Published on June 18, 2023 at 18:31
FOREIGN EXCHANGE MANAGEMENT (NON-DEBT INSTRUMENTS) RULES, 2019
[Last amended on January 24, 2024]
NOTIFICATION
New Delhi, the 17th October, 2019
S.O. 3732(E). In exercise
of the powers conferred by clauses (aa) and (ab) of sub-section (2) of section
46 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in
supersession of the Foreign Exchange Management (Transfer of Issue of Security
by a Person Resident outside India) Regulations, 2017 and the Foreign Exchange
Management (Acquisition and Transfer of Immovable Property in India)
Regulations, 2018, except as respects things done or omitted to be done before
such supersession, the Central Government hereby makes the following rules,
namely:-
CHAPTER I
PRELIMINARY
1.
Short title
and commencement : (1) These rules may be called the Foreign Exchange Management
(Non-debt Instruments) Rules, 2019.
(2) Save as otherwise
provided in these rules, they shall come into force from the date of their
publication in the Official Gazette.
2.
Definitions:
- In these rules, unless the
context otherwise requires:-
a)
"Act" means the
Foreign Exchange Management Act, 1999 (42 of 1999);
b)
"asset
reconstruction company" 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 (54 of 2002);
c)
"authorised
bank" shall have the meaning assigned to it in the Foreign
Exchange Management (Deposit) Regulations,2016;
d)
"authorised
dealer" includes a person authorised
under sub-section (1) of section 10 of the Act;
e)
"convertible
note" means an instrument issued by a startup company
acknowledging receipt of money initially as debt, repayable at the option of
the holder, or which is convertible into such number of equity shares of that
company, within a period not exceeding [1][ten]
years from the date of issue of the convertible note, upon occurrence of
specified events as per other terms and conditions agreed and indicated in the
instrument;
f)
"debt
instruments" means all instruments other than non-debt
instruments defined in clause (ai) of this rule;
g)
"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 (18 of 2013);
h)
"domestic
custodian" means a custodian of securities registered with
the Securities and Exchange Board of India in accordance with the SEBI
(Custodian of Securities) Regulations, 1996;
i)
"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;
j)
"ESOP" means
Employees stock option as defined under the Companies Act, 2013 and issued
under the regulations by the Securities and Exchange Board of India;
k)
"equity
instruments" means equity shares, convertible debentures,
preference shares and share warrants issued by an Indian company;
Explanation:-
(i)
[2][Equity
shares issued by an Indian Company in accordance with the provisions of the
Companies Act, 2013 or any other applicable law, shall include equity shares
that have been partly paid. "Convertible debentures" means fully
and mandatorily convertible debentures which are fully paid. "Preference
shares" means fully and mandatorily convertible preference shares which
are fully paid. "Share Warrants" are those issued by an Indian Company in accordance
with the regulations made by the Securities and Exchange Board of India, the
Companies Act, 2013 or any other applicable law. Equity 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].
(ii)
Partly paid shares that have been
issued to a person resident outside India shall be fully called-up within
twelve months of such issue or as may be specified by the Reserve Bank from
time to time. Twenty- five per cent of the total consideration amount (including
share premium, if any) shall be received upfront.
(iii)
In case of
share warrants, at least twenty-five per cent of the consideration shall be
received upfront and the balance amount within eighteen months of the issuance
of share warrants.
l)
"escrow
account" means an escrow account maintained in accordance
with the Foreign Exchange Management (Deposit) Regulations, 2016;
m)
"FDI linked performance conditions"
means the sector specific conditions specified in Schedule I of these rules for
companies receiving foreign investment;
n)
"FVCI" means a
Foreign Venture Capital Investor incorporated and established outside India and
registered with the Securities and Exchange Board of India under the Securities
and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000;
o)
"foreign
central bank" means an institution or organisation
or 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;
p)
"FCNR (B) account"
means a Foreign Currency Non-Resident (Bank) account maintained in accordance
with the Foreign Exchange Management (Deposit) Regulations, 2016;
q)
"FCCB" or "Foreign
Currency Convertible Bond" means a bond issued under the Issue of
Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository
Receipt Mechanism) Scheme, 1993;
r)
"FDI" or "Foreign
Direct Investment" means investment through equity instruments by a
person resident outside India in an unlisted Indian company; or in ten per cent
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 equity instruments of
a listed Indian company falls to a level below ten 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;
s)
"foreign
investment" means any investment made by a person resident
outside India on a repatriable basis in equity instruments of an Indian company
or to the capital of a LLP;
[3][Explanation: - If a declaration is
made by a person as per the provisions of the Companies Act, 2013 or any other
applicable law, as the case may be, 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 FDI or as
FPI in any particular Indian company;
t)
"foreign
portfolio investment" means any investment made by a person
resident outside India through equity instruments where such investment is less
than ten percent of the post issue paid-up share capital on a fully diluted
basis of a listed Indian company or less than ten percent of the paid-up value
of each series of equity instrument of a listed Indian company;
u)
"FPI" or "Foreign Portfolio Investor"
means a person registered in accordance with the provisions of the Securities
and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014;
v)
"government
approval" means the 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;
w)
"group
company" means two or more enterprises which, directly or
indirectly, are in a position to (i) exercise
twenty-six per cent, or more of voting rights in other enterprise; or (ii)
appoint more than fifty per cent of members of Board of Directors in the other
enterprise;
x)
"hybrid
securities" means hybrid instruments such as optionally or
partially convertible preference shares or debentures and other such
instruments as specified by the Central Government from time to time, which can
be issued by an Indian company or trust to a person resident outside India;
y)
[4][ "Indian
company" means a company as defined in the Companies Act, 2013 or a
body corporate established or constituted by or under any Central or State Act,
which is incorporated in India;
Note:
(i) It
is clarified that reference to 'company' or 'investee company' or 'transferee
company' or 'transferor company' in these rules also includes a reference to a
body corporate established or constituted by or under any Central or State Act.
(ii) It is further
clarified that if the term 'Company ' or 'Indian company' or 'Investee company'
or 'transferee company' or 'transferor company' is qualified by a reference to
a company incorporated under the Companies Act, 2013 such term shall mean a
company incorporated under the said Act but not a body corporate.
(iii) It is also clarified
that 'Indian company' does not include a society, trust or any entity, which is
excluded as an eligible investee entity under the FDI Policy.];
z)
"IDR" or "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;
(aa) "Indian entity" shall mean an Indian
company or a LLP ;
[5][(aaa) "International
Exchange" shall mean permitted stock exchange in permissible
jurisdictions which are listed at Schedule XI annexed to these rules;]
(ab) "investing company" means an Indian
company holding only investments in other Indian company/ies
directly or indirectly, other than for trading of such holdings or securities;
(ac) "investment" means to subscribe,
acquire, hold or transfer any security or unit issued by a person resident in India;
Explanation:-
(i)
Investment shall 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;
(ii)
for the purpose of LLP, investment
shall mean capital contribution or acquisition or transfer of profit shares;
(ad) "investment on repatriation basis"
means an investment, sale or maturity proceeds of which are net of taxes,
eligible to be repatriated out of India, and the expression "investment
on non-repatriation basis" , shall be construed accordingly;
(ae) "investment vehicle" means an entity
registered and regulated under the regulations framed by the Securities and
Exchange Board of India or any other authority designated for that purpose and
shall include, namely:- (i) Real Estate Investment
Trusts (REITs) governed by the Securities and Exchange Board of India (REITs)
Regulations, 2014;(ii) Infrastructure Investment Trusts (InvIts)
governed by the Securities and Exchange Board of India (InvIts)
Regulations, 2014 (iii) Alternative Investment Funds (AIFs) governed by the
Securities and Exchange Board of India (AIFs) Regulations, 2012 [6][*];
(af) "LLP"
means a limited liability partnership formed and registered under the Limited
Liability Partnership Act, 2008 (6 of 2009);
(ag) [7][ "listed
Indian company" means an Indian company which has any of its equity
instruments or debt instruments listed on a recognised
stock exchange in India and on an International Exchange and the expression "unlisted
Indian company" shall be construed accordingly;]
(ah) "manufacture" , with its grammatical
variations, means a change in a non-living physical object or article or thing,:-
(i)
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
(ii)
bringing into existence of a new and
distinct object or article or thing with a different chemical composition or
integral structure;
(ai) "non-debt instruments" means the
following instruments; namely :-
(i)
all investments in equity instruments
in incorporated entities: public, private, listed and unlisted;
(ii)
capital participation in LLP;
(iii)
all instruments of investment recognised in the FDI policy notified from time to time;
(iv)
investment in units of Alternative
Investment Funds (AIFs), Real Estate Investment Trust (REITs) and
Infrastructure Investment Trusts (InvIts);
(v)
investment in units of mutual funds or
Exchange-Traded Fund (ETFs) which invest more than fifty per cent in equity;
(vi)
junior-most layer (i.e. equity
tranche) of securitisation structure;
(vii)
acquisition, sale or dealing directly
in immovable property;
(viii)
contribution to trusts; and
(ix)
depository receipts issued against
equity instruments;
(aj) "NRI"
or "Non-Resident
Indian" means an individual resident outside India who is a citizen of India;
(ak) "OCI"
or Overseas
Citizen of India means an individual resident outside India who is
registered as an Overseas Citizen of India Cardholder under section 7A of the
Citizenship Act, 1955 (57 of 1955);
[8][(aka) "permissible jurisdiction" eans such jurisdiction as notified by the Central
Government under sub-clause (f) of sub-rule (3) of rule 9 of Prevention of
Money-laundering (Maintenance of Records) Rules, 2005;]
(al) "resident Indian citizen" means an
individual who is a person resident in India and is a citizen of India by
virtue of the Constitution of India or the Citizenship Act, 1955
;
(am) "sectoral cap" means the maximum
investment including both foreign investment on a repatriation basis by persons
resident outside India in equity [9][*]
instruments of a company or the capital of a 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:
(i)
FCCBs and DRs having underlying of instruments being in the nature of debt shall
not be included in the sectoral cap;
(ii)
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;
[10][(ama) "Share Based Employee Benefits"
means issue of equity instruments to employees or directors or employees or
directors of the holding company or joint venture or wholly owned overseas
subsidiary or subsidiaries who are resident outside India, pursuant to Share
Based Employee Benefits schemes formulated by an Indian Company;]
(an) "startup company" means a private
company incorporated under the Companies Act, 2013 and identified under G.S.R.
180(E), dated the 17th February, 2016 issued by the
Department of Industrial Policy and Promotion, Ministry of Commerce and
Industry;
[11][(ana) "subsidiary" shall have the same
meaning as is assigned to it in the Companies Act, 2013, as amended from time
to time;
(ao) "sweat
equity shares" means sweat equity shares defined under the Companies
Act, 2013;
(ap) "transferable development rights (TDR)""
shall have the meaning assigned to it in the regulations made under sub-section
(2) of section 6 of the Act;
(aq) "unit"
means a beneficial interest of an investor in an investment vehicle;
(ar) "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 (Alternative Investment Funds) Regulations, 2012.
(2) The words and expressions used but not
defined in these rules shall have the same meanings respectively assigned to
them in the Act, rules and regulations.
[12][2A. Reserve Bank to administer these rules.
(1) These
rules shall be administered by the Reserve Bank.
(2) While
administrating these rules, the Reserve Bank may interpret and issue such
directions, circulars, instructions, clarifications, as it may deem necessary,
for effective implementation of the provisions of these rules.]
CHAPTER II
GENERAL CONDITIONS APPLICABLE TO ALL INVESTORS
3.
Restriction
on investment in India 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 made
thereunder and held on the date of commencement of these rules shall be deemed
to have been made under these rules and shall accordingly be governed by these
rules:
Provided further that the
Reserve Bank may, on an application made to it and for sufficient reasons [13][*], 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 [14][*] 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 rules or the 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 rules.
CHAPTER III
INVESTMENT BY PERSON RESIDENT OUTSIDE INDIA
6.
Investments
by person resident outside India: - A
person resident outside India may make investment as under:-
(a) may subscribe, purchase or sell equity instruments
of an Indian company in the manner and subject to the terms and conditions
specified in Schedule I:
[15][Provided that an entity of a
country, which shares land border with India or the beneficial owner of an
investment into India who is situated in or is a citizen of any such country,
shall invest only with the Government approval:
Provided
further that, a citizen of Pakistan or an entity incorporated in
Pakistan shall invest only under the Government route, in sectors or activities
other than defence, space, atomic energy and such
other sectors or activities prohibited for foreign investment:
Provided
also that in the event of the transfer of ownership of any existing or
future FDI in an entity in India, directly or indirectly, resulting in the
beneficial ownership falling within the restriction or purview of the above
provisos, such subsequent change in beneficial ownership shall also require
government approval.]
[16][Provided also that a Multilateral
Bank or Fund, of which India is a member, shall not be treated as an entity of
a particular country nor shall any country be treated as the beneficial owner
of the investments of such Bank or Fund in India.]
Note: Issue or transfer of
participating interest or 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 I.
(b) 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 or transfer of profit shares of an LLP, in the manner and subject
to the terms and conditions specified in Schedule VI.
(c) 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 VIII.
(d) 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 specified in Schedule IX.
7.
