Q. 47 Can NRIs invest their funds in Government securities
or Units of Unit Trust of India (UTI)?
Q. 48 Can NRIs make investments in National Savings
Certificates issued by Post Offices in India?
Q. 49 Can Government securities/units be freely transferred
or sold?
Q. 50 Are sale/maturity proceeds of Government securities/Units/National
Savings Certificates allowed to be repatriated abroad?
Q. 51 Is permission of Reserve Bank required for
NRIs to invest in proprietary/partnership concerns on non-repatriation
basis?
Q. 52 Is permission of Reserve Bank required for
making investments in new issues of Indian companies on non-repatriation
basis?
Q. 53 Are any formalities required to be completed
by NRIs for getting the benefit of the above general permission?
Q. 54 Can NRI individuals make investments in domestic
public/private sector Mutual Funds or Money Market Mutual Funds floated
by commercial banks and public/private sector financial institutions on
non-repatriation basis?
Q. 55 Can Overseas Corporate Bodies make similar
investments in mutual funds on non-repatriation basis?
Q. 56 Can NRIs make investments in non-convertible
debentures of Indian companies?
Q. 57 Can NRIs purchase existing shares/debentures
of Indian companies by private arrangement?
Q. 58 Is it necessary for a resident, holding securities
in Indian companies, to secure any approval from Reserve Bank on his becoming
a non-resident for holding such securities?
Q. 59 Is income/interest earned on investments/deposits
held in India by NRIs on non-repatriation basis allowed to be repatriated?
Q. 60 What is the procedure to be followed for seeking
repatriation in such cases?
Q. 61 What are the schemes available to NRIs for
direct investments in India with repatriation benefits?
Q. 62 What is 24% Scheme?
Q. 63 What is 40% Scheme?
Q. 64 Is remittance of interest/dividend to NRI investors
freely allowed under the 24%/40% Scheme?
Q. 65 What are the specified industries under the
100% Scheme?
Q. 66 Is dividend/interest earned in respect of investments
made under the 100% Scheme freely remittable to the NRIs abroad?
Q. 67 How does an NRI obtain permission of Reserve
Bank for investment under the 24% or 40% or 100% Scheme?
Q. 68 Besides the 24%, 40% and 100% Schemes is there
any other scheme for investment by NRIs in the equity of Indian companies?
Q. 69 Is the capital brought into India for revival
of a sick industrial unit allowed to be repatriated?
Q. 70 How can an NRI obtain permission of Reserve
Bank for investment in a sick industrial unit?
Q. 71 Under the existing Industrial Policy, investment
by foreign collaborators upto 50%/51%/74% of the equity is allowed by Reserve
Bank on repatriation basis in certain high priority industries. Can NRIs
take up the balance 50%/49%/26% equity in such cases on repatriation basis?
Q. 72 Can NRIs make investments in companies engaged
in real estate development in India?
Q. 73 What is the procedure for obtaining Reserve
Bank permission in this regard?
Q. 74 Will repatriation of the origional investment
and/or dividend income be freely permitted?
Q. 75 Are investments in Air Taxi operations permitted
to be made by NRIs?
Q. 76 Are there any restrictions on repatriation
of the investment made under this scheme or income earned thereon?
Q. 77 Can NRIs invest in non-convertible debentures
on repatriation basis?
Q. 78 What is the procedure to be followed for making
investment in the schemes of domestic Mutual Funds or public sector bonds
with repatriation benefits?
Q. 79 Can NRIs invest in 100% Export Oriented Units
on repatriation basis?
Q. 80 Can NRIs acquire shares disinvested by Government
of India in Public Sector Enterprises (PSEs) by inviting sealed tenders?
Q. 81 What is the procedure for issue of rights entitlement
to NRIs?
Q. 82 What is the procedure required to be followed
by NRIs for renunciation of rights entitlement?
Q. 83 What is the procedure for issue of bonus shares?
Q. 84 Can NRIs obtain loans abroad against the collateral
of shares/debentures of Indian companies?
Q. 85 Can sale proceeds of the shares/debentures
be remitted abroad for liquidation of outstandings against such loans/overdrafts?
