| Portfolio Investment in Shares/Debentures
of Indian Companies and in Domestic Mutual Funds |
| Portfolio investments in shares/debentures
by NRIs/OCBs are permitted only through designated branches
of authorized dealers, preferably located at centers having
stock exchanges. Authorized dealers should inform the names
of such branches to Central Office of Reserve Bank and obtain
approval. The Code number allotted by Reserve Bank should
be quoted in all correspondence undertaken with Reserve
Bank in this regard. Non-resident investors can also authorize
Indian residents or stock exchange brokers as their agents
in India to purchase/sell shares on their behalf under the
schemes but all transactions should be routed through the
designated branch of authorized dealer. |
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| General Conditions for Purchase with
Repatriation or Non-Repatriation rights |
- NRIs/OCBs will be permitted to
make portfolio investment in shares/debentures (convertible
and non-convertible) of Indian companies, with or
without repatriation benefits provided the purchase
is made through a stock exchange and also through
designated branch of an authorized dealer. NRIs/OCBs
are required to designate only one branch authorized
by Reserve Bank for this purpose.
- Investment in equity shares and
convertible debentures will be permitted subject to
an overall ceiling of (a) 10 per cent of the total
paid-up equity capital of the company concerned; and
(b) 10 per cent of the total paid-up value of each
series of the convertible debentures issued by the
company concerned for all NRIs/OCBs taken together
both on repatriation and on non-repatriation basis.
- The purchase of shares and debentures
under the scheme is required to be made at the ruling
market price.
- NRIs / OCBs intending to invest
on non-repatriation basis should submit their applications
in Form NRI / NRC respectively, through a designated
branch of an authorized dealer, to Reserve Bank (Central
Office). Reserve Bank will grant general permission
to the concerned authorized dealer to purchase shares/debentures
of Indian companies, securities (other than bearer
securities) of the Central or any State Government
and Treasury Bills on behalf of the NRI/OCB subject
to the condition that the payment for such investment
is received through inward remittance or from the
investor's NRE/FCNR/NRO/NRSR account.
- The general permission granted
by Reserve Bank would be initially valid for a period
of five years. Authorized dealers may themselves renew
the permission granted by Reserve Bank to individual
NRIs as well as OCBs for a period of five years at
a time.
- NRIs and OCBs intending to invest
with repatriation benefits should submit their applications
through a designated branch of an authorized dealer
in Form RPI / RPC respectively.
- Reserve Bank will grant general
permission to the designated branch for purchase of
shares/debentures of Indian companies, securities
(other than bearer securities) of the Central or any
State Government and Treasury Bills,subject to the
conditions that the payment is received through an
inward remittance in foreign exchange or by debit
to the investor's NRE/FCNR account.
- Investment made by any single
NRI/OCB investor in equity/preference shares and convertible
debentures of any listed Indian company should not
exceed 5% of its total paid-up equity or preference
capital or 5% of the total paid-up value of each series
of convertible debentures issued by it and NRIs/OCBs
take delivery of the shares/convertible debentures
purchased and give delivery of the shares/convertible
debentures sold under the Scheme
- The general permission granted
by Reserve Bank will be valid initially for a period
of five years. Authorized dealers may themselves renew
the permission granted by Reserve Bank to individual
NRIs as well as OCBs for a further period of five
years at a time. Authorized dealers may note to obtain
the latest OAC/OAC 1 certificate from the OCB concerned
before renewing the permission.
NRIs/OCBs intending to invest in the
units of domestic mutual funds on non-repatriation/repatriation
basis under the Portfolio Investment Scheme should apply
to Reserve Bank (Central Office) in the above manner.
