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Investment in Government Securities and units of UTI
NRIs can freely purchase units of UTI, Central and State Government securities (other than bearer securities) and National Plan/ Savings Certificates by effecting remittances from abroad through normal banking channels or by withdrawing funds from their non-resident accounts with banks in India. Such investments should be made through the banks maintaining their non-resident accounts. The banks have been permitted to credit the dividend/ interest and sale or maturity proceeds of the units/ securities to Ordinary Non-resident accounts of NRI. Units can also be bought by NRIs/OCBs directly from UTI.
They can also invest on non-repatriation basis, in bonds issued by public sector undertakings and Mutual Funds set up by public sector Institutions and banks, provided they have secured RBI permission to seek investments from Non-Residents.
Investment in Proprietorship/ Partnership Concerns
By its Notification No. FERA 113/92-RB dated 27th April, 1992 issued under Section 9(1) read with Section 29(1) of FERA, 1973, RBI has granted general permission:
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to NRI to invest by way of capital contribution in any proprietary or partnership concern in India engaged in any Industrial, commercial or trading activity, on non-repatriation basis; and
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to any proprietary or partnership concern in India to place to the credit or make payment to or any NRI any sum invested by such NRI in that proprietary or partnership concern or the income accruing to such person by way of profit on his investments.
The general permission is, however subject to fulfillment of the following conditions: -
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The amount invested is received from NRI investor either by remittance from abroad through normal banking channels or by transfer of funds from the investor’s NRE/FCNR/NRO accounts with a bank in India.
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The proprietary or partnership concern in India is not engaged in any agricultural/ plantation activity or real estate business, i.e., dealing in land and immovable property with a view to earning profit or earning income therefrom.
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The amount invested and the income accruing thereon are not eligible for repatriation to any place outside India and is payable only in non-repatriable Indian rupees.
Consequently, it will not be necessary for proprietary/ partnership concern in India to obtain the prior permission of RBI for receiving capital contribution from NRIs provided the conditions mentioned in the above paragraph are satisfied. Declaration in form DIN should be filed by the investee concern with the concerned office of RBI within whose jurisdiction it is situated within ninety days from the date of receipt of the investment together with the following documents.
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Names of NRI investor’s alongwith the amount invested by them.
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Certificate/s from the bankers in India evidencing receipt of inward remittance/s in foreign exchange through normal banking channel or withdrawal of funds from investor’s NRE/FCNR/NRO accounts.
The concerned proprietary/ partnership concern should also obtain a non-repatriation undertaking from NRI investor and send a confirmation to that effect to RBI while filing the declaration in form DIN.
All profits on the capital invested by the NRI investor may be credited either to the NRO account of the investor with a bank in India or ploughed back in the business on the non-repatriation basis.
Investment under the scheme is not permitted to OCBs.
Investment in New Issue of shares/ debentures of Indian Companies
By Notification No- FERA 114/92- RB dated 27th April, 1992 issued under Section 29(1) read with Section 19(1) of FERA, 1973, RBI has granted general permission:
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to NRIs and OCBs to take up or subscribe on non-repatriation basis the shares or convertible debentures issued, whether by public issue or private placement, by a company incorporated in India; and
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to a company incorporated in India to issue shares/ convertible debentures to NRIs/ OCBs by way of new/ rights/ bonus issue and to send out of India share/ debenture certificates to such NRIs/OCBs.
The general permission is subject to the following:
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the investee company does not carry on agriculture/ plantation activities and/or real estate business ( excluding real estate development, i.e. development of property and construction of houses
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The payment for the shares or convertible debentures issued to such NRIs or OCBs is received by remittances from abroad through normal banking channels or by transfer of funds held in investor’s NRE/ FCNR/ NRO accounts maintained with banks authorized to deal in foreign exchange in India or authorized co-operative/ commercial banks in India.
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Neither the capital invested nor any income arising therefrom whether by way of capital appreciation or dividend or otherwise is eligible for repatriation out of India at any time,
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All dividend/ interest accruals and sale proceeds of shares/ convertible debentures (if sold in future) with permission of RBI, will be credited to the investor’s ordinary non-resident rupee account with a bank authorized to deal in foreign exchange in India.
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The company issuing the shares or convertible debentures files a declaration, not later than ninety days from the date of issue, with RBI in form DIN. Where shares or convertible debentures are issued to an OCB, a certificate in the form specified ( OAC/OAC1) issued by an overseas auditor , Chartered Accountant or Certified Public accountant, showing the ownership of such OCB shall be filed with RBI alongwith the declaration.