Q. 86 What is the Portfolio Investment Scheme?
Q. 87 What is the procedure for making applications?
Q. 88 What is a designated branch?
Q. 89 Whether NRI can apply through more than one
designated branch?
Q. 90 Is it necessary to maintain a bank account
with the designated branch through whom the application is made?
Q. 91 What is the validity period of Reserve Bank
approval for the purchase of shares/debentures of Indian companies or units
of domestic Mutual Funds?
Q. 92 Is there any ceiling on the investment under
the Portfolio Investment Scheme?
Q. 93 Can NRIs keep deposits with companies in India
with repatriation benefits?
Q. 94 Do NRIs need permission of Reserve Bank for
placing funds in fixed deposits with firms/companies on non-repatriation
basis?
Q. 95 Are NRIs permitted to invest in Commercial
Paper (CP) issued by Indian companies?
Q. 96 Is permission of Reserve Bank required for
sale/transfer of Government securities/units?
Q. 97 Is permission of Reserve Bank required by NRIs
for sale/transfer of shares/debentures of Indian companies to other NRIs?
Q. 98 Can NRIs transfer/sell their shares/debentures/bonds
held on non-repatriation basis to residents freely?
Q. 99 What is the procedure for sale/transfer of
shares/debentures/bonds held by NRIs with repatriation benefits?
Q. 100 What is the procedure to be followed by NRIs
for sale/transfer of shares/debentures to residents by private arrangements?
Q. 101 Can shares/debentures be given away as gifts
to relatives?
Section 3: INVESTMENTS IN SECURITIES/SHARES AND COMPANY DEPOSITS
A. Government Securities/Units
Q. 47 Can NRIs invest their funds in Government
securities or Units of Unit Trust of India (UTI)?
Ans. Yes. NRIs are freely permitted to invest their funds in Government
securities or Units of UTI through authorised dealers. Units can also be
purchased directly from UTI.
Q. 48 Can NRIs make investments in National
Savings Certificates issued by Post Offices in India?
Ans. Yes. Investments in National Savings Certificates can be made
by NRIs subject to the terms and conditions applicable to the sale/issue
of such certificates. However, NRIs are not permitted to invest in bearer
securities like Indira Vikas Patra/Kisan Vikas Patra.
Q. 49 Can Government securities/units be freely
transferred or sold?
Ans. Yes, provided the transfers/sales are arranged through an authorised
dealer. Units can, however, be repurchased directly by UTI.
Q. 50 Are sale/maturity proceeds of Government
securities/Units/National Savings Certificates allowed to be repatriated
abroad?
Ans. If such securities were purhased out of funds remitted from abroad
or out of NRE/FCNR accounts, sale/maturity proceeds can be repatriated.
Sale/maturity proceeds of securities purchased out of funds in NRO accounts
can only be credited to NRO accounts and cannot be remitted abroad. Interest
earned during the financial year 1994-95 and onwards can, however, be remitted
to the extent permitted by Reserve Bank (See Answers to Questions 59 and
60).
B. Company Shares/Debentures
NRIs are permitted to make direct investments in proprietary/partnership
concerns in India as also in shares/debentures of Indian companies. They
are also permitted to make portfolio investments i.e. purchase of shares/debentures
of Indian companies through stock exchange/s in India. These facilities
are granted both on repatriation and non-repatriation basis.
B.1 Direct Investment without Repatriation benefits
Q. 51 Is permission of Reserve Bank required
for NRIs to invest in proprietary/partnership concerns on non-repatriation
basis?
Ans No. Reserve Bank has granted general permission to non-resident
individuals of Indian nationality/origin to invest by way of capital contribution
in any proprietary or partnership concern in India on non-repatriation
basis provided the investee concern is not engaged in any agricultural/plantation
activity or real estate business. This facility is, however, not available
to OCBs.
Q. 52 Is permission of Reserve Bank required
for making investments in new issues of Indian companies on non-repatriation
basis?
Ans. No. Indian companies have been granted general permission to accept
investments on non-repatriation basis, in shares/convertible debentures
by way of new/rights/bonus issue provided the investee company is not engaged
in agricultural/plantation activity or real estate business (excluding
real estate development i.e. development of property and construction of
house) or chit fund or is not a Nidhi company.
