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| Home > Business Law > Investment in India |
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| Foreign Direct Investments and Guidelines |
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FOREIGN DIRECT INVESTMENTS AND GUIDELINES
Foreign Institutional Investors(FIIs) such as pension funds, mutual funds, investment trusts, asset management companies and incorporated/institutional portfolio managers or their power of attorney-holders which are registered with the Securities and Exchange Board of India (SEBI) can invest in listed and unlisted securities and debt markets subject to certain guidelines. FIIs are allowed to invest in all the securities traded on the primary and secondary markets.
There is no restriction on the minimum volume of investment for the purpose of entry of FIIs in the primary/ secondary market. There is no lock-in-period for the purpose of investments made by FIIs.
Portfolio investments in primary or secondary markets in any one company are subject to a ceiling for all FIIs (along with NRIs and OCBs) of 30% of the issued capital of such company.
The holding of a single FII in any one company is subject to a ceiling of 10% of total issued capital of such company. The holding of a FII group is to be counted as holdings of single FII for this purpose.
The maximum holding of 30% of all non-resident portfolios investment includes investment by non-resident Indians, corporate and non-corporate investments, but excludes foreign investments under financial collaborations and investments by FIIs through offshore single/ regional funds, global depository receipts and Euro convertibles.
Facilities that are available to all overseas corporate bodies that are predominantly owned by Non-Resident Indians of Indian Nationality/Origin are as follows:
GENERAL FACILITIES
As a measure of providing greater investment opportunities in India to Non-resident Indians, the schemes outlined in the preceding paragraphs have been extended (with the exception of investment in proprietary and partnership concerns) to overseas companies, partnership firms, societies, trusts and other corporate bodies owned directly or indirectly to the extent of at least 60% by non-residents of Indian nationality or origin (OCBs). Under these schemes, entities of the above types are eligible to make investments in India in share, debentures and company deposits. Likewise, they can also invest in Units of UTI, National Plan/savings certificates and others Government Securities if permitted under the terms of and conditions governing the sale/issue of such securities and the purchase/ subscription is arranged through authorized dealers. It is a necessity for such entities to submit the certificates to the Reserve Bank in the prescribed form OAC or OAC-1 (annexure 16.20and 16.21) (as the case may be) from an overseas auditor/Chartered Accountants/certified public accountant along with the applications for investments in India. They are also required to submit such certificates to banks in India with whom they intend to open accounts. If the ownership interest in any such entity (irrevocable beneficial interest in the case of trusts) held by non-residents of Indian nationality or origin falls below the level of 60 percent at any time in future, if has to intimate the change immediately to its bankers in India or the Reserve Bank as the case may be.
BANK ACCOUNT FACLITIES
Overseas bodies owned by non-residents of Indian nationality or origin to the extent indicated above may open with authorized dealers (and not with authorized co-operative/commercial banks) NRE/FCNR and NRO accounts out of funds remitted by them to India, provided the bank maintaining the account is satisfied that such funds have legitimately accrued to the account holders. Various tax exemptions granted to non-resident individuals of Indian nationality or origin are not available to the overseas corporate entities.
INVESTMENT IN SHARES/DEBETURES
Applications from OCBs for permission to designated banks for purchasing on their behalf shares/debentures through stock exchanges on non repatriation basis may be made in form NRC (annexure 16.18) and applications for purchasing share/debentures with repatriation rights may be made in Form RPC (annexure 16.19) to the controller, Exchange Control Department (Foreign Investment division), Reserve Bank of India, Central Office, Mumbai-400 023.
Applications for issue of shares/debentures to OCBs on non-repatriation basis under the direct investment scheme should be to the office of the Reserve Bank under whose jurisdiction the company's head/registered office are situated. However, in the case of investment in new issues of shares/ debentures on repatriation basis, applications may be made in Form ISD (annexure 16.13) by the Indian companies to the Controller, Exchange Control Department (Foreign Investment Division) RBI, Central Office, Mumbai-400 023.
SALE, TRANSFER OF SHARES/DEBENTRES
Applications for permission to sell shares/debentures through stock exchange/ s in India should be made by OCBs to the Central Office of Reserve Bank in Form TS 3 (annexure 16.15) in respect of shares/debentures acquired with repatriation rights under the Portfolio Investment Schemes. For sale through stock exchange of shares/ debentures acquired on non-repatriation basis, a consolidated application (by letter) giving full details including names of the Indian companies, total number of share/ debentures, their face value. Folio through stock exchange or out of new issues of the companies concerned and number and date of the Reserve Bank approval for acquiring or holding them, should be made to the concerned office of Reserve Bank. If the sale/transfer is desired to be made by private arrangement, the application should be made in Form TS 1 (annexure 16.17) to the concerned office of Reserve Bank if the sale/transfer is on non-repatriation basis and to the Bank's Central Office if such sale/transfer is with repatriation rights
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