Investment by NRIs for establishment of Schools/ Colleges in India
With a view to liberalizing the existing facilities for investment by NRIs in India, RBI has allowed investment by NRIs in establishment of schools and colleges in India. In case the investment is made by NRIs through a proprietary/ partnership concern or Indian Company on non-repatriation basis, it will be covered under the general permission granted by RBI Notification No- FERA 113 and FERA 114/92-RB both dated 27th April 1992. In case the concerned investment is proposed to be made through an Indian company on repatriation basis, it will require the specific permission of RBI for investment under 24% Scheme. Applications may be made to Central Office of RBI in Form ISD®.
If the educational institution requires affiliation to any University/ Board, it will have to comply with the relative regulations of the concerned State/ Central Government.
Investment in non-convertible debentures
Permission of RBI is necessary for investment by NRIs/ OCBs in non-convertible debentures of Indian Companies, applications in form ISD has to be submitted by the Indian company and RBI will grant permission on case to case basis. Once the permission to Indian Company is granted, no separate approval for non-resident investor will be necessary.
Investment in Mutual Funds floated by Private/ Public Sector Banks/ Financial Institutions
Mutual funds floated by private/ public sector banks/ financial institutions seeking investment from non-residents have to obtain necessary approval from RBI, application in form ISD is required to be made by these banks/ institutions for permission to allow investment by NRIs/ OCBs on non-repatriation basis. Non-resident investors do not need a separate approval from RBI.
Such investment can also be made through secondary market. NRIs/ OCBs intending to invest in Mutual funds Scheme on non-repatriation basis through secondary market under Portfolio Investment Scheme should submit the application through a designated branch of an authorized dealer.
Investment in Money Market Mutual Fund ( MMMFs )
NRIs/ OCBs are permitted to i8invest on non-repatriation basis in Money Market Mutual funds floated by commercial banks and public sector/ private sector financial institutions with authorization from RBI/ SEBI. Application should be made to the RBI in form ISD by the concerned bank/ institution. The NRIs/ OCBs do not need separate permission from RBI for this purpose.
Deposits with Companies
Public/ private limited companies can accept deposits from NRIs within the limits prescribed for acceptance of deposits in conformity with the prevailing rules and subject to further limits and conditions as may be prescribed by the RBI. The deposit can be made either by sending remittances from abroad or from the investor’s NRE/ FCNR/ NRO account. The company accepting deposits should apply through an authorized dealer to the office of RBI under whose jurisdiction the head/-registered office of the company is situated together with full details of the deposit scheme. Once the necessary permission is obtained by the company, it is not necessary for the non-resident depositors to seek separate permission from the RBI for placing deposits with the company concerned.
Investment in Commercial Paper (CP) issued by Indian Companies
Non-residents are permitted to invest in commercial paper issued by Indian Companies on the following terms & conditions:
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The investment is allowed only on non-repatriation basis.
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Payment for investment is to be received only by remittance from abroad or out of funds held in investors NRE/ FCNR/ NRO accounts
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CP is to be issued only in Indian rupees.
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Maturity proceeds of CP is creditable to the ordinary non-resident rupee account of the investor.
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CP issued to NRIs will not be transferable. The Indian Company has to submit a statement in form ICP within a period of 10 days from the closure of the subscriptttion to the issue.
OCBs are not permitted to invest in CP.
Purchase of shares of Indian Companies by Private Arrangement
NRIs/ OCBs require permission of RBI for purchasing shares of Indian Companies by private placement. For this purpose, application in form FNC 7 in duplicate, is to be submitted to the concerned office of RBI within whose jurisdiction, the registered / head office of the investee company is situated. The application is to be accompanied with the following documents:
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Balance Sheet and Profit & Loss Account Statements for the preceding three years, if the applicant is a company.
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Balance Sheet and Profit & Loss Account Statements for the preceding three years of the company whose shares are proposed to be purchased.
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An auditor’s certificate showing fair valuation of shares to be purchased.
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Certifies copies of sale deed/ agreement for sale in respect of purchase of shares by private arrangement.
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A non-repatriation undertaking in the prescribed form NRU.
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In case the proposed investment is to be made by an OCB, a certificate in original of a recent date in form OAC/ OAC1 from an overseas auditor/ chartered accountant/ certified public accountant.
Investment in shares/ debentures of companies through stock exchange (Portfolio investment)
NRIs and OCBs are permitted to invest in shares/ debentures of companies through stock exchange under "Portfolio Investment Scheme". The investment is permitted both on non-repatriation and on repatriation basis.
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