Q. 53 Are any formalities required to be completed
by NRIs for getting the benefit of the above general permission?
Ans. No. However, the firms/companies concerned are required to file
declarations with Reserve Bank in form DIN giving particulars of the investments
made, within ninety days from the date of the investment.
Q. 54 Can NRI individuals make investments
in domestic public/private sector Mutual Funds or Money Market Mutual Funds
floated by commercial banks and public/private sector financial institutions
on non-repatriation basis?
Ans. Yes.
Q. 55 Can Overseas Corporate Bodies make similar
investments in mutual funds on non-repatriation basis?
Ans. OCBs can make such investments only in domestic public/private
sector Mutual Funds. They can also make investments in Money Market Mutual
Funds.
Q. 56 Can NRIs make investments in non-convertible
debentures of Indian companies?
Ans. Yes. Applications for necessary permission should be made to Reserve
Bank (Central Office) by the concerned Indian company in form ISD.
Q. 57 Can NRIs purchase existing shares/debentures
of Indian companies by private arrangement?
Ans. Yes. Reserve Bank permits NRIs, on application in form FNC 7,
to purchase shares/debentures of existing Indian companies on non-repatriation
basis. An undertaking about non-repatriation is to be given in form NRU.
Q. 58 Is it necessary for a resident, holding
securities in Indian companies, to secure any approval from Reserve Bank
on his becoming a non-resident for holding such securities?
Ans. No. Reserve Bank has granted general permission to companies in
India to enter the overseas addresses of the shareholders in their books
in such cases provided the companies obtain undertakings from the holders
that they will not seek repatriation of any income or sale proceeds of
the security.
Q. 59 Is income/interest earned on investments/deposits
held in India by NRIs on non-repatriation basis allowed to be repatriated?
Ans. Yes. Income/interest accruing during the financial year 1994-95
and onwards on bank deposits and investments held by NRIs with non-repatriation
benefits will be eligible for repatriation as under:
(a) Up to U.S. $ 1,000 or its equivalent in full and one-third of the
balance income earned during the financial year 1994-95;
(b) Up to U.S. $ 1,000 or its equivalent in full and two-third of the
balance income earned during the financial year 1995-96;
(c) The entire income earned during the financial year 1996-97 and
onwards.
Note : The investment/principal amount of deposits made/held
on non-repatriation basis will, however, not be allowed to be repatriated
abroad.
Q. 60 What is the procedure to be followed
for seeking repatriation in such cases?
Ans. NRIs should designate a branch of an authorised dealer through
whom the remittance of income is to be made and make an application in
form RCI to the designated branch giving details of incomes earned during
the previous financial year alongwith a Chartered Accountant's Certificate.
The designated branch will allow the remittance of net amount (i.e. after
payment of tax) or credit it to NRE/FCNR account of the applicant.
B. 2 Direct Investment with Repatriation benefits
Q. 61 What are the schemes available to NRIs
for direct investments in India with repatriation benefits?
Ans. NRIs can make investments in new issues of shares/convertible
debentures of Indian companies under direct investment schemes such as
24% scheme/40% scheme/100% scheme. They can also invest in the schemes
of domestic Mutual Funds floated by public/private sector institutions/companies
and bonds issued by public sector undertakings. Non-resident investors
are not required to apply for permission to invest but the company concerned
will have to obtain permission from Reserve Bank.
Q. 62 What is 24% Scheme?
Ans. Under the 24% Scheme, Indian companies engaged or proposing to
engage in any activity including finance, hire purchase, leasing, trading
or other services, establishment of schools/colleges, etc. (except agricultural/plantation
activities) are allowed by Reserve Bank to issue shares/debentures to NRIs
with repatriation benefits to the extent of 24% of the new issue.
Q. 63 What is 40% Scheme?
Ans. Under the 40% Scheme, Indian companies engaged or proposing to
engage in the following activities are allowed by Reserve Bank to issue
shares/debentures to NRIs with repatriation benefits to the extent of 40%
of the new issue.
