These FAQs coverbroadly the following areas : I.Foreign DirectInvestmentII. Foreign Technology Collaboration AgreementIII. Foreign Portfolio Investment IV. Investment in Government Securitiesand Corporate debt V. Foreign Venture Capital Investment VI. Investment by QFIs and is been Updated up to January 28, 2014.
Updated up to January 28, 2014
I. Foreign Direct Investment (FDI)
Q. 1. What are the forms in which business can be conducted by a foreign company in India?
Ans. A foreign company planning to set up business operations in India may:
Incorporate a company under the Companies Act, 1956, as a Joint Venture or a Wholly Owned Subsidiary.
Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of theforeign company which can undertake activities permitted under the Foreign Exchange Management (Establishment in India of Branch Office or Other Place of Business) Regulations, 2000.
Q.2. What is the procedure for receiving Foreign Direct Investment in an Indian company?
Ans. An Indian company may receive Foreign Direct Investment under the two routes as given under:
i. Automatic Route
FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.
ii. Government Route
FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance. Application can be made in Form FC-IL, which can be downloaded from http://www.dipp.gov.in. Plain paper applications carrying all relevant details are also accepted. No fee is payable.
The Indian company having received FDI either under the Automatic route or the Government route is required to comply with provisions of the FDI policy including reporting the FDI to the Reserve Bank. as stated in Q 4.
Q.3. What are the instruments for receiving Foreign Direct Investment in an Indiancompany?
Ans. Foreign investment is reckoned as FDI only if the investment is made in equity shares , fully and mandatorily convertible preference shares and fully and mandatorily convertible debentures with the pricing being decided upfront as a figure or based on the formula that is decided upfront. Anyforeign investment into an instrument issued by an Indian company which:
gives an option to the investor to convert or not to convert it into equity or
does not involve upfront pricing of the instrument
as a date would be reckoned as ECB and would have to comply with the ECB guidelines.
The FDI policy provides that the price/ conversion formula of convertible capital instruments should be determined upfront at the time of issue of the instruments. 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 the extant FEMA regulations [the DCF method of valuation for the unlisted companies and valuation in terms of SEBI (ICDR) Regulations, for the listed companies].
Q.4. What are the modes of payment allowed for receiving Foreign Direct Investment in an Indian company?
Ans. An Indian company issuing shares /convertible debentures under FDI Scheme to a person resident outside India shall receive the amount of consideration required to be paid for such shares /convertible debentures by:
(i) inward remittance through normal banking channels.
(ii) debit to NRE / FCNR account of a person concerned maintained with an AD category I bank.
(iii) conversion of royalty / lump sum / technical know how fee due for payment or conversion of ECB, shall be treated as consideration for issue of shares.
(iv) conversion of import payables / pre incorporation expenses / share swap can be treated as consideration for issue of shares with the approval of FIPB.
(v) debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the approval from AD Category – I bank and is maintained with the AD Category I bank on behalf of residents and non-residents towards payment of share purchase consideration.
If the shares or convertible debentures are not issued within 180 days from the date of receipt of the inward remittance or date of debit to NRE / FCNR (B) / Escrow account, the amount shall be refunded. Further, Reserve Bank may on an application made to it and for sufficient reasons permitan Indian Company to refund / allot shares for the amount of consideration received towards issue ofsecurity if such amount is outstanding beyond the period of 180 days from the date of receipt.
Q.5. Which are the sectors where FDI is not allowed in India, both under the Automatic Route as well as under the Government Route?
Ans. FDI is prohibited under the Government Route as well as the Automatic Route in the following sectors:
i) Atomic Energy
ii) Lottery Business
iii) Gambling and Betting
iv) Business of Chit Fund
v) Nidhi Company
vi) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors) and Plantations activities (other than Tea Plantations) (c.f.Notification No. FEMA 94/2003-RB dated June 18, 2003).
vii) Housing and Real Estate business (except development of townships, construction of residen*tial/commercial premises, roads or bridges to the extent specified in Notification No. FEMA 136/2005-RB dated July 19, 2005).
viii) Trading in Transferable Development Rights (TDRs).
ix) Manufacture of cigars , cheroots, cigarillos and cigarettes , of tobacco or of tobacco substitutes.
(Please also see the the website of Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India at www.dipp.gov.in for details regarding sectors and investment limits therein allowed ,under FDI)
Q.6. What is the procedure to be followed after investment is made under the Automatic Route or with Government approval?
Ans. A two-stage reporting procedure has to be followed :.
• On receipt of share application money:
Within 30 days of receipt of share application money/amount of consideration from the non-resident investor, the Indian company is required to report to the Foreign Exchange Department, Regional Office concerned of the Reserve Bank of India,under whose jurisdiction its Registered Office is located, the Advance Reporting Form, containing the following details :
Name and address of the foreign investor/s;
Date of receipt of funds and the Rupee equivalent;
Name and address of the authorised dealer through whom the funds have been received;
Details of the Government approval, if any; and
KYC report on the non-resident investor from the overseas bank remitting the amount of consideration.
The Indian company has to ensure that the shares are issued within 180 days from the date of inward remittance which otherwise would result in the contravention / violation of the FEMA regulations.
• Upon issue of shares to non-resident investors:
Within 30 days from the date of issue of shares, a report in Form FC-GPR- PART A together with the following documents should be filed with the Foreign Exchange Department, Regional Office concerned of the Reserve Bank of India.
• Certificate from the Company Secretary of the company accepting investment from persons resident outside India certifying that:
The company has complied with the procedure for issue of shares as laid down under the FDI scheme as indicated in the Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to time.
• The investment is within the sectoral cap / statutory ceiling permissible under the Automatic Route of the Reserve Bank and it fulfills all the conditions laid down for investments under the Automatic Route,
• OR
• Shares have been issued in terms of SIA/FIPB approval No. ——————— dated ——————– (enclosing the FIPB approval copy)
• Certificate from Statutory Auditors/ SEBI registered Merchant Banker / Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India.
Q.7. What are the guidelines for transfer of existing shares from non-residents to residents or residents to non-residents?
