Explain the facilities provided to NRIs/OCBs for making investment
Facilities Provided to NRIs/OCBS For Investment:
Following are
the facilities available to NRIs/OCBs for the investment in India
1. General permission is subscribed to Memorandum and Articles of Association of Indian companies.
General permission has been granted to NRIS to subscribe to Memorandum and Articles of Association of an Indian company and also to make up shares for the purpose of its incorporation subject to the condition that the total face value of the shares to be taken up by them does not exceed Rs. 10,000.
Further, the company should be engaged in industrial activity and
its Memorandum should not permit the company to take up any agricultural
plantation activity or real estate business. Also, the company within 90 days
of the incorporation is required to file a declaration with the RBI giving
details of the non-resident shareholding.
This general permission has been granted by the RBI under Section
29 (1) (b) read with Section 19(1) (a). As for repatriation of capital
investment in shares in terms of this permission and income earned thereon the
RBI will decide upon it when the company approached it for permission under
Section 19 (1) (d) of FERA, 1973, to issue further shares to NRIs.
2. Direct Investment up to 100% without repatriation benefits (i. e., on-repatriation basis)
- Investment in Partnership/Proprietorship Concerns. Nonresident Indians and Overseas Corporate Bodies (OCB) are permitted to make direct investment in Partnership/Proprietorship Concerns in India irrespective of the nature of activity of the concern except investment in real estate, agriculture, and plantation business provided the investor undertakes not to seek at any time repatriation of the capital invested and income there from. For such investments, it would not be necessary for the non-resident investors to associate any resident(s) as partner(s).
Any amount (profits) due to NRIs from such investments would be
required to be credited to their ordinary Non-resident Accounts in India or
ploughed back into the business on non-repatriation basis.
Vide Notification No. PERA 113/92-RB dated 24-4-92 issued under Section 9
- Read with Section 29
- The RBI has granted general permission to (a) NRIs to intake such capital investment in proprietorship/partnership concerns carrying on any industrial, commercial or trading activity on non-repatriation basis, and (b) to such concerns make payment to or place to the credit of the NRI, any sum invested by him or the income accruing therefrom. Other conditions mentioned in the para above are applicable to this general permission also.
- Investment in New Issue of Shares/Debentures of Indian Companies. Non-resident Indians (NRIs) and Overseas Corporate Bodies (OCBs) who undertake not to seek repatriation of capital and income therefrom at any time are entitled to subscribe, without limit, to new issue of shares [both equity and preference) of any industrial, manufacturing or trading activity, financing of housing development, real estate development i.e., development of property and construction of roads, bridges etc., except in real estate or agricultural/plantation activities. Such investment by NRIs/OCBs may also extend up to 100% of the new issue.
Vide Notification No. FERA 114/92-RB dated 27-4-1992 issued under Section 29
- Read with Section 19
- Of the FERA the RBI has granted permission to (a) NRIs/OCBs to subscribe to shares/convertible debentures of any Indian Company by way of public issue of private placement on non-repatriation basis, and (b) to such companies to issue shares/debentures to NRIs/OCBs by way of new/rights/bonus issue and to export share/debenture certificate to such NRIs/OCBs.
Dividend/interest due on such investments may be credited to the
investors MHO account in India.
- NRIs/OCBs may also be allowed by the BRI on application, to purchase existing shares of Indian companies by private arrangement on the condition that the capital invested and income thereon would be repairable.
- NRSs and OCBs may place deposit with firms/companies in India subject to the condition that deposit as well as the interest accrued thereon would not be allowed to be repatriated outside India.
NRIs may also invest in commercial papers (CPs) issued by Indian
companies subject to the conditions that the amount will not be repatriable and
the CP will not be transferable.
However, the company issuing the CP must comply with the
Non-Banking Companies (Accepting Deposits through Commercial paper) Directors,
1989 issued by the RBI.
- NRIs/OCBs are permitted to invest in Government securities/UTI units etc. subject to the terms and conditions applicable for the issue/sale thereof by making remittances from abroad out of funds held in their NRE/FCNR accounts, through the authorized dealer maintaining the account. The funds invested any income earned thereon will not be eligible for repatriation outside India.
