Indian Consulate On-Line

Investment & Other Facilities for Non-Resident Indians

Investment in Securities/Shares and Company Deposits

Government Securities/Units

Company Shares/Debentures

  1. Direct Investment without Repatriation Benefits

  2. Direct Investment with Repatriation Benefits

  3. Portfolio Investment Scheme

Company Deposits

Sale/Transfer of Shares/Securities

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Question-45: Can NRIs invest their funds in Government Securities or Units of Unit Trust of India ?

Answer:
Yes. NRIs are freely permitted to invest their funds in Government securities or Units of UTI through authorised dealers. Units can also be purchased directly from UTI.

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Question-46: Can NRIs make investments in National Savings Certificates issued by Post Offices in India ?

Answer:
Yes. Investments in National Savings Certificates can also be made by NRIs subject to the terms and conditions applicable to the sale/issue of such certificates. However, NRIs are not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Patra.

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Question-47: Can Government securities/units be freely transferred or sold ?

Answer:
Yes, provided the transfers/sales are arranged through an authorised dealer or units are repurchased directly by UTI.

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Question-48: Are sale/maturity proceeds of Government securities/units/National Savings Certificates allowed to be repatriated abroad ?

Answer:
If such securities were purchased out of funds remitted from abroad or out of NRE/FCNR accounts,sale/maturity proceeds can be repatriated. Sale/maturity proceeds of securities purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be remitted abroad. Interest earned during the financial year 1994-95 and onwards can, however, be remitted to the extent permitted by Reserve Bank (See Answers to Questions 55 & 56).

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Company Shares/Debentures

NRIs are permitted to make direct investments in proprietary/partner- ship concerns in India as also in shares/debentures of Indian conpanies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchange/s in India. These facilities are granted both on repatriation and non-repatriation basis.

Direct Investment without repatriation benefits

Question-49: Is permission of Reserve Bank required for NRIs to invest in propriet- ary/partnership concerns on non-repatriation basis ?

Answer:
No. Reserve Bank has granted general permission to non-resident indivi- duals of Indian nationality/origin to invest by way of capital contribu- tion in any proprietary or partnership concern in India on non-repatri- ation basis provided the investee concern is not engaged in any agricu- ltural/plantation activity or real estate business. This facility is, however, not available to OCBs.

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Question-50: Is permission of Reserve Bank required for making investments in new issues of Indian companies on non-repatriation basis ?

Answer:
No. Indian companies have been granted generl permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights/bonus issue provided the investee conpany does not carry on agrilcultural/plantation activity and/or real estate business (excluding real estate development i.e. development of property and construction of houses).

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Question-51: Are any formalities required to be completed by NRIs for getting the benefit of the above general permission ?

Answer:
No. However, the firms/companies concerned are required to file a declaration with Reserve Bank in a specified form giving particulars of the investments made within ninety days from the date of investment.

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Question-52: Can NRIs make investment in non-convertible debentures of Indian companies ?

Answer:
Yes. Applications for the purpose are required to be made to Reserve Bank in the prescribed form by the Indian company concerned.

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Question-53: Can NRIs purchase existing shares/debentures of Indian companies by private arrangement ?

Answer:
Yes. Reserve Bank permits NRIs,on applicatioin in the prescribed form, to purchase shares/debentures of existing Indian companies on non- repatriation basis.

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Question-54: Is it necessary for a resident,holding securities in Indian companies, to secure any approval from Reserve Bank on his becoming a non-resident for holding such securities ?

Answer:
No. Reserve Bank has granted general permission to companies in India to enter the overseas address of the shareholder in their books in such cases provided the companies obtain an undertaking from the holder that he will not seek repatriatioin of any income, dividend or sale proceeds of the security.

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Question-55: Are incomes/interest earned on investments/deposits held in India by NRIs on non-repatriation basis allowed to be repatriated ?

Answer:
Yes. Incomes/interest earned during the financial year 1994-95 and onwards on investments held by NRIs with non-repatriation benefits will be eligible for repatriation as under:

Note: The investment/principal amount of deposits made/held on non-repatria- tion basis will, however,not be allowed to be repatriated abroad.