Ans. The term ‘transfer’ is defined under FEMA as including “sale, purchase, acquisition, mortgage, pledge, gift, loan or any other form of transfer of right, possession or lien” {Section 2 (ze) of FEMA, 1999}.
The following share transfers are allowed without the prior approval of the Reserve Bank of India
A. Transfer of shares from a Non Resident to Resident under the FDI scheme where the pricing guidelines under FEMA, 1999 are not met provided that :-
i. The original and resultant investment are in line with the extant FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as minimum capitalization, etc.), reporting requirements, documentation, etc.;
ii. The pricing for the transaction is compliant with the specific/explicit, extant and relevant SEBI regulations / guidelines (such as IPO, Book building, block deals, delisting, exit, open offer/ substantial acquisition / SEBI SAST, buy back); and
iii. Chartered Accountants Certificate to the effect that compliance with the relevant SEBI regulations / guidelines as indicated above is attached to the form FC-TRS to be filed with the AD bank.
B. Transfer of shares from Resident to Non Resident:
i) where the transfer of shares requires the prior approval of the FIPB as per the extant FDI policy provided that :
a) the requisite approval of the FIPB has been obtained; and
b) the transfer of share adheres with the pricing guidelines and documentation requirements as specified by the Reserve Bank of India from time to time.
ii) where SEBI (SAST) guidelines are attracted subject to the adherence with the pricing guidelines and documentation requirements as specified by Reserve Bank of India from time to time.
iii) where the pricing guidelines under the Foreign Exchange Management Act (FEMA), 1999 are not met provided that:-
1. The resultant FDI is in compliance with the extant FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as minimum capitalization, etc.), reporting requirements, documentation etc.;
2. The pricing for the transaction is compliant with the specific/explicit, extant and relevant SEBI regulations / guidelines (such as IPO, Book building, block deals, delisting, exit, open offer/ substantial acquisition / SEBI SAST); and
3. Chartered Accountants Certificate to the effect that compliance with the relevant SEBI regulations / guidelines as indicated above is attached to the form FC-TRS to be filed with the AD bank
iv) where the investee company is in the financial sector provided that :
a) NOCs are obtained from the respective financial sector regulators/ regulators of the investee company as well as transferor and transferee entities and such NOCs are filed along with the form FC-TRS with the AD bank; and
b) The FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as minimum capitalization, etc.), reporting requirements, documentation etc., are complied with.
Transfer of shares/ fully and mandatorily convertible debentures by way of Gift:
A person resident outside India can freely transfer shares/ fully and mandatorily convertible debentures by way of gift to a person resident in India as under:
Any person resident outside India, (not being a NRI or an erstwhile OCB), can transfer by way of gift the shares/ fully and mandatorily convertible debentures to any person resident outside India (including NRIs but excluding OCBs).
Note: Transfer of shares from or by erstwhile OCBs would require prior approval of the Reserve Bank of India.
a NRI may transfer by way of gift, the shares/convertible debentures held by him to another NRI only,
Any person resident outside India may transfer share/ fully and mandatorily convertible debentures to a person resident in India by way of gift.
Q.8. Can a person resident in India transfer security by way of gift to a person resident outside India?
Ans. A person resident in India who proposes to transfer security by way of gift to a person resident outside India [other than an erstwhile OCBs] shall make an application to the Central Office of the Foreign Exchange Department, Reserve Bank of India furnishing the following information, namely:
Name and address of the transferor and the proposed transferee
Relationship between the transferor and the proposed transferee
Reasons for making the gift.
In case of Government dated securities, treasury bills and bonds, a certificate issued by a Chartered Accountant on the market value of such securities.
In case of units of domestic mutual funds and units of Money Market Mutual Funds, a certificate from the issuer on the Net Asset Value of such security.
In case of shares/ fully and mandatorily convertible debentures, a certificate from a Chartered Accountant on the value of such securities according to the guidelines issued by the Securities & Exchange Board of India or the Discounted Free Cash Flow (DCF) method with regard to listed companies and unlisted companies, respectively.
Certificate from the Indian company concerned certifying that the proposed transfer of shares/convertible debentures, by way of gift, from resident to the non-resident shall not breach the applicable sectoral cap/ FDI limit in the company and that the proposed number of shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per cent of the paid up capital of the company.
The transfer of security by way of gift may be permitted by the Reserve bank provided:
(i) The donee is eligible to hold such security under Schedules 1, 4 and 5 to Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time.
(ii) The gift does not exceed 5 per cent of the paid up capital of the Indian company/ each series of debentures/ each mutual fund scheme
(iii) The applicable sectoral cap/ foreign direct investment limit in the Indian company is not breached
(iv) The donor and the donee are relatives as defined in section 6 of the Companies Act, 1956.
(v) The value of security to be transferred by the donor together with any security transferred to any person residing outside India as gift in the financial year does not exceed the rupee equivalent of USD 50000.
(vi) Such other conditions as considered necessary in public interest by the Reserve Bank.
Q.9. What if the transfer of shares from resident to non-resident does not fall under the above categories?
Ans.
Transfer of Shares by Resident which requires Government approval
The following instances of transfer of shares from residents to non-residents by way of sale or otherwise requires Government approval:
(i) Transfer of shares of companies engaged in sector falling under the Government Route.
(ii) Transfer of shares resulting in foreign investments in the Indian company, breaching the sectoral cap applicable.
Prior permission of the Reserve Bank in certain cases for acquisition / transfer of security
i) Transfer of shares or convertible debentures from residents to non-residents by way of sale requires prior approval of Reserve Bank in case where the non-resident acquirer proposes deferment of payment of the amount of consideration. Further, in case approval is granted for the transaction, the same should be reported in Form FC-TRS to the AD Category – I bank, within 60 days from the date of receipt of the full and final amount of consideration.
(ii) A person resident in India, who intends to transfer any security, by way of gift to a person resident outside India, has to obtain prior approval from the Reserve Bank.
Any other case not covered by General Permission.
Q 10. What are the reporting obligations in case of transfer of shares between resident and non-resident ?
Ans. The transaction should be reported by submission of form FC-TRS to the AD Category – I bank, within 60 days from the date of receipt/remittance of the amount of consideration. The onus of submission of the form FC-TRS within the given timeframe would be on the resident in India, the transferor or transferee, as the case may be.
