1. A person resident outside India shall issue or transfer any security only as prescribed under the Foreign Exchange Management Act, its rules or regulations.
2. A security which is issued prior to and is held on the date of commencement of the Reserve Bank Regulations, 2000 shall be deemed to have been issued under such Regulations and shall be governed by them.
3. On an application made to it and for sufficient reasons, the Reserve Bank may allow a person resident outside India to issue or transfer any security subject to the necessary terms and conditions.
4. An Indian entity is not allowed to issue any security to a person resident outside India or to record in its books any transfer of security from or to such person, unless the Reserve Bank allows it on an application made to it and for sufficient reasons.

1. A person resident outside India (other than a citizen of Bangladesh/Pakistan/Sri Lanka) or an entity incorporated outside India (other than that in Bangladesh or Pakistan) under the Foreign Direct Investment-Scheme.
2. A registered Foreign Institutional Investor (FII) under the Portfolio Investment Scheme (no investments to be made in the paid up equity capital of Asset Reconstruction Companies or with an Indian company engaged in the print media sector).
3. A Non-resident Indian, on a Stock Exchange, under the Portfolio Investment Scheme, (no investments to be made with an Indian company engaged in the print media sector)
4. A Non-resident Indian / an Overseas Corporate Body, on non-repatriation basis, other than under Portfolio Investment Scheme.
5. A non-resident Indian/an overseas corporate body/a registered Foreign Institutional Investor may purchase securities other than shares or convertible debentures of an Indian company.
6. A foreign venture capital investor registered with SEBI may invest in a venture Capital Fund or an Indian Venture Capital Undertaking (no investments to be made with an Indian company engaged in the print media sector).
7. A registered Foreign Institutional Investor (FII) having valid approval under FERA, 1973 or FEMA, 1999 may trade in all exchange traded derivative contracts approved by SEBI, subject to the limits prescribed by SEBI.
8. A non-resident Indian may invest in exchange traded derivative contracts approved by SEBI on non-repatriable basis subject to the limits prescribed by SEBI.

ISSUE/ACQUISITION OF SHARES:

1. Right Shares: An Indian company may offer to a person resident outside India equity/preference shares/convertible debentures offered on right basis, provided it satisfies the following conditions:
   1. there is no increase in the percentage of foreign equity already permissible under the Foreign Direct Investment Scheme;
   2. the existing non-resident shareholders may apply for issue of additional shares and the investee company may allow it provided the overall issue of shares to non-residents in the total paid-up capital does not exceed the sectoral cap;
   3. the existing shares or debentures against which shares or debentures are issued by the company on right basis were acquired and are held by the non-resident Indian as per the Reserve Bank regulations;
   4. the offer on right basis to the non-resident Indians is at a price not lower than that at which it is made to resident shareholders.
   5. the right shares or debentures are subjected to the same conditions and restrictions in regard to repatriability as are applicable to the original shares.
2. Bonus Shares: An Indian company may issue bonus shares to its non-resident shareholders, subject to the following conditions:
   1. The original shares were acquired / held by the non-resident shareholder in accordance with the Rules/Regulations applicable to such acquisition;
   2. The bonus shares are subjected to the same conditions and restrictions in regard to repatriability as are applicable to original shares.
3. Issue of shares after merger/de-merger/amalgamation of Indian companies: In case of merger/de-merger/amalgamation of Indian companies, the transferee or new company may issue shares to the shareholders of the transferor company resident outside India, subject to following conditions:
   1. the percentage of shareholding of persons resident outside India in the transferee or new company does not exceed the percentage specified in the approval granted by the Central Government or the Reserve Bank;
   2. in case the above percentage exceeds, an approval is sought from the Central Government and the Reserve Bank;
   3. the transferor/transferee/new company does not engage in agriculture/plantation/real estate business;
   4. the transferee/new company files a report with the Reserve Bank giving full details of the shares held by persons resident outside India in the transferor and the transferee or the new company, before and after the merger/amalgamation/reconstruction.
4. Issue of shares under Employees Stock Options Scheme to persons resident outside India:
   1. An Indian company may issue either directly or through a Trust, shares under the Employees' Stock Options Scheme, to its employees/employees of its joint venture/wholly owned subsidiary abroad who are resident outside India.
   2. The Scheme must comply with the regulations issued under the Securities and Exchange Board of India Act, 1992.
   3. The value of shares held by persons resident outside India must not exceed 5% of the paid-up capital of the issuing company.
   4. The issuing company must furnish a report to the Reserve Bank giving details of names of persons to whom shares are issued, number of shares issued to them and a certificate from the issuing company's Company Secretary that the SEBI regulations are complied with.

TRANSFER OF SHARES/CONVERTIBLE DEBENTURES OF AN INDIAN COMPANY:

1. By a person resident outside India:
1. A person resident outside India who is not a non-resident Indian or an overseas corporate body, may transfer by way of sale or gift the shares / convertible debentures held by him / it to any person resident outside India.
2. A non-resident Indian or an overseas corporate body may transfer by way of sale or gift, the shares/convertible debentures held by him/it to another non-resident Indian or overseas corporate body.
3. Prior permission of the Central Government must be obtained if the person to whom the shares are being transferred has previous venture / tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement in India in the same field in which the Indian company transferring the shares is engaged.
4. A person resident outside India may transfer by way of gift, the shares/convertible debentures held by him to a person resident in India, or may sell the same on a recognized Stock Exchange in India through a registered broker.
2. By way of gift or sale by a person resident in India: A person resident in India who proposes to transfer to a person resident outside India:
1. any security, by way of gift, shall make an application to the Reserve Bank for its approval furnishing the required information or documents and the Reserve Bank may grant such approval on being satisfied of certain conditions.
2. any share/convertible debenture of an Indian company, whose activities fall under Private Sector Banking, Non-Banking Financial Companies or Insurance, by way of sale, must obtain the prior approval of the Government and the Reserve Bank. In case the share/convertible debenture is of an Indian company involved in other activities as specified in the Annexure to the Reserve Bank Regulations, such approval is not required.
3. Others:
1. A person resident outside India may transfer by way of sale the shares / convertible debentures held by him to a person resident in India with prior permission of the Reserve Bank.
2. A person resident outside India may transfer share or convertible debenture of an Indian company without the Reserve Bank's permission., by way of sale, to a person resident in India, provided the pricing guidelines, documentation and reporting requirements for such transfers as specified by the Reserve Bank are complied with.