Acquisition
through rights issue or bonus issue.-A person
resident outside India and having investment in an Indian company may make
investment in equity instruments (other than share warrants) issued by such
company as a rights issue or a bonus issue, provided that,-
(a) the offer made by the Indian company is in
compliance with the provisions of the Companies Act, 2013;
(b) such issue shall not result in a breach of the
sectoral cap applicable to the company;
(c) the share holding 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 rules;
(d) in case of a listed Indian company, the rights
issue to persons resident outside India shall be at a price determined by the company;
(e) 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;
(f) such investment made through rights issue or bonus
issue shall be subject to the conditions as are applicable at the time of such issue;
(g) the mode of payment and attendant conditions for such
transactions shall be specified by the Reserve Bank.
(h) an individual who is a person resident outside
India exercising a right which was issued when he or she was a person resident
in India shall hold the equity instruments (other than share warrants) so
acquired on exercising the option on a non-repatriation basis.
Explanation: [17][*]
[18][7A. Acquisition
after renunciation of rights.- A person resident outside India who has acquired a
right from a person resident in India who has renounced it may acquire equity
instruments (other than share warrants) against the said rights as per pricing
guidelines specified under rule 21 of these rules.]
8.
[19][Issue of Employees Stock Options , sweat equity
shares and Share Based Employee Benefits to persons resident outside India.- An Indian company may issue employees stock
option , sweat equity shares , and Share Based Employee Benefits to its
employees or directors or employees or directors of its holding company or
joint venture or wholly owned overseas subsidiary or subsidiaries who are
resident outside India:
Provided that. -
(a)
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 or as per other applicable law, as the case may be;
(b)
the
employee s stock option or sweat equity shares or Share Based Employee
Benefits so issued under the applicable rules or regulations are in compliance
with the sectoral cap applicable to the said company;
(c)
the issue
of employee s stock option or sweat equity shares or Share Based Employee
Benefits in a company where foreign investment is under the approval route
shall require prior government approval;
(d)
issue of
employee s stock option or sweat equity shares or Share Based Employee
Benefits to a citizen of Bangladesh or Pakistan shall require prior government
approval:
Provided further that an individual who is a person resident outside India exercising an
option which was issued when he or she was a person resident in India shall
hold the shares so acquired on exercising the option on a non-repatriation
basis]
9.
Transfer of
equity instruments of an Indian company by or to a person resident outside
India.- A person resident outside
India holding equity instruments of an Indian company or units in accordance
with these rules or a person resident in India, may transfer such equity
instruments or units so held by him in compliance with the conditions, if any,
specified in the Schedules of these rules and subject to the terms and
conditions prescribed 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 equity instruments of an
Indian company or units held by him to any person resident outside India;
Explanation:
It shall also include transfer of equity instruments of an Indian company
pursuant to liquidation, merger, de-merger and amalgamation of entities or
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 equity instruments are held by the person
resident outside India on a non-repatriable basis, the transfer by way of sale
where the transferee intends to hold the equity instruments on a repatriable
basis, shall be in compliance with and subject to the adherence to entry
routes, sectoral caps or investment limits, as specified in these rules and
attendant conditionalities for such investment, pricing guidelines,
documentation and reporting requirements for such transfers, as may be
specified by the Reserve Bank from time to time;
(2) A person resident outside India, holding equity
instruments of an Indian company or units in accordance with these rules may
transfer the same to a person resident in India by way of sale or gift or may
sell the same on a recognised stock exchange in India
in the manner specified by the 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 the Reserve Bank in consultation with the
Central Government from time to time;
(ii)
where the
equity instruments are held by the person resident outside India on a
non-repatriable basis, conditions at item (i) of the
proviso shall not apply.
(3) A person resident in India holding equity
instruments of an Indian company or units, may transfer the same to a person
resident outside India by way of sale, subject to the adherence to entry
routes, sectoral caps or 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 the Reserve Bank in consultation with the Central Government from
time to time;
(4) A person resident in India holding equity
instruments or units of an Indian company [20][*] 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, namely:-
(i)
the donee is eligible to hold such a security under the
Schedules of these Rules;
(ii)
the gift
does not exceed five percent of the paid up capital of
the Indian company or each series of debentures or
each mutual fund scheme;
Explanation: The five percent of the paid up capital of
the Indian company or each series of debentures or
each mutual fund scheme will be on cumulative basis by a single person to
another single person.
(iii)
the
applicable sectoral cap in the Indian company is not breached;
(iv)
the donor
and the donee shall be relatives within the meaning
in clause (77) of section 2 of the Companies Act, 2013;
(v)
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 fifty-thousand US Dollars;
(vi)
such other
conditions as considered necessary in public interest by the Central
Government.
(5) A person resident outside India holding equity
instruments of an Indian company containing an optionality clause in accordance
with these rules and exercising the option or right, may exit
without any assured return, subject to the pricing guidelines prescribed in
these rules and a minimum lock-in period of one year or minimum lock-in period
as prescribed in these rules, whichever is higher.
(6) In case of transfer of equity instruments between a
person resident in India and a person resident outside India, an amount not
exceeding twenty five percent of the total consideration,-
(i)
may be paid
by the buyer on a deferred basis within a period not exceeding eighteen months
from the date of the transfer agreement; or
(ii)
may 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
(iii)
may 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 that the total
consideration finally paid for the shares shall be compliant with the
applicable pricing guidelines.
(7) In case of transfer of equity 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 and such escrow account may be
funded by way of inward remittance through banking channels and/ or by way of
guarantee issued by an authorised dealer bank,
subject to the terms and conditions as specified in the Foreign Exchange
Management (Guarantees) Regulations, 2000.
(8) The transfer of equity instruments of an Indian
company or units of an investment vehicle by way of pledge is subject to the
following terms and conditions, namely :-
(i)
any person
being a promoter of a company registered in India (borrowing company), which
has raised external commercial borrowing 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 raised by the borrowing company subject to the following further
conditions, namely :-
(A) the period of such pledge shall be co-terminus with
the maturity of the underlying external commercial borrowing;
(B) in case of invocation of pledge, transfer shall be
made in accordance with these rules and directions issued by the Reserve Bank;
(C) the statutory auditor has certified that the
borrowing company shall utilise or has utilised the proceeds of the external commercial borrowing
for the permitted end-use only;
(D) 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;
(ii)
any person
resident outside India holding equity instruments in an Indian company or units
of an investment vehicle may pledge the equity instruments or units, as the
case may be,-
(A) in favour of a bank in
India to secure the credit facilities being extended to such Indian company for
bona fide purposes,
(B) 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,
(C) 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,
(D) subject to the authorised
dealer bank satisfying itself of the compliance of the conditions stipulated by
the Reserve Bank in this regard;
(iii)
in case of
invocation of pledge, transfer of equity instruments of an Indian company or
units shall be in accordance with entry routes, sectoral caps or investment
limits, pricing guidelines and other attendant conditions at the time of
creation of pledge.
CHAPTER IV
INVESTMENT BY FOREIGN PORTFOLIO INVESTOR (FPI)
10. Investment by FPI - A FPI may make investments as under:-
(1) A FPI may purchase or sell equity instruments of an
Indian company which is listed or to be listed on a recognised
stock exchange in India, and/or may purchase or sell securities other than
equity instruments, in the manner and subject to the terms and conditions
specified in Schedule II.
Note - A FPI 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 specified by the Securities and Exchange Board of India and the
conditions prescribed in Schedule II.
(2) A FPI 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 as prescribed in Schedule X.
11.
[21][Transfer of equity instruments of an Indian
company by FPI A FPI holding equity
instruments of an Indian company or units in accordance with these rules, may
transfer such equity instruments or units held by him in compliance with the
conditions, if any, specified in the Schedules annexed to these rules, subject
to the terms and conditions specified therein and by the Securities and
Exchange Board of India:
Provided that, -
(i) prior Government approval shall be obtained for any
transfer in case the company is engaged in a sector which requires the
Government approval;
(ii) where the acquisition of equity instruments by FPI
under Schedule II has resulted in a breach of the applicable aggregate FPI
limits or sectoral limits the provisions of item (iii) of sub-paragraph (a) of
paragraph (1) of Schedule II shall apply.]
CHAPTER
V
INVESTMENT
BY NON-RESIDENT INDIAN OR AN OVERSEAS CITIZEN OF INDIA
12. Investment by NRI or OCI - A NRI or an OCI may make investments as under:-
(1) A NRI or an OCI may, on repatriation basis,
purchase or sell equity instruments of a listed Indian company and other
securities in the manner and subject to the terms and conditions prescribed in
Schedule III.
(2) A NRI or an OCI may, on non-repatriation basis,
purchase or sell equity instruments of an Indian company or other securities 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 IV.
Note: A NRI or an OCI may trade or invest in all exchange traded derivative
contracts approved by the Securities and Exchange Board of India from time to
time subject to the limits specified by Securities and Exchange Board of India
and conditions prescribed in Schedule III.
(3) A NRI or an OCI 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 X.
13. Transfer of equity instruments by NRI or OCI - A NRI or an OCI holding equity instruments of an
Indian company or units in accordance with these rules may transfer such equity
instruments or units so held by him in compliance with the conditions, if any,
prescribed in the Schedules of these rules and subject to the terms and
conditions prescribed hereunder:
(1) A NRI or an OCI holding equity 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 equity instruments by an
NRI or an OCI under the provisions of Schedule III of these rules has resulted
in a breach of the applicable aggregate NRI or OCI limit or sectoral limits,
the NRI or the OCI shall sell such equity instruments to a person resident in
India eligible to hold such instruments within the time stipulated by the
Reserve Bank of India in consultation with the Central Government and 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
rules.
(2) A NRI or an OCI or an eligible investor under
Schedule IV of these rules, holding equity 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 or 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 the Reserve Bank in consultation with the Central Government from time to
time;
Provided that the entry routes, sectoral caps or 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 IV of these rules
acquiring such investment.
(3) A NRI or an OCI or an eligible investor under
Schedule IV of these rules holding equity 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 of
India, in the manner prescribed, and subject to the following conditions, namely :-
(i)
the donee is eligible to hold such a security under relevant
Schedules of these rules;
(ii)
the gift
does not exceed five percent of the paid up capital of
the Indian company or each mutual fund scheme;
Explanation: The five
percent shall be on cumulative basis by a single person to another single
person.
(iii) the applicable sectoral cap in the Indian company
is not breached;
(iv) the donor and the donee
shall be relatives within the meaning in clause (77) of section 2 of the
Companies Act, 2013;
(v)
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 USD 50000;
(vi) such other conditions as may be considered
necessary in public interest by the Central Government.
(4) A NRI or an OCI or an eligible investor specified
under Schedule IV of these rules holding equity 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 IV of these
rules who shall hold it on a non-repatriable basis.
(5) An erstwhile OCB may transfer equity instruments
subject to the directions issued by the Reserve Bank of India from time to time
in this regard.
Explanation: Overseas
Corporate Body (OCB) means an entity de-recognised
through Foreign Exchange Management [Withdrawal of General Permission to
Overseas Corporate Bodies (OCBs)] Regulations, 2003.
CHAPTER VI
INVESTMENT BY OTHER NON-RESIDENT INVESTORS
14. Investment in securities by other non-resident
investors - The other non-resident
investors may make investments in securities in the manner and subject to the
terms and conditions specified in Schedule V.
15. Transfer of securities by other non-resident investors :- The other non-resident investors, holding
securities in accordance with these rules, may transfer the securities subject
to such terms and conditions prescribed in Schedule V and as specified by the
Securities and Exchange Board of India and the Reserve Bank.
CHAPTER VII
INVESTMENT BY FOREIGN VENTURE CAPITAL INVESTOR
16. Investment by FVCI - A Foreign Venture Capital Investor (FVCI) may make investments in the
manner and subject to the terms and conditions specified in Schedule VII.
17.
Transfer of
equity instruments of an Indian company by or to a FVCI - A FVCI holding equity instruments of an Indian
company or units in accordance with these rules or a person resident in India,
may transfer such equity instruments or units so held by him in compliance with
the conditions, if any, prescribed in Schedule VII of these rules and as
specified by the Securities and Exchange Board of India and the Reserve Bank.
CHAPTER VIII
GENERAL PROVISIONS
18. 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 or 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) The mode of payment and other attendant conditions
for remittance of sale or maturity proceeds shall be specified by the Reserve
Bank.
(4) A NRI or an OCI may acquire convertible notes on non-repatriation basis in accordance with Schedule IV of
these rules.
(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.
19. Merger or demerger or amalgamation of Indian companies.-
(1)
[22][Where a scheme of compromise or arrangement or
merger or amalgamation of two or more Indian companies or a reconstruction by
way of demerger or otherwise of an Indian company, or transfer of undertaking of
one or more Indian company to another Indian company, or involving division of
one or more Indian company, has been approved by the National Company Law
Tribunal (NCLT) or other authority competent to do so by law, the transferee
company or the new company, as the case may be, may issue equity instruments to
the existing shareholders 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 approval from the Central Government;
(b)
the
transferor company or the transferee company or the new company is not engaged
in any sector prohibited for investment by a person resident outside India.
Note: Government approval shall not be required in case of mergers and
acquisitions taking place in sectors under automatic route.]
(2) where a scheme of [23][compromise or arrangement] or merger or
amalgamation of two or more Indian companies or a reconstruction by way of
demerger or otherwise of an Indian company where any of the companies involved
is listed on a recognised stock exchange in India,
then the scheme of arrangement shall be in compliance with
the SEBI (Listing Obligation and Disclosure Requirement) Regulations, 2015.
20. Reporting requirements - The reporting requirements for any investment in
India by a person resident in India shall be as specified by the Reserve Bank.
21. Pricing guidelines
(1)
The pricing
guidelines specified in these rules 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 specified by Securities and Exchange Board of
India.