Q.11. What is the method of payment and remittance/credit of sale proceeds in case of transfer of shares between resident and non-resident?
Ans. The sale consideration in respect of the shares purchased by a person resident outside India shall be remitted to India through normal banking channels. In case the buyer is a Foreign Institutional Investor (FII), payment should be made by debit to its Special Non-Resident Rupee Account. In case the buyer is a NRI, the payment may be made by way of debit to his NRE/FCNR (B) accounts. However, if the shares are acquired on non-repatriation basis by NRI, the consideration shall be remitted to India through normal banking channel or paid out of funds held in NRE/FCNR (B)/NRO accounts.
The sale proceeds of shares (net of taxes) sold by a person resident outside India) may be remitted outside India. In case of FII the sale proceeds may be credited to its special Non-Resident Rupee Account. In case of NRI, if the shares sold were held on repatriation basis, the sale proceeds (net of taxes) may be credited to his NRE/FCNR(B) accounts and if the shares sold were held on non repatriation basis, the sale proceeds may be credited to his NRO account subject to payment of taxes. The sale proceeds of shares (net of taxes) sold by an erstwhile OCB may be remitted outside India directly if the shares were held on repatriation basis and if the shares sold were held on non-repatriation basis, the sale proceeds may be credited to its NRO (Current) Account subject to payment of taxes, except in the case of erstwhile OCBs whose accounts have been blocked by Reserve Bank.
Q. 12. Are the investments and profits earned in India repatriable?
Ans. All foreign investments are freely repatriable (net of applicable taxes) except in cases where:
i) the foreign investment is in a sector like Construction and Development Projects and Defence wherein the foreign investment is subject to a lock-in-period; and
ii) NRIs choose to invest specifically under non-repatriable schemes.
Further, dividends (net of applicable taxes) declared on foreign investments can be remitted freely through an Authorised Dealer bank.
Q.13. What are the guidelines on issue and valuation of shares in case of existing companies?
Ans.
A. The price of shares issued to persons resident outside India under the FDI Scheme shall not be less than :
(i) the price worked out in accordance with the SEBI guidelines, as applicable, where the shares of the company is listed on any recognised stock exchange in India;
(ii) the fair valuation of shares done by a SEBI registered Category – I Merchant Banker or a Chartered Accountant as per the discounted free cash flow method, where the shares of the company is not listed on any recognised stock exchange in India; and
(iii) the price as applicable to transfer of shares from resident to non-resident as per the pricing guidelines laid down by the Reserve Bank from time to time, where the issue of shares is on preferential allotment.
B. The price of shares transferred from resident to a non-resident and vice versa should be determined as under:
i) Transfer of shares from a resident to a non-resident:
a) In case of listed shares, at a price which is not less than the price at which a preferential allotment of shares would be made under SEBI guidelines.
b) In case of unlisted shares at a price which is not less than the fair value as per the Discounted Free Cash Flow (DCF) Method to be determined by a SEBI registered Category-I- Merchant Banker/Chartered Accountant.
ii) Transfer of shares from a non-resident to a resident – The price should not be more than the minimum price at which the transfer of shares would have been made from a resident to a non-resident.
In any case, the price per share arrived at as per the above method should be certified by a SEBI registered Category-I-Merchant Banker / Chartered Accountant.
Q.14. What are the regulations pertaining to issue of ADRs/ GDRs by Indian companies?
Ans.
Indian companies can raise foreign currency resources abroad through the issue of ADRs/ GDRs, in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India thereunder from time to time.
A company can issue ADRs / GDRs, if it is eligible to issue shares to persons resident outside India under the FDI Scheme. However, an Indian listed company, which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue ADRs/GDRs.
Unlisted companies, which have not yet accessed the ADR/GDR route for raising capital in the international market, would require prior or simultaneous listing in the domestic market, while seeking to issue such overseas instruments. Unlisted companies, which have already issued ADRs/GDRs in the international market, have to list in the domestic market on making profit or within three years of such issue of ADRs/GDRs, whichever is earlier.
After the issue of ADRs/GDRs, the company has to file a return in Form DR as indicated in the RBI Notification No. FEMA.20/ 2000-RB dated May 3, 2000, as amended from time to time. The company is also required to file a quarterly return in Form DR- Quarterly as indicated in the RBI Notification ibid.
There are no end-use restrictions on GDR/ADR issue proceeds, except for an express ban on investment in real estate and stock markets.
Erstwhile OCBs which are not eligible to invest in India and entities prohibited to buy, sell or deal in securities by SEBI will not be eligible to subscribe to ADRs / GDRs issued by Indian companies.
The pricing of ADR / GDR issues including sponsored ADRs / GDRs should be made at a price determined under the provisions of the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India and directions issued by the Reserve Bank, from time to time.
Q.15. What is meant by Sponsored ADR & Two-way fungibility Scheme of ADR/ GDR?
Ans. Sponsored ADR/GDR: An Indian company may sponsor an issue of ADR/ GDR with an overseas depository against shares held by its shareholders at a price to be determined by the Lead Manager. The operative guidelines for the same have been issued vide A.P. (DIR Series) Circular No.52 dated November 23, 2002.
Two-way fungibility Scheme: Under the limited Two-way fungibility Scheme, a registered broker in India can purchase shares of an Indian company on behalf of a person resident outside India for the purpose of converting the shares so purchased into ADRs/ GDRs. The operative guidelines for the same have been issued vide A.P. (DIR Series) Circular No.21 dated February 13, 2002. The Scheme provides for purchase and re-conversion of only as many shares into ADRs/ GDRs which are equal to or less than the number of shares emerging on surrender of ADRs/ GDRs which have been actually sold in the market. Thus, it is only a limited two-way fungibility wherein the headroom available for fresh purchase of shares from domestic market is restricted to the number of converted shares sold in the domestic market by non-resident investors. So long the ADRs/ GDRs are quoted at discount to the value of shares in domestic market, an investor will gain by converting the ADRs/ GDRs into underlying shares and selling them in the domestic market. In case of ADRs/ GDRs being quoted at premium, there will be demand for reverse fungibility, i.e. purchase of shares in domestic market for re-conversion into ADRs/ GDRs. The scheme is operationalised through the Custodians of securities and stock brokers under SEBI.