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Question-56: What is the procedure to be followed for seeking repatriation in such cases ?

Answer:
NRIs should designate one branch of an authorised dealer through whom the remittance of income is to be made and approach Rererve Bank for necessary permission. Such remittance will be allowed only after the payment of tax as per the provisions of the IncomeTax Act.

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Direct Investment with repatriation benefits

Question-57: What are the schemes available to NRIs for direct investment in India with repatriation benefits ?

Answer:
NRIs can make investments in new issues of shares/convertible debentur- es of Indian companies under direct investment schemes such as 40% scheme/100% scheme. They can also invest in the schemes of domestic Mutual Funds floated by public/private sector institutions/companies and bonds issued by Public Sector Undertakings. Non-resident investors are not required to apply for permission to invest but the company concerned will have to obtain permission from Reserve Bank.

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Question-58: What is the 40% Scheme ?

Answer:
Under the 40% Scheme, Indian companies engaged or proposing to engage in the following activities are allowed by Reserve Bank to issue shares/debentures to NRIs with repatriation benefits to the extent of 40% of the new issue.
  1. Industrial and manufacturing units
  2. Hotels with 3,4 or 5 star category
  3. Hospitals and diagnostic centres
  4. Shipping companies
  5. Development of computer software
  6. Oil exploration servies

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Question-59: Is remittance of interest/dividend to NRI investors freely allowed under the 40% Scheme ?

Answer:
Yes. There is no ceiling or restriction on the amount of remittable dividend. Remittance of interest/dividend to NRI investors will be allowed by authorised dealers under the powers delegated to them.

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Question-60: What are the specified industries under the 100% Scheme ?

Answer:
Under 100% Scheme NRIs are permitted to invest in high priority indust- ries listed in Annexure III to the Statement on Industrial Policy dated 24th July 1991 of the Government of India upto 100% of the new issues.

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Question-61: Is dividend/interest earned in respect of investments made under the 100% Scheme freely remittable to the NRIs abroad ?

Answer:
Dividend/interest can be remitted freely except in the case of consumer goods industries where the outflow on account of dividend is balanced by export earnings of the company either in the year of declaration of dividend or in the years prior to the declaration of dividend. This requirement is enforced for a period of seven years from the commencem- ent of commercial production.

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Question-62: How does an NRI obtain permission of Reserve Bank for investment under the 40% or 100% Scheme ?

Answer:
The NRI investor need not apply to Reserve Bank. Application for necessary permission under the Schemes should be made by the Indian company/firm to the Central Office of Reserve Bank in Bombay in the prescribed form.

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Question-63: Besides the 40% and 100% Scheme, is there any other scheme for invest- ment by NRIs in the equity of Indian companies ?

Answer:
Yes. NRIs are permitted to undertake revival of sick industrial units by making bulk investment in them to the extent of 100 per cent either by way of purchase of existing equity shares or in the form of subscri- ption to new equity issues.

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Question-64: Is the capital brought into India for revival of a sick industrial unit allowed to be repatriated ?

Answer:
Repatriation of capital in such cases is allowed after a minimum period of five years, on the merits of individual cases.

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Question-65: How can an NRI obtain permission of Reserve Bank for investment in a sick industrial unit ?

Answer:
Application for necessary permission should be made by the Indian company to the Central Office of Reserve Bank in Bombay in the prescribed form.

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Question-66: Under the new Industrial Policy, foreign investment upto 51% of the equity is allowed on repatriation basis in certain high priority industries. Can NRIs take up the balance 49% equity in such cases on repatriation basis ?

Answer:
Yes.

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Question-67: Can NRIs make investment in companies engaged in real estate development in India ?

Answer:
Yes. Investment upto 100% in the new issue of equity shares/ convertible debentures of Indian companies engaged in the following areas is allowed:

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Question-68: What is the procedure for obtaining Reserve Bank permission in this regard ?

Answer:
Applications for the purpose should be made by the concerned Indian company to the Central Office of Reserve Bank in Bombay in the prescribed form.

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Question-69: Will repatriation of the original investment and/or dividend income be freely permitted ?