REMITTANCE OF SALE PROCEEDS:

1. The remittance of sale proceeds of an Indian security held by a person resident outside India can be made only in accordance with the Reserve Bank regulations.
2. An authorized dealer may allow the remittance of sale proceeds of a security to the seller of shares resident outside India provided the security was held by him on repatriation basis/the security was sold on a recognized stock exchange in India or with Reserve Bank's approval in other cases/a no tax clearance certificate has been produced from the income-tax authority.

FOREIGN DIRECT INVESTMENT SCHEME:

Restricted and Prohibited Activities:

1. For the following activities, Automatic Route of Reserve Bank for investment from person resident outside India is not available:

Natural Gas / LNG Pipelines, Investing companies in Infrastructure and Services Sector, Defence and Strategic Industries, Atomic Minerals, Print Media, Broadcasting, Postal Services, Courier Services, Establishment and Operation of satellite, Development of Integrated Township, Tea Sector, Asset Reconstruction Companies.

2. For the following activities or items Foreign Direct Investment is prohibited:

Retail Trading, Atomic Energy, Lottery Business, Gambling and Betting, Housing and Real Estate business, Agriculture (excluding Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisiculture and Cultivation of Vegetables, Mushrooms etc.) and Plantations (other than Tea plantations).

Issue of shares by an Indian Company under Reserve Bank's Automatic Route:

1. An Indian company which complies with the Industrial Policy and Procedures as notified by Secretariat for Industrial Assistance (SIA) in the Ministry of Commerce and Industry provided the activities of the issuer company do not require an industrial license and the issuance of shares is not with the purpose of acquiring existing shares of any Indian company.
2. A trading company incorporated in India subject to certain conditions.
3. A small scale industrial unit.
4. An Export Oriented Unit/Unit in Free Trade Zone/Export Processing Zone/Software Technology Park/Electronic Hardware Technology Park.
5. An Indian company, being a provider of technology / technical know-how, against Royalty / Lump sum fees due for payment or against External Commercial Borrowing.

Issue of shares by a Company requiring the Government approval:

1. a company being engaged or proposing to engage in any activity included in the list of Restricted and Prohibited Activities;
2. a company proposing to issue shares beyond the sectoral limits as specified in the Reserve Bank regulations;
3. a company otherwise not being eligible to issue shares to a person resident outside India.

Issue of Shares by International offering:

1. An Indian company can raise foreign currency resources abroad by issuing its Rupee denominated shares to a person resident outside India being a depository for the purpose of issuing Global Depository Receipts (GDRs) and/or American Depository Receipts (ADRs).
2. Such Indian company must have an approval from the Ministry of Finance to issue such ADRs/GDRs and must not be otherwise ineligible to issue shares to persons resident outside India.
3. The ADRs/GDRs must be issued in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Central Government from time to time.
4. A registered broker in India may purchase shares of an Indian company on behalf of a person resident outside India for converting them into ADRs/GDRs, subject to certain conditions.
5. An Indian company may sponsor an issue of ADRs/GDRs with an overseas depository against shares held by its shareholders subject to certain conditions.

Mode of Payment for issued shares:

1. by inward remittance through normal banking channels, or
2. by debit to Non Resident External (NRE) account/Foreign Currency (FCNR) account of the person concerned maintained with an authorized dealer/bank.

PORTFOLIO INVESTMENT SCHEME

Purchase of shares/debentures by a Registered Foreign Institutional Investor:

1. A registered Foreign Institutional Investor (FII) may purchase shares/convertible debentures of an Indian company through a registered broker on a recognized stock exchange, subject to certain conditions.
2. Payment for purchase of shares/debentures must be made by inward remittance from abroad through normal banking channels or out of funds held in an account maintained with the designated branch of an authorized dealer in India.
3. A registered FII is permitted to purchase shares/convertible debentures of an Indian company through offer/private placement, subject to the ceiling specified in the Reserve Bank regulations.

Purchase/Sale of shares/debentures by a Non Resident Indian:

1. A Non-resident Indian may purchase/sell shares/convertible debentures of an Indian company through a registered broker on a recognized stock exchange, subject to certain conditions.
2. Non-resident Indians may purchase and sell shares/convertible debentures under this scheme through a branch designated by an Authorised Dealer approved by the Reserve Bank.
3. The Non-resident Indian investor will have to take delivery of the shares purchased and give delivery of the shares sold.
4. Payment for purchase of shares/debentures must be made by inward remittance in foreign exchange through normal banking channels or out of funds held in NRE/FCNR account maintained in India if the shares are purchased on repatriation basis and by inward remittance or out of funds held in NRE/FCNR/NRO/NRNR/NRSR account of the Non-resident Indian concerned, maintained in India where the shares/debentures are purchased on non-repatriation basis.