(i) Industrial and manufacturing units
(ii) Hotels with 3, 4 or 5 star category
(iii) Hospitals and diagnostic centres
(iv) Shipping companies
(v) Development of computer software
(vi) Oil exploration services
Q. 64 Is remittance of interest/dividend to
NRI investors freely allowed under the 24%/40% Scheme?
Ans. Yes. There is no ceiling or restriction on the amount of remittable
dividend. Remittance of interest/dividend to NRI investors will be allowed
by authorised dealers under the powers delegated to them.
Q. 65 What are the specified industries under
the 100% Scheme?
Ans. Under 100% Scheme, NRIs are permitted to invest in high priority
industries listed in Annexure III to the Statement on Industrial Policy
dated 24th July 1991 of the Government of India up to 100% of the new issue.
Q. 66 Is dividend/interest earned in respect
of investments made under the 100% Scheme freely remittable to the NRIs
abroad?
Ans. Dividend/interest can be remitted freely except in the case of
consumer goods industries where the outflow on account of dividend is required
to be balanced by export earnings of the company either in the year of
declaration of dividend or in the years prior to the declaration of dividend.
This requirement is enforced for a period of seven years from the commencement
of commercial production.
Q. 67 How does an NRI obtain permission of
Reserve Bank for investment under the 24% or 40% or 100% Scheme?
Ans. The NRI investor need not apply to Reserve Bank. Application for
necessary permission under the schemes should be made by the Indian company/firm
to the Central Office of Reserve Bank in Mumbai in form ISD/ISD(R).
Q. 68 Besides the 24%, 40% and 100% Schemes
is there any other scheme for investment by NRIs in the equity of Indian
companies?
Ans. Yes. NRIs are permitted to undertake revival of sick industrial
units by making bulk investment in them to the extent of 100 per cent either
by way of purchase of existing equity shares or in the form of subscription
to new equity issues.
Q. 69 Is the capital brought into India for
revival of a sick industrial unit allowed to be repatriated?
Ans. Yes.
Q. 70 How can an NRI obtain permission of Reserve
Bank for investment in a sick industrial unit?
Ans. Application for necessary permission should be made by the Indian
company to the Central Office of Reserve Bank in Mumbai in form RSU.
Q. 71 Under the existing Industrial Policy,
investment by foreign collaborators upto 50%/51%/74% of the equity is allowed
by Reserve Bank on repatriation basis in certain high priority industries.
Can NRIs take up the balance 50%/49%/26% equity in such cases on repatriation
basis?
Ans. Yes.
Q. 72 Can NRIs make investments in companies
engaged in real estate development in India?
Ans. Yes. Investment upto 100% in the new issue of equity shares/convertible
debentures of Indian companies engaged in the following areas is allowed
-
i) Development of serviced plots and construction of built up residential
premises;
ii) Real estate covering construction of residential and commercial
premises including business centres and offices;
iii) Development of township;
iv) City and region level urban infrastructure facilities including
roads and bridges;
v) Manufacture of building material;
vi) Financing of housing development.
Q. 73 What is the procedure for obtaining Reserve
Bank permission in this regard?
Ans. Applications for the purpose should be made by the concerned Indian
company to the Central Office of Reserve Bank in Mumbai in form ISD(R).
Q. 74 Will repatriation of the origional investment
and/or dividend income be freely permitted?
Ans. Yes. Repatriation of original investment will be permitted after
a lock-in period of three years from the date of issue of the equity shares/convertible
debentures. In addition, OCBs will be permitted to repatriate net profit
(upto 16 per cent) arising from the sale of such investment after the lock-in-period
of three years. Annual dividend/interest on equity shares/debentures can,
however, be freely remitted subject to payment of tax.
Q. 75 Are investments in Air Taxi operations
permitted to be made by NRIs?
Ans. Yes. Investments upto 100% equity participation for carrying on
Air Taxi operations are permitted in terms of the guidelines issued by
the Director General of Civil Aviation for Air Taxi operations. Applications
for the purpose should be made to Reserve Bank (Central Office) in form
ISD(R) by the concerned Indian company.
Q. 76 Are there any restrictions on repatriation
of the investment made under this scheme or income earned thereon?
Ans. No. However, repatriation of the investment and/or remittance
of dividend will be permitted only after the expiry of five years of operation
and only out of accumulated net foreign exchange earnings.