Q.16. Can Indian companies issue Foreign Currency Convertible Bonds (FCCBs)?
Ans. FCCBs can be issued by Indian companies in the overseas market in accordance with the Scheme for Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993.
The FCCB being a debt security, the issue needs to conform to the External Commercial Borrowing guidelines, issued by RBI vide Notification No. FEMA 3/2000-RB dated May 3, 2000, as amended from time to time.
Q.17. Can a foreign investor invest in Preference Shares? What are the regulations applicable in case of such investments?
Ans. Yes. Foreign investment through preference shares is treated as foreign direct investment. However, the preference shares should be fully and mandatorily convertible into equity shares within a specified time to be reckoned as part of share capital under FDI. Investment in other forms of preference shares requires to comply with the ECB norms.
Q.18. Can a company issue debentures as part of FDI?
Ans. Yes. Debentures which are fully and mandatorily convertible into equity within a specified time would be reckoned as part of share capital under the FDI Policy.
Q.19. Can shares be issued against Lumpsum Fee, Royalty, ECB , Import of capital goods/ machineries / equipments (excluding second-hand machine) and Pre-operative/pre-incorporation expenses (including payments of rent)?
Ans. An Indian company eligible to issue shares under the FDI policy and subject to pricing guidelines as specified by the Reserve Bank from time to time, may issue shares to a person resident outside India :
1. being a provider of technology / technical know-how, against Royalty / Lumpsum fees due for payment;
2. against External Commercial Borrowing (ECB) (other than import dues deemed as ECB or Trade Credit as per RBI Guidelines).
3. With prior approval from FIPB for against import of capital goods/ machineries / equipments and Pre-operative/pre-incorporation expenses subject to the compliance with the extant FEMA regulations and AP Dir Series 74 dated June 30,2011.
Provided, that the foreign equity in the company, after such conversion, is within the sectoral cap.
Q.20. What are the other modes of issues of shares for which general permission is available under RBI Notification No. FEMA 20 dated May 3, 2000?
Ans.
Issue of shares under ESOP by Indian companies to its employees or employees of its joint venture or wholly owned subsidiary abroad who are resident outside India directly or through a Trust up to 5% of the paid up capital of the company.
Issue and acquisition of shares by non-residents after merger or de-merger or amalgamation of Indian companies.
Issue shares or preference shares or convertible debentures on rights basis by an Indian company to a person resident outside India.
Q.21. Can a foreign investor invest in shares issued by an unlisted company in India?
Ans. Yes. As per the regulations/guidelines issued by the Reserve Bank of India/Government of India, investment can be made in shares issued by an unlisted Indian company.
Q.22. Can a foreigner set up a partnership/ proprietorship concern in India?
Ans. No. Only NRIs/PIOs are allowed to set up partnership/proprietorship concerns in India on non-repatriation basis.
Q.23. Can a foreign investor invest in Rights shares issued by an Indian company at a discount?
Ans. There are no restrictions under FEMA for investment in Rights shares issued at a discount by an Indian company, provided the rights shares so issued are being offered at the same price to residents and non-residents. The offer on right basis to the person’s resident outside India shall be:
(a) in the case of shares of a company listed on a recognized stock exchange in India, at a price as determined by the company; and
(b) in the case of shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to resident shareholders.
Q.24. Can a AD bank allow pledge of shares of an Indian company held by non-resident investor in favor of an Indian bank or an Overseas bank?
Ans. Yes, the same has been allowed vide the instruction and subject to compliance with the terms and conditions as mentioned in the AP Dir Series Circular No 57 dated May 2, 2011.
Q.25. What declaration/certificate needs to be obtained by the AD in respect of utilization of loan proceeds for the declared purpose, consequent to pledge of shares, to comply with para. 2 (i) (b) of the A. P. (DIR Series) Circular No. 57 dated May 2, 2011?
Ans. The AD may obtain a board resolution ‘ex ante’ passed by the Board of Directors of the investee company, that the loan proceeds received consequent to pledge of shares, will be utilisedby the investee company for the declared purpose.
The AD may also obtain a certificate from the statutory auditor ‘ex post’ of the investee company, that the loan proceeds received consequent to pledge of shares, have been utilised by the investee company for the declared purpose.
Q.26 : Is a non-resident permitted to acquire share on stock exchange under FDI scheme?
Ans: Prior to issuance of A.P (DIR Series) Circular No. 38, dated September 6, 2013, no person resident outside India except a portfolio investor was allowed to acquire shares on stock exchange.
Portfolio Investors registered with SEBI namely FII and QFI were eligible to acquire shares on stock exchange in accordance with the requirements. Further, NRIs were also permitted to acquire shares on stock exchange, on repatriation and non-repatriation basis, in accordance with portfolio investment scheme for them.
With effect from August 5, 2013 (date of publication of relevant notification), a non-resident, other than portfolio investor, is eligible to acquire shares on stock exchange through a registered broker subject to the condition that the non-resident investor has already acquired and continues to hold the control in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations i.e. he has complied with the minimum stake requirement under SEBI Regulations.
Q.27 : What will be the pricing norms for a non-resident permitted to acquire share on stock exchange under FDI scheme?
Ans: He shall acquire shares at the ruling market price.
Q:28 Whether the non-resident, permitted to acquire shares on stock exchange under FDI scheme, can sell those shares?
Ans: Non-Residents were already permitted to sell the shares on the recognised stock exchange in accordance with Regulation 9(2)(iii(b) of Notification FEMA No. 20 dated May 3, 2000.
Yes, the non-resident shall be at liberty to sell those shares as applicable under FDI guidelines. The shares acquired under the present scheme shall be treated as acquisition under FDI scheme and as such all requirement namely, sectoral cap, entry route, pricing, reporting, documentation etc. would have to be complied.
Thus, non-resident having acquired shares under the scheme can subsequently transfer shares under FDI scheme.
Q:29 What will be mode of payment for the non-resident permitted to acquire share on stock exchange under FDI scheme?
