry, in
consultation with Ministry of Defence and Ministry of External Affairs.
(c) Foreign investment in this
sector is subject to security clearance and guidelines of the Ministry of
Defence.
(d) Investee company should be
structured to be self-sufficient in areas of product design and
development. The investee/ joint venture company along with manufacturing
facility, should also have maintenance and life cycle support facility of
the product being manufactured in India.
|
7.
|
Broadcasting
|
|
|
7.1
|
Broadcasting Carriage Services
|
|
|
7.1.1
|
(a) Teleports (setting up of
up-linking HUBs/ Teleports);
(b) Direct to Home (DTH);
(c) Cable Networks (Multi
System Operators (MSOs) operating at National or State or District level
and undertaking up-gradation of networks towards digitalization and
addressability);
(d) Mobile TV;
(e) Head-end-in-the Sky
Broadcasting Service (HITS)
|
100%
|
Automatic
|
7.1.2
|
Cable Networks (Other MSOs not
undertaking up-gradation of networks towards digitalization and
addressability and Local Cable Operators (LCOs)).
|
100%
|
Automatic
|
7.1.3
|
Note: Infusion of fresh
foreign investment for sectors specified in 7.1.1 and 7.1.2 above, beyond
49 percent in a company not seeking license/ permission from sectoral
Ministry, resulting in change in the ownership pattern or transfer of
stake by existing investor to new foreign investor, will require
Government approval
|
7.2
|
Broadcasting Content Services
|
|
|
7.2.1
|
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.
|
49%
|
Government
|
7.2.2
|
Up-Linking of ‘News &
Current Affairs’ TV Channels
|
49%
|
Government
|
7.2.3
|
Up-linking of Non-'News &
Current Affairs' TV Channels/ Down-linking of TV Channels
|
100%
|
Automatic
|
7.3
|
Other Conditions
|
|
|
|
(a) Foreign investment in
companies engaged in all the afore-stated services will be subject to
relevant regulations and such terms and conditions, as may be specified
from time to time, by the Ministry of Information and Broadcasting.
(b) Foreign investment in the
afore-stated broadcasting carriage services will be subject to the terms
and conditions as may be specified by the Ministry of Information and
Broadcasting, from time to time, in this regard.
(c) Licensee shall ensure that
broadcasting service installation carried out by it should not become a
safety hazard and is not in contravention of any statute, rule or
regulations and public policy.
(d) In the l& B sector
where the sectoral cap is up to 49 percent, the company should be owned
and controlled by resident Indian citizens or Indian companies which are
owned and controlled by resident Indian citizens.
(i) For this purpose, the
equity held by the largest Indian shareholder shall be at least 51
percent of the total equity, excluding the equity held by Public Sector
Banks and Public Financial Institutions, as defined in Section 4A of the
Companies Act, 1956 or Section 2 (72) of the Companies Act, 2013, as the
case may be. The term 'largest Indian shareholder' used in this clause, will
include any or a combination of the following:
(1) In the case of an
individual shareholder,
(aa) The individual
shareholder,
(bb) A relative of the
shareholder within the meaning of Section 2 (77) of Companies Act, 2013.
(cc) A company/group of companies
in which the individual shareholder/HUF to which he belongs has
management and controlling interest.
(2) In the case of an Indian
company,
(aa) The Indian company
(bb) A group of Indian
companies under the same management and ownership control.
(3) For this purpose,
"Indian company" shall be a company which must have a resident
Indian or a relative as defined under Section 2 (77) of Companies Act,
2013/ HUF, either singly or in combination holding at least 51percent of
the shares.
(4) Provided that, in case of
a combination of all or any of the entities mentioned in Sub-Clauses
(d)(i) 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.
|
8.
|
Print Media
|
|
|
8.1
|
Publishing of newspaper and
periodicals dealing with news and current affairs
|
26%
|
Government
|
8.2
|
Publication of Indian editions
of foreign magazines dealing with news and current affairs
|
26%
|
Government
|
8.2.1
|
Other conditions
|
|
|
|
(a) '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.
(b) Foreign investment shall
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.
|
8.3
|
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
|
8.4
|
Publication of facsimile
edition of foreign newspapers
|
100%
|
Government
|
8.4.1
|
Other conditions:
|
|
|
|
(a) Foreign investment should
be made by the owner of the original foreign newspapers whose facsimile
edition is proposed to be brought out in India.
(b) 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, 2013.
(c) 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.
|
9.
|
Civil Aviation
|
9.1
|
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:
(a) "Airport" means
a landing and taking off area for aircrafts, usually with runways and
aircraft maintenance and passenger facilities and includes aerodrome as
defined in clause (2) of section 2 of the Aircraft Act, 1934;
(b) "Aerodrome"
means any definite or limited ground or water area intended to be used,
either wholly or in part, for the landing or departure of aircraft, and
includes all buildings, sheds, vessels, piers and other structures
thereon or pertaining thereto;
(c) "Air transport
service" means a service for the transport by air of persons, mails
or any other thing, animate or inanimate, for any kind of remuneration
whatsoever, whether such service consists of a single flight or series of
flights;
(d) "Air Transport
Undertaking" means an undertaking whose business includes the
carriage by air of passengers or cargo for hire or reward;
(e) "Aircraft
component" means any part, the soundness and correct functioning of
which, when fitted to an aircraft, is essential to the continued
airworthiness or safety of the aircraft and includes any item of
equipment;
(f) "Helicopter"
means a heavier than air aircraft supported in flight by the reactions of
the air on one or more power driven rotors on substantially vertical
axis;
(g) "Scheduled air
transport service" means an air transport service undertaken between
the same two or more places and operated 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;
(h) "Non-Scheduled air
transport service" means any service which is not a scheduled air
transport service and will include Cargo airlines;
(i) "Cargo airlines"
would mean such airlines which meet the conditions as given in the Civil
Aviation Requirements issued by the Ministry of Civil Aviation;
(j) "Seaplane" means
an aeroplane capable normally of taking off from and alighting solely on
water;
(k) "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
(iii) any other activity specified by the Central Government to be a part
of either ramp handling or traffic handling.
|
9.2
|
Airports
|
|
|
|
(a) Greenfield projects
|
100%
|
Automatic
|
(b) Existing projects
|
100%
|
Automatic
|
9.3
|
Air Transport Services
|
|
|
|
(a) (i) Scheduled Air
Transport Service/ Domestic Scheduled Passenger Airline
(ii) Regional Air Transport
Service
|
49%
(100% for NRIs and OCIs)
|
Automatic
|
|
(b) Non-Scheduled Air
Transport Service
|
100%
|
Automatic
|
|
(c) Helicopter services/
seaplane services requiring DGCA approval
|
100%
|
Automatic
|
9.4
|
Other Services under Civil
Aviation sector
|
|
|
|
(a) Ground Handling Services
subject to sectoral regulations and security clearance
|
100%
|
Automatic
|
|
(b) Maintenance and Repair
organizations; flying training institutes and technical training
institutions
|
100%
|
Automatic
|
9.5
|
Other Conditions
|
|
|
|
(a) Air Transport Services
would include Domestic Scheduled Passenger Airlines, Non-Scheduled Air
Transport Services, helicopter and seaplane services.
(b) Foreign airlines are
allowed to make foreign investment in Cargo airlines, helicopter and
seaplane services, as per the limits and entry routes mentioned above.
(c) Foreign airlines are
allowed to invest in the capital of Indian companies, operating scheduled
and non-scheduled air transport, services up to the limit 49 percent of
the paid up capital of the Indian investee company. Such foreign
investment would be subject to the following conditions:
(i) It shall be under the
Government approval route.
(ii) The foreign investment
shall comply with the relevant regulations of Securities and Exchange
Board of India as well as other applicable rules and regulations.
(iii) A Scheduled Operator's
Permit can be granted only to a company:
a.
(1)
that is registered and has its principal place of business within India;
b.
(2)
the Chairman and at least two-thirds of the Directors of which are
citizens of India; and
c.
(3)
the substantial ownership and effective control of which is vested in
Indian citizens.
(iv) All foreign nationals
likely to be associated with Indian scheduled and non-scheduled air
transport services, as a result of such foreign investment shall be
cleared from security view point before deployment; and
(v) All technical equipment
that might be imported into India as a result of such foreign investment
shall require clearance from the relevant authority in the Ministry of
Civil Aviation.
Note:
(1) The sectoral caps/ entry
routes, mentioned at paragraph 9.3(a) and 9.3(b) above, are applicable in
the situation where there is no investment by foreign airlines.
(2) The dispensation for NRIs
and OCIs regarding foreign investment up to 100% shall also be applicable
in respect of the investment regime specified at 9.5(c) above.
(3) The policy mentioned at
9.5(c) above is not applicable to M/s Air India Limited.
(4) The investee company
additionally shall have to follow guidelines issued by the concerned
ministry of the Central Government.
|
10
|
Construction Development:
Townships, Housing, Built-up infrastructure
|
|
|
10.1
|
Construction-development
projects (which would include development of townships, construction of
residential/ commercial premises, roads or bridges, hotels, resorts,
hospitals, educational institutions, recreational facilities, city and
regional level infrastructure, townships)
|
100%
|
Automatic
|
10.2
|
Other Conditions
|
10.2
|
(a) Each phase of the
construction development project would be considered as a separate
project.
(b) The investor will be
permitted to exit on completion of the project or after development of
trunk infrastructure i.e. roads, water supply, street lighting, drainage
and sewerage.
(c) Notwithstanding anything
contained at (b) above, a person resident outside India will be permitted
to exit and repatriate foreign investment before the completion of
project under automatic route, provided that a lock-in-period of three
years, calculated with reference to each tranche of foreign investment
has been completed. Further, transfer of stake from a person resident
outside India to another person resident outside India, without
repatriation of foreign investment will neither be subject to any lock-in
period nor to any government approval.