(2) Unless otherwise prescribed in these rules, the
price of equity instruments of an Indian company, -
(a)
issued by
such company to a person resident outside India shall not be less than :
(i)
the price
worked out in accordance with the 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;
(ii) the valuation of equity 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 Merchant Banker registered
with the Securities and Exchange Board of India or a practising
Cost Accountant, in case of an unlisted Indian Company.
[24][Explanation:
In case of convertible equity instruments, the price or 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 rules.]
(b)
transferred
from a person resident in India to a person resident outside India shall not be
less than,-
(i)
the price
worked out in accordance with the Securities and Exchange Board of India
guidelines in case of a listed Indian company;
(ii) 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;
(iii) the valuation of equity 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 Merchant Banker registered
with the Securities and Exchange Board of India or a practising
Cost Accountant, in case of an unlisted Indian company.
(c)
transferred
by a person resident outside India to a person resident in India shall not exceed :
(i)
the price
worked out in accordance with the relevant Securities and Exchange Board of
India guidelines in case of a listed Indian company;
(ii) 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;
(iii) the valuation of equity 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 Merchant Banker registered
with the Securities and Exchange Board of India or a practising
Cost Accountant, in case of an unlisted Indian company.
Explanation: The guiding
principle shall be that the person resident outside India is not guaranteed any
assured exit price at the time of making such investment or agreement and shall
exit at the price prevailing at the time of exit.
(iv) in case of swap of equity instruments, subject to
the condition that irrespective of the amount, valuation involved in the swap
arrangement shall have to be made by a Merchant Banker registered with the
Securities and Exchange Board of India or an investment banker outside India
registered with the appropriate regulatory authority in the host country.
(v)
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.
(vi)
in case of
share warrants, their pricing and the price or conversion formula shall be
determined upfront:
Provided
that these pricing guidelines shall not be applicable for investment in
equity instruments by a person resident outside India on a non-repatriation
basis.
22. Taxes and remittances of sale proceeds
(1)
Taxes - All transaction under these rules shall be
undertaken through banking channels in India and subject to the payment of
applicable taxes and other duties or levies in India.
(2) Remittance of sale proceeds:
(a) 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 rules , the conditions
prescribed in the relevant Schedule and as specified by the Reserve Bank.
(b) 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 that -
(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.
23. Downstream investment
(1)
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 one hundred percent is permitted
under automatic route and there are no FDI linked performance conditions.
(2) With effect from the 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 ( 10 of 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.
(3) Guidelines for calculating total foreign investment
in Indian companies are as follows ,-
(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 shall 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 31st March of the
previous financial year in the Indian company making the downstream investment
shall be considered for computing its total foreign investment;
(e) indirect foreign investment received by a wholly
owned subsidiary of an Indian company shall be limited to the total foreign
investment received by the company making the downstream investment.
(4) Downstream investment that is treated as indirect
foreign investment for the investee entity shall be subject to the following
conditions, namely :-
(a) downstream investment shall 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 and the
downstream investments may be made through internal accruals and for this
purpose, internal accruals shall 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.
(5) Equity 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-
(a) a person resident outside India, subject to the
reporting requirements as specified by the Reserve Bank.
(b) a person resident in India subject to adherence to
pricing guidelines;
(c) 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.
(6) The first level Indian company making downstream
investment shall be responsible for ensuring compliance with the provisions of
these rules for the downstream investment made by it at second level and so on
and so forth and such first level company shall obtain a certificate to this
effect from its statutory auditor on an annual basis and such compliance of
these rules 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 Registered Office.
(7) The provisions (5) and (6) of rule 23 shall apply mutatis
mutandis to a LLP.
Note: Downstream investment that is treated as indirect foreign investment
for the investee entity made in accordance with the guidelines in existence
prior to the 13th February, 2009 shall not require any
modification to conform to these rules and all such investments, after the said
date, shall come under the ambit of these rules. Downstream investment that is
treated as indirect foreign investment for the investee entity made between the
13th February, 2009 and 21st June 2013 which is not in conformity with these rules shall have to be
intimated to the Reserve Bank by 3rd October,2013
for treating such cases as compliant with these Rules.
Explanation.- For
the purposes of this rule,-
(a) "ownership of an Indian
company" shall mean beneficial
holding of more than fifty percent of the equity instruments of such company
and "ownership
of an LLP" shall mean contribution of more than fifty 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 and 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 and 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 and 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 and 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 and 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
which has total foreign investment in it, 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,-
(A) 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
(B) 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
that no person resident in India other than an Indian entity can
receive Indirect Foreign Investment;
[25][Explanation:
An investment made by an Indian entity which is owned and controlled by NRI(s),
on a non-repatriation basis, shall not be considered for calculation of
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.
CHAPTER IX
ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA
24. Acquisition and transfer of property in India by a
NRI or an OCI - A NRI or an OCI may-
(a) acquire immovable property in India other than an
agricultural land or farm house or plantation property:
Provided
that the consideration, if any, for transfer, shall be made out of funds
received in India through banking channels by way of inward remittance from any
place outside India ; or
(i)
funds held
in any non-resident account maintained in accordance with the provisions of the
Act, rules or regulations framed thereunder:
Provided
further that no payment for any transfer of immovable property shall be
made either by traveller s cheque or by foreign
currency notes or by any other mode other than those specifically permitted
under this clause;
(b) acquire any immovable property in India other than
agricultural land or farm house or plantation property
by way of gift from a person resident in India or from an NRI or from an OCI,
who in any case is a relative as defined in clause (77) of section 2 of the
Companies Act, 2013;
(c) acquire any immovable property in India by way of
inheritance from a person resident outside India who had acquired such property:-
(i)
in
accordance with the provisions of the foreign exchange law in force at the time
of acquisition by him or the provisions of these rules ;or
(ii) from a person resident in India;
(d)
transfer
any immovable property in India to a person resident in India;
(e)
transfer
any immovable property other than agricultural land or farm
house or plantation property to an NRI or an OCI.
25. Joint acquisition by the spouse of a NRI or an OCI : A person
resident outside India, not being an NRI or an OCI, who is a spouse of an NRI
or an OCI may acquire one immovable property (other than agricultural land or
farm house or plantation property), jointly with his or her NRI or OCI spouse :
Provided that -
(a)
consideration
for transfer, shall be made out of -
(i)
funds
received in India through banking channels by way of inward remittance from any
place outside India; or
(ii)
funds held
in any non-resident account maintained in accordance with the provisions of the
Act and the regulations made by the Reserve Bank;
(b) no payment for any transfer of immovable property
shall be made either by traveller s cheque or by
foreign currency notes or by any other mode other than those specifically
permitted under this clause:
Provided
that the marriage has been registered and subsisted for a continuous
period of not less than two years immediately preceding the acquisition of such
property:
Provided
further that the non-resident spouse is not otherwise prohibited from
such acquisition.
26. Acquisition of immovable property for carrying on a
permitted activity - A person
resident outside India who has established in India in accordance with the
Foreign Exchange Management (Establishment in India of a Branch office or a
liaison office or a project office or any other place of business) Regulations,
2016, as amended from time to time, a branch, office or other place of business
for carrying on in India any activity, excluding a liaison office, may-
(a)
acquire any
immovable property in India, which is necessary for or incidental to carrying
on such activity:
Provided that,-
(i)
all
applicable laws, rules, regulations, for the time being in force are duly
complied with; and
(ii)
the person
files with the Reserve Bank a declaration in the Form IPI as specified by the
Reserve Bank from time to time, not later than ninety days from the date of
such acquisition;
(b)
transfer by
way of mortgage to an authorised dealer as a security
for any borrowing, the immovable property acquired in pursuance of clause (a)
of rule 26:
Provided
that no person of Pakistan or
Bangladesh or Sri Lanka or Afghanistan or China or Iran or Hong Kong or Macau
or Nepal or Bhutan or Democratic People s Republic of Korea (DPRK) shall
acquire immovable property, other than on lease not exceeding five years, without
prior approval of the Reserve Bank.
27. Purchase or sale of immovable property by Foreign
Embassies or Diplomats or Consulate Generals - A Foreign Embassy or Diplomat or Consulate General may purchase or sell
immovable property in India other than agricultural land or plantation property
or farm house provided :
(i)
clearance
from Government of India, Ministry of External Affairs is obtained for such
purchase or sale; and
(ii)
the
consideration for acquisition of immovable property in India is paid out of
funds remitted from abroad through banking channels.
28. Acquisition by a long-term visa holder - A person being a citizen of Afghanistan, Bangladesh
or Pakistan belonging to minority communities in those countries, namely,
Hindus, Sikhs, Buddhists, Jains, Parsis and Christians who is residing in India
and has been granted a Long Term Visa (LTV) by the Central Government may
purchase only one residential immovable property in India as dwelling unit for
self-occupation and only one immovable property for carrying out
self-employment subject to the following conditions, namely :-
(a)
the
property shall not be located in and around restricted
or protected areas so notified by the Central Government and cantonment areas;
(b)
the person
submits a declaration to the Revenue Authority of the district where the
property is located, specifying the source of funds and that he or she is
residing in India on LTV;
(c)
the
registration documents of the property shall mention the nationality and the
fact that such person is on LTV;
(d)
the
property of such person may be attached or confiscated in the event of his or
her indulgence in anti-India activities;
(e)
a copy of
the documents of the purchased property shall be submitted to the Deputy
Commissioner of Police (DCP) or Foreigners Registration Office (FRO) or
Foreigners Regional Registration Office (FRRO) concerned and to the Ministry of
Home Affairs (Foreigners Division);
(f)
such person
shall be eligible to sell the property only after acquiring Indian citizenship,
however, transfer of the property before acquiring Indian citizenship shall
require prior approval of DCP or FRO or FRRO concerned.
29. Repatriation of sale proceeds
(1)
A person
referred to in sub-section (5) of section 6 of the Act, or his successor shall
not, except with the general or specific permission of the Reserve Bank,
repatriate outside India the sale proceeds of any immovable property referred
to in that sub- section.
(2) In the event of sale of immovable property other
than agricultural land or farm house or plantation property in India by an NRI
or an OCI, the authorised dealer may allow
repatriation of the sale proceeds outside India, provided the following
conditions are satisfied, namely:-
(a)
the
immovable property was acquired by the seller in accordance with the provisions
of the foreign exchange law in force at the time of acquisition or the
provisions of these rules;
(b)
the amount
for acquisition of the immovable property was paid in foreign exchange received
through banking channels or out of funds held in Foreign Currency Non-Resident
Account or out of funds held in Non-Resident External Account;
(c)
in the case
of residential property, the repatriation of sale proceeds is restricted to not
more than two such properties.
(3) In the event of failure in repayment of external
commercial borrowing availed by a person resident in India under the provisions
of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange)
Regulations, 2000, as amended from time to time, a bank which is an authorised dealer may permit the overseas lender or the
security trustee (in whose favour the charge on
immovable property has been created to secure the ECB) to sell the immovable
property on which the said loan has been secured only to a (by the) person
resident in India and to repatriate the sale proceeds towards outstanding dues
in respect of the said loan and not any other loan.
30. Prohibition on transfer of immovable property in
India
(1)
Save as
otherwise provided in the Act or rules, no person resident outside India shall
transfer any immovable property in India:
Provided that:-
(a)
the Reserve
Bank may, for sufficient reasons, permit the transfer subject to such
conditions as may be considered necessary;
(b)
a bank
which is an authorised dealer may, subject to the
directions issued by the Reserve Bank in this behalf, permit a person resident
in India or on behalf of such person to create charge on his immovable property
in India in favour of an overseas lender or security
trustee, to secure an external commercial borrowing availed under the
provisions of the Foreign Exchange Management (Borrowing or Lending in Foreign
Exchange) Regulations, 2000;
(c)
an authorised dealer in India being the Indian correspondent
of an overseas lender may, subject to the directions issued by the Reserve Bank
in this regard, create a mortgage on an immovable property in India owned by an
NRI or an OCI, being a director of a company outside India, for a loan to be
availed by the company from the said overseas lender :
Provided further that :-
(i)
the funds
shall be used by the borrowing company only for its core business purposes overseas;
(ii)
in case of
invocation of charge, the Indian bank shall sell the immovable property to an
eligible acquirer and remit the sale proceeds to the overseas lender.
(2) A person resident outside India who has acquired
any immovable property in India in accordance with foreign exchange laws in
force at the time of such acquisition or with the general or specific
permission of the Reserve Bank may transfer such property to a person resident
in India provided the transaction takes place through banking channels in India
and provided further that the resident is not otherwise prohibited from such
acquisition.
31. Prohibition on acquisition or transfer of immovable
property in India by citizens of certain countries - No person being a citizen of Pakistan, Bangladesh,
Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Hong Kong or Macau or
Democratic People s Republic of Korea (DPRK) without prior permission of the
Reserve Bank shall acquire or transfer immovable property in India, other than
lease not exceeding five years :
Provided
that this prohibition shall not
apply to an OCI.
Explanation: For the purpose of this rule, the term citizen shall include
natural persons and legal entities.
32. Miscellaneous - Any transaction involving acquisition or transfer of immovable
property under these rules shall be undertaken:-
(a) through banking channels in India;
(b) subject to payment of applicable taxes and other
duties or levies in India.
33. Savings - Any existing holding of immovable property in India by a person
resident outside India made in accordance with the policy in existence at the
time of such acquisition would not require any modifications to conform to
these rules.