Ans: The Non-Resident permitted to acquire shares under the scheme can use following mode for payment of shares:
1. by way of inward remittance through normal banking channels, or
2. by way of debit to the NRE/FCNR account of the person concerned maintained with an authorised dealer/bank;
3. by debit to non-interest bearing Escrow account (in Indian Rupees) maintained in India with the AD bank in accordance with Foreign Exchange Management (Deposit) Regulations, 2000;
4. the consideration amount may also be paid out of the dividend payable by Indian investee company, in which the said non-resident holds control, provided the right to receive dividend is established and the dividend amount has been credited to specially designated non-interest bearing rupee account for acquisition of shares on the floor of stock exchange.
Q:30 Can an escrow account be opened without RBI permission for the non-resident permitted to acquire share on stock exchange under FDI scheme?
Ans: Yes, an escrow account for the purpose can be opened under General Permission under Regulation 5(5) of Foreign Exchange Management (Deposit) Regulations. [c.f. FEMA Notification No. 280 dated July 10, 2013]
Q:31 What is the meaning of Indian company?
Ans: An Indian Company means a company registered under the Companies Act, 1956.
Q32: What is the concept of downstream investment?
Ans: In common understanding, downstream investment would mean investment by a company in another company by way of subscription or acquisition of shares or acquisition of control. The investment in another Indian company (downstream) by an Indian company already having foreign investment is called downstream investment subject to conditions of ownership and control. Thus, there will be two Indian Companies, a first level company which has accepted foreign investment and in turn has made investment in a second level company i.e. another Indian company. [c.f. A.P.(DIR Series) Circular Numbers 1, 42 and 44 respectively dated July 4, 2013, September 13, 2013 and September 13, 2013].
Q:33 What will be the composition of ‘direct foreign investment’?
Ans: The concept ‘direct foreign investment’ means foreign investment in any Indian company made directly in form of Foreign Direct Investment (FDI), Portfolio investment from Foreign Institutional Investment (FII), Non-Resident Indian and Qualified Foreign Investor (QFI), Foreign Venture Capital Investor i.e under Schedule 1, 2, 3, 6 and 8 of the Notification No. FEMA. 20/2000-RB dated May 3, 2000, as amended from time to time. Thus, the investment in the above manner will be aggregated in first level Indian Company. Such first level Indian Company obviously cannot have indirect foreign investment.
Q: 34 What about foreign investment in second level Indian Company?
Ans: The second level Indian Company can have ‘direct foreign investment’ as explained above and also have investment from another Indian company which is not ‘resident owned and controlled’ i.e. indirect foreign investment.
Further, the methodology for calculation of total foreign investment i.e. direct as well as indirect foreign investment would apply at every stage of investment in Indian companies and thus in each and every Indian company.
Q:35 What is the meaning of ‘resident owned’ Indian Company?
Ans: An Indian company be treated as ‘Owned by resident Indian citizens’ if more than 50% of the capital in it is beneficially owned by resident Indian citizens and/or Indian companies, which are ultimately owned and controlled by resident Indian citizens. Thus, computation of such percentage would require ascertaining shareholding by ‘resident Indian citizens’ and if the shareholding of such company is held by another Indian companies each of such Indian companies are ultimately owned and controlled by resident Indian citizens. It is clarified the such Indian owners are not only resident within meaning of Section 2(v) of FEMA, 1999 but are also citizen of India. The shareholding of a foreign citizen who has become resident within meaning of Section 2(v) ibid will not be aggregated for the benchmark of 50% and above.
Further, for Information & Broadcasting and defence sector if a declaration is made by persons as per section 187C of the Indian Companies Act about a beneficial interest being held by a non-resident entity, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment.
Q:36 What is meaning of ‘control’?
Ans: ‘Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. For ascertaining control by resident Indian citizens the above norms shall be applied.
Q:37 What will be the composition of ‘indirect foreign investment’?
Ans: ‘Indirect foreign investment’ means entire investment in other Indian companies by an Indian company (IC), having foreign investment in it provided IC is not ‘owned and controlled’ by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens or where the IC is owned or controlled by non-residents. However, as an exception, the indirect foreign investment in the 100% owned subsidiaries of operating-cum-investing/investing companies will be limited to the foreign investment in the operating-cum-investing/ investing company. Thus, if an Indian company A has 60% FDI/ADR/GDR/Portfolio investment/FCCB/FVCI in it, invests in 100% of the shareholding of another Indian company B, it will be taken as B has indirect foreign investment of 60%. But, foreign owned Indian company A, having foreign investment of more than 50% but less than 100%, invests in 20% of the shareholding of another Indian company B, it will be taken as B has indirect foreign investment of 20%.
Q:38 Are there any exception on application of downstream investment?
Ans: The downstream rule may not be applied in following cases:
Where the first level Indian company is owned and controlled by resident Indian citizens;
Where the second level Indian company is engaged in an activity eligible for 100% foreign investment under automatic route;
where for investment in sectors it is specified in a statute or a rule there under. The above methodology of determining direct and indirect foreign investment therefore does not apply to the insurance sector which will continue to be governed by the relevant Regulation;
Downstream investment/s made by a banking company, as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949, incorporated in India, which is owned and/or controlled by non-residents/ a non-resident entity/non-resident entities, under Corporate Debt Restructuring (CDR), or other loan restructuring mechanism, or in trading books, or for acquisition of shares due to defaults in loans, shall not count towards indirect foreign investment.
Q: 39 What are implications of applicability of downstream rule:
Ans: While the norms of foreign investment for first level Indian company were already in place, the downstream investment in second level Indian companies would now have to be in accordance/ compliance with the relevant sectoral conditions on entry route, conditionalities and caps.
Such a company has to notify Secretariat for Industrial Assistance, DIPP and FIPB of its downstream investment in the form available at http://www.fipbindia.com within 30 days of such investment, even if capital instruments have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme).
The downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of its Board of Directors as also a Shareholders’ Agreement, if any;
The issue/transfer/pricing/valuation of shares shall continue to be in accordance with extant SEBI/RBI guidelines;
For the purpose of downstream investment, the Indian companies making the downstream investments would have to bring in requisite funds from abroad and not use funds borrowed in the domestic market. This would, however, not preclude downstream operating companies, from raising debt in the domestic market. Downstream investments through internal accruals are permissible.
Q:40 As portfolio investment may undergo change quite frequently, it will be difficult to monitor downstream investment?
Ans: To facilitate such computation, for the purpose portfolio investments either by FIIs, NRIs or QFIs holding as on March 31 of the previous year would be taken into account. e.g. for monitoring foreign investment for the financial year 2011-12, portfolio investment as on March 31, 2011 would be taken into account.
Q:41 What is the procedure to ensure compliance with the downstream investment guidelines?
Ans: The FDI recipient Indian company at the first level which is responsible for ensuring compliance with the FDI conditionalities like no indirect foreign investment in prohibited sector, entry route, sectoral cap/conditionalities, etc. for the downstream investment made by in the subsidiary companies at second level and so on and so forth would obtain a certificate to this effect from its statutory auditor on an annual basis as regards status of compliance with the instructions on downstream investment and compliance with FEMA provisions. The fact that statutory auditor has certified that the company is in compliance with the regulations as regards downstream investment and other FEMA prescriptions will be duly 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 Reserve Bank of India, Foreign Exchange Department (FED), Regional Office (RO) of the Reserve Bank in whose jurisdiction the Registered Office of the company is located.
Q:42 What will be the role of Regional Office of RBI?
Ans: Where the statutory auditor has given qualified report about the downstream investment, RO shall take action to ensure compliance in consultation with the Central Office.
Q:43 Since the instructions were issued by RBI in 2013 for the period commencing from February 13, 2009, how to ensure compliance retrospectively?
Ans: As regards investments made between February 13, 2009 and the date of publication of the FEMA notification i.e. June 21, 2013, Indian companies shall be required to intimate, within 90 days from the date of this circular, through an AD Category I bank to the concerned Regional Office of the Reserve Bank, in whose jurisdiction the Registered Office of the company is located, detailed position where the issue/transfer of shares or downstream investment is not in conformity with the regulatory framework now being prescribed. Reserve Bank shall consider treating such cases as compliant with these guidelines within a period of six months or such extended time as considered appropriate by RBI in consultation with Government of India.
ROs shall forward such consolidated statement to the Central Office with their comments for ensuring compliance with the instructions.
Q:44 Is first level Indian investee company making downstream investment required to file FC-GPR?
Ans: No, it is not required. FC-GPR is not to be filed by the first level Indian investee company at the time of making downstream investment in second level Indian investee company. However, compliance has to be ensured as explained under Q 41.
Q 45: After the issue of instructions on ‘Pricing Guidelines for FDI instruments with optionality clauses’, in terms of APDIR 86 dated January 9, 2014, what will be the status of pricing guidelines for FDI instruments without any optionality clauses?
Ans: The extant pricing guidelines shall continue to be applicable for FDI instruments without any optionality clauses [Plain FDI instruments]. The pricing guidelines for FDI instruments with optionality clauses in terms of APDIR 86 dated January 9, 2014 provides for pricing at the time of exercise of exit option only. If the investor, exercises his option during the validity of the optionality clause shall exit only in accordance with the guidelines stated in APDIR 86 dated January 9, 2014
Q 46: Will there now be two pricing regimes, one for FDI with optionality clauses and one without optionality clauses?
Ans: Yes, the instructions, as contained in APDIR 86 dated January 9, 2014, are applicable at the time of exit by non resident investor from FDI with optionality agreement. Therefore there will be two sets of pricing guidelines at the time of exit of non-resident from FDI. One applicable to plain FDI instruments and another for FDI with optionality clause.
The FDI at the time of entry shall continue to be regulated under existing guidelines. Thus, entry time pricing guidelines shall be the same for FDI with or without optionality.
Q 47: The instructions prescribe that in case of a listed company, the non-resident investor shall be eligible to exit at the market price obtaining on recognised stock exchanges. Does it mean that all exit from investment in case of a listed company having FDI with optionality are to happen on the floor of stock exchange?
Ans: The optionality clause creates an obligation for the investee to buy the shares from the investor at the price prevailing on the stock market at the relevant time.
Q 48: It has been specified that in case of unlisted company, the non-resident investor shall be eligible to exit from the investment in equity shares of the investee company at a price not exceeding that arrived at on the basis of Return on Equity (RoE) as per the latest audited balance sheet. What does it mean? What is the meaning of latest audited balance sheet?
Ans: It means that in case of an unlisted company, the non-resident investor can exit at a price which gives annualized return equal to or less than the RoE as per latest audited balance sheet.
II. Foreign Technology Collaboration Agreement
Whether the payment in terms of foreign technology collaboration agreement’ can be made by an Authorised Dealer (AD) bank?
Ans. Yes, RBI has delegated the powers, to make payments for royalty, lumpsum fee for transfer of technology and payment for use of trademark/brand name in terms of the foreign technology collaboration agreement entered by the Indian company with its foreign partners, to the AD banks subject to compliance with the provisions of Foreign Exchange Management (Current Account Transactions) Rules, 2000. Further, the requirement of registration of the agreement with the Regional Office of Reserve Bank of India has also been done away with.
III. Foreign Portfolio Investment
Q.1. What are the regulations regarding Portfolio Investments by SEBI registered Foreign Institutional Investors (FIIs)?
Ans.
Investment by SEBI registered FIIs is regulated under SEBI (FII) Regulations, 1995 and Regulation 5(2) of FEMA Notification No.20 dated May 3, 2000, as amended from time to time. FIIs include Asset Management Companies, Pension Funds, Mutual Funds, and Investment Trusts as Nominee Companies, Incorporated / Institutional Portfolio Managers or their Power of Attorney holders, University Funds, Endowment Foundations, Charitable Trusts and Charitable Societies.
SEBI acts as the nodal point in the registration of FIIs. The Reserve Bank of India has granted general permission to SEBI Registered FIIs to invest in India under the Portfolio Investment Scheme (PIS).