(d) 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.
(e) The Indian investee
company will be permitted to sell only developed plots. For the purposes
of this policy "developed plots" will mean plots where trunk
infrastructure i.e. roads, water supply, street lighting, drainage and sewerage,
have been made available.
(f) The Indian 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 prescribed under applicable rules/ bye-Laws/
regulations of the State Government/ Municipal/ Local Body concerned.
(g) The State Government/
Municipal/ Local Body concerned, which approves the building/ development
plans, will monitor compliance of the above conditions by the developer.
Note:
(1) Foreign investment is not
permitted in an entity which is engaged or proposes to engage in real
estate business, construction of farm houses and trading in transferable
development rights (TDRs).
(2) Condition of lock-in
period will not apply to Hotels and Tourist Resorts, Hospitals, Special
Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment
by NRIs/ OCIs.
(3) Completion of the project
will be determined as per the local bye-laws/ rules and other regulations
of State Governments.
(4) Foreign investment up to
100 percent under automatic route is permitted in completed projects for
operating and managing townships, malls/ shopping complexes and business
centres. Consequent to such foreign investment, transfer of ownership
and/ or control of the investee company from persons resident in India to
persons resident outside India is also permitted. However, there would be
a lock-in-period of three years, calculated with reference to each
tranche of foreign investment and transfer of immovable property or part
thereof is not permitted during this period.
(5) "Transfer", in
relation to this sector, includes,-
a. the sale, exchange or
relinquishment of the asset; or
b. the extinguishment of any
rights therein; or
c. the compulsory acquisition thereof
under any law; or
d. any transaction involving
the allowing of the possession of any immovable property to be taken or
retained in part performance of a contract of the nature referred to in
section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or
e. any transaction, by
acquiring capital instruments in a company or by way of any agreement or
any arrangement or in any other manner whatsoever, which has the effect
of transferring, or enabling the enjoyment of, any immovable property.
(6) Real estate business’
means dealing in land and immovable property with a view to earning
profit therefrom and does not include development of townships,
construction of residential/ commercial premises, roads or bridges,
educational institutions, recreational facilities, city and regional
level infrastructure, townships;
Explanation:
a. Investment in units of Real
Estate Investment Trusts (REITs) registered and regulated under the
Securities and Exchange Board of India (REITs) regulations 2014 shall
also be excluded from the definition of “real estate business”.
b. Earning of rent income on
lease of the property, not amounting to transfer, will not amount to real
estate business.
c. Transfer in relation to
real estate includes,
(i) the sale, exchange or
relinquishment of the asset; or
(ii) the extinguishment of any
rights therein; or
(iii) the compulsory
acquisition thereof under any law; or
(iv) any transaction involving
the allowing of the possession of any immovable property to be taken or
retained in part performance of a contract of the nature referred to in
section 53A of the Transfer of Property Act, 1882 (4 of 1882); or
(v) any transaction, by
acquiring capital instruments in a company or by way of any agreement or
any arrangement or in any other manner whatsoever, which has the effect
of transferring, or enabling the enjoyment of, any immovable property.
|
11.
|
Industrial Parks
|
100%
|
Automatic
|
11.1
|
For the purpose of this
sector:
(a) "Industrial
Park" is a project in which quality infrastructure in the form of
plots of developed land or built up space or a combination with common
facilities, is developed and made available to all the allottee units for
the purposes of industrial activity.
(b) “Infrastructure” refers to
facilities required for functioning of units located in the Industrial
Park and includes roads (including approach roads), railway line/ sidings
including electrified railway lines and connectivity to the main railway
line, water supply and sewerage, common effluent treatment facility,
telecom network, generation and distribution of power, air conditioning.
(c) “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),
railway line/ sidings including electrified railway lines and
connectivity to the main railway line, 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 centre,
ambulance and other safety services, training facilities and such other
facilities meant for common use of the units located in the Industrial
Park.
(d) "Allocable area"
in the Industrial Park means-
(i) in the case of plots of
developed land - the net site area available for allocation to the units,
excluding the area for common facilities.
(ii) in the case of built up
space - the floor area and built-up space utilized for providing common
facilities.
(iii) 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.
(e) "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; basic and applied research
and development on bio-technology, pharmaceutical sciences/ life
sciences, natural sciences and engineering; business and management
consultancy activities; and architectural, engineering and other
technical activities.
|
11.2
|
Foreign investment in
Industrial Parks would not be subject to the conditionalities applicable
for construction development projects etc. spelt out in para 10 above,
provided the Industrial Parks meet with the under-mentioned conditions:
(a) it would comprise of a
minimum of 10 units and no single unit shall occupy more than 50 percent
of the allocable area;
(b) the minimum percentage of
the area to be allocated for industrial activity shall not be less than
66 percent of the total allocable area.
|
12.
|
Satellites - Establishment and
operation
|
|
|
|
Satellites Establishment and
operation, subject to the sectoral guidelines of Department of Space/
ISRO
|
100%
|
Government
|
13.
|
Private Security Agencies
|
49%
|
Government
|
14.
|
Telecom services
(including Telecom Infrastructure Providers Category-l)
|
|
|
14.1
|
All telecom services including
Telecom Infrastructure Providers Category-I, viz. Basic, Cellular, United
Access Services, Unified license (Access services), Unified License,
National/ International Long Distance, Commercial V-Sat, Public Mobile
Radio Trunked Services (PMRTS), Global Mobile Personal Communications
Services (GMPCS), all types of ISP licenses, Voice Mail/ Audiotex/ UMS,
Resale of IPLC, Mobile Number Portability services, Infrastructure
Provider Category-I (providing dark fibre, right of way, duct space,
tower) except Other Service Providers.
|
100%
|
Automatic up to 49%; Government route beyond 49%
|
14.2
|
Other Conditions
|
|
|
|
The licensing and security
conditions as notified by the Department of Telecommunications (DoT) from
time to time, shall be observed by licensee as well as investors except
for foreign investment in “Other Service Providers”, which is allowed up
to 100 percent under the automatic route.
|
15.
|
Trading
|
|
|
15.1
|
Cash and Carry Wholesale
Trading/ Wholesale Trading (including sourcing from MSEs)
|
100%
|
Automatic
|
15.1.1
|
Definition:
(a) Cash and Carry Wholesale
trading (WT)/ Wholesale trading, shall mean sale of goods/ merchandise to
retailers, industrial, commercial, institutional or other professional
business users or to other wholesalers and related subordinated service
providers.
(b) Wholesale trading shall,
accordingly, imply 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 shall be
the type of customers to whom the sale is made and not the size and
volume of sales. Wholesale trading shall include resale, processing and
thereafter sale, bulk imports with export/ ex-bonded warehouse business
sales and B2B e-Commerce.
|
15.1.2
|
Other Conditions
|
|
(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 obtained.
(b) Except in cases of sales
to Government, sales made by the wholesaler shall be considered as 'cash
and carry wholesale trading/ wholesale trading' with valid business
customers, only when WT is made to the following entities:
(i) Entities holding sales
tax/ VAT registration/ service tax/ excise duty/Goods and Services Tax
(GST) registration; or
(ii) Entities holding trade
licenses i.e. a license/ registration certificate/ membership
certificate/ registration under Shops and Establishment Act, issued by a
Government Authority/ Government Body/ Local Self-Government Authority,
reflecting that the entity/ person holding the license/ registration
certificate /membership certificate, as the case may be, is itself/
himself/ herself engaged in a business involving commercial activity; or
(iii) Entities holding
permits/ license etc. for undertaking retail trade (like tehbazari and
similar license for hawkers) from Government Authorities/ Local Self
Government Bodies; or
(iv) Institutions having certificate
of incorporation or registration as a society or registration as public
trust for their self-consumption.
Note: An
Entity, to whom WT is made, may fulfil any one of the 4 conditions at
(b)(i) to (iv) above.
(c) Full records indicating
all the details of such sales like name of entity, kind of entity,
registration/ license/ permit etc. number, amount of sale etc. should be
maintained on a day to day basis.
(d) WT of goods shall be
permitted among companies of the same group. However, such WT to group
companies taken together shall not exceed 25 percent of the total
turnover of the wholesale venture.
(e) WT can be undertaken as
per normal business practice, including extending credit facilities
subject to applicable regulations.
(f) A wholesale/ cash and
carry trader can undertake single brand retail trading, subject to the
conditions mentioned in para 15.3. An entity undertaking wholesale/ cash
and carry as well as retail business will be mandated to maintain
separate books of accounts for these two arms of the business and duly
audited by the statutory auditors. Conditions under these Regulations for
wholesale/ cash and carry business and for retail business have to be
separately complied with by the respective business arms.
|
15.2
|
E-Commerce
|
|
|
15.2.1
|
B2B E-commerce activities
|
100%
|
Automatic
|
|
Such companies would engage
only in Business to Business (B2B) e-commerce and not in retail trading,
inter alia implying that existing restrictions on FDI in domestic trading
would be applicable to e-commerce as well.
|
15.2.2
|
Market place model of e-commerce
|
100%
|
Automatic
|
15.2.3
|
Other Conditions:
|
|
|
|
(a) E-commerce’ means buying
and selling of goods and services including digital products over digital
& electronic network;
(b) ‘E-commerce entity’ means
a company incorporated under Companies Act, 2013 or a foreign company
covered under section 2 (42) of the Companies Act, 2013 or an office,
branch or agency in India as provided in Section 2 (v) (iii) of FEMA,
1999, owned or controlled by a person resident outside India and
conducting the e-commerce business;
(c) ‘Inventory based model of
e-commerce’ means an e-commerce activity where inventory of goods and
services is owned by e-commerce entity and is sold to the consumers directly;
(d) ‘Market place model of
e-commerce’ means providing of an information technology platform by an
e-commerce entity on a digital & electronic network to act as a
facilitator between buyer and seller.