Answer:
Yes. Repatriation of original investment will be permitted after a lock-in period of three years from the date of issue of the equity shares/convertible debentures. In addition, OCBs will be permitted to repatriate net profit (upto 16 per cent) arising from the sale of such investment after the lock-in period of three years. Annual dividend/interest on equity shares/debentures can, however, be freely remitted subject to payment of tax.

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Question-70: Are investments in Air Taxi operations permitted to be made by NRIs ?

Answer:
Yes. Investments upto 100% equity participation for carrying on Air Taxi operations permitted in terms of the guidelines issued by the Director General of Civil Aviation for Air Taxi operations.Applications for the purpose should be made to Reserve Bank (Central Office) in the prescribed form by the concerned Indian Company.

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Question-71: Are there any restrictions on repatriation of the investment made under this scheme or income earned thereon ?

Answer:
No. However, repatriation of the investment and/or remittance of dividend only after the expiry of five years of operation and only out of accumulated net foreign exchange earnings.

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Question-72: What about investment in non-convertible debentures by NRIs on repatriation basis ?

Answer:
Applications for necessary permission should be made to Reserve Bank (Central Office) by the concerned Indian company in the prescribed form. Such applications are considered on merits,

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Question-73: What is the procedure to be followed for making investment in the scheme of domestic Mutual Funds or public sector bonds with repatria- tion benefits ?

Answer:
The concerned Fund/Public Sector Undertaking should obtain necessary permission from Reserve Bank for issue of units/bonds to NRIs.

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Question-74: Can NRIs invest in 100% Export Oriented Units on repatriation basis ?

Answer:
Yes. NRIs are permitted to invest upto 100% in Indian companies primarily engaged in export trading activities or in 100% Export Oriented Units or units located in Export processing Zones. Applcations for the purpose are required to be made in the prescribed form to the concerned regional office of Reserve Bank along with copy of Government approval.

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Portfolio Investment Scheme

Question-75: What is the Portfolio Investment Scheme ?

Answer:
Under this scheme, NRIs are permitted to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock Exchange/s in India.

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Question-76: What is the procedure for making application ?

Answer:
The application is to be submitted to Reserve Bank through a designated branch of a bank in India in one of the prescribed forms, i.e. NRC/NRI/ RPC/RPI.

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Question-77: What is a designated branch ?

Answer:
Reserve Bank has authorised a few branches of each bank to conduct the business under Portfolio Investment Scheme on behalf of NRIs. These branches are the main branches of major commercial banks located close to the stock exchange/s. NRIs will have to route their applications through any of the designatd bank branches who have authorisation from Reserve Bank.

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Question-78: Whether NRI can apply through more than one designated branch ?

Answer:
No. Each NRI has to select one branch for this purpose for investment on repatriation/non-repatriation basis.

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Question-79: Is it necessary to maintain a bank account with the designated branch through whom the application is made ?

Answer:
It is advisable to maintain bank account with the designated branch for administrative convenience.

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Question-80: What is the validity period of Reserve Bank approval for the purchase of shares/debentures of Indian companies or units of domectic Mutual Funds ?

Answer:
Reserve Bank approval is valid for a period of five years from the date of issue. This can be renewed further by making a request by means of a simple letter.

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Question-81: Is there any ceiling on the ilnvestment under the Portfolio Investment Scheme ?

Answer:
There is an overall ceiling of 5% of paid-up share cepital of the company/paid-up value of each series of convertible debentures for purchase by NRIs/OCBs. The overall ceiling can be raised to 24% if the company concerned passes a resolution to that effect in its general body meeting. Individually, NRIs/OBCs can make investment upto 1% of the paid-up share capital/each series of convertible debentures. However, there is no ceiling on investment in domestic Mutual Funds.

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Question-82: Is there any lock-in period for investment made in shares/debentures of Indian companies under the scheme ?

Answer:
No. The lock-in period of one year for investment made on repatriation basis prescribed earlier has since been withdrawn.

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Company Deposits

Question-83: Can NRIs keep deposits with companies in India with repatriation benefits ?