[26][CHAPTER X
INVESTMENT
BY PERMISSIBLE HOLDER IN EQUITY SHARES OF PUBLIC COMPANIES INCORPORATED IN
INDIA AND LISTED ON INTERNATIONAL EXCHANGES
34.
Investment by
permissible holder .-
(1)
A permissible
holder may purchase or sell equity shares of a public Indian company which is
listed or to be listed on an International Exchange under Direct Listing of
Equity Shares of Companies Incorporated in India on International Exchanges
Scheme as specified in Schedule XI.
(2)
The mode of
payment and other attendant conditions for remittance of proceeds of issue
shall be as specified by the Reserve Bank.]
SCHEDULE I
(See rule 6(a))
Purchase or
sale of equity instruments of an Indian company by a person resident outside India
(1)
Purchase
or sale of equity instruments of an Indian company by a person resident outside
India
(a)
An Indian company may issue equity
instruments to a person resident outside India subject to entry routes,
sectoral caps and attendant conditionalities prescribed in this Schedule.
(b)
A person resident outside India may
purchase equity instruments of a listed Indian company on a stock exchange in
India:
Provided that -
(i)
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;
(ii)
the amount of consideration may be
paid as per the mode of payment specified by the Reserve Bank 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 noninterest bearing rupee account
for acquisition of shares on the recognised stock
exchange.
(c)
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 equity instruments to the said non-resident
entity against pre- incorporation or pre-operative expenses incurred by the
said nonresident entity up to a limit of five percent of its authorised capital or USD 500,000 whichever is less,
subject to the condition that within thirty days from the date of issue of
equity instruments but not later than one year from the date of incorporation
or such time as the Reserve Bank permits, the Indian company shall report the
transaction to the Reserve Bank as per the reporting requirements as specified
by the Reserve Bank.
(d)
An Indian company may issue, subject
to compliance with the conditions prescribed by the Central Government and/or
the Reserve Bank from time to time, equity instruments to a person resident
outside India, if the Indian investee company is engaged in an automatic route
sector, against,-
(i)
swap of equity instruments; or
(ii)
import of capital goods or machinery
or equipment (excluding second-hand machinery); or
(iii)
pre-operative or pre-incorporation
expenses (including payments of rent etc.):
Provided that the
Government approval shall be obtained if the Indian investee company is engaged
in a sector under Government route and the applications for approval shall be
made in the manner prescribed by the Central Government from time to time.
(e)
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 that 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 the Act or the rules or the regulations framed thereunder have been
completed.
(f)
The mode of payment and other
attendant conditions for remittance of sale or maturity proceeds shall be
specified by the Reserve Bank.
(2) Sectors
prohibited for FDI.-
(a)
Lottery business including Government
or private lottery, online lotteries, etc.
(b)
Gambling and betting including
casinos, etc.
(c)
Chit funds
(d)
Nidhi company
(e)
Trading in Transferable Development
Rights
(f)
Real estate business or construction
of farm houses
[27][Explanation: For the purpose of this rule, 'real estate
business' means dealing in land and immovable property with a view to earning
profit from there and does not include development of townships, construction
of residential or commercial premises, roads or bridges, educational
institutions, recreational facilities, city and regional level infrastructure,
townships, real estate broking services and Real Estate Investment Trusts
(REITs) registered and regulated under the SEBI (REITs) Regulations 2014 and
earning of rent or income on lease of the property, not amounting to transfer]
(g)
Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco
substitutes.
(h)
Activities or sectors not open to private sector investment e.g. (I) Atomic energy
and (II) Railway operations (other than permitted activities mentioned in
paragraph (3) of Schedule I)
(i)
Foreign technology collaborations in
any form including licensing for franchise, trademark, brand name, management
contract is also prohibited for lottery business and gambling and betting
activities.
(3) Permitted sectors, entry routes and
sectoral caps for total foreign investment
Unless otherwise specified in these Rules or the
Schedules, the entry routes and sectoral caps for the total foreign investment
in an Indian entity shall be as follows, namely:-
(a)
Entry
routes.-
(i)
automatic
route means the entry route through which investment by a
person resident outside India does not require the prior approval of the
Reserve Bank or the Central Government;
(ii)
government
route means the entry route through which investment by a
person resident outside India requires prior Government approval and foreign
investment received under this route shall be in accordance with the conditions
stipulated by the Government in its approval.
(iii)
Aggregate foreign portfolio investment
up to forty-nine percent of the paid-up capital on a fully diluted basis or the
sectoral or statutory cap, whichever is lower, shall 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 and other investments by a person
resident outside India shall be subject to the conditions of Government
approval and compliance of sectoral conditions as laid down in these rules.
(b)
Sectoral
caps.
(i)
Sectoral cap for the sectors or
activities specified in the table is the limit indicated against each sector.
The total foreign investment shall not exceed the sectoral or statutory cap.
(ii)
Foreign investment in the following
sectors or activities is subject to applicable laws or regulations, security
and other conditionalities.
(iii)
In sectors or activities not listed
below or not prohibited under paragraph (2) of Schedule I of these rules,
foreign investment is permitted up to one hundred percent on the automatic
route, subject to applicable laws or regulations, security and other conditionalities:
Provided that
foreign investment in financial services other than those indicated under
serial number F below would require prior approval of the Government.
(iv)
Wherever there is a requirement of
minimum capitalisation, it shall include premium
received along with the face value of the equity instrument, only when it is
received by the company upon issue of such instruments to the person resident
outside India and the amount paid by the transferee during post-issue transfer
beyond the issue price of the capital instrument, shall not be taken into
account while calculating minimum capitalization requirement.
(v)
(A) Foreign Investment in investing
companies not registered as Non-Banking Financial Companies with the Reserve
Bank and in core investment companies (CICs), both engaged in the activity of
investing in the capital of other Indian entities, shall require prior approval
of the Government.
Note: Compliance to
these rules by the core investment companies is in addition to the compliance
of the regulatory framework prescribed to such companies as NBFCs under the
Reserve Bank of India Act, 1934 and regulations framed thereunder.
(B)Foreign investment in investing
companies registered as Non-Banking Financial Companies (NBFCs) with the
Reserve Bank, shall be under 100% automatic route.
(vi)
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 that is treated as indirect foreign investment for the investee
entity, may receive investment in its equity instruments from persons resident
outside India under automatic route, however, approval of the Government shall
be required for such companies for undertaking activities which are under Government
route and as and when such a company commences business or makes downstream
investment that is treated as indirect foreign investment for the investee
entity, it shall have to comply with the relevant sectoral conditions on entry
route, conditionalities and caps.
(vii)
The onus of compliance with the
sectoral or statutory caps on such foreign investment and attendant conditions,
if any, shall be on the company receiving foreign investment.
(viii)
Wherever the person resident outside
India who has made foreign investment specifies a particular auditor or audit
firm having international network for the audit of the Indian investee company,
then audit of such investee company shall be carried out as joint audit wherein
one of the auditors is not part of the same network.
TABLE
|
Sl. No (1) |
Sector/
Activity (2) |
Sectoral Cap (3) |
Entry Route (4) |
|
1. |
Agriculture
and Animal Husbandry |
|
|
|
1.1 |
(a)
Floriculture, Horticulture and
Cultivation of vegetables and 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 or 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 and
Regulation) Act, 1957. |
100% |
Automatic |
|
3.2 |
Coal
and Lignite |
|
|
|
|
(a) [28][Coal
and Lignite mining for captive consumption by power projects, iron and steel
and cement units and other eligible activities permitted under and subject to
the provisions of the Mines and Minerals (Development and Regulation) Act,
1957 (67 of 1957) and the Coal Mines (Special Provisions) Act, 2015 (11 of
2015).] (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. (c) [29][For
sale of coal, coal mining activities including associated processing
infrastructure subject to the provisions of the Mines and Minerals
(Development and Regulation) Act, 1957 and the Coal Mines (Special
Provisions) Act, 2015 and as amended from time to time and other relevant
Acts on the subject.] |
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 and 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)
[30][Associated
Processing Infrastructure as contained in 3.2 (c) includes coal washery,
crushing, coal handling, and separation (magnetic and non-magnetic).] (b)
Foreign investment for separation of
titanium bearing minerals and ores shall 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. (c)
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 Rules can be achieved, the
conditions prescribed at (a)(i) above shall be
deemed to be fulfilled. |
||
|
4. |
Petroleum
and 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 |
|
[31][4.3 |
Notwithstanding
anything contained at Sl. No. 4.2 above, foreign investment up to 100% under
the automatic route is allowed in case an 'in-principle' approval for
strategic disinvestment of a PSU has been granted by the Government.] |
||
|
5. |
Manufacturing |
100% |
Automatic |
|
5.1 |
[32][Manufacturing
activities may be either self manufacturing by the
investee entity or contract manufacturing in India through a legally tenable
contract, whether on Principal to Principal or Principal to Agent basis.
Further, a manufacturer is permitted to sell his products manufactured in
India through wholesale and/or retail, including through e-commerce, without
Government approval.] Notwithstanding
the provisions of these Rules on trading sector, 100 percent foreign
investment under the 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 shall be processed in the Department of Industrial Policy and
Promotion before being considered by the Government for approval. |
||
|
[33][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 74% Government
route beyond 74% wherever it is likely to result in access to modern
technology or for other reasons to be recorded. |
|
6.2 |
Other Conditions |
||
|
|
(a)
FDI up to 74% under automatic route
shall be permitted for companies seeking new industrial licenses. (b)
Infusion of fresh foreign investment up to
49%, in a company not seeking industrial license or which already has
Government approval for FDI in Defence, shall
submit a declaration with the Ministry of Defence
in cases of change in equity/shareholding pattern or transfer of stake by existing
investor to new foreign investor, for FDI up to 49%, within a period of
thirty days of such change and any proposal for raising FDI beyond 49% from
such companies shall require Government approval. (c)
License applications will be
considered by the Department for Promotion of Industry and Internal Trade,
Ministry of Commerce and Industry, in consultation
with Ministry of Defence and Ministry of External
Affairs. (d)
Foreign investment in the sector
shall be subject to security clearance by the Ministry of Home Affairs and as
per guidelines of the Ministry of Defence. (e)
Investee company shall be structured
to be self-sufficient in the areas of product design and development and the
investee or joint venture company along with the manufacturing facility, shall
also have maintenance and life cycle support facility of the product being
manufactured in India. (f)
Foreign investments in the Defence sector shall be subject to scrutiny on grounds of
national security and Government reserves the right to review any foreign
investment in the Defence sector that affects or
may affect national security.] |
||
|
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 |
|
[34][7.2.3 |
Uploading/Streaming
of News and Current Affairs through Digital Media |
26% |
Government] |
|
[35][7.2.4] |
Up-linking of
Non-'News & Current Affairs' TV Channels/ Downlinking of TV Channels |
100% |
Automatic |
|
7.3 |
Other Conditions |
|
|
|
|
(a)
Foreign investment in companies
engaged in all the afore-stated services shall 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 shall 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 shall
not become a safety hazard and is not in contravention of any statute, rule
or regulations and public policy. (d)
In the I and 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 and the term `largest
Indian shareholder' used in this clause, shall include any or a combination
of the following, namely : (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 or group of companies in
which the individual shareholder or Hindu Undivided Family 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, shall 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 and Broadcasting on 4-12-2008. |
||
|
8.3 |
Publishing or
printing of Scientific and Technical Magazine or specialty journals or
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 shall 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 shall 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 and 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 or 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 the landing or departure of aircraft, and includes all buildings,
sheds, vessels, piers and other definite or limited ground or water area
intended to be used, either wholly or in part, for 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 |
|
|
[36][9.3 |
Air Transport Services |
|
|
|
|
(1) (a)
Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline (b) Regional
Air Transport Service |
100% |
Automatic up
to 49% (Automatic up
to 100% for NRIs) Government route beyond 49% |
|
|
(2) Non-Scheduled Air Transport Service |
100% |
Automatic |
|
|
(3)
Helicopter services/ seaplane services requiring Directorate General of Civil Aviation approval |
100% |
Automatic ] |
|
[37][Note:
As per Schedule XI of the Aircraft Rules, 1937, Air Operator Certificate to
operate Scheduled Air Transport Services (including Domestic Scheduled
Passenger Airline or Regional Air Transport Service) is granted to such
company or a body corporate, - (a) which is registered and has its principal place of business
within India; (b) whose Chairman and at least
two-thirds of its Directors are citizens of India; and (c) whose substantial ownership and effective control is vested in Indian nationals.] |
|||
|
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)
[38][Air
Transport Services shall include Domestic Scheduled Passenger Airlines,
Non-Scheduled Air Transport Services, helicopter and
seaplane services. (b)
Foreign airlines are allowed to
participate in the equity of companies operating 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 of 49 per cent of their
paid-up capital, subject to the following conditions, namely
:- (i)
it is made under the Government
approval route, (ii)
the 49 per cent limit will subsume
FDI and FII/FPI investment, (iii)
the investments so made would need
to comply with the relevant regulations of the Securities and Exchange Board
of India (SEBI), such as the Issue of Capital and Disclosure Requirements
(ICDR) Regulations/Substantial Acquisition of Shares and Takeovers (SAST)
Regulations, as well as other applicable rules and regulations, (iv)
all foreign nationals likely to be
associated with Indian scheduled and non-scheduled air transport services, as
a result of such 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 investment shall require clearance
from the relevant authority in the Ministry of Civil Aviation. It shall be
under the Government approval route. (d)
In addition to the above conditions,
foreign investment in M/s Air India Limited shall be subject to the following
conditions, namely :- (i)
foreign investments in M/s Air India
Limited, including that of foreign airlines shall not exceed 49 per cent
either directly or indirectly except in case of those NRIs, who are Indian
Nationals, where foreign investments is permitted up
to 100 per cent under automatic route. (ii)
substantial ownership and effective
control of M/s Air India Limited shall continue to be vested in Indian
Nationals as stipulated in Aircraft Rules, 1937. (e)
FDI in Civil Aviation shall be
subject to provisions of the Aircraft Rules, 1937,
as amended from time to time. Note: (i) The FDI limits or entry routes mentioned at serial
numbers 9.2 and 9.3 above, are applicable in the situation where there is no
investment by foreign airline. (ii)