(e) Digital & electronic
network will include network of computers, television channels and any
other internet application used in automated manner such as web pages,
extranets, mobiles etc.
(f) Marketplace e-commerce
entity will be permitted to enter into transactions with sellers
registered on its platform on B2B basis.
(g) E-commerce marketplace may
provide support services to sellers in respect of warehousing, logistics,
order fulfilment, call centre, payment collection and other services.
(h) E-commerce entity providing
a marketplace will not exercise ownership over the inventory i.e. goods
purported to be sold. Such an ownership over the inventory will render
the business into inventory based model.
(i) An e-commerce entity will
not permit more than 25 percent of the sales value on financial year
basis affected through its marketplace from one vendor or their group
companies.
(j) Goods/ services made
available for sale electronically on website should clearly provide name,
address and other contact details of the seller. Post sales, delivery of
goods to the customers and customer satisfaction will be responsibility
of the seller.
(k) Payments for sale may be
facilitated by the e-commerce entity in conformity with the guidelines
issued by the Reserve Bank in this regard.
(l) Any warranty/ guarantee of
goods and services sold will be the responsibility of the seller.
(m) E-commerce entities
providing marketplace will not directly or indirectly influence the sale
price of goods or services and shall maintain level playing field.
(n) Guidelines on cash and
carry wholesale trading as given in Sl No. 15.1.2 above shall apply to
B2B e-commerce activities.
Note: Foreign investment is
not permitted in inventory based model of e-commerce.
|
15.2.4
|
Sale of services through e-commerce
shall be under automatic route subject to the sector specific conditions,
applicable laws/ regulations, security and other conditionalities.
|
15.3
|
Single Brand Product Retail
Trading
Foreign investment in Single
Brand Product Retail Trading (SBRT) 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.
|
100%
|
Automatic up to 49%; Government route beyond 49%
|
15.3.1
|
Other 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-retail trading would cover only products which are branded during
manufacturing.
(d) A person resident outside
India, whether owner of the brand or otherwise, shall be permitted to
undertake ‘single brand’ product retail trading in the country for the
specific brand, directly or through a legally tenable agreement, with the
brand owner for undertaking single brand product retail trading. The onus
for ensuring compliance with this condition will rest with the Indian
entity carrying out single-brand product retail trading in India. The
investing entity shall provide evidence to this effect at the time of
seeking approval, including a copy of the licensing/ franchise/
sub-licence agreement, specifically indicating compliance with the above
condition. The requisite evidence should be filed with the RBI for the
automatic route and the Government for cases involving approval.
(e) In respect of proposals
involving foreign investment beyond 51 percent, sourcing of 30 percent of
the value of goods purchased, will be done from India, preferably from
MSMEs, village and cottage industries, artisans and craftsmen, in all
sectors. The quantum of domestic sourcing will be self-certified by the
company, to be subsequently checked, by statutory auditors, from the duly
certified accounts which the company will be required to maintain. The
procurement requirement is to be met in the first instance as an average
of five years total value of goods purchased beginning 1st April of the
year of the commencement of the business. Thereafter it shall be met on
an annual basis. For the purpose of ascertaining the sourcing
requirement, the relevant entity would be the company, incorporated in
India, which is the recipient of foreign investment for the purpose of
carrying out single brand product retail trading.
(f) Subject to the conditions
mentioned in this Para, a single brand retail trading entity operating
through brick and mortar stores, is permitted to undertake retail trading
through e-commerce.
(g) Applications seeking
permission of the Government for foreign investment exceeding 49 percent
in a company which proposes to undertake single brand retail trading in
India shall be made to the Department of Industrial Policy &
Promotion. The applications would specifically indicate the product/
product categories which are proposed to be sold under a ‘Single Brand’.
Any addition to the product/ product categories to be sold under ‘Single
Brand’ would require a fresh Government approval. In case of foreign
investment up to 49 percent, the list of products/ product categories
proposed to be sold except food products shall be provided to the Reserve
Bank.
(h) Applications would be
processed in the Department of Industrial Policy and Promotion, to
determine whether the proposed investment satisfies the notified
guidelines, before being considered for Government approval.
Note:
(1) Conditions mentioned at
(b) and (d) above shall not be applicable for undertaking SBRT of Indian
brands.
(2) An Indian manufacturer is
permitted to sell its own branded products in any manner i.e. wholesale,
retail, including through e-commerce platforms.
(3) Indian manufacturer would
be the investee company, which is the owner of the Indian brand and which
manufactures in India, in terms of value, at least 70 percent of its
products in house, and sources, at most 30 percent from Indian
manufacturers.
(4) Indian brands should be
owned and controlled by resident Indian citizens and/ or companies which
are owned and controlled by resident Indian citizens.
(5) Sourcing norms will not be
applicable up to three years from commencement of the business i.e.
opening of the first store for entities undertaking single brand retail
trading of products having 'state-of-art' and 'cutting-edge' technology
and where local sourcing is not possible. Thereafter, condition mentioned
at (e) above will be applicable.
|
15.4
|
Multi Brand Retail Trading
(MBRT)
|
51%
|
Government
|
15.4.1
|
Other Conditions
|
|
|
|
(a) Fresh agricultural
produce, including fruits, vegetables, flowers, grains, pulses, fresh
poultry, fishery and meat products, can be unbranded.
(b) Minimum amount to be
brought in as foreign investment would be USD 100 million.
(c) At least 50 percent of the
total foreign investment brought in the first tranche of USD 100 million,
shall be invested in 'back-end infrastructure' within three years, where
'back-end infrastructure' will include capital expenditure on all
activities, excluding that on front-end units; for instance, back-end
infrastructure will include investment made towards processing,
manufacturing, distribution, design improvement, quality control,
packaging, logistics, storage, warehouse, agriculture market produce
infrastructure etc. Expenditure on land cost and rentals, if any, will
not be counted for purposes of back-end infrastructure. Subsequent
investment in the back-end infrastructure would be made by the MBRT
retailer as needed, depending upon its business requirements.
(d) At least 30 percent of the
value of procurement of manufactured/ processed products purchased shall
be sourced from Indian micro, small and medium industries, which have a
total investment in plant & machinery not exceeding USD2 million.
This valuation refers to the value at the time of installation, without
providing for depreciation. The 'small industry' status would be reckoned
only at the time of first engagement with the retailer and such industry
shall continue to qualify as a 'small industry' for this purpose, even if
it outgrows the said investment of USD2 million during the course of its
relationship with the said retailer. Sourcing from agricultural
co-operatives and farmers co-operatives would also be considered in this
category. The procurement requirement would have to be met, in the first
instance, as an average of five years total value of the manufactured/
processed products purchased, beginning 1st April of the year during
which the first tranche of foreign investment is received. Thereafter, it
would have to be met on an annual basis.
(e) Self-certification is
required by the company, to ensure compliance of the conditions at serial
nos. (b), (c) and (d) above, which could be cross-checked, as and when
required. Accordingly, the investors shall maintain accounts, duly
certified by statutory auditors.
(f) Retail sales outlets may
be set up only in cities with a population of more than 10 lakh as per
the 2011 Census or any other cities as per the decision of the respective
State Governments, and may also cover an area of 10 kms. Around the
municipal/ urban agglomeration limits of such cities; retail locations
will be restricted to conforming areas as per the Master/ Zonal Plans of
the concerned cities and provision will be made for requisite facilities
such as transport connectivity and parking.
(g) Government will have the
first right to procure agricultural products.
(h) The above policy is an
enabling policy only and the State Governments/ Union Territories would
be free to take their own decisions in regard to implementation of the
policy. Therefore, retail sales outlets may be set up in those States/
Union Territories which have agreed, or agree in future, to allow foreign
investment in MBRT under this policy. The States/ Union Territories which
have conveyed their agreement are mentioned at 15.4.2. Such agreement, in
future, to permit establishment of retail outlets under this policy,
would be conveyed to the Government of India through the Department of
Industrial Policy and Promotion and additions would be made to the said
list. The establishment of the retail sales outlets will be in compliance
of applicable State/ Union Territory laws/ regulations, such as the Shops
and Establishments Act etc.
(i) Retail trading, in any
form, by means of e-commerce, would not be permissible, for companies
with foreign investment engaged in multi-brand retail trading.
(j) Applications would be
processed in the Department of Industrial Policy and Promotion, to
determine whether the proposed investment satisfies the notified
guidelines, before being considered for Government approval.
|
15.4.2
|
States/ Union Territories are
Andhra Pradesh, Assam, Delhi, Haryana, Himachal Pradesh, Jammu &
Kashmir, Karnataka, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman
& Diu and Dadra and Nagar Haveli (Union Territories)
|
15.5
|
Duty Free Shops
|
100%
|
Automatic
|
15.5.1
|
Other Conditions:
|
|
|
|
(a) Duty Free Shops would mean
shops set up in custom bonded area at International Airports/
International Seaports and Land Custom Stations where there is transit of
international passengers.
(b) Foreign investment in Duty
Free Shops is subject to compliance of conditions stipulated under the
Customs Act, 1962 and other laws, rules and regulations.
(c) Duty Free Shop entity
shall not engage into any retail trading activity in the Domestic Tariff
Area of the country.
|
16
|
Pharmaceuticals
|
|
|
16.1
|
Greenfield
|
100%
|
Automatic
|
16.2
|
Brownfield
|
100%
|
Automatic up to 74%; Government route beyond 74%
|
16.3
|
Other Conditions
|
|
|
|
(a) 'Non-compete' clause would
not be allowed except in special circumstances with the Government
approval.
(b) The prospective investor
and the prospective investee are required to provide a certificate given
at 16.4 along with the application submitted for Government approval.
(c) Government approval may
incorporate appropriate conditions for foreign investment in brownfield
cases.