Q. 77 Can NRIs invest in non-convertible debentures
on repatriation basis?
Ans. Yes. Application for necessary permission should be made to Reserve
Bank (Central Office) by the concerned Indian company in form ISD(R).
Q. 78 What is the procedure to be followed
for making investment in the schemes of domestic Mutual Funds or public
sector bonds with repatriation benefits?
Ans. The concerned Fund/Public Sector Undertaking should obtain necessary
permission from Reserve Bank for issue of units/bonds to NRIs. Applications
for the purpose are required to be made to the Central Office of Reserve
Bank in form ISD(R).
Q. 79 Can NRIs invest in 100% Export Oriented
Units on repatriation basis?
Ans. Yes. NRIs will be permitted to invest up to 100% in 100% Export
Oriented Units subject to obtaining approval from the Government of India,
Ministry of Industries (SIA) for setting up the EOU. In the case of units
located in Export Processing Zones, approval from the Development Commissioner
of the concerned zone is required to be obtained. Thereafter an application
should be made to the concerned regional office of Reserve Bank in form
ISD alongwith copy of Government approval for necessary clearance under
FERA 1973.
Q. 80 Can NRIs acquire shares disinvested by
Government of India in Public Sector Enterprises (PSEs) by inviting sealed
tenders?
Ans. Yes. Reserve Bank has granted general permission to NRIs to acquire
shares of PSEs on their bids being successful provided the holding of a
single NRI investor does not exceed one per cent of the paid up capital
of the PSE concerned, the purchase consideration/bid money is paid by way
of remittance from abroad or by debit to his NRE/FCNR accounts.
Q. 81 What is the procedure for issue of rights
entitlement to NRIs?
Ans. The concerned company should approach Reserve Bank for issue of
rights entitlement to NRIs in the prescribed form if on repatriation basis.
However, rights entitlement on non-repatriation basis would be covered
by the general permission (Please see Answer to Question No. 52 and 53).
Q. 82 What is the procedure required to be
followed by NRIs for renunciation of rights entitlement?
Ans. NRIs can make an application to Reserve Bank by a letter detailing
therein the folio number of the shares held and the manner in which the
rights are being sold.
Q. 83 What is the procedure for issue of bonus
shares?
Ans. The concerned Indian company should approach Reserve Bank for
issue of bonus shares to NRIs if the original investment is on repatriation
basis. Issue of bonus shares in respect of investment on non-repatriation
basis is covered by general permission (Please also see Answer to Question
No. 52).
Q. 84 Can NRIs obtain loans abroad against
the collateral of shares/debentures of Indian companies?
Ans. Yes. Authorised dealer have been permitted to grant loans/overdrafts
abroad to NRIs through their overseas branches and correspondents against
collateral of the shares/debentures of Indian companies held by them, provided
the concerned shares/debentures were acquired on repatriation basis.
Q. 85 Can sale proceeds of the shares/debentures
be remitted abroad for liquidation of outstandings against such loans/overdrafts?
Ans. Yes, subject to payment of Income tax, Capital Gains tax etc.
payable, if any.
B. Portfolio Investment Scheme
Q. 86 What is the Portfolio Investment Scheme?
Ans. Under this scheme, NRIs are permitted to acquire shares/debentures
of Indian companies or units of domestic Mutual Funds through the stock
exchange/s in India.
Q. 87 What is the procedure for making applications?
Ans. The application is to be submitted to Reserve Bank through a designated
branch of a bank in India in one of the prescribed forms, i.e. NRC/NRI/RPC/RPI.
Q. 88 What is a designated branch?
Ans. Reserve Bank has authorised a few branches of each bank to conduct
the business under Portfolio Investment Scheme on behalf of NRIs. These
branches are the main branches of major commercial banks located close
to the stock exchange/s. NRIs will have to route their applications through
any of the designated bank branches who have authorisation from Reserve
Bank.
Q. 89 Whether NRI can apply through more than
one designated branch?
Ans. No. Each NRI has to select one branch for this purpose for investment
on repatriation/non-repatriation basis.
Q. 90 Is it necessary to maintain a bank account
with the designated branch through whom the application is made?