Any investment by foreign airlines in companies operating in Air Transport
Services, including in M/s Air India Limited, shall be subject to entries (b)
and (c) above. (iii)
The dispensation for those NRIs, who are Indian Nationals, regarding FDI up
to 100 per cent will continue in respect of the investment regime specified
at entries (c) (ii) and (d) above.] |
||
|
10 |
Construction Development: Townships, Housing, Built-up
infrastructure |
|
|
|
10.1 |
Construction-development
projects (which shall 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 |
||
|
|
(a)
Each phase of the construction
development project shall be considered as a separate project. (b)
The investor shall 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 shall be permitted to exit and
repatriate foreign investment before the completion of project under
automatic route, provided that a lock-inperiod 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, byelaws, rules, and other regulations of the State
Government or Municipal or Local Body concerned. (e)
The Indian investee company shall be
permitted to sell only developed plots. For the purposes of this policy developed
plots shall 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 or 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 or Municipal or Local Body concerned. (g)
The State Government or Municipal or
Local Body concerned, which approves the building or development plans, shall
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 shall not apply to Hotels and Tourist Resorts, Hospitals,
Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs or OCIs. (3)
Completion of the project shall 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
shall 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, shall 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. (7)
Real estate broking services shall
be excluded from the definition of real estate business and 100% foreign
investment is allowed in real estate broking services under automatic route. |
||
|
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 or 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 shall 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 undermentioned conditions:
(a) it
shall 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 |
[39][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), Other Service Providers and such other services as may be
permitted by the Department of Telecommunications (DoT).] |
100% |
[40][Automatic]
|
|
14.2 |
Other Conditions |
|
|
|
|
[41][The
licensing, security and any other terms and conditions as notified by
Department of Telecommunications (DoT) from time to time, shall be observed
by licensee/entities providing services as referred in serial number 14.1
above as well as investors.] |
||
|
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 or 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 or
Regulations or Rules or Orders of the State Government or Government Body or
Government Authority or Local Self-Government Body under that State
Government shall 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 or VAT registration or service tax or excise duty or Goods
and Services Tax (GST) registration; or (ii) Entities
holding trade licenses i.e. a license or registration certificate or
membership certificate or registration under Shops and Establishment Act,
issued by a Government Authority or Government Body/ Local Self-Government
Authority, reflecting that the entity or person holding the license or
registration certificate or membership certificate, as the
case may be, is itself or himself or herself engaged in a business
involving commercial activity; or (iii) Entities
holding permits or license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from
Government Authorities or 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. shall 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 or 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 shall 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 rules for wholesale or 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 1956 or the Companies Act, 2013 (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 and electronic network to act
as a facilitator between buyer and seller. (e)
Digital and electronic network shall
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 shall
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 shall not exercise ownership over the
inventory i.e. goods purported to be sold. Explanation:
Inventory of a vendor shall be deemed to be controlled by e-commerce
marketplace entity if more than 25% of purchases of such vendor are from the
marketplace entity or its group companies which shall render the business
into inventory based model. (i)
An entity having equity
participation by e-commerce marketplace entity or its group companies or
having control on its inventory by e-commerce marketplace entity or its group
companies, shall not be permitted to sell its products on the platform run by
such marketplace entity. (j)
Goods/ services made available for
sale electronically on website shall clearly provide name, address
and other contact details of the seller. Post sales, delivery of goods to the
customers and customer satisfaction shall 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 or guarantee of goods
and services sold shall be the responsibility of the seller. (m)
E-commerce entities providing marketplace shall not directly or indirectly influence the
sale price of goods or services and shall maintain level playing field.
Services should be provided by e-commerce marketplace entity or other
entities in which e-commerce marketplace entity has direct or indirect equity
participation or common control, to vendors on the platform at arm s length
and in a fair and non-discriminatory manner. Explanation:
Such services shall include but not limited to fulfilment, logistics,
warehousing, advertisement or marketing, payments, financing etc. Cash back
provided by group companies of marketplace entity to buyers shall be fair and
non-discriminatory. For the purposes of this clause, provision of services to
any vendor on such terms which are not made available to other vendors in
similar circumstances will be deemed unfair and discriminatory. (n)
Guidelines on cash and carry
wholesale trading as given in Sl. No. 15.1.2 above shall apply to B2B
e-commerce activities. (o)
No e-commerce marketplace entity
shall mandate any seller to sell any of their product
exclusively on its platform. (p)
[42][e-commerce
marketplace entity with FDI shall have to obtain and maintain a report of
statutory auditor by 30th of September every year for the preceding financial
year confirming compliance of the e-commerce guidelines] 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% |
[43][Automatic] |
|
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 shall be sold under the same brand
in one or more countries other than India. (c)
'Single Brand' product-retail
trading shall 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,
either directly by the brand owner or through a legally tenable agreement
executed between the Indian entity undertaking single brand retail trading
and the brand owner. (e)
[44][In
respect of proposals involving foreign investment beyond 51 per cent,
sourcing of 30 per cent. of the value of goods procured, shall be done from
India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of
domestic sourcing shall be self-certified by the company, to be subsequently
checked, by statutory auditors, from the duly certified accounts which the
company shall 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
procured beginning 1st April of the year of the commencement of SBRT business
(i.e. opening of first store or start of online retail, whichever is
earlier). Thereafter, SBRT entity shall be required to meet the 30 per cent
local sourcing norms 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)
For the purpose of meeting local
sourcing requirement laid down at entry (e), all procurements made from India
by the SBRT entity for that single brand shall be counted towards local sourcing,
irrespective of whether the goods procured are sold in India or exported.
SBRT entity is also permitted to set off sourcing of goods from India for
global operations against the mandatory sourcing requirement of 30 per cent.
For this, purpose, sourcing of goods from India for global operations shall
mean value of goods sourced from India for global operations for that single brand
( in INR terms) in a particular financial year
directly by the entity undertaking SBRT or its group companies ( resident or
non-resident), or indirectly by them through a third party under a legally
tenable agreement. (g)
A SBRT entity operating through brick and mortar stores, can also undertake retail trading
through e-commerce. However, retail trading through e-commerce can also be
undertaken prior to opening of brick and mortar
stores, subject to the condition that the entity opens brick and mortar stores
within two years from date of start of online retail.] Note: (1)
Conditions mentioned at (b) and (d)
above shall not be applicable for undertaking SBRT of Indian brands. (2)
Indian brands should be owned and
controlled by resident Indian citizens and/ or companies which are owned and
controlled by resident Indian citizens. (3)
Sourcing norms shall not be
applicable up to three years from commencement of the business i.e. opening
of the first store [45][or
start of online retail, whichever is earlier] 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 15.3.1(e) above shall be
applicable. A Committee under the Chairmanship of Secretary, DPIIT, with
representatives from NITI Aayog, concerned Administrative Ministry and
independent technical expert(s) on the subject shall examine the claim of
applicants on the issue of the products being in the nature of state-of-art
and cutting-edge technology where local sourcing is not possible and give
recommendations for such relaxation. |
||
|
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' shall include capital expenditure on all activities, excluding
that on front-end units; for instance, back-end infrastructure shall 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, shall 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 or processed products purchased shall be sourced
from Indian micro, small and medium industries, which have a total investment
in plant and machinery not exceeding USD2 million. This valuation refers to
the value at the time of installation, without providing for depreciation.
The 'small industry' status shall 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 shall also
be considered in this category. The procurement requirement shall 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 shall 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 or urban agglomeration limits of such cities; retail locations
shall be restricted to conforming areas as per the Master or Zonal Plans of
the concerned cities and provision shall be made for requisite facilities
such as transport connectivity and parking. (g)
Government shall have the first
right to procure agricultural products. (h)
The above policy is an enabling
policy only and the State Governments or Union Territories shall 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 or Union
Territories which have agreed, or agree in future, to allow foreign
investment in MBRT under this policy. The States or 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 shall be made to
the said list. The establishment of the retail sales outlets shall be in compliance of applicable
State/ Union Territory laws or regulations, such as the Shops and
Establishments Act etc. (i)
Retail trading, in any form, by
means of e-commerce, shall not be permissible, for companies with foreign
investment engaged in multi-brand retail trading. (j)
Applications shall 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 or Union territories are Andhra Pradesh,
Assam, Delhi, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka,
Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman and 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
or 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 shall 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 shall 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 shall 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, shall 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 shall,
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 disability;
(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)
in-vitro diagnostic device which is a 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
examination of specimens derived from the human bodies or animals. |
||
|
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 shall be governed by the provisions of Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002. Similarly, investment by
institutional or non-institutional investors shall 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 shall be within the relevant
regulatory cap as applicable. (c)
All investments shall 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 shall 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 shall 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)
[46][Applications
for foreign direct investment in private banks having joint venture or
subsidiary in insurance sector may be addressed to the Reserve Bank for
consideration in consultation with the Insurance Regulatory and Development
Authority of India, in order to ensure that the limit of foreign investment
applicable for the insurance sector as specified in serial number F. 8.1 and
F. 8.2 is not breached.] (d)
Transfer of shares under FDI from
residents to non-residents shall 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
shall 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 shall apply to foreign investment as well. (g)
Setting up of a subsidiary by
foreign banks: (i)
Foreign banks shall 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 shall 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 shall 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 shall 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 shall
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 shall 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 shall 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, shall be subject to the Guidelines or Rules or
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 rules 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 or Regulations. |
||
|
F.5 |
Commodities
Spot Exchange |
49% |
Automatic |
|
F.5.1 |
Investment shall be subject to guidelines
prescribed by the Central or 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)
A person resident outside India
including persons acting in concert should not hold more than 5 percent. (b)
The investment shall be in compliance with Securities and Exchange Board of
India Regulations, other applicable laws/ rules/ 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 shall 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 shall 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 |
[47][Insurance
Company] |
[48][74%] |
Automatic |
|
[49][F8.1A |
Life Insurance Corporation of
India |
20% |
Automatic] |
|
F.8.2 |
[50][Intermediaries
or Insurance Intermediaries including insurance brokers, re-insurance
brokers, insurance consultants, corporate agents, third party administrator,
Surveyors and Loss Assessors and such other entities, as may be notified by
the Insurance Regulatory and Development Authority of India from time to
time.] |
[51]
[100%] |
[52]
[Automatic] |
|
[53][F.8.3.1 |
Other conditions applicable to
Indian insurance companies and intermediaries or insurance intermediaries] |
||
|
|
(a)
[54][No
Indian Insurance company shall allow the aggregate holdings by way of total
foreign investment in its equity shares by foreign investors, including
portfolio investors, to exceed [55][seventy-four]
percent of the paid up equity capital of such Indian
Insurance Company. (b)
The foreign investment up to [56]
[seventy-four] percent of the total paid-up equity of the Indian Insurance
Company shall be allowed on the automatic route subject to approval or
verification by the Insurance Regulatory and Development Authority of India. (c)
Foreign investment in this sector
shall be subject to compliance with the provisions of the Insurance Act, 1938
and the condition that Companies receiving FDI shall obtain necessary license
or approval from the Insurance Regulatory and Development Authority of India
for undertaking insurance and related activities. (d)
[57][(I)
In an Indian Insurance Company having foreign investment,- (i)
A majority of its directors; (ii)
A majority of its Key Management
Persons; and (iii) At
least one among the Chairperson of its Board, its Managing Director
and its Chief Executive Officer, shall be
Resident Indian Citizens. Explanation:
For the above purposes, the expression- Key Management Person shall
have the same meaning as assigned to it in guidelines made by the Insurance
Regulatory and Development Authority of India on corporate governance for
insurers in India. (II) An
Indian Insurance company having foreign investment shall comply with the
provisions under the Indian Insurance Companies (Foreign Investment) Rules,
2015, as amended from time to time and applicable rules and regulations
notified by the Department of Financial Services or the Insurance Regulatory
and Development Authority of India from time to time.] (e)
Foreign portfolio investment in an
Indian Insurance company shall be governed by the provisions contained in
Chapter-IV, rule 10 and rule 11 read with Schedule-II of these rules and
provisions of the Securities and Exchange Board of India (Foreign Portfolio
Investors) Regulations, [58][2019].