Investment by SEBI registered FIIs and its sub accounts cannot exceed 10 per cent of the paid up capital of the Indian company. However, in case of foreign corporates or High Net-worth Individuals (HNIs) registered as sub accounts of an FII, their investment shall be restricted to 5 per cent of the paid up capital of the Indian company. All FIIs and their sub-accounts taken together cannot acquire more than 24 per cent of the paid up capital of an Indian Company.
SEBI registered FIIs/sub-accounts of FIIs can invest in primary issues of Non-Convertible Debentures (NCDs)/ bonds only if listing of such bonds / NCDs is committed to be done within 15 days of such investment. In case the NCDs/bonds issued to the SEBI registered FIIs / sub-accounts of FIIs are not listed within 15 days of issuance to the SEBI registered FIIs / sub-accounts of FIIs, for any reason, then the FII/sub-account of FII shall immediately dispose of these bonds/NCDs either by way of sale to a third party or to the issuer and the terms of offer to FIIs / sub-accounts should contain a clause that the issuer of such debt securities shall immediately redeem / buyback the said securities from the FIIs/sub-accounts of FIIs in such an eventuality.
Q.2. Is Indian Investee Company eligible to raise the aggregate cap of 24% for Portfolio Investments by SEBI registered Foreign Institutional Investors (FIIs)?
Ans.
An Indian company can raise the 24 per cent ceiling to the sectoral cap / statutory ceiling, as applicable, by passing a resolution by its Board of Directors followed by passing a Special Resolution to that effect by their General Body. Indian company raising the aggregate FII investment limit of 24 per cent to the sectoral cap/ statutory limit, as applicable to the respective Indian company, should necessarily intimate the same to the Reserve Bank of India, immediately, as hitherto, along with a Certificate from the Company Secretary stating that all the relevant provisions of the extant Foreign Exchange Management Act, 1999 regulations and the Foreign Direct Policy, as amended from time to time, have been complied with.
The Indian Company thus raising the aggregate cap for FII investment should inform Reserve Bank of India, Foreign Exchange Department, Central Office, Shahid Bhagat Singh Marg, Fort, and Mumbai 400001. The intimation should necessarily be accompanied by (a) a resolution passed by Board of Directors of the Company enhancing the FII aggregate cap, (b) A special Resolution to the effect passed by the shareholders of the Company (c) a certificate from the Company Secretary stating that all the relevant provisions of the extant Foreign Exchange Management Act, 1999 regulations and the Foreign Direct Policy, as amended from time to time, have been complied with, (d) a certificate from the Company Secretary stating that all the resident shareholders of the investee company are ‘owned and controlled’ by residents.
To avoid inconvenience to the FII investors/Indian company, such intimation should be well in advance else RBI shall caution list the company on FII investment in the company reaching 22% of paid up capital or paid up capital of each series of convertible debentures issued by the company.
Q.3. What are the regulations regarding Portfolio Investments by NRIs/PIOs?
Ans.
Non- Resident Indian (NRIs) and Persons of Indian Origin (PIOs) can purchase or sell shares/ fully and mandatorily convertible debentures of Indian companies on the Stock Exchanges under the Portfolio Investment Scheme. For this purpose, the NRI/ PIO has to apply to a designated branch of a bank, which deals in Portfolio Investment. All sale/ purchase transactions are to be routed through the designated branch.
An NRI or a PIO can purchase shares up to 5 per cent of the paid up capital of an Indian company. All NRIs/PIOs taken together cannot purchase more than 10 per cent of the paid up value of the company.
The sale proceeds of the repatriable investments can be credited to the NRE/ NRO, etc. accounts of the NRI/ PIO, whereas the sale proceeds of non-repatriable investment can be credited only to NRO accounts.
The sale of shares will be subject to payment of applicable taxes.
Q.4. Is Indian Investee Company eligible to raise the aggregate cap of 10% for Portfolio Investments by SEBI registered NRI/PIO?
Ans.
This limit for investment by NRI/PIO under Portfolio investment scheme can be increased by the Indian company from 10 per cent to 24 per cent by passing a General Body resolution. Indian company raising the aggregate NRI investment limit of 10 per cent to 24 per cent, should necessarily intimate the same immediately to Reserve Bank of India, Foreign Exchange Department, Central Office, Shahid Bhagat Singh Marg, Fort, Mumbai 400001. The intimation should necessarily be accompanied by (a) a resolution passed by Board of Directors of the Company enhancing the FII aggregate cap, (b) A special Resolution to the effect passed by the shareholders of the Company (c) a certificate from the Company Secretary stating that all the relevant provisions of the extant Foreign Exchange Management Act, 1999 regulations and the Foreign Direct Policy, as amended from time to time, have been complied with, (d) a certificate from the Company Secretary stating that all the resident shareholders of the investee company are ‘owned and controlled’ by residents
To avoid inconvenience to the company such intimation should be well in advance else RBI shall caution list the company on FII investment in the company reaching 8% of paid up capital or paid up capital of each series of convertible debentures issued by the company.
Q.5. With Reference to instructions issued for NRI – PIS Scheme in Para. 2 (i) and (ii) of the A. P. (DIR Series) Circular No. 29 dated August 20, 2013 – whether RBI will allot separate / new Unique Code No. to the Link Office of the AD bank or will the Current Code No. allocated will continue to be the Unique Code No.?
Ans.
If the AD bank’s Link Office already has a Code No. allotted by RBI, it will continue to be the Unique Code Number for reporting the transactions of NRI-PIS to RBI and the bank need not apply for new code.
Q.6. Can an AD bank debit investment advisory fees, chartered accountant’s fees for issue of 15CA/CB certificates to NRE/NRO – PIS account, as the permissible debit under the head – “Any charges on account of sale/purchase of shares or convertible debentures under PIS”?
Ans.
The charges towards investment advisory fees, chartered accountant fees for issue of 15CA / CB certificates, etc. related to the transactions of sale/purchase of shares / debentures under PIS, may be debited to the NRE / NRO PIS accounts.