(d) Foreign investment in
brownfield pharmaceuticals, irrespective of entry route, is further
subject to the following conditions
(i) The production level of
National List of Essential Medicines (NLEM) drugs and/ or consumables and
their supply to the domestic market at the time of induction of foreign
investment, being maintained over the next five years at an absolute
quantitative level. The benchmark for this level would be decided with
reference to the level of production of NLEM drugs and/ or consumables in
the three financial years, immediately preceding the year of induction of
foreign investment. Of these, the highest level of production in any of
these three years would be taken as the level.
(ii) Research and Development
(R&D) expenses being maintained in value terms for 5 years at an
absolute quantitative level at the time of induction of foreign
investment. The benchmark for this level would be decided with reference
to the highest level of R&D expenses which has been incurred in any
of the three financial years immediately preceding the year of induction
of foreign investment.
(iii) The administrative
Ministry will be provided complete information pertaining to the transfer
of technology, if any, along with induction of foreign investment into
the investee company.
(iv) The administrative
Ministry (s) i.e. Ministry of Health and Family Welfare, Department of
Pharmaceuticals or any other regulatory Agency/Development as notified by
Central Government from time to time, will monitor the compliance of
conditionalities.
Note :
(1) Foreign investment up to
100% under the automatic route is permitted for manufacturing of medical
devices. The abovementioned conditions will, therefore, not be applicable
to greenfield as well as brownfield projects of this industry.
(2) Medical device means :-
(a) Any instrument, apparatus,
appliance, implant, material or other article, whether used alone or in
combination, including the software, intended by its manufacturer to be
used specially for human beings or animals for one or more of the
specific purposes of:-
(aa) Diagnosis, prevention,
monitoring, treatment or alleviation of any disease or disorder;
(ab) diagnosis, monitoring,
treatment, alleviation of, or assistance for, any injury or handicap;
(ac) investigation,
replacement or modification or support of the anatomy or of a
physiological process;
(ad) supporting or sustaining
life;
(ae) disinfection of medical
devices;
(af) control of conception;
and which does not achieve its
primary intended action in or on the human body or animals by any
pharmacological or
immunological or metabolic
means, but which may be assisted in its intended function by such means;
(b) an accessory to such an
instrument, apparatus, appliance, material or other article;
(c) a device which is reagent,
reagent product, calibrator, control material, kit, instrument,
apparatus, equipment or system whether used alone or in combination
thereof intended to be used for examination and providing information for
medical or diagnostic purposes by means of in vitro examination of
specimens derived from the human body or animals.
(3) The definition of medical
device at Note (2) above would be subject to the Drugs and Cosmetics Act,
1940.
|
16.4
|
Certificate to be Furnished by
the Prospective Investor as well as the Prospective Recipient Entity
It is certified that the
following is the complete list of all inter-se agreements, including the
shareholders agreement, entered into between foreign investor(s) and
investee brownfield pharmaceutical entity
1. ………………
2. ……………….
3. ……………….
(copies of all agreements to be enclosed)
It is also certified that none
of the inter-se agreements, including the shareholders agreement, entered
into between foreign investor(s) and investee brownfield pharmaceutical
entity contain any non-compete clause in any form whatsoever.
It is further certified that
there are no other contracts/agreements between the foreign investor(s)
and investee brownfield pharma entity other than those listed above.
The foreign investor(s) and
investee brownfield pharma entity undertake to submit to the FIPB any
inter-se agreements that may be entered into between them subsequent to
the submission and consideration of this application.
|
17
|
Railway Infrastructure
|
|
|
17.1
|
Construction, operation and
maintenance of the following:
(i) Suburban corridor projects
through PPP, (ii) high-speed train projects, (iii) Dedicated freight
lines, (iv) Rolling stock including train sets, and locomotives/ coaches
manufacturing and maintenance facilities, (v) Railway Electrification,
(vi) Signalling systems, (vii) Freight terminals, (viii) Passenger
terminals, (ix) Infrastructure in industrial park pertaining to railway
line/ sidings including electrified railway lines and connectivity to
main railway line and (x) Mass Rapid Transport Systems.
|
100%
|
Automatic
|
17.2
|
Other Conditions
|
|
|
|
(a) Foreign investment in this
sector open to private-sector participation is subject to sectoral
guidelines of Ministry of Railways.
(b) Proposals involving
foreign investment beyond 49 percent sensitive areas from security point
of view, will be brought by the Ministry of Railways before the Cabinet
Committee on Security (CCS) for consideration on a case to case basis.
|
F
|
FINANCIAL
SERVICES
Investment in financial
services, other than those indicated below, would require prior
Government approval.
|
F.1
|
Asset Reconstruction Companies
|
100%
|
Automatic
|
F.1.1
|
Other Conditions
|
|
|
|
(a) Investment limit of a
sponsor in the shareholding of an ARC will be governed by the provisions
of Securitisation and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002. Similarly, investment by institutional/
non-institutional investors will also be governed by the said Act.
(b) FPIs can invest in the
Security Receipts (SRs) issued by ARCs. FPIs may be allowed to invest up
to 100 percent of each tranche in SRs issued by ARCs, subject to
directions/ guidelines of Reserve Bank. Such investment should be within
the relevant regulatory cap as applicable.
(c) All investments would be
subject to provisions of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002.
|
F.2
|
Banking - Private sector
|
74%
|
Automatic up to 49% Government route beyond 49% and up
to 74%
|
F.2.1
|
Other conditions:
|
|
|
|
(a) At all times, at least 26
percent of the paid up capital will have to be held by residents, except
in regard to a wholly-owned subsidiary of a foreign bank.
(b) In case of NRIs individual
holdings is restricted to 5 percent of the total paid up capital both on
repatriation and non-repatriation basis and aggregate limit cannot exceed
10 percent of the total paid up capital both on repatriation and
non-repatriation basis. However, NRI holdings can be allowed up to 24
percent of the total paid up capital both on repatriation and
non-repatriation basis subject to a special resolution to this effect
passed by the banking company’s general body.
(c) Applications for foreign
investment in private banks having joint venture/ subsidiary in insurance
sector may be addressed to the Reserve Bank for consideration in
consultation with the Insurance Regulatory and Development Authority of
India (IRDAI) in order to ensure that the 49 percent limit of investment
applicable for the insurance sector is not breached.
(d) Transfer of shares under
FDI from residents to non-residents will require approval of the Reserve
Bank and/ or the Government, wherever applicable
(e) The policies and
procedures prescribed by RBI and other institutions such as Securities
and Exchange Board of India, Ministry of Corporate Affairs and IRDAI on
these matters will apply.
(f) RBI guidelines relating to
acquisition by purchase or otherwise of capital instruments of a private
bank, if such acquisition results in any person owning or controlling 5 percent
or more of the paid up capital of the private bank will apply to foreign
investment as well.
(g) Setting up of a subsidiary
by foreign banks
(i) Foreign banks will be
permitted to either have branches or subsidiaries but not both.
(ii) Foreign banks regulated
by banking supervisory authority in the home country and meeting Reserve
Bank's licensing criteria will be allowed to hold 100 percent paid-up
capital to enable them to set up a wholly-owned subsidiary in India.
(iii) A foreign bank may
operate in India through only one of the three channels viz., (i)
branches (ii) a wholly-owned subsidiary (iii) a subsidiary with aggregate
foreign investment up to a maximum of 74 percent in a private bank.
(iv) A foreign bank will be
permitted to establish a wholly-owned subsidiary either through
conversion of existing branches into a subsidiary or through a fresh
banking license. A foreign bank will be permitted to establish a
subsidiary through acquisition of shares of an existing private sector
bank provided at least 26 percent of the paid-up capital of the private
sector bank is held by residents at all times consistent with para (c)
above.
(v) A subsidiary of a foreign
bank will be subject to the licensing requirements and conditions broadly
consistent with those for new private sector banks.
(vi) Guidelines for setting up
a wholly-owned subsidiary of a foreign bank will be issued separately by
RBI.
(vii) All applications by a
foreign 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.
(h) The present limit of 10
percent on voting rights in respect banking companies may be noted by the
potential investor.
(i) All investments shall be
subject to the guidelines prescribed for the banking sector under the
Banking Regulation Act, 1949 and the Reserve Bank of India Act, 1934.
|
F.3
|
Banking - Public Sector
|
|
|
F.3.1
|
Banking - Public Sector
subject to Banking Companies (Acquisition & Transfer of Undertakings)
Acts, 1970/ 80. This ceiling is also applicable to the State Bank of
India.
|
20%
|
Government
|
F.4
|
Infrastructure Companies in
the Securities Market
|
|
|
F.4.1
|
Infrastructure companies in
Securities Markets, namely, stock exchanges, commodity derivative
exchanges, depositories and clearing corporations, in compliance with
Securities and Exchange Board of India Regulations
|
49%
|
Automatic
|
F.4.2
|
Other conditions:
|
|
|
|
(a) Foreign investment,
including investment by FPIs, will be subject to the Guidelines/
Regulations issued by the Central Government, Securities and Exchange
Board of India and the Reserve Bank from time to time.
(b) Words and expressions used
herein and not defined in these regulations but defined in the Companies
Act, 2013 (18 of 2013) or the Securities Contracts (Regulation) Act, 1956
(42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15
of 1992) or the Depositories Act, 1996 (22 of 1996) or in the concerned
Regulations issued by Securities and Exchange Board of India shall have
the same meanings respectively assigned to them in those Acts/
Regulations.
|
F.5
|
Commodities Spot Exchange
|
49%
|
Automatic
|
F.5.1
|
Investment shall be subject to
guidelines prescribed by the Central/ State Government
|
F.6
|
Power Exchanges
|
|
|
|
Power Exchanges under the
Central Electricity Regulatory Commission (Power Market) Regulations,
2010
|
49%
|
Automatic
|
F.6.1
|
Other conditions
|
|
|
|
(a) Investment by FPIs shall
be restricted to secondary market only.
(b) A person resident outside
India including persons acting in concert should not hold more than 5
percent.