(f)
Any increase in foreign investment
in an Indian Insurance company shall be in accordance with the pricing
guidelines specified in these rules. (g)
The foreign equity investment cap of
100 per cent shall apply on the same terms as above to insurance brokers,
re-insurance brokers, insurance consultants, corporate agents, third party administrator,
Surveyors and Loss Assessors and such other entities, as may be notified by
the Insurance Regulatory and Development Authority of India from time to
time. However, [59][the
composition of the Board of Directors and key management persons of
Intermediaries or Insurance Intermediaries], as specified in clause (d)
above, shall not be applicable to Intermediaries and Insurance Intermediaries
and composition of the Board of Directors and key management persons shall be
as specified by the concerned regulators from time to time. (h)
The foreign direct investment
proposals shall be allowed under the automatic route subject to verification
by the Authority and the foreign investment in intermediaries or insurance
intermediaries shall be governed by the same terms as provided under rules 7
and 8 of the Indian Insurance Companies (Foreign Investment) Rules, 2015, as
amended from time to time: Provided
that where an entity like a Bank, whose primary business
is outside the insurance area, is allowed by the Authority 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 the primary (non-insurance related) business must remain
above 50 per cent of their total revenues in any financial year. (i)
The insurance intermediary that has
majority shareholding of foreign investors shall undertake the following: (i)
be incorporated as a limited company
under the provisions of the Companies Act, 2013; (ii)
at least one from among the Chairman
of the Board of Directors or the Chief Executive Officer or Principal Officer
or Managing Director of the insurance intermediary shall be a resident Indian
citizen; (iii)
shall take prior permission of the
Authority for repatriating dividend; (iv)
shall bring in the latest
technological, managerial and other skills; (v)
shall not make payments to the
foreign group or promoter or subsidiary or interconnected or associate
entities beyond what is necessary or permitted by the Authority; (vi)
shall make disclosures in the
formats to be specified by the Authority of all payments made to its group or
promoter or subsidiary or interconnected or associate entities; (vii)
composition of the Board of
Directors and key management persons shall be as specified by the concerned regulators (j)
The other condition under the
heading Banking-Private Sector specified against serial number F.2.1 shall
be applicable in respect of bank promoted insurance companies. (k)
[60][*][61][Terms
Equity Share Capital , ‟Foreign Direct Investment (FDI), Foreign Investors , ‟Foreign
Portfolio Investment , Indian Insurance Company , ‟Indian
Company , Non-resident Entity , Public
Financial Institution , Resident Indian Citizen and Total Foreign
Investment shall have the same meaning as specified in the rules under the
Insurance Act, 1938 or in the regulations issued by Insurance Regulatory and
Development Authority of India from time to time, in respect of foreign
investment in Indian Insurance Companies and intermediaries or insurance
intermediaries.].] |
||
|
[62][F8.3.2 |
Other
conditions applicable to the Life Insurance Corporation of India (LIC) (a)
Foreign investment
in LIC shall be subject to the provisions of the Life Insurance Corporation
Act, 1956, (LIC Act) as amended from time to time (LIC Act) and such
provisions of the Insurance Act, 1938, as amended from time to time, as are
applicable to LIC. (b)
Provisions of
clauses (e) and (f) under Sl. No. F.8.3.1, shall also apply to LIC, as if
reference therein to an Indian Insurance Company is a reference to LIC. (c)
The
terms referred to in clause (k) under Sl. No. F.8.3.1 shall have the same
meaning as referred to therein. Explanation:
For the purposes of this Sl. No., any reference to Indian insurance company
or company referred to in clause (k) under Sl. No. F.8.3.1, shall be
construed as a reference to LIC. .] |
||
|
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
shall 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 or regulation issued by them. |
||
|
F.10 |
Other
Financial Services |
100% |
Automatic |
|
F.10.1 |
Other
Conditions |
|
|
|
|
(a)
Other Financial Services shall 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 shall 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" that is
treated as indirect foreign investment for the investee entity shall be
subject to these rules. |
||
SCHEDULE II
(See
rule 10(1))
Investments by Foreign Portfolio
Investors
(1)
Purchase
or sale of equity instruments by Foreign Portfolio Investors
(a)
Purchase
and sale of equity instruments.- A
FPI may purchase or sell equity instruments of an Indian company listed or to
be listed on a recognised stock exchange in India
subject to the following conditions, namely:-
(i)
The total holding by each FPI or an
investor group, 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 [63][by
FPIs] and the total holdings of all FPIs put together, including any other
direct and indirect foreign investments in the Indian company [64][by
FPIs] permitted under these rules, shall not exceed 24 per cent 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 shall be called the individual and aggregate limit, respectively:
[65][Provided
the aggregate limit of 24 per cent 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.]
(ii)
With effect from the 1st April, 2020, the aggregate limit shall be the sectoral
caps applicable to the Indian company as laid out in sub-paragraph (b) of
paragraph 3 of Schedule I of these rules, with respect to its paid-up equity
capital on a fully diluted basis or such same sectoral cap percentage of paid
up value of each series of debentures or preference shares or share warrants:
Provided that the
aggregate limit as provided above may be decreased by the Indian company
concerned to a lower threshold limit of 24% or 49% or 74% as deemed fit, with
the approval of its Board of Directors and its General Body through a
resolution and a special resolution, respectively before 31st March, 2020:
Provided further,
that the Indian company which has decreased its aggregate limit to 24% or 49%
or 74%, may increase such aggregate limit to 49% or 74% or the sectoral cap or
statutory ceiling respectively as deemed fit, with the approval of its Board of
Directors and its General Body through a resolution and a special resolution,
respectively:
Provided also
that once the aggregate limit has been increased to a higher threshold, the
Indian company cannot reduce the same to a lower threshold:
Provided also
that the aggregate limit with respect to an Indian company in a sector where
FDI is prohibited shall be 24 per cent.
Explanation: In
case, two or more FPI s including foreign Governments/their related entities
are having common ownership, directly or indirectly, of more than fifty percent
or common control, all such FPI s shall be treated as forming part of an
investor group. Control includes the right to appoint majority of the directors
or to control the management or policy decisions exercisable by a person or
persons acting individually or in concert, directly or indirectly, including by
virtue of shareholding or management rights or shareholders agreements or
voting agreements or in any other manner.
(iii)
[66][The
FPIs investing in breach of the prescribed limit shall have the option of
divesting their holdings within five trading days from the date of settlement
of the trades causing the breach. In case the FPI chooses not to divest, then
the entire investment in the company by such FPI and its investor group shall
be considered as investment under Foreign Direct Investment (FDI) and the FPI
and its investor group shall not make further portfolio investment in the
company concerned. The FPI, through its designated custodian, shall bring the
same to the notice of the depositories as well as the concerned company for
effecting necessary changes in their records, within -seven trading days from
the date of settlement of the trades causing the breach. The divestment of
holdings by the FPI and the reclassification of FPI investment as FDI shall be
subject to further conditions, if any, specified by Securities and Exchange
Board of India and the Reserve Bank in this regard. The breach of the said
aggregate or sectoral limit on account of such acquisition for the period
between the acquisition and sale or conversion to FDI within the prescribed
time, shall not be reckoned as a contravention under these rules.]
(iv)
The investment by foreign Government
agencies shall be clubbed with the investment by the foreign Government or its
related entities for the purpose of calculation of 10 percent limit for FPI
investments in a single company, if they form part of an investor group.
However, certain foreign Government agencies and its related entities may be
exempt from such clubbing requirements and other investment conditions either
by way of an agreement or treaty with other sovereign governments or by an
order of the Central Government.
(v)
A FPI may purchase equity instruments
of an Indian company through public offer or private placement, subject to the
individual and aggregate limits specified under this Schedule:
Provided that -
(A)
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
(B)
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 Merchant Banker or Chartered
Accountant or a practicing Cost Accountant, as applicable registered with the
Securities and Exchange Board of India
(vi)
A 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.
(vii)
Investments made under this Schedule
shall be subject to the limits and margin requirements specified by the Reserve
Bank or the Securities and Exchange Board of India as well as the stipulations
regarding collateral securities as specified by the Reserve Bank from time to
time.
(b)
Purchase or sale of securities other than
equity instruments by FPIs.-
(i)
A FPI may purchase units of domestic
mutual funds or Category III Alternative Investment Fund or offshore fund for
which no objection is issued in accordance with the SEBI (Mutual Fund)
Regulations, 1996, which in turn invest more than 50 percent in equity
instruments on repatriation basis subject to the terms and conditions specified
by the Securities and Exchange Board of India and the Reserve Bank.
(ii)
An FPI may purchase units of REITs and
InVITs on repatriation basis subject to the terms and
conditions specified by the Securities and Exchange Board of India.
(2)
The mode of
payment and other attendant conditions for remittance of sale or maturity
proceeds shall be specified by the Reserve Bank.
SCHEDULE III
(See rule 12(1))
Investments by Non-Resident Indian
(NRI) or Overseas Citizen of India (OCI) on repatriation basis
(1)
Purchase
or sale of equity instruments of a listed Indian company
A Non-resident Indian (NRI) or an Overseas Citizen of
India (OCI) may purchase or sell equity instruments of a listed Indian company
on repatriation basis, on a recognized stock exchange in India, subject to the
following conditions, namely:-
(a)
NRIs or OCIs may purchase and sell
equity instruments through a branch designated by an Authorized Dealer for the purpose;
(b)
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 shall 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)
Purchase
or sale of units of domestic mutual funds
A Non-resident Indian (NRI) or an Overseas Citizen of
India (OCI) may without limit purchase or sell units of domestic mutual funds
which invest more than 50 percent in equity.
(3)
Purchase
or sale of shares in public sector enterprises
A Non-resident Indian (NRI) or an Overseas Citizen of
India (OCI) may, without limit purchase or sell 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.
(4)
Subscription
to National Pension System.-
A NRI or an OCI may subscribe to the 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 Pension Fund Regulatory and Development Authority Act. The
annuity/ accumulated saving will be repatriable:
Provided that
NRIs or OCIs may offer such instruments as permitted by the Reserve Bank from
time to time as collateral to the recognised Stock
Exchanges in India for their transactions in exchange traded derivative
contracts as prescribed in sub-clause (2) of clause 12 of these Rules.
(5)
The mode of payment and attendant
conditions for remittance of sale or maturity proceeds shall be specified by
the Reserve Bank.
SCHEDULE IV
(See
rule 12(2))
Investment by NRI or OCI on non-repatriation
basis
A. Purchase or sale of equity
instruments of an Indian company or units or contribution to the capital of a LLP by Non-Resident Indian (NRI) or Overseas Citizen of
India (OCI) on Non-repatriation basis.
(1) Purchase or sale of equity
instruments or convertible notes or units or contribution to the capital of a LLP.
(a) 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 or contribute, as the case may be,
on non-repatriation basis the following, namely:-
(i)
a
equity instrument issued by a company without any limit either on the stock
exchange or outside it;
(ii)
units issued by an investment vehicle
without any limit, either on the stock exchange or outside it;
(iii) The
capital of a Limited Liability Partnership without any limit;
(iv) convertible
notes issued by a startup company in accordance with these rules.
(b) The
investment detailed at sub-paragraph (a) of paragraph
(1) above shall be deemed to be domestic investment at par with the investment
made by residents.
(2) Purchase or sale of units of
domestic mutual funds
A Non-resident Indian (NRI) or an Overseas Citizen of
India (OCI) may without limit purchase or sell units of domestic mutual funds
on non-repatriation basis which invest more than 50% in equity.
(3)
Prohibition
on purchase of equity instruments of certain companies.
Notwithstanding anything contained in paragraph 1, a
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 equity instruments or units of a Nidhi
company or a company engaged in agricultural or plantation activities or real
estate business or construction of farm houses or
dealing in transfer of development rights.
Explanation: Real estate business shall have the
same meaning as specified in sub-paragraph (b) of paragraph (3) of Schedule 1.
(4) The
mode of payment and attendant conditions for remittance of sale or maturity
proceeds shall be specified by the Reserve Bank.
B.
Investment in a firm or a proprietary concern.
(1)
Contribution to capital of a firm or a
proprietary concern.
A 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 or plantation activity or print media or real estate business.
Explanation: Real estate business shall have the
same meaning as specified in sub paragraph (b) of paragraph (3) of Schedule I.
(2)
The mode of payment and attendant
conditions for remittance of sale or maturity proceeds shall be specified by
the Reserve Bank.
SCHEDULE V
(See
Rule (14))
Investment by other non-resident
investors
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 and Foreign Central Banks may purchase securities subject to such
terms and conditions as may be specified by the Reserve Bank and the Securities
and Exchange Board of India.
(2)
Eligible Foreign Entity (EEE) as
defined in SEBI circular dated the 9th
October 2018 and having actual exposure to Indian physical commodity market may
participate in domestic commodity derivative markets in accordance with
framework specified by the Securities and Exchange Board of India.
(3)
The mode of payment and other
attendant conditions for remittance of sale or maturity proceeds shall be
specified by the Reserve Bank.
SCHEDULE VI
(See
rule 6(b))
Investment in a Limited Liability Partnership
(LLP)
(i)
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 or
activities where foreign investment up to 100 per cent is permitted under
automatic route and there are no FDI linked performance conditions.
(ii)
Investment by way of profit share
shall fall under the category of reinvestment of earnings.
(iii)
Investment in a
LLP is subject to the compliance of the conditions of Limited Liability
Partnership Act, 2008.
(iv)
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,
may be converted into a LLP under the automatic route.
(v)
A LLP
having foreign investment, engaged in a sector where foreign investment up to
100 per cent is permitted under the automatic route and there are no FDI linked
performance conditions, may be converted into a company under the automatic
route.
(vi)
Investment in a LLP either by way of
capital contribution or by way of acquisition or transfer of profit shares,
should not be less than the fair price worked out as per any valuation norm
which is internationally accepted or adopted as per market practice
(hereinafter referred to as fair price of capital contribution or profit share
of a LLP ) and a valuation certificate to that effect shall be issued by the
Chartered Accountant or by a practising Cost
Accountant or by an approved valuer from the panel maintained by the Central
Government.
