INVESTMENT SCHEMES FOR NRI 1. Various schemes are available for NRI investment in India. Non-Resident Indian (NRI) means a person resident outside India who is a citizen of India or is a person of Indian origin. FDI BY NRI 2. As far as Foreign Direct Investment (FDI) is concerned, there is not much difference between policy in respect of NRI and other foreign investors. 3. For all sectors excluding those falling under Government Approval, NRIs (which also includes PIOs) are eligible to bring investment (FDI) through the Automatic Route of RBI. All other proposals which do not fulfill any or all of the criteria for automatic Approval are considered by the Government through the FIPB. 4. NRIs are allowed to hold up to 100 percent equity in civil aviation sector in which otherwise foreign equity only up to 40 per cent is permitted. PORTFOLIO INVESTMENT SCHEME FOR NRI 5. Purchase/sale of shares and/or convertible debentures by an NRI on a Stock Exchange in India on repatriation and/or non-repatriation basis under Portfolio Investment Scheme (PIS) is permissible. Statutory provisions are contained in Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000, particularly in schedule 3 and 4. 6. A Non-resident Indian (NRI) may purchase/sell shares and/or convertible deben¬tures of an Indian company, through a registered broker on a recognized stock exchange, subject to the following conditions as laid down under para 1 of Schedule 3 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000]. 7. The NRI can purchase and sell shares/convertible debentures through a designated branch of an authorised dealer approved by RBI. Thus, he need not restrict his transactions to only one branch - amendment dated 18-6-2003. 8. The paid-up value of shares of an Indian company, purchased by each NRI both on repatriation and on non-repatriation basis, does not exceed 5 percent of the paid-up value of shares issued by the company concerned. 9. The NRI investor takes delivery of the shares purchased and gives delivery of shares sold (i.e. speculative purchases are not permitted). 10. Payment for purchase of shares and/or debentures is 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 account of the NRI concerned maintained in India where the shares/debentures are purchased on non-repatriation basis. 11. Shares purchased can be sold on stock exchange. Sale by private placement or by way of gift will require RBI approval. 12. NRIs can invest in Exchange Traded Derivative Contracts approved by SEBI. REMITTANCE/CREDIT OF SALE/MATURITY PROCEEDS OF SHARES AND/OR DEBENTURES 13. The net sale/maturity proceeds (after payment of taxes) of shares and/or debentures of an Indian company purchased by NRI under the PIS Scheme, can be credited only in designated branch of an authorised dealer under para 3 Schedule 3 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000]- • In NRO account, where the shares and/or debentures were purchased on non-repatriation basis, or • It can be remitted abroad or credited to his/its NRE/FCNR/NRO account, where shares and/or debentures were purchased on repatriation basis. 14. Dividend can be credited in NRE account. - RBI circular No. 5 dated 15-7-2002. PURCHASE AND SALE OF SHARES/CONVERTIBLE DEBENTURES BY NRI ON NON-REPATRIATION BASIS 15. NRI can purchase, without any limit, on non-repatriation basis, shares or convertible debentures of an Indian company issued whether by public issue or private place¬ment or right issue. The statutory provisions are contained in Schedule 4 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. Provisions are summarized in Part I Section IV of RBI Master Circular No. 15/2013-H dated 1-7-2013. 16. Investment by NRI for development of township, construction of residential/commercial premises, roads, bridges, etc. is permissible. 17. However, no purchase of shares or convertible debentures of an Indian company shall be made under this Scheme if the company concerned is a Chit Fund or a Nidhi company or is engaged in agricultural/plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights. 18. Dividend can be credited in NRE account under RBI circular No. 5 dated 15-7-2002. PURCHASE BY NRI OF OTHER SECURITIES ON REPATRIATION/NON-REPATRIATION BASIS 19. Investment on repatriation basis - A Non-resident Indian can purchase without any limit, on repatriation basis, (i) Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds; (ii) bonds issued by a public sector undertaking (PSU) in India; (iii) shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accor¬dance with the terms and conditions stipulated in the notice inviting bids. The payment shall be made either by inward remittance through normal banking channels or out of funds held in his/its NRE/FCNR account. 20. Investment on non-repatriation basis - A Non-resident Indian may, without limit, purchase on non-repatriation basis, dated Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds in India, or National Plan/Savings Certificates. The payment shall be made either by inward remittance through normal banking channels or out of funds held in his/its NRE/FCNR/NRO account. 21. Sale of securities and remittance of proceeds - A person resident outside India who has purchased securities in accordance with above schemes may (a) sell such securities through a registered stock broker on a recognised stock exchange or (b) tender units of mutual funds to the issuer for repurchase or for payment of maturity proceeds or (c) tender Government securities/treasury bills to the Reserve Bank for payment of maturity proceeds. 22. NRI cannot open PF account or post office account but can continue earlier account till maturity A Non-resident Indian cannot open Public Provident Fund (PPF) account, but can continue and subscribe to the account till maturity, if he had opened the account when he was resident. NRI cannot open a post office savings bank account. However, if he had an account when he was resident, he can continue it till maturity on non-repatriation basis. 23. Derivative contracts by NRI FII, NRI or person resident outside India having FDI in India can enter into a foreign currency-rupee option contract with an authorised dealer in India, under same terms and conditions applicable to forward contracts. 24. NRIs can trade in derivative contracts out of rupee funds. The investment will not be eligible for repatriation benefits. They can also trade in exchange traded derivative contracts from funds held in India on non-repatriation basis.
Posted on: Mon, 21 Oct 2013 06:41:12 +0000
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