Q.7. Under FERA 1973, in terms of para. 2 of the A.D.(M.A. Series) Cir. No. 32 dated November 1, 1999, powers were delegated to the ADs, to grant permissions to the NRIs/OCBs who made portfolio investments through a designated branch of an AD, on repatriation or non-repatriation basis. The investment could be made in shares, debentures, Govt. securities (other than bearer securities), treasury bills, units of MFs, etc. Hence, the prescribed format for permission letter for investment on repatriation basis viz. ‘RBI-RPC- on repatriation basis’ [available at page nos. 37 to 40 of the A.P. (DIR Series) Circular No. 29, dated August 20, 2013 on RBI website] includes a reference to all such investments besides equity shares and convertible debentures. Whether the same format is applicable under FEMA also?
Ans.
Under FEMA, the PIS includes investment only in equity shares and convertible debentures of Indian companies, on repatriation or non-repatriation basis. Hence, while issuing the approval letter to their NRI clients for undertaking investments under PIS, the relevant paragraphs in the format of permission letter viz.. ‘RBI-RPC- on repatriation basis’, will be required to be suitably modified by the ADs. In this connection, attention of the AD is also invited to para. 2(iii) of the A.P. (DIR Series) Circular No. 29, dated August 20, 2013.
Q.8. Whether the transfer of funds from NRE – PIS and NRO – PIS accounts to NRE / NRO accounts of the NRI ( opened under provisions of Notification No. FEMA. 5/2000-RB dated May 3, 2000 amended from time to time), is allowed on account of sale/maturity proceeds of equity shares and convertible debentures purchased and sold under Portfolio Investment Scheme (PIS) through NRE-PIS and NRO – PIS accounts ?
Ans.
It is clarified that NRE-PIS and NRO-PIS are essentially NRE and NRO accounts respectively and so designated to keep the portfolio investment related operations of the account holder segregated for facilitating identification and compliance. As such, there is no prohibition on transfer of any balances held in a NRE-PIS account to a NRE account or in a NRO-PIS account to a NRO account, subject of course to payment of taxes, if and as applicable.
IV. Investment in other securities
Q.1. Can a Non-resident Indian (NRI) and SEBI registered Foreign Institutional Investor (FII)invest in Government Securities/ Treasury bills and Corporate debt?
Ans. Under the FEMA Regulations, only NRIs andSEBI registered FIIs are permitted to purchase Government Securities/Treasury bills and Corporate debt. The details are as under :
A. A Non-resident Indian can purchase without limit,
(1) on repatriation basis
i) Dated Government securities (other than bearer securities) or treasury bills or units of domestic mutual funds;
ii) Bonds issued by a public sector undertaking (PSU) in India; and
iii) Shares in Public Sector Enterprises being disinvested by the Government of India.
(2) on non-repatriation basis
i) Dated Government securities (other than bearer securities) or treasury bills or units of domestic mutual funds;
ii) Units of Money Market Mutual Funds in India; and
iii) National Plan/Savings Certificates.
B. A SEBI registered FII may purchase, on repatriation basis, dated Government securities/ treasury bills, listed non-convertible debentures/ bonds issued by an Indian company and units of domestic mutual funds either directly from the issuer of such securities or through a registered stock broker on a recognised stock exchange in India.
Purchase of debt instruments including Upper Tier II instruments issued by banks in India and denominated in Indian Rupees by FIIs are subject to limits notified by SEBI and the Reserve Bank from time to time. The present limit for investment in Corporate Debt Instruments like non-convertible debentures / bonds by FIIs is USD 45 billion , which constitutes of the:
Out of USD 45 billion, USD 25 billion is earmarked for investment in infrastructure corporate bonds and the remaining USD 20 billion is earmarked for investment in non-infrastructure corporate bonds. Out of the USD 25 billion earmarked for FIIs investment in infrastructure corporate bonds, a uniform lock-in period of one year and residual maturity of fifteen months has been prescribed for USD 22 billion investment by FIIs excluding the USD 3 billion limit earmarked for QFIs investment in mutual fund debt oriented schemes.The present limit of investment by SEBI registered FIIs in Government Securities is USD 20 billion which constitutes of :
USD 10 billion will be without any conditions and the remaining USD 10 billion is with the condition that the residual maturity of the instrument at the time of first purchase by FIIs should be at least three years.
Sovereign Wealth Funds (SWFs), Multilateral agencies, endowment funds, insurance funds, pension funds and foreign Central Banks to be registered with SEBI are also allowed to invest in Government securities within this enhanced limit of USD 20 billion.
Q.2. Can a NRI and SEBI registered FII invest in Tier I and Tier II instruments issued by banks in India?
Ans. SEBI registered FIIs and NRIs have been permitted to subscribe to the Perpetual Debt instruments (eligible for inclusion as Tier I capital) and Debt Capital instruments (eligible for inclusion as upper Tier II capital), issued by banks in India and denominated in Indian Rupees, subject to the following conditions:
1. Investment by all FIIs in Rupee denominated Perpetual Debt instruments (Tier I) should not exceed an aggregate ceiling of 49 per cent of each issue and investment by individual FII should not exceed the limit of 10 per cent of each issue.
2. Investments by all NRIs in Rupee denominated Perpetual Debt instruments (Tier I) should not exceed an aggregate ceiling of 24 per cent of each issue and investments by a single NRI should not exceed 5 percent of each issue.
3. Investment by FIIs in Rupee denominated Debt Capital instruments (Tier II) shall be within the limits stipulated by SEBI for FII investment in corporate debt instruments.
4. Investment by NRIs in Rupee denominated Debt Capital instruments (Tier II) shall be in accordance with the extant policy for investment by NRIs in other debt instruments.
5. Investment by FIIs in Rupee denominated Upper Tier II Instruments raised in Indian Rupees will be within the limit prescribed by the SEBI for investment in corporate debt instruments.
6. The details of the secondary market sales / purchases by FIIs and the NRIs in these instruments on the floor of the stock exchange are to be reported by the custodians and designated Authorised Dealer banks respectively, to the Reserve Bank through the soft copy of the Forms LEC (FII) and LEC (NRI).
Q.3. Can a NRI and SEBI registered FIIinvest in Indian Depository Receipts (IDRs)?
Ans. NRI and SEBI registered FIIs have been permitted to invest, purchase, hold and transfer IDRs of eligib