(vii) In
case of transfer of capital contribution or 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 or profit
share of a LLP. Further, in case of transfer of
capital contribution or 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 or profit share of an
LLP.
(viii)
The mode of payment and other
attendant conditions for remittance of sale or maturity proceeds shall be
specified by the Reserve Bank.
SCHEDULE VII
(See
rule 16)
Investment by a
Foreign Venture Capital Investor (FVCI)
(1)
Subject to the terms and conditions as may be
laid down by the Central Government, a Foreign Venture Capital Investor (FVCI)
may purchase,- -
(i)
securities, issued by an Indian
company engaged in any sector mentioned in paragraph (4) of this Schedule and
whose securities are not listed on a recognised stock
exchange at the time of issue of the said securities;
(ii)
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.
(iii)
equity or equity linked instrument or
debt instrument issued by an Indian start-up irrespective of the sector in
which the start-up is engaged. The definition of start-up shall be as per
Department for Promotion of Industry and Internal Trade s Notification No.
G.S.R. 364(E), dated the 11th April, 2018 :
Provided that if
the investment is in equity instruments, then the sectoral caps, entry routes
and attendant conditions shall apply.
(2)
A FVCI may purchase the securities or
instruments mentioned above either from the issuer of these securities/
instruments or from any person holding these securities or instruments. The
FVCI may invest in securities on a recognised 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 or 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 or funds set up by the VCFs or Cat-I AIFs.
(4)
The mode of payment and other
attendant conditions for remittance of sale or maturity proceeds shall be
specified by the Reserve Bank of India
(5)
List of sectors in which a Foreign
Venture Capital Investor is allowed to invest is as follows :-
(a)
biotechnology;
(b)
IT related to hardware and software development;
(c)
nanotechnology;
(d)
seed research and development;
(e)
research and development of new
chemical entities in pharmaceutical sector.
(f)
dairy industry;
(g)
poultry industry;
(h)
production of bio-fuels;
(i)
hotel-cum-convention centres with seating capacity of more than three thousand;
(j)
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 the March 27, 2012
as amended or updated.
SCHEDULE
VIII
(See
Rule 6(c))
Investment by a person resident
outside India in 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 the
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
equity 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 organised
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 or investment
managers , with the general exclusion to others. In case the sponsors and
managers or investment managers of the AIF are individuals, for the treatment
of down- stream investment by such AIF as domestic, sponsors and manager or
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 or rules or regulations made thereunder.
(6)
The mode of payment and other
attendant conditions for remittance of sale or maturity proceeds shall be
specified by the Reserve Bank.
SCHEDULE IX
(See
rule 6(d))
Investment in Depository Receipts by a
person resident outside India
(1) Issue
or transfer of eligible instruments to a foreign depository for the purpose of
issuance of depository receipts by eligible person(s).-
(a)
Any security or unit in which a person
resident outside India is allowed to invest under these rules shall be eligible
instruments for issue of Depository Receipts in terms of Depository Receipts
Scheme, 2014 (DR Scheme,2014).
(b)
A person shall 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 the Central Government in this regard.
(c)
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.
(d)
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.
(e)
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 specified in this Schedule.
SCHEDULE X
(See
rule 10(2))
Issue of Indian Depository Receipts
(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:
(a)
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;
(b)
any issue of IDRs by financial or
banking companies having presence in India, either through a branch or
subsidiary, shall require prior approval of the sectoral regulator(s);
(c)
IDRs shall be denominated in Indian
rupee only;
(d)
the proceeds of the issue of IDRs
shall be immediately repatriated outside India by the companies issuing such
IDRs.
(2) Purchase or sale of IDRs.-
A FPI or a NRI or an OCI may purchase, hold, or sell IDRs, subject to the
following terms and conditions, namely:-
(a)
the mode of payment and attendant
conditions for remittance of sale or maturity proceeds shall be as specified by
the Reserve Bank;
(b)
limited two way
fungibility of IDRs shall be permissible subject to the terms and conditions
stipulated by the Reserve Bank in this regard;
(c)
IDR shall not be redeemable into
underlying equity shares before the expiry of one year from the date of issue;
(d)
Redemption or conversion of IDRs into
underlying equity shares of the issuing company shall be in
compliance with the Foreign Exchange Management (Transfer or Issue of
any Foreign Security) Regulations, 2004.
[67][SCHEDULE XI
(See rule 34)
Direct Listing
of Equity Shares of Companies Incorporated in India on International Exchanges
Scheme
(1) Issue
and Listing on International Exchanges .- A public Indian company may issue
equity shares or offer equity shares of existing shareholders, subject to the
following conditions, namely:-
(i)
such issue or offer of equity shares
of existing shareholders shall be permitted and such shares shall be listed on
any of the specified International Exchange.
(ii)
such issue or offer of equity shares
of existing shareholders shall be subject to prohibited activities, and sectoral
caps prescribed in paragraph 2 and 3 of Schedule I to these rules;
(iii)
such equity shares to be issued by the
public Indian company or offered by its existing shareholders on an International
Exchange shall be in dematerialised form and rank pari passu with equity shares listed on a recognised stock exchange in India:
Provided that the prior Government approval,
wherever applicable, shall be obtained.
(2)
Permissible holder .- (a)
permissible holder means a holder of equity shares of the Company which are
listed on International Exchange, including its beneficial owner:
Provided that
such a holder who is a citizen of a country which shares land border with
India, or an entity incorporated in such a country, or an entity whose
beneficial owner is from such a country, shall hold equity shares of such
public Indian company only with the approval of the Central Government.
Explanation 1.-
For the purposes of this clause, permissible holder is not a person resident in
India.
Explanation 2.-
The permissible holder, including its beneficial owner, shall be responsible
for ensuring compliance
with this
requirement. The public Indian company, in its offer document, by whatever name
called in the permissible
jurisdiction,
shall make a disclosure to this effect.
(b) a
permissible holder may purchase or sell equity shares of an Indian company
listed on an international exchange
subject to limit specified for foreign
portfolio investment under these rules.
(3)
Eligibility .-
(1)
(I) a public Indian company may issue
equity shares on International Exchange; or (II) the existing shareholders may
offer equity shares in such exchange, subject to compliance with following
conditions and other requirements as laid down in this Scheme:
(i)
a public Indian company shall be
eligible to issue equity shares in permissible jurisdiction, if-
a
the public Indian company, any of its
promoters, promoter group or directors or selling shareholders are not debarred
from accessing the capital market by the appropriate regulator;
b
none of the promoters or directors of
the public Indian company is a promoter or director of any other Indian company
which is debarred from accessing the capital market by the appropriate regulator;
c
the public Indian company or any of
its promoters or directors is not a wilful defaulter;
d
the public Indian company is not under
inspection or investigation under the provisions of the Companies Act, 2013 (18
of 2013);
e
none of its promoters or directors is
a fugitive economic offender.
(ii)
Existing holders of the public Indian
company shall be eligible to offer shares, if
a
the public Indian company or the
holder offering equity shares are not debarred from accessing the capital market
by the appropriate regulator;
b
none of the promoters or directors of
the public Indian company is a promoter or director of any other Indian company,
listed or otherwise, which is debarred from accessing the capital market by the
appropriate regulator;
c
the public Indian company or the
holder offering equity shares is not a wilful defaulter;
d
the public Indian company is not under
inspection or investigation under the provisions of the Companies Act, 2013 (18
of 2013);
e
none of the promoters or directors of
the public Indian company or the holder offering equity shares is a fugitive
economic offender.
(2)
(I) a listed Indian company may issue
equity shares on International Exchange; or (II)
the existing share holders may offer equity shares in
such exchange, subject to compliance with the conditions and other requirements
as per the norms notified by the Securities and Exchange Board of India from
time to time.
(3)
(I) a public unlisted Indian company
may issue equity shares on International Exchange; or (II) the existing share holders may offer equity shares in such exchange, subject to compliance with the conditions and other
requirements as per the norms notified by the Ministry of Corporate Affairs
from time to time.
Explanation.-
The restrictions mentioned at items (a) and (b) of
sub-clause (i) of clauses (I) and (II) of
sub-paragraph (1) of paragraph 3 and items (a) and (b) of sub-clause (ii) of clauses
(I) and (II) of sub-paragraph (1) of paragraph 3 shall not apply to the persons
or entities mentioned therein, who were debarred in the past by the Government
or the appropriate regulator and the period of debarment is already over as on
the date of listing of its equity shares on the International Exchange(s)
(4)
Obligations of companies
(1)
The public Indian company shall ensure
compliance with extant laws relating to issuance of equity shares, including
requirements prescribed in this Scheme, the Securities Contracts (Regulation)
Act,1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15
of 1992), the Depositories Act, 1996 (22 of 1996), the Foreign Exchange
Management Act,1999(42 of 1999), the Prevention of Money-laundering Act, 2002
(15 of 2003) or the Companies Act, 2013 (18 of 2013) and rules and regulations
made thereunder, as applicable. For this purpose, the said public Indian
company may also enter into necessary arrangements
with Indian Depository and Foreign Depository.
(2)
The public Indian company shall ensure
that the aggregate of equity shares which may be issued or offered in a
permissible jurisdiction, along with equity shares already held in India by
persons resident outside India, shall not exceed the limit on foreign holding
under the Schedule I to these rules.
(5)
Voting rights .- The public
Indian companies having their equity shares listed on International Exchange
shall ensure that the voting rights on such equity shares shall be exercised
directly by the permissible holder or through their custodian pursuant to
voting instruction only from such permissible holder.
(6)
Pricing .-
(1)
Where equity shares are issued by a
listed company or offered by the existing shareholders of equity shares listed
on Recognised Stock Exchange in India, the same shall
be issued at a price, not less than the price applicable to a corresponding
mode of issuance of such equity shares to domestic investors under the
applicable laws.
(2)
In case of initial listing of equity
shares by a public unlisted Indian company on the International Exchange, the price
of issue or transfer of equity shares shall be determined by a book- building
process as permitted by the said International Exchange and shall not be less
than the fair market value under applicable rules or regulations under the
Foreign Exchange Management Act, 1999(42 of 1999):
Provided that
subsequent issuance or transfer of shares for the purpose of listing additional
shares post initial listing would be based on applicable pricing norms of the
International Exchange and the permissible jurisdiction.
Explanation.
For the purposes of this Scheme-
(a)
appropriate
regulator means any financial sector regulator or Government Ministry
or Department administering Acts applicable to the company, listed or unlisted;
(b)
beneficial
owner shall have the same meaning as provided in proviso to sub-rule
(1) of rule 9 of the Prevention of Money-laundering (Maintenance of Records)
Rules, 2005;
(c) foreign depository means a
corporate entity registered and regulated in a permissible jurisdiction for the
purpose of
(i) holding securities and maintaining securities accounts
for beneficial owners in an electronic manner; and
(ii) managing
rights or interests in securities resulting from the credit of securities to a
securities account.
Explanation.-For
the purposes of this clause foreign depository includes Central Securities
Depositories and International Central Securities Depositories.
(d)
fugitive
economic offender shall have the same meaning as assigned to it under
clause (f) of sub-section (1) of section 2 of the Fugitive Economic Offenders
Act, 2018 (17 of 2018);
(e)
Indian depository
means a depository as defined in clause (e) of sub-section (1) of section 2 of
the Depositories Act, 1996 (22 of 1996);
(f) offer by existing holders of equity
shares means offer of existing equity shares of the company pursuant
to formal agreement among the company, the Indian Depository and the Foreign depository;
(g) offer document means a
prospectus, red herring prospectus, or shelf prospectus, as applicable, as
referred to in clause (70) of section 2 of the Companies Act, 2013 (18 of
2013), in case of a public issue, and a letter of offer in case of a rights
issue;
(h)
wilful
defaulter means a person who is categorised
as a wilful defaulter by any bank or financial
institution or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India.
Annexure
List of
International Exchanges
1. International
Financial Services Centre in India- India International Exchange, NSE
International Exchange.]
DISCLAIMER: This document is meant for educational purposes only,
and does not constitute legal advice of any kind. By accessing this
document, you agree that this document has been provided free-of-cost
and that the maintainer shall not be responsible for any errors, mistakes,
misstatements, or omissions. Kindly refer to the official gazette notifications
to verify the authenticity of text in this document.
[1]
Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]. Substituted
text: five
[2]
Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]. Substituted
text: (i) Equity shares issued in accordance with
the provisions of the Companies Act, 2013 shall include equity shares that have
been partly paid. Convertible 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 by the
Securities and Exchange Board of India. Equity 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
[3] Substituted vide Foreign Exchange
Management (Non-debt Instruments) (Amendment) Rules, 2022 [S.O. 1802(E)
dated April 12, 2022]. Substituted text: Explanation: - If a declaration is
made by a person 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
[4] Substituted vide Foreign Exchange
Management (Non-debt Instruments) (Amendment) Rules, 2022 [S.O. 1802(E)
dated April 12, 2022]. Substituted text: Indian company means a
company incorporated in India
[5] Inserted vide Foreign
Exchange Management (Non-debt Instruments) (Amendment) Rules, 2024 [S.O. 332(E)
dated January 24, 2024]
[6] Deleted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019].