(c) The investment would be in
compliance with Securities and Exchange Board of India Regulations, other
applicable laws/ regulations, security and other conditionalities
|
F.7
|
Credit Information Companies
|
100%
|
Automatic
|
F.7.1
|
Other conditions
|
|
|
|
(a) Foreign investment in
Credit Information Companies is subject to the Credit Information
Companies (Regulation) Act, 2005 and regulatory clearance from the
Reserve Bank.
(b) FPI investment would be
permitted subject to the following conditions:
(i) A single entity shall
directly or indirectly hold below 10 percent equity;
(ii) Any acquisition in excess
of 1 percent will have to be reported to Reserve Bank as a mandatory requirement;
and
(iii) FPIs investing in Credit
Information Companies shall not seek a representation on the Board of
Directors based upon their shareholding.
|
F.8
|
Insurance
|
|
|
F.8.1
|
(a) Insurance Company
(b) Insurance Brokers
(c) Third Party Administrators
(d) Surveyors and Loss
Assessors
(e) Other Insurance
Intermediaries appointed under the provisions of Insurance Regulatory and
Development Authority Act, 1999 (41 of 1999)
|
49%
|
Automatic
|
F.8.2
|
Other Conditions
|
|
|
|
(a) Foreign investment in this
sector shall be subject to compliance with the provisions of the
Insurance Act, 1938 and subject to necessary license/ approval from the
Insurance Regulatory & Development Authority of India for undertaking
insurance and related activities.
(b) An Indian Insurance
company shall ensure that its ownership and control remains at all times
with resident Indian entities as determined by Central Government/
Insurance Regulatory and Development Authority of India as per the rules/
regulation issued.
(c) Where an entity like a
bank, whose primary business is outside the insurance area, is allowed by
the Insurance Regulatory and Development Authority of India to function
as an insurance intermediary, the foreign equity investment caps
applicable in that sector shall continue to apply, subject to the
condition that the revenues of such entities from their primary (i.e.,
non-insurance related) business must remain above 50 percent of their
total revenues in any financial year.
(d) The provisions of
paragraphs F.2.1 relating to 'Banking-Private Sector', shall be
applicable in respect of bank promoted insurance companies.
(e) Terms 'Control', 'Equity
Share Capital', 'Foreign Direct Investment' (FDI), 'Foreign Investors',
'Foreign Portfolio Investment', 'Indian Insurance Company', 'Indian
Company', 'Indian Control of an Indian Insurance Company', 'Indian
Ownership', 'Non-resident Entity', 'Public Financial Institution',
'Resident Indian Citizen', 'Total Foreign Investment' will have the same
meaning as provided in Notification No. G.S.R 115 (E), dated 19th
February, 2015 issued by Department of Financial Services and regulations
issued by Insurance Regulatory and Development Authority of India from
time to time.
|
F.9
|
Pension Sector
|
49%
|
Automatic
|
F.9.1
|
Other conditions
|
|
|
|
(a) Foreign investment in this
sector shall be in accordance with the Pension Fund Regulatory and
Development Authority (PFRDA) Act, 2013.
(b) Foreign investment in
Pension Funds will be subject to the condition that entities investing in
capital instruments issued by an Indian Pension Fund as per Section 24 of
the PFRDA Act, 2013 shall obtain necessary registration from the PFRDA
and comply with other requirements as per the PFRDA Act, 2013 and Rules
and Regulations framed under it for so participating in Pension Fund
Management activities in India.
(c) An Indian pension fund
shall ensure that its ownership and control remains at all times with
resident Indian entities as determined by the Government of India/ PFRDA
as per the rules/ regulation issued by them.
|
F.10
|
Other Financial Services
|
100%
|
Automatic
|
F.10.1
|
Other Conditions
|
|
|
|
(a) Other Financial Services
will mean financial services activities regulated by financial sector
regulators, viz., Reserve Bank, Securities and Exchange Board of India,
Insurance Regulatory and Development Authority, Pension Fund Regulatory
and Development Authority, National Housing Bank or any other financial
sector regulator as may be notified by the Government of India.
(b) Foreign investment in
'Other Financial Services' activities shall be subject to
conditionalities, including minimum capitalization norms, as specified by
the concerned Regulator/Government Agency
(c) 'Other Financial Services'
activities need to be regulated by one of the Financial Sector
Regulators. In all such financial services activity which are not
regulated by any Financial Sector Regulator or where only part of the
financial services activity is regulated or where there is doubt
regarding the regulatory oversight, foreign investment up to 100 percent
will be allowed under Government approval route subject to conditions
including minimum capitalization requirement, as may be decided by the
Government.
(d) Any activity which is
specifically regulated by an Act, the foreign investment limits will be
restricted to those levels/ limit that may be specified in that Act, if
so mentioned.
(e) Downstream investments by
any of these entities engaged in "Other Financial Services"
will be subject to these Regulations.
|
(Shekhar
Bhatnagar)
Chief General Manager-in-Charge
Schedule
1
[See Regulation 5(1)]
Purchase/
Sale of capital instruments of an Indian company by a person resident
outside India
1. Purchase/sale of capital
instruments of an Indian company by a person resident outside India
(1) An Indian company may issue
capital instruments to a person resident outside India subject to entry
routes, sectoral caps and attendant conditionalities specified in
Regulation 16;
(2) A person resident outside
India may purchase capital instruments of a listed Indian company on a
stock exchange in India provided that:
a.
The
person resident outside India making the investment has already acquired
control of such company in accordance with SEBI (Substantial Acquisition of
Shares and Takeover) Regulations, 2011 and continues to hold such control;
b.
The
amount of consideration may be paid as per the mode of payment prescribed
in this Schedule or out of the dividend payable by Indian investee company
in which the person resident outside India has acquired and continues to
hold the control in accordance with SEBI (Substantial Acquisition of Shares
and Takeover) Regulations, 2011 provided the right to receive dividend is
established and the dividend amount has been credited to a specially
designated non-interest bearing rupee account for acquisition of shares on
the recognised stock exchange.
(3) A wholly owned subsidiary
set up in India by a non-resident entity, operating in a sector where 100
percent foreign investment is allowed in the automatic route and there are
no FDI linked performance conditions, may issue capital instruments to the
said non-resident entity against pre-incorporation/ preoperative expenses
incurred by the said non-resident entity up to a limit of five percent of
its authorised capital or USD 500,000 whichever is less, subject to the
following conditions:
a.
Within
thirty days from the date of issue of capital instruments but not later
than one year from the date of incorporation or such time as Reserve Bank
or Central Government permits, the Indian company shall report the
transaction in the Form FC-GPR to the Reserve Bank;
b.
A
certificate issued by the statutory auditor of the Indian company that the
amount of pre-incorporation/ pre-operative expenses against which capital
instruments have been issued has been utilized for the purpose for which it
was received should be submitted with the Form FC-GPR.
Explanation: Pre-incorporation/
pre-operative expenses shall include amounts remitted to Investee Company’s
account, to the investor’s account in India if it exists, to any
consultant, attorney or to any other material/ service provider for
expenditure relating to incorporation or necessary for commencement of
operations.
(4) An Indian company may issue
capital instruments to a person resident outside India against swap of
capital instruments if the Indian investee company is engaged in an
automatic route sector.
(5) An Indian company may issue
equity shares against any funds payable by it to a person resident outside
India, the remittance of which is permitted under the Act or the rules and
regulations framed or directions issued thereunder or does not require
prior permission of the Central Government or the Reserve Bank under the
Act or the rules and regulations framed or directions issued thereunder or
has been permitted by the Reserve Bank under the Act or the rules and
regulations framed or directions issued thereunder.
Provided in case where
permission has been granted by the Reserve Bank for making remittance, the
Indian company may issue equity shares against such remittance provided all
regulatory actions with respect to the delay or contravention under FEMA or
the rules or the regulations framed thereunder have been completed
(6) An Indian company may issue
capital instruments to a person resident outside India with prior
Government approval against:
a.
Swap
of capital instruments if the Indian investee company is engaged in a
sector under Government route;
b.
Import
of capital goods/ machinery/ equipment (excluding second-hand machinery)
subject to compliance with the conditions specified by the Central
Government and the Reserve Bank from time to time; or
c.
Pre-operative/
pre-incorporation expenses (including payments of rent etc.), subject to
compliance with the conditions specified by the Central Government and the
Reserve Bank from time to time.
2. Mode of payment
(1) The amount of consideration
shall be paid as inward remittance from abroad through banking channels or
out of funds held in NRE/ FCNR(B)/ Escrow account maintained in accordance
with the Foreign Exchange Management (Deposit) Regulations, 2016.
Explanation: The amount of
consideration shall include:
i.
Issue
of equity shares by an Indian company against any funds payable by it to
the investor
ii.
Swap
of capital instruments.
(2) Capital instruments shall be
issued to the person resident outside India making such investment within
sixty days from the date of receipt of the consideration.
Explanation: In case of partly
paid equity shares, the period of 60 days shall be reckoned from the date
of receipt of each call payment
(3) Where such capital
instruments are not issued within sixty days from the date of receipt of
the consideration the same shall be refunded to the person concerned by
outward remittance through banking channels or by credit to his NRE/
FCNR(B) accounts, as the case may be within fifteen days from the date of
completion of sixty days.
Provided Prior approval of the
Reserve Bank shall be required for payment of interest, if any, as laid
down in the Companies Act, 2013, for delay in refund of the amount so
received.
(4) An Indian company issuing
capital instruments under this Schedule may open a foreign currency account
with an Authorised Dealer in India in accordance with Foreign Exchange
Management (Foreign currency accounts by a person resident in India)
Regulations, 2016.
3. Remittance of sale proceeds
The sale proceeds (net of taxes)
of the capital instruments may be remitted outside India or may be credited
to the NRE/ FCNR(B) of the person concerned.