3. Direct Investment with Retaliation Benefits.
- Investment in New Issue of Indian Companies under the 40 percent scheme. Non-residents of Indian nationality or origin are permitted to make investment of any new or existing company (other than FERA company, i.e. a company in which more than 40 per cent interest is held by non-residents). The investment can be made any in private/publicized companies raising capital for setting up new industrial/manufacturing activities. Investment under this scheme can also be made in the petals projects for expansion/diversification of existing industrial/miniaturing having large capital outlays and, in the hotel, industry provided it in in three-star, four-star, five-star hotels as well as new or existing companies engaged in shipping development of computer software, or of exploration services. In case of new issue by public limited companies engaged in any of the activities mentioned above other than through issue of prospectus NRI investment up to 40% of the new capital issue of the company would be permitted subject to a monetary ceiling of Rs. 40 lakhs. No monetary ceiling is applicable in case of new issue by private limited companies.
- Investment up to 100% in high-priority industries. NRIs and OCBs will be permitted to invest up to 100% equity capital or convertible debentures or any private/public limited company engaged in or proposed to be engaged in high-priority industries with full repatriation benefits. Such proposals will receive automatic approval provided.
- Contribution towards equity/convertible debentures is received through foreign remittance or from investors accounts and the foreign equity covers the foreign exchange requirement for import of capital goods.
- In case of consumer goods industries, outflow on account of dividend payments is balanced by export earnings over a period of 7 years from the commencement of commercial production.
- The proposed project is not located within 25 kms. from the periphery or the standard urban area limits of a city having more than 10 lakhs population according to 1991 census. This facility will be available for new investment for expansion as well as for diversification of existing industrial undertakings.
Investment meeting the above conditions will be approved by the
RBI, Investment by NRIS/OCBs in high-priority industries not meeting the above
conditions will require the approval of the SIA (Secretariat for Industries
approvals). Special Approval Committee (NRI). Ministry of Industry. Government
of India, before approval by the RBI.
- Investment up to 100% in other industries. NRIs/OCBs will be permitted to invest up to 100% equity with full repatriation benefits in industries requiring compulsory licensing or those reserved for the small. scale sector and other industries except those reserved for the public sector. By such investment may be made only with the approval of the special Approvals Committee (NRI) of the SIA.
Investment in industries reserved for small scale sector will be permitted provided the export obligation criterion prescribed for that industry has been met with.
NRI equity holding up to 100% will be permitted in hotels tourism
related industry and hospitals, advanced diagnostic centers, shipping export
oriented deep sea fishing industry and oil exploration services with full
repatriation benefits, NRIs and indigenous clearance provided the said goods
are new goods they are fully financed by the NRIs out of their own resources
abroad and the goods are restricted items under Export-Import Policy.
- Investment in Sick Industrial Units For the purpose of investment by eligible NRIs, a company will be considered sick only if a public financial institution or a consortium is clearly formulating a plan for its rehabilitation/revival or the company is consistently showing losses for the last three years and the market price of the shares is below par two years and the public financial institutions/banks are satisfied in this regard.
Non-resident Indians have been permitted to invest OB repatriation
basis in the revival of existing sick companies subject to observance of the
following guidelines:
- The bulk investment by the NRIs can be either by purchase of shares of existing shareholders or by subscription of fresh capital.
- Investment on repatriation basis up to 100 per cent of the equity capital of the company can be permitted provided a request is made by the Indian company and supported by special resolution from the shareholders.
- Repatriation of original capital brought into India for a sick company will be permitted after a minimum period of five years. The clearance will be given on a case-by-case examination and the future payment liabilities would be especially taken into account while processing these cases.
- The investee company shall not be allowed to undertake real estate business or agricultural plantation activities.
- Investment may be made either from proceeds of a fresh foreign inward remittance or from funds held in NRE/FCNR account of the NRI. RBI will adopt normal procedures to satisfy itself that intending NRI investors are not-residents of Indian origin or corporate entities which are predominantly owned by SRIs.
- Deposits with Public Limited Companies with repatriation benefits. Non-residents of Indian nationality or origin will be permitted to place funds with public limited companies in India including Government undertaking with limited liability with full repatriation benefits, provided:
- The deposits are made in conformity with the prevailing rules and within the limits prescribed for acceptance of deposits by such companies.
- The funds are made available by the depositors either by the remittance from abroad or by payment from Non-resident (Externally)/FCNR accounts, and
- The deposit is kept for a period of 3 years.