Ans. It is advisable to maintain a bank account with the designated
branch for administrative convenience.
Q. 91What is the validity period of Reserve
Bank approval for the purchase of shares/debentures of Indian companies
or units of domestic Mutual Funds?
Ans. Reserve Bank approval is valid for a period of five years from
the date of issue. This can be renewed further by making a request by means
of a simple letter.
Q. 92 Is there any ceiling on the investment
under the Portfolio Investment Scheme?
Ans. There is an overall ceiling of 5% of paid-up equity share capital
of the company/paid-up value of each series of convertible debentures for
purchase by NRIs/OCBs. The overall ceiling can be raised to 30% if the
company concerned passes a special resolution to that effect in its general
body meeting and a Board resolution. Individually, NRIs/OCBs can make investment
upto 1% of the paid-up equity share capital/each series of convertible
debentures. However, there is no ceiling on investment in domestic Mutual
Funds.
C. Company Deposits
Q. 93 Can NRIs keep deposits with companies
in India with repatriation benefits?
Ans. Yes. NRIs are permitted to keep deposits with public limited companies
in India for a minimum period of three years subject to certain ceilings/conditions.
Application for the purpose is required to be made by the company receiving
the deposits through an authorised dealer.
Q. 94 Do NRIs need permission of Reserve Bank
for placing funds in fixed deposits with firms/companies on non-repatriation
basis?
Ans. Yes. Permission for placement of funds in fixed deposits with
firms/companies in India is granted by Reserve Bank on application by the
depositor or the deposit accepting firm/company, on non-repatriation basis,
subject to certain ceilings/conditions.
Q. 95 Are NRIs permitted to invest in Commercial
Paper (CP) issued by Indian companies?
Ans. Yes. General permission has been granted by Reserve Bank to Indian
companies to issue CP to NRI individuals subject to the conditions that
the amount invested will not be repatriated outside India and the CP will
not be transferable.
D. Sale/Transfer of Shares/Securities
Q. 96 Is permission of Reserve Bank required
for sale/transfer of Government securities/units?
Ans. No. Authorised dealers have been permitted to undertake sale of
Government securities/units on behalf of NRIs without prior approval of
Reserve Bank. Sale/maturity proceeds can be remitted abroad if the original
investment was made out of funds remitted from abroad or funds in NRE/FCNR
accounts. Otherwise, they will have to be credited to NRO account of the
holder.
Q. 97 Is permission of Reserve Bank required
by NRIs for sale/transfer of shares/debentures of Indian companies to other
NRIs?
Ans. No. Transfer of shares/debentures of Indian companies by NRIs
to other non-residents does not require permission of Reserve Bank. However,
the transferee NRI would need permission for purchase of such shares for
which an application is required to be made to Reserve Bank in form FNC
7.
Q. 98 Can NRIs transfer/sell their shares/debentures/bonds
held on non-repatriation basis to residents freely?
Ans. Yes. General exemption has been granted by Reserve Bank for transfer/sale
of shares/debentures/bonds by NRIs/OCBs through stock exchanges if such
transfers are made in favour of an Indian citizen or a person of Indian
origin or a company incorporated in India and sale proceeds thereof are
credited to NRO account.
Q. 99 What is the procedure for sale/transfer
of shares/debentures/bonds held by NRIs with repatriation benefits?
Ans. In the case of shares/debentures/bonds acquired by NRIs through
stock exchanges under the Portfolio Investment Scheme, general exemption
has been granted for transfer through stock exchanges provided the sale
is arranged through the same designated branch through whom they were purchased.
In other cases, applications for necessary permission is required to be
made to Reserve Bank in form TS 4.
Q. 100 What is the procedure to be followed
by NRIs for sale/transfer of shares/debentures to residents by private
arrangements?
Ans. NRIs are required to submit application in form TS 1 to Reserve
Bank for sale of shares/debentures by private arrangements.
Q. 101 Can shares/debentures be given away
as gifts to relatives?
Ans. Yes. Reserve Bank has granted general permission to NRIs to transfer,
by way of gift, shares, bonds and debentures of Indian companies held by
them with Reserve Bank's permission to their resident close relative/s.