Schedule
2
[See Regulation 5(2)]
Purchase/
Sale of capital instruments of a listed Indian company on a recognised
stock exchange in India by Foreign Portfolio Investors
1. Purchase/sale of capital
instruments
A Foreign Portfolio Investor
(FPI) may purchase or sell capital instruments of an Indian company on a
recognised stock exchange in India subject to the following conditions.
(1) The total holding by each
FPI or an investor group as referred in SEBI (FPI) Regulations, 2014, shall
be less than 10 percent of the total paid-up equity capital on a fully
diluted basis or less than 10 percent of the paid-up value of each series
of debentures or preference shares or share warrants issued by an Indian
company and the total holdings of all FPIs put together shall not exceed 24
percent of paid-up equity capital on a fully diluted basis or paid up value
of each series of debentures or preference shares or share warrants. The
said limit of 10 percent and 24 percent will be called the individual and
aggregate limit, respectively.
Provided the aggregate limit of
24 percent may be increased by the Indian company concerned up to the
sectoral cap/ statutory ceiling, as applicable, with the approval of its
Board of Directors and its General Body through a resolution and a special
resolution, respectively.
(2) In case the total holding of
an FPI increases to 10 percent or more of the total paid-up equity capital
on a fully diluted basis or 10 percent or more of the paid-up value of each
series of debentures or preference shares or share warrants issued by an
Indian company, the total investment made by the FPI shall be re-classified
as FDI subject to the conditions as specified by Securities and Exchange
Board of India and the Reserve Bank in this regard and the investee company
and the investor complying with the reporting requirements prescribed in
regulation 13 of these Regulations.
(3) An FPI may purchase capital
instruments of an Indian company through public offer/ private placement, subject
to the individual and aggregate limits prescribed under this Schedule.
Provided:
i.
in
case of Public Offer, the price of the shares to be issued is not less than
the price at which shares are issued to residents, and
ii.
in
case of issue by private placement, the price is not less than (a) the
price arrived in terms of guidelines issued by the Securities and Exchange
Board of India, or (b) the fair price worked out as per any internationally
accepted pricing methodology for valuation of shares on arm’s length basis,
duly certified by a Securities and Exchange Board of India registered
Merchant Banker or Chartered Accountant or a practicing Cost Accountant, as
applicable
(4) An FPI may, undertake short
selling as well as lending and borrowing of securities subject to such
conditions as may be stipulated by the Reserve Bank and the Securities and
Exchange Board of India from time to time.
(5) Investments made under this
schedule shall be subject to the limits and margin requirements prescribed
by the Reserve Bank/ Securities and Exchange Board of India as well as the
stipulations regarding collateral securities as specified by the Reserve Bank
from time to time.
2. Mode of payment
1.
The
amount of consideration shall be paid as inward remittance from abroad
through banking channels or out of funds held in a foreign currency account
and/ or a Special Non-Resident Rupee (SNRR) account maintained in
accordance with the Foreign Exchange Management (Deposit) Regulations,
2016.
2.
The
foreign currency account and SNRR account shall be used only and
exclusively for transactions under this Schedule
3. Remittance of sale proceeds
The sale proceeds (net of taxes)
of the investments made under this schedule may be remitted outside India
or may be credited to the foreign currency account or a SNRR account of the
FPI.
4. Saving
All investments made by deemed
FPIs in accordance with the regulations prior to their registration as FPI
shall be continued to be valid and taken into account for computation of
aggregate limits.
Schedule
3
[See Regulation 5(3)]
Purchase/
Sale of Capital Instruments of a listed Indian company on a recognised
stock exchange in India by Non-Resident Indian (NRI) or Overseas Citizen of
India (OCI) on repatriation basis
1. Purchase/sale of capital
instruments
A Non-resident Indian (NRI) or
an Overseas Citizen of India (OCI) may purchase or sell Capital Instruments
of a listed Indian company on repatriation basis, on a recognised stock
exchange in India, subject to the following conditions:
1.
NRIs
or OCIs may purchase and sell Capital Instruments through a branch
designated by an Authorised Dealer for the purpose;
2.
The
total holding by any individual NRI or OCI shall not exceed 5 percent of
the total paid-up equity capital on a fully diluted basis or should not
exceed 5 percent of the paid-up value of each series of debentures or
preference shares or share warrants issued by an Indian company and the
total holdings of all NRIs and OCIs put together shall not exceed ten percent
of the total paid-up equity capital on a fully diluted basis or shall not
exceed ten percent of the paid-up value of each series of debentures or
preference shares or share warrants;
Provided that the aggregate
ceiling of 10 percent may be raised to 24 percent if a special resolution
to that effect is passed by the General Body of the Indian company.
2. Mode of payment
1.
The
amount of consideration shall be paid as inward remittance from abroad
through banking channels or out of funds held in a Non-Resident External
(NRE) account maintained in accordance with the Foreign Exchange Management
(Deposit) Regulations, 2016.
2.
The
NRE account will be designated as an NRE (PIS) Account and the designated
account shall be used exclusively for putting through transactions
permitted under this Schedule.
3. Remittance of sale proceeds
The sale proceeds (net of taxes)
of the capital instruments may be remitted outside India or may be credited
to NRE (PIS) account of the person concerned.
4. Saving
Any account designated as NRO
(PIS) shall be re-designated as NRO account.
Schedule
4
[See Regulation 5(4)]
Investment
on non-repatriation basis
A. Purchase or Sale of Capital
Instruments or convertible notes of an Indian company or Units or
contribution to the capital of an LLP by Non-Resident Indian (NRI) or
Overseas Citizen of India (OCI) on Non-Repatriation basis
1. Purchase/ sale of capital
instruments or convertible notes or units or contribution to the capital of
an LLP
(1) A Non-resident Indian (NRI)
or an Overseas Citizen of India (OCI), including a company, a trust and a
partnership firm incorporated outside India and owned and controlled by
NRIs or OCIs, may purchase/ contribute, as the case may be, on
non-repatriation basis the following:
a.
Any
capital instrument issued by a company without any limit either on the
stock exchange or outside it.
b.
Units
issued by an investment vehicle without any limit, either on the stock
exchange or outside it.
c.
The
capital of a Limited Liability Partnership without any limit.
d.
Convertible
notes issued by a startup company in accordance with these Regulations.
(2) The investment detailed at
sub-para 1 above will be deemed to be domestic investment at par with the
investment made by residents
2. Prohibition on purchase of
capital instruments of certain companies.
Notwithstanding anything
contained in paragraph 1, an NRI or an OCI including a company, a trust and
a partnership firm incorporated outside India and owned and controlled by
NRIs or OCIs, shall not make any investment, under this Schedule, in
capital instruments or units of a Nidhi company or a company engaged in
agricultural/ plantation activities or real estate business or construction
of farm houses or dealing in Transfer of Development Rights.
Explanation: Real estate
business will have the same meaning as laid down in regulation 16.
3. Mode of Payment
The amount of consideration
shall be paid as inward remittance from abroad through banking channels or
out of funds held in NRE/ FCNR(B)/ NRO account maintained in accordance
with the Foreign Exchange Management (Deposit) Regulations, 2016.
4. Sale/ maturity proceeds
1.
The
sale/ maturity proceeds (net of applicable taxes) of capital instruments
purchased or disinvestment proceeds of a LLP shall be credited only to the
NRO account of the investor, irrespective of the type of account from which
the consideration was paid;
2.
The
amount invested in capital instruments of an Indian company or the
consideration for contribution to the capital of a LLP and the capital
appreciation thereon shall not be allowed to be repatriated abroad.
B. Investment in a firm or a
proprietary concern
1. Contribution to capital of a
firm or a proprietary concern
An NRI or an OCI may invest, on
a non-repatriation basis, by way of contribution to the capital of a firm
or a proprietary concern in India provided such firm or proprietary concern
is not engaged in any agricultural/ plantation activity or print media or real
estate business.
Explanation: Real estate
business will have the same meaning as laid down in regulation 16.
2. Mode of payment
The amount of consideration
shall be paid as inward remittance from abroad through banking channels or
out of funds held in NRE/ FCNR(B)/ NRO account maintained in accordance
with the Foreign Exchange Management (Deposit) Regulations, 2016.
3. Sale/ maturity proceeds
1.
The
disinvestment proceeds shall be credited only to the NRO account of the
person concerned, irrespective of the type of account from which the
consideration was paid;
2.
The
amount invested for contribution to the capital of a firm or a proprietary
concern and the capital appreciation thereon shall not be allowed to be
repatriated abroad.
Schedule
5
[See Regulation 5(5)]
Purchase
and sale of securities other than capital instruments by a person resident
outside India
1. Permission to persons
resident outside India
A. Permission to Foreign
Portfolio Investors (FPIs)
An FPI may purchase the
following instruments on repatriation basis subject to the terms and
conditions specified by the Securities and Exchange Board of India and the
Reserve Bank:
(a) dated Government securities/
treasury bills;
(b) non-convertible debentures/
bonds issued by an Indian company;
(c) commercial papers issued by
an Indian company;
(d) units of domestic mutual
funds;
(e) Security Receipts (SRs)
issued by Asset Reconstruction Companies up to 100 percent of each tranche,
subject to directions/ guidelines of the Reserve Bank;
(f) 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) provided
that the investment by all eligible investors in Perpetual Debt instruments
(Tier I) shall not exceed an aggregate ceiling of 49 percent of each issue
and investment by a single FPI shall not exceed the limit of 10 percent of
each issue;
(g) non-convertible debentures/
bonds issued by Non-Banking Financial Companies categorized as
‘Infrastructure Finance Companies’(IFCs) by the Reserve Bank;
Provided this will include such
instruments issued on or after November 3, 2011 and held by deemed FPIs;
(h) Rupee denominated bonds/
units issued by Infrastructure Debt Funds;
Provided this will include such
instruments issued on or after November 22, 2011 and held by deemed FPIs.