Answer:
Yes. NRIs are permitted to keep deposits with public limited companies in India for a minimum period of three years subject to ceilings prescribed under the Companies (Acceptance of Deposits) Rules,1975. Application for the purpose is required to be made by the company receiving the deposits through an authorised dealer.

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Question-84: Do NRI need permission of Reserve Bank for placing funds in fixed deposits with firms/companies on non-repatriation basis ?

Answer:
Yes. Permission for placement of funds in fixed deposits with firms/ companies in India is granted by Reserve Bank on application by the depositor or the deposit accepting firm/company, on non-repatriation basis. The total deposits received by the firm/company from non-reside- nts/residents, however, should be within the ceiling prescribed under the Companies (Acceptance of Deposits) Rules, 1975.

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Question-85: Are NRIs permitted to invest in Commercial Paper (CP) issued by Indian companies ?

Answer:
Yes. Genersl permission has been granted by Reserve Bank to Indian companies to issue CP to NRI individuals subject to the conditions that the amount invested will not be repatriated outside India and the CP will not be transferable.

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SALE/TRANSFER OF SHARES/SECURITIES

Question-86: Is permission of Reserve Bank required for sale/transfer of Government securities/units ?

Answer:
No. Authorised dealers have been permitted to undertake sale of Govern- ment securities/units on behalf of NRIs without prior approval. Sale/ maturity proceeds can be remitted abroad if the original investment was made out of funds remitted from abroad or funds in NRE/FCNR accounts. Otherwise, they will have to be credited to NRO account of the holder.

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Question-87: Is permission of Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs ?

Answer:
No. Transfer of shares/debentures of Indian companies by NRIs to other non-residents does not require permission of Reserve Bank. However, the transferee NRI would need permission for purchase of such shares for which an application is required to be made to Reserve Bank.

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Question-88: Is permission of Reserve Bank required for sale/transfer of shares/ debentures by NRIs to residents ?

Answer:
Yes.

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Question-89: What is the procedure to be followed by NRIs for transfer/sale of shares/debentures held by them on non-repatriation basis to residents ?

Answer:
General exemption has been granted by Reserve Bank for transfer/sale of shares/debentures by NRI individuals through stock exchange if such transfers are made in favour of an Indian citizen or a person of Indian origin or a company incorporated in India and sale proceeds thereof are credited to NRO account. For sale/transfer of shares/ debentures held by overseas corporate bodies through stock exchange, permission from Reserve Bank is required to be obtained.

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Question-90: What is the procedure for sale/transfer of shares held by NRIs with repatriation benefits ?

Answer:
In the case of shares acquired by NRI individuals through stock exchange under the Portfolio Investment Scheme, general exemption has been granted for transfer through stock exchange, provided the sale is arranged through the same designated branch through whom they were purchased. In other cases, application for necessary permission is required to be made to Reserve Bank in the prescribed form.

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Question-91: What is the procedure to be followed by NRIs for sale/transfer of shares/debentures to residents by private arrangements ?

Answer:
NRIs are required to submit application in form TS1 to Reserve Bank for sale of shares/debentures by private arrangements.

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Question-92: What is the procedure for issue of rights entitlement to NRIs ?

Answer:
The concerned company should approach Reserve Bank for issue of rights entitlement to NRIs in the prescribed form if on repatriation basis. However, rights entitlement on non-repatriation basis would be covered by the general permission (Please see Answer to Question No.50).

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Question-93: Can shares/debentures be given away as gifts to relatives ?

Answer:
Yes. Reserve Bank has granted general permission to NRIs to transfer by way of gift shares, bonds and debentures of an Indian company held by them with Reserve Bank's permission to their resident close relative/s.

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Question-94: What is the procedure required to be followed by NRIs for renunciation of rights entitlement ?

Answer:
NRIs can make an application to Reserve Bank by a letter detailing therein the folio number of the shares held and the manner in which the rights are being sold.

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Question-95: What is the procedure for issue of bonus shares ?

Answer:
The concerned Indian company should approach Reserve Bank for issue of bonus shares to NRIs if the original investment is on repatriation basis. Issue of bonus shares in respect of investment on non-repatriation basis is covered by general permission. (Please see answer to Question No. 50).

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