Deleted text: and (iv) mutual funds which invest more than fifty percent in
equity governed by the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996 [effective from October 17, 2019]
[7] Substituted vide
Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2024
[S.O. 332(E) dated January 24, 2024]. Substituted text:
(ag) listed
Indian company means an Indian company which has any of its equity
instruments or debt instruments listed on a recognised
stock exchange in India and the expression unlisted Indian company shall be
construed accordingly;
[8] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2024 [S.O. 332(E) dated January 24, 2024]
[9] Deleted vide Foreign
Exchange Management (Non-debt Instruments) (Amendment) Rules, 2019 [S.O.
4355(E) dated December 05, 2019]. Deleted text: and debt [effective
from October 17, 2019]
[10] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]
[11] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]
[12] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Third Amendment) Rules, 2020 [S.O.2442(E) dated July 27, 2020]
[13] Deleted vide Foreign Exchange Management (Non-debt
Instruments) (Third Amendment) Rules, 2020 [S.O.2442(E) dated July 27, 2020].
The deleted text: and
in consultation with the Central Government
[14] Deleted vide Foreign Exchange Management (Non-debt
Instruments) (Third Amendment) Rules, 2020 [S.O.2442(E) dated July 27, 2020].
The deleted text: and
in consultation with the Central Government
[15] Substituted vide Foreign Exchange Management (Non-debt
Instruments) Amendment Rules, 2020 [S.O. 1278(E) dated April 22, 2020]. Substituted
text: Provided that a person who is a citizen of Bangladesh or
Pakistan or is an entity incorporated in Bangladesh or Pakistan cannot purchase
equity instruments without the prior government approval:
Provided further that a citizen of Pakistan or an
entity incorporated in Pakistan cannot invest in defence, space, atomic energy
and sectors or activities prohibited for foreign investment even through the
government route.
[16] Inserted vide Foreign Exchange Management (Non-debt Instruments)
(Fourth Amendment) Rules, 2020 [S.O. 4441(E) dated December 08, 2020].
[17] Deleted vide Foreign Exchange Management
(Non-debt Instruments) (Second Amendment) Rules, 2020 [S.O.1374(E) dated April
27, 2020]. Deleted text: The above conditions shall also be applicable in case
a person resident outside India makes investment in equity 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
[18] Inserted
vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment)
Rules, 2020 [S.O.1374(E) dated April 27, 2020]
[19] Substituted vide Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]. Substituted
text: 8. Issue of Employees Stock Options and sweat equity shares to persons
resident outside India.- An Indian company may issue employees stock option
and/ or sweat equity shares to its employees or directors or employees or
directors of its holding company or joint venture or wholly owned overseas
subsidiary or subsidiaries who are resident outside India:
Provided that. - (a) 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, as the
case may be;
(b) the employee s stock option or sweat equity
shares so issued under the rules or regulations are in compliance with the
sectoral cap applicable to the said company;
(c) the issue of employee s stock option or sweat
equity shares in a company where investment by a person resident outside India
is under the approval route shall require prior government approval and issue
of employee s stock option or sweat equity shares to a citizen of
Bangladesh or Pakistan shall require prior government approval :
Provided further that an individual who is a person
resident outside India exercising an option which was issued when he or she was
a person resident in India shall hold the shares so acquired on exercising the
option on a non- repatriation basis.
[20] Deleted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019].
Deleted text: on a non- repatriation basis . [effective from October
17, 2019]
[21] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. [effective
from October 17, 2019] Substituted text: 11. Transfer of equity instruments of an Indian company
by FPI - A FPI holding
equity instruments of an Indian company or units in accordance with these
rules, may transfer such equity instruments or units so held by him in
compliance with the conditions, if any, prescribed in the respective Schedules
of these rules and subject to the terms and conditions prescribed hereunder and
as specified by the Securities and Exchange Board of India;
(1) A FPI may transfer by way of sale or gift the
equity instruments of an Indian company or units held by him to any person
resident outside India;
Explanation: For the purposes of this rule transfer shall also
include transfer of equity instruments of an Indian company pursuant to
liquidation, merger, de-merger and amalgamation of entities or 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 the Government approval.
(ii)
where the acquisition of equity instruments by FPI made under Schedule II of
these rules has resulted in a breach of the applicable aggregate FPI limits or
sectoral limits, the provisions of sub-paragraph a (iii) of paragraph (1) of
Schedule II shall apply.
[22] Substituted vide Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]. Substituted
text: (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 the National Company Law Tribunal (NCLT) or
competent authority, the transferee company or the new company, as the case may
be, may issue equity 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 approval 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.
[23] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]
[24] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. [effective
from October 17, 2019]
[25] Inserted
vide Foreign Exchange Management (Nondebt Instruments) (Amendment) Rules, 2021
[S.O.3206(E) dated August 06, 2021 (published August 09, 2021]
[26] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2024 [S.O. 332(E) dated January 24, 2024]
[27] Substituted vide Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]. Substituted
text: Explanation: For the
purpose of this rule, real estate business shall not include development of
townships, construction of residential or commercial premises, roads or bridges
and Real Estate Investment Trusts (REITs) registered and regulated under the
SEBI (REITs) Regulations, 2014.
[28] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. Substituted text: (a.) Coal and Lignite mining
for captive consumption by power projects, iron and steel and cement units and
other eligible activities permitted under and subject to the provisions of Coal
Mines (Nationalization) Act, 1973.
[29] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]
[30] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]
[31] Inserted
vide Foreign Exchange Management (Non-debt Instruments) (Third Amendment)
Rules, 2021 [S.O. 4091(E) dated October 05, 2021].
[32] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. Substituted
text: A manufacturer is permitted to sell its products manufactured in
India through wholesale and/ or retail, including through e-commerce without Government
approval.
[33] Substituted vide Foreign Exchange Management (Non-debt Instruments)
(Fourth Amendment) Rules, 2020 [S.O. 4441(E) dated December 08, 2020]. Prior to
substitution, the para read as:
|
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, shall
require Government approval. (b)
Licence applications will be considered
and licences shall be given by the Department of
Industrial Policy and 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. |
||
[34] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019].
[35] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. Substituted
text: 7.2.3 .
[36] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Third Amendment) Rules, 2020 [S.O.2442(E) dated July 27, 2020]. Substituted
text: Air Transport Services
|
(a) (i) Scheduled Air
Transport Service/ Domestic Scheduled Passenger Airline (ii)
Regional Air Transport Service |
100% |
Automatic up to 49%;Government
route beyond 49%(Automatic up to 100% for NRI s and OCI s) |
|
(b)
Non-Scheduled Air Transport Service |
100% |
Automatic |
|
(c) Helicopter service or seaplane services
requiring Directorate General
of Civil Aviation approval |
100% |
Automatic |
[37] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Third Amendment) Rules, 2020 [S.O.2442(E) dated July 27, 2020].
[38] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Third Amendment) Rules, 2020 [S.O.2442(E) dated July 27, 2020]. Substituted
text: (a) Air Transport Services shall 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 nonscheduled
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, namely,:
(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 may be granted
only to a company:
(1) that is registered and has its principal place of
business within India;
(2) the Chairman and at least two-thirds of the
Directors of which are citizens of India; and
(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.
(d) In addition to the above conditions, foreign
investment in M/s Air India Limited shall be subject to the following
conditions:
(i) Foreign investment in
M/s Air India Ltd., including that of foreign airline(s), shall not exceed 49%
either directly or indirectly.
(ii) Substantial ownership and effective control of
M/s Air India Ltd. shall continue to be vested in Indian Nationals.
Note:
(4) The sectoral caps or 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.
(5) 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.
(6) The investee company additionally
[39] Substituted
vide Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment)
Rules, 2021 [S.O. 4242(E) dated October 12, 2021]. Substituted text: 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.
[40] Substituted
vide Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment)
Rules, 2021 [S.O. 4242(E) dated October 12, 2021]. Substituted text: Automatic up to 49%; Government route beyond 49%
[41] Substituted
vide Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment)
Rules, 2021 [S.O. 4242(E) dated October 12, 2021]. Substituted text: 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.
[42] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. Substituted
text: (p) All existing investments
shall have to be in compliance with the above conditions from the date of issue
of this Notification.
[43] Substituted Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. Substituted
text: Automatic up to 49%;
Government route beyond 49%
[effective from October
17, 2019]
[44] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. Substituted
text: (e) In respect of proposals involving foreign investment beyond 51
percent, sourcing of 30 percent of the value of goods purchased, shall be done
from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors. The quantum of
domestic sourcing shall be self-certified by the company, to be subsequently
checked, by statutory auditors, from the duly certified accounts which the
company shall 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) Single
brand retail trading entity shall be permitted to set off its incremental
sourcing of goods from India for global operations during initial 5 years,
beginning 1st April of the year of the opening of first store, against the
mandatory sourcing requirement of 30% of purchases from India. For this
purpose, incremental sourcing shall mean the increase in terms of value of such
global sourcing from India for that single brand (in INR terms) in a particular
financial year from India over the preceding financial year, by the
non-resident entities undertaking single brand retail trading, either directly
or through their group companies. After completion of this 5 years period, the
SBRT entity shall be required to meet the 30% sourcing norms directly towards
its India s operation, on an annual basis.
[45] Inserted
vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment)
Rules, 2020 [S.O.1374(E) dated April 27, 2020]
[46] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Second Amendment) Rules, 2021 [S.O. 3411(E) dated August 19, 2021].
Substituted text: Applications
for foreign investment in private banks having joint venture or 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.
[47] Substituted
vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment)
Rules, 2020 [S.O.1374(E) dated April 27, 2020]. Substituted text: (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).
[48] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Second Amendment) Rules, 2021 [S.O. 3411(E) dated August 19,
2021]. Substituted text: 49%
[49] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022]
[50] Inserted
vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment)
Rules, 2020 [S.O.1374(E) dated April 27, 2020]
[51] Inserted
vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment)
Rules, 2020 [S.O.1374(E) dated April 27, 2020]
[52] Inserted
vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment)
Rules, 2020 [S.O.1374(E) dated April 27, 2020]
[53] Substituted vide Foreign Exchange Management
(Non-debt Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12,
2022]. Substituted text: F8.3 Other Conditions
[54] Substituted
vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment)
Rules, 2020 [S.O.1374(E) dated April 27, 2020]. Substituted text: (a) Foreign
investment in this sector shall be subject to compliance with the provisions of
the Insurance Act, 1938 and subject to necessary license or approval from the
Insurance Regulatory and 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 the Central Government
or 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.
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.
[55] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Second Amendment) Rules, 2021 [S.O. 3411(E) dated August 19,
2021]. Substituted text: forty-nine
percent
[56] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Second Amendment) Rules, 2021 [S.O. 3411(E) dated August 19,
2021]. Substituted text: forty-nine
percent
[57] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Second Amendment) Rules, 2021 [S.O. 3411(E) dated August 19,
2021]. Substituted text: (d)
An Indian Insurance company shall ensure that its ownership and control remains at all times in the hands of resident Indian
entities as determined by Department of Financial Services or Insurance
Regulatory and Development Authority of India as per the rules or regulation
issued by them from time to time.
[58]
Substituted vide Foreign
Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2021 [S.O.
3411(E) dated August 19, 2021]. Substituted text: 2014
[59] Substituted vide Foreign
Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2021 [S.O.
3411(E) dated August 19, 2021]. Substituted text: the condition of Indian owned and controlled
[60] Substituted vide Foreign Exchange Management (Non-debt
Instruments) (Second Amendment) Rules, 2021 [S.O. 3411(E) dated August 19,
2021]. Substituted text: 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 the 19th February, 2015 issued by
Department of Financial Services and regulations issued by Insurance Regulatory
and Development Authority of India from time to time . Subsequently further
substituted as follows.
[61] Substituted vide Foreign Exchange Management
(Non-debt Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12,
2022]. Substituted text: (k) Terms Equity Share Capital , Foreign Direct
Investment (FDI), Foreign Investors , Foreign Portfolio Investment , Indian
Insurance Company , Indian Company , Non-resident Entity , Public Financial
Institution , Resident Indian Citizen , Total Foreign Investment shall have
the same meaning as provided in Notification No. G.S.R 115(E), dated 19th
February, 2015 issued by the Department of Financial Services and regulations
issued by the Insurance Regulatory and Development Authority of India from time
to time
[62] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2022 [S.O. 1802(E) dated April 12, 2022].
[63] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. [effective
from October 17, 2019]
[64] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. [effective
from October 17, 2019]
[65] Inserted vide Foreign Exchange Management (Non-debt
Instruments) (Amendment) Rules, 2019 [S.O. 4355(E) dated December 05, 2019]. [effective
from October 17, 2019]
[66] Substituted
vide Foreign Exchange Management (Non-debt Instruments) (Second Amendment)
Rules, 2020 [S.O.1374(E) dated April 27, 2020]. Substituted text: (iii) The
FPIs investing in breach of the prescribed limit shall have the option of
divesting their holdings within 5 trading days from the date of settlement of
the trades causing the breach. In case the FPI chooses not to divest, then the
entire investment in the company by such FPI and its investor group shall be
considered as investment under Foreign Direct Investment (FDI) and the FPI and
its investor group shall not make further portfolio investment in the company
concerned. The FPI, through its designated custodian, shall bring the same to
the notice of the depositories as well as the concerned company for effecting
necessary changes in their records, within 7 trading days from the date of
settlement of the trades causing the breach. The breach of the said aggregate
or sectoral limit on account of such acquisition for the period between the
acquisition and sale or conversion to FDI within the prescribed time, shall not
be reckoned as a contravention under these Rules.
[67] Inserted
vide Foreign Exchange Management (Non-debt Instruments) (Amendment) Rules, 2024
[S.O. 332(E) dated January 24, 2024]