(i) Credit enhanced bonds;
(j) Listed non-convertible/
redeemable preference shares or debentures issued in terms of Regulation 9
of these Regulations;
(k) Security receipts issued by
securitization companies subject to conditions as specified by the Reserve
Bank and/ or Securities and Exchange Board of India;
(l) Securitised debt
instruments, including (i) any certificate or instrument issued by a special
purpose vehicle (SPV) set up for securitisation of asset/s with banks,
Financial Institutions or NBFCs as originators; and/ or (ii) any
certificate or instrument issued and listed in terms of the Securities and
Exchange Board of India (Regulations on Public Offer and Listing of
Securitised Debt Instruments), 2008.
Provided that FPIs may offer
such instruments as permitted by the Reserve Bank from time to time as
collateral to the recognized Stock Exchanges in India for their
transactions in exchange traded derivative contracts as specified in
sub-Regulation 5 of Regulation 5.
B. Permission to Non-resident
Indians (NRIs) or Overseas Citizens of India (OCIs) – Repatriation basis
(1) A Non-resident Indian (NRI)
or an Overseas Citizen of India (OCI) may, without limit, purchase the
following instruments on repatriation basis,
a.
Government
dated securities (other than bearer securities) or treasury bills or units
of domestic mutual funds;
b.
Bonds
issued by a Public Sector Undertaking (PSU) in India;
c.
Shares
in Public Sector Enterprises being disinvested by the Central Government,
provided the purchase is in accordance with the terms and conditions
stipulated in the notice inviting bids;
d.
Bonds/
units issued by Infrastructure Debt Funds;
e.
Listed
non-convertible/ redeemable preference shares or debentures issued in terms
of Regulation 9 of these Regulations;
(2) An NRI or an OCI may
purchase on repatriation basis 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, as stipulated by
Reserve Bank. The investments by all NRIs or OCIs in Perpetual Debt
Instruments (Tier I) should not exceed an aggregate ceiling of 24 percent
of each issue and investments by a single NRI or OCI should not exceed 5
percent of each issue. Investment by NRIs or OCIs in Debt Capital
Instruments (Tier II) shall be accordance with the extant policy for
investment by NRIs or OCIs in other debt instruments.
(3) An NRI may subscribe to National
Pension System governed and administered by Pension Fund Regulatory and
Development Authority (PFRDA), provided such person is eligible to invest
as per the provisions of the PFRDA Act. The annuity/ accumulated saving
will be repatriable.
Provided that NRI/ OCIs may
offer such instruments as permitted by the Reserve Bank from time to time
as collateral to the recognized Stock Exchanges in India for their
transactions in exchange traded derivative contracts as specified in
sub-Regulation 5 of Regulation 5.
C. Permission to Non-resident
Indians (NRIs) or Overseas Citizens of India (OCIs) – Non-Repatriation
basis
(1) An NRI or an OCI may,
without limit, purchase on non-repatriation basis, dated Government
securities (other than bearer securities), treasury bills, units of
domestic mutual funds, units of money Market Mutual Funds, or National
Plan/ Savings Certificates.
(2) An NRI or an OCI may,
without limit, purchase on non-repatriation basis, listed non-convertible/
redeemable preference shares or debentures issued in terms of Regulation 9
of these Regulations.
(3) An NRI or an OCI may,
without limit, on non-repatriation basis subscribe to the chit funds
authorised by the Registrar of Chits or an officer authorised by the State
Government in this behalf.
D. Permission to Foreign Central
Banks or a Multilateral Development Bank for purchase of Government
Securities
(1) A Foreign Central Bank may
purchase and sell dated Government securities/ treasury bills in the
secondary market subject to the conditions as may be stipulated by the
Reserve Bank.
(2) A Foreign Central Bank, may
purchase and sell dated Government securities/ treasury bills subject to
the conditions as may be stipulated by Reserve Bank.
(3) A Multilateral Development
Bank which is specifically permitted by Government of India to float rupee
bonds in India may purchase Government dated securities.
E. Permission to other
non-resident investors for purchase of securities
(1) Long term investors like
Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds,
Insurance Funds, Pension Funds which are registered with Securities and
Exchange Board of India as eligible investors in Infrastructure Debt Funds
may purchase on repatriation basis Rupee Denominated bonds/ units issued by
Infrastructure Debt Funds.
(2) Long term investors like
Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds,
Insurance Funds, Pension Funds and Foreign Central Banks registered with
Securities and Exchange Board of India may purchase, on repatriation basis
the following instruments and subject to such terms and conditions as may
be specified by the Reserve Bank and the Securities and Exchange Board of
India:
a.
dated
Government securities/ treasury bills;
b.
commercial
papers issued by an Indian company;
c.
units
of domestic mutual funds;
d.
listed
non-convertible debentures/ bonds issued by an Indian company;
e.
listed
and unlisted non-convertible debentures/ bonds issued by an Indian company
in the infrastructure sector. The term ‘Infrastructure Sector’ has the same
meaning as given in the Harmonised Master List of Infrastructure
sub-sectors approved by Government of India vide Notification F. No.
13/06/2009-INF dated March 27, 2012 as amended/ updated;
f.
non-convertible
debentures/bonds issued by Non-Banking Finance Companies categorized as
‘Infrastructure Finance Companies (IFCs)’ by the Reserve Bank;
g.
security
Receipts (SRs) issued by Asset Reconstruction Companies up to 100 percent
of each tranche, subject to directions/ guidelines of the Reserve Bank;
h.
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) provided that the investment by all eligible investors in Perpetual
Debt instruments (Tier I) shall not exceed an aggregate ceiling of 49
percent of each issue, and investment by a single long term investor shall
not exceed the limit of 10 pe cent of each issue;
i.
primary
issues of non-convertible debentures/ bonds provided such non-convertible
debentures/ bonds are committed to be listed within 15 days of such
investment. In the event of the instruments not being listed within 15 days
of issuance then the long term investor shall immediately dispose such
instruments by way of sale to a third party or to the issuer and the terms
of offer to the long term investors should contain a clause that the issuer
of such instruments shall immediately redeem/ buyback those securities from
the long term investors in such an eventuality;
j.
credit
enhanced bonds;
k.
listed
non-convertible/ redeemable preference shares or debentures issued in terms
of Regulation 9 of these Regulations;
l.
security
receipts (SRs) issued by securitization companies subject to conditions as
specified by Reserve Bank and/ or Securities and Exchange Board of India
2. Mode of Payment
(1) The amount of consideration
for purchase of instruments by FPIs shall be paid out of inward remittance
from abroad through banking channels or out of funds held in a foreign
currency account and/ or Special Non-Resident Rupee (SNRR) account
maintained in accordance with the Foreign Exchange Management (Deposit)
Regulations, 2016. The foreign currency account and SNRR account shall be
used only and exclusively for transactions under this Schedule.
(2) The amount of consideration
for purchase of instruments by NRIs or OCIs on repatriation basis shall be
paid out of inward remittances from abroad through banking channels or out
of funds held in NRE/ FCNR(B) account maintained in accordance with the
Foreign Exchange Management (Deposit) Regulations, 2016.
(3) The amount of consideration
for (a) purchase of instruments by NRIs or OCIs on non-repatriation basis
and (b) subscriptions to the National Pension System by NRIs shall be paid
out of inward remittances from abroad through banking channels or out of
funds held in NRE/ FCNR(B)/ NRO account maintained in accordance with the
Foreign Exchange Management (Deposit) Regulations, 2016.
(4) The amount of consideration
for purchase of Government dated securities by a Foreign Central Bank or a
Multilateral Development Bank shall be paid out of inward remittances from
abroad through banking channels or out of funds held in an account opened
with the specific approval of the RBI.
(5) The amount of consideration
for purchase of instruments by other non-resident investors shall be paid
out of inward remittances from abroad through banking channels.
3. Permission for Sale of instruments
A person resident outside India
who has purchased instruments in accordance with this Schedule may sell/
redeem the instruments subject to such terms and conditions as may be
specified by the Reserve Bank and the Securities Exchange Board of India.
4. Remittance/ credit of sale/
maturity proceeds
(1) The sale/ maturity proceeds
(net of taxes) of instruments held by Foreign Portfolio Investors (FPIs)
may be remitted outside India or may be credited to the foreign currency
account or SNRR account of the FPI.
(2) The net sale/ maturity
proceeds (net of taxes) of instruments held by NRIs or OCIs, may be:
a.
Credited
to the NRO account person concerned where the instruments were held on
non-repatriation basis
b.
Credited
to the NRO account person concerned where the payment for the purchase of
the instruments sold was made out of funds held in NRO account, or
c.
Remitted
abroad or at the NRI/ OCI investor's option, credited to his NRE/ FCNR(B)/
NRO account, where the instruments were purchased on repatriation basis.
(3) In all other cases, the
sale/ maturity proceeds (net of taxes) may be remitted abroad or credited
to an account opened with the prior permission of the Reserve Bank.
Schedule
6
[See Regulation 5(6)]
Investment
in a Limited Liability Partnership (LLP)
1. Investment in an LLP
(1) A person resident outside
India (other than a citizen of Pakistan or Bangladesh) or an entity
incorporated outside India (other than an entity incorporated in Pakistan
or Bangladesh), not being a Foreign Portfolio Investor (FPI) or a Foreign
Venture Capital Investor (FVCI), may contribute to the capital of an LLP
operating in sectors/ activities where foreign investment up to 100 percent
is permitted under automatic route and there are no FDI linked performance
conditions.
(2) Investment by way of ‘profit
share’ will fall under the category of reinvestment of earnings
(3) Investment in an LLP is
subject to the compliance of the conditions of Limited Liability
Partnership Act, 2008.
(4) A company having foreign
investment, engaged in a sector where foreign investment up to 100 percent
is permitted under the automatic route and there are no FDI linked
performance conditions, can be converted into an LLP under the automatic
route.
(5) An LLP having foreign
investment, engaged in a sector where foreign investment up to 100 percent
is permitted under the automatic route and there are no FDI linked
performance conditions, may be converted into a company under the automatic
route.
(6) Investment in an LLP either
by way of capital contribution or by way of acquisition/ transfer of profit
shares, should not be less than the fair price worked out as per any
valuation norm which is internationally accepted/ adopted as per market
practice (hereinafter referred to as "fair price of capital
contribution/ profit share of an LLP") and a valuation certificate to
that effect shall be issued by the Chartered Accountant or by a practicing
Cost Accountant or by an approved valuer from the panel maintained by the
Central Government.
(7) In case of transfer of
capital contribution/ profit share from a person resident in India to a
person resident outside India, the transfer shall be for a consideration
not less than the fair price of capital contribution/ profit share of an
LLP. Further, in case of transfer of capital contribution/ profit share
from a person resident outside India to a person resident in India, the
transfer shall be for a consideration which is not more than the fair price
of the capital contribution/ profit share of an LLP.
2. Mode of payment
Payment by an investor towards
capital contribution of an LLP shall be made by way of an inward remittance
through banking channels or out of funds held in NRE or FCNR(B) account
maintained in accordance with the Foreign Exchange Management (Deposit)
Regulations, 2016.
3. Remittance of disinvestment
proceeds
The disinvestment proceeds may
be remitted outside India or may be credited to NRE or FCNR(B) account of
the person concerned.
Schedule
7
[See Regulation 5(7)]
Investment
by a Foreign Venture Capital Investor (FVCI)
1. Investment by Foreign Venture
Capital Investor
(1) Subject to the terms and
conditions as may be laid down by the Reserve Bank, a Foreign Venture
Capital Investor (FVCI) may purchase
a.
securities,
issued by an Indian company engaged in any sector mentioned at para 4 of
this Schedule and whose securites are not listed on a recognised stock
exchange at the time of issue of the said securities;
b.
securities
issued by a startup;
c.
units
of a Venture Capital Fund (VCF) or of a Category I Alternative Investment
Fund (Cat-I AIF) or units of a scheme or of a fund set up by a VCF or by a
Cat-I AIF.
Provided if the investment is in
capital instruments, then the sectoral caps, entry routes and attendant
conditions shall apply;
(2) An FVCI may purchase the
securities/ instruments mentioned above either from the issuer of these
securities/ instruments or from any person holding these securities/
instruments. The FVCI may invest in securities on a recognized stock
exchange subject to the provisions of the Securities and Exchange Board of
India (FVCI) Regulations, 2000.
(3) The FVCI may acquire, by
purchase or otherwise, from, or transfer, by sale or otherwise, to, any
person resident in or outside India, any security/ instrument it is allowed
to invest in, at a price that is mutually acceptable to the buyer and the
seller/ issuer. The FVCI may also receive the proceeds of the liquidation
of VCFs or of Cat-I AIFs or of schemes/ funds set up by the VCFs or Cat-I
AIFs.
2. Mode of payment
1.
The
amount of consideration shall be paid as inward remittance from abroad
through banking channels or out of funds held in a foreign currency account
and/ or a Special Non-Resident Rupee (SNRR) account maintained in
accordance with the Foreign Exchange Management (Deposit) Regulations,
2016.
2.
The
foreign currency account and SNRR account shall be used only and
exclusively for transactions under this Schedule.
3. Remittance of sale/ maturity
proceeds
The sale/ maturity proceeds (net
of taxes) of the securities may be remitted outside India or may be
credited to the foreign currency account or a Special Non-resident Rupee
Account of the FVCI.
4. List of sectors in which a
Foreign Venture Capital Investor is allowed to invest
1.
Biotechnology
2.
IT
related to hardware and software development
3.
Nanotechnology
4.
Seed
research and development
5.
Research
and development of new chemical entities in pharmaceutical sector
6.
Dairy
industry
7.
Poultry
industry
8.
Production
of bio-fuels
9.
Hotel-cum-convention
centres with seating capacity of more than three thousand.
10.
Infrastructure
sector. The term ‘Infrastructure Sector’ has the same meaning as given in
the Harmonised Master List of Infrastructure sub-sectors approved by
Government of India vide Notification F. No. 13/06/2009-INF dated March 27,
2012 as amended/ updated.
Schedule
8
[See Regulation 5(8)]
Investment
by a person resident outside India in an Investment Vehicle
1. Investment in units of an
Investment Vehicle
(1) A person resident outside
India (other than a citizen of Pakistan or Bangladesh) or an entity incorporated
outside India (other than an entity incorporated in Pakistan or Bangladesh)
may invest in units of Investment Vehicles.
(2) A person resident outside
India who has acquired or purchased units in accordance with this Schedule
may sell or transfer in any manner or redeem the units as per regulations
framed by Securities and Exchange Board of India or directions issued by
the Reserve Bank.
(3) An Investment vehicle may
issue its units to a person resident outside India against swap of capital
instruments of a Special Purpose Vehicle (SPV) proposed to be acquired by
such Investment Vehicle.
(4) Investment made by an
Investment Vehicle into an Indian entity shall be reckoned as indirect
foreign investment for the investee Indian entity if the Sponsor or the
Manager or the Investment Manager (i) is not owned and not controlled by
resident Indian citizens or (ii) is owned or controlled by persons resident
outside India.
Provided that for sponsors or
managers or investment managers organized in a form other than companies or
LLPs, Securities and Exchange Board of India shall determine whether the
sponsor or manager or investment manager is foreign owned and controlled.
Explanation: ‘Control’ of the
AIF should be in the hands of ‘sponsors’ and ‘managers/ investment
managers’, with the general exclusion to others. In case the ‘sponsors and
‘managers/ investment managers’ of the AIF are individuals, for the
treatment of downstream investment by such AIF as domestic, ‘sponsors’ and
‘managers/ investment managers’ should be resident Indian citizens.
(5) An Alternative Investment
Fund Category III which has received any foreign investment shall make
portfolio investment in only those securities or instruments in which a FPI
is allowed to invest under the Act, rules or regulations made thereunder.
2. Mode of payment
The amount of consideration
shall be paid as inward remittance from abroad through banking channels or
by way of swap of shares of a Special Purpose Vehicle or out of funds held
in NRE or FCNR(B) account maintained in accordance with the Foreign
Exchange Management (Deposit) Regulations, 2016.
3. Remittance of sale/ maturity
proceeds
The sale/ maturity proceeds (net
of taxes) of the units may be remitted outside India or may be credited to
the NRE or FCNR(B) account of the person concerned.
Schedule
9
[See Regulation 5(9)]
Investment
in Depository receipts by a person resident outside India
1. Issue/ transfer of eligible
instruments to a foreign depository for the purpose of issuance of
depository receipts by eligible person(s)
(1) Any security or unit in
which a person resident outside India is allowed to invest under these
regulations shall be eligible instruments for issue of Depository Receipts
in terms of Depository Receipts Scheme, 2014 (DR Scheme, 2014).
(2) A person will be eligible to
issue or transfer eligible instruments to a foreign depository for the
purpose of issuance of depository receipts in accordance with the DR
Scheme, 2014 and guidelines issued by Central Government in this regard.
(3) A domestic custodian may
purchase eligible instruments on behalf of a person resident outside India,
for the purpose of converting the instruments so purchased into depository
receipts in terms of DR Scheme 2014.
(4) The aggregate of eligible
instruments which may be issued or transferred to foreign depositories,
along with eligible instruments already held by persons resident outside
India, shall not exceed the limit on foreign holding of such eligible
instruments under the Act, rules or regulations framed thereunder.
(5) The eligible instruments
shall not be issued or transferred to a foreign depository for the purpose
of issuing depository receipts at a price less than the price applicable to
a corresponding mode of issue or transfer of such instruments to domestic
investors under the applicable laws.
2. Saving
Depository Receipts issued under
the Issue of Foreign Currency Convertible Bonds and Ordinary Shares
(Through Depository Receipt Mechanism) Scheme, 1993 shall be deemed to have
been issued under the corresponding provisions of DR Scheme 2014 and have
to comply with the provisions laid out in this Schedule.
Schedule
10
[See Regulation 5(10)]
Issue
of Indian Depository Receipts (IDRs)
1. Issue of IDRs
Companies incorporated outside
India may issue IDRs through a Domestic Depository, to persons resident in
India and outside India, subject to the following conditions
1.
the
issue of IDRs is in compliance with the Companies (Registration of Foreign
Companies) Rules, 2014 and the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009;
2.
any
issue of IDRs by financial/ banking companies having presence in India,
either through a branch or subsidiary, shall require prior approval of the
sectoral regulator(s);
3.
IDRs
shall be denominated in Indian Rupees only;
4.
the
proceeds of the issue of IDRs shall be immediately repatriated outside
India by the companies issuing such IDRs.
2. Purchase/ sale of IDRs:
An FPI or an NRI or an OCI may
purchase, hold or sell IDRs, subject to the following terms and conditions:
1.
NRIs
or OCIs may invest in the IDRs out of funds held in their NRE/ FCNR(B)
account, maintained in accordance with the Foreign Exchange Management
(Deposit) Regulations, 2016;
2.
Limited
two way fungibility of IDRs shall be permissible subject to the terms and
conditions stipulated by Reserve Bank in this regard;
3.
IDR
shall not be redeemable into underlying equity shares before the expiry of
one year from the date of issue;
Redemption/ conversion of IDRs
into underlying equity shares of the issuing company shall be a compliance
the Foreign Exchange Management (Transfer or Issue of any Foreign Security)
Regulations, 2004.
Published in the Official
Gazette of Government of India – Extraordinary – Part-II, Section 3,
Sub-Section (i) dated 07.11.2017- G.S.R.No. 1374(E)
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