However, approvals already granted for portfolio investment
in shares/debentures of Indian companies will also be
valid for purchase of units of domestic mutual funds. |
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| Investment in Joint Names |
Shares/debentures
purchased by NRIs/OCBs should be held and registered in
the names of either the investor himself or an authorized
dealer or the latter's nominee/s.Shares/debentures can be
purchased by NRIs in joint names with other NRIs with permission
of Reserve Bank. In such cases, if the investment is with
repatriation benefits, the first holder is to be treated
as investor for the purpose of 5% ceiling. The second or
third holder will be eligible to invest separately in the
same company in his own name as the first holder in joint
holdings up to the limit of 5%. Reserve Bank will also permit
investment jointly with residents. However, if the resident
joint holder inherits the shares/debentures, he/she will
not be entitled to repatriation benefits. |
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| Sale / Transfer of Shares / Bonds
/ Debentures by NRIs to Residents |
The Reserve Bank
has granted general exemptions sale/transfer of shares/bonds/
debentures through stock exchanges in India subject to fulfillment
of certain conditions.Applications for sale / transfer of
shares / bonds /debentures held by NRIs/OCBs by private
arrangement i.e. other than through stock exchange should
be made to Reserve Bank in form TS 1 either by the transferor
or the transferee, attaching therewith the letter of consent
of the other party irrespective of whether the shares/bonds/
debentures are listed on a stock exchange or not. While
conveying its approval, Reserve Bank will stipulate the
conditions subject to which the sale/transfer should be
effected. In cases of sale/transfer of shares/bonds/debentures
acquired on repatriation basis, repatriation of such proceeds
of bulk holdings (i.e. shares/bonds/debentures exceeding
Rupees one lakh in face value or 5% of the company's paid-up
capital whichever is lower) will be permitted only on production
of a certificate from a Chartered Accountant or the concerned
company's secretary stating that shares with necessary transfer
forms duly signed have been received/lodged with the company
for registration in favour of the transferee. |
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| General Exemption for Sale/Transfer
of Shares/Bonds |
The Reserve Bank by its Notification
No. FERA.149/93-RB dated 26th April 1993 has exempted
the transfer of shares, bonds or debentures of Indian
companies made by NRIs through stock exchange in India
in case where :-
- such transfers are made in favour
of an Indian citizen or person of Indian origin resident
in India or in favour of a company or other body corporate
incorporated in India and
- sale proceeds of shares are credited
to the NRO account of the transferor with no right
of repatriation outside India.
In such cases, authorized dealers
may credit the sale proceeds to the seller's NRO account
after verifying the contract notes issued by recognized
stock exchange brokers through whom the sale was effected.
This exemption is available in respect of shares, bonds
or debentures acquired by NRIs under the Portfolio Investment
Scheme as well as under any Direct Investment Scheme.For
sale/transfer of shares, bonds or debentures by OCBs acquired
on non repatriation basis through a stock exchange in
India, a consolidated application giving full particulars
may be submitted to the concerned office of Reserve Bank.
Permission will be granted by Reserve Bank for a specific
period subject to renewal. |
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| General Exemption
for Sale/Transfer of Shares/Bonds/Debentures of Indian Companies
through a Stock Exchange acquired with repatriation benefits
under the Portfolio Investment Scheme. |
The Reserve Bank by its Notification
No.FERA.150/93-RB dated 26th April 1993 has exempted transfer
of shares, bonds or debentures of Indian companies registered
in India previously acquired by NRIs/OCBs with repatriation
benefits under the Portfolio Investment Scheme to persons
resident in India or persons of Indian origin resident
in India or in favour of companies or bodies corporate,
incorporated under any law in force in India if the following
conditions are satisfied :-
-
The transferor had purchased such
shares, bonds or debentures from the stock market
through a member of a recognized stock exchange in
India and delivery of shares, bonds or debentures
so purchased has been taken by him or on his behalf
by the concerned authorized dealer or its nominee.
-
The shares, bonds or debentures
are sold in the stock market through a member of a
recognized stock exchange in India and the sale transaction
is effected at the ruling market price as determined
on the floor of the stock exchange by normal bid and
offer method and through the same designated branch
of the authorized dealer through which the shares,
bonds or debentures were earlier purchased.
-
The sale proceeds are paid to the
said designated branch.
Consequently, it is not necessary
for NRIs/OCBs to obtain Reserve Bank's permission for
sale of shares/bonds/debentures effected in the above
manner. As regards the repatriation of sale proceeds received
by the designated branches, Reserve Bank will, while granting
approval for purchase of shares/bonds/debentures also
grant approval for repatriation of the sale proceeds if
and when shares/bonds/debentures are sold in the above
manner. The actual repatriation of the sale proceeds or
credit thereof to the NRE/FCNR account of the beneficiary
will be subject to payment of Indian taxes.Sale/transfer
of shares/bonds/debentures acquired by NRIs/OCBs with
repatriation benefits under the Direct Investment Scheme
and sold through the Stock Exchange in India will require
permission of Reserve Bank. Applications for necessary
permission should be made by NRIs/OCBs to the Central
Office of Reserve Bank in form TS 4 through the designated
bank branch of an authorized dealer. In such cases, permission
for sale/transfer of shares / bonds/ debentures acquired
with the right of repatriation will be granted by Reserve
Bank to the bank branch designated by the seller or to
the authorized dealer, as the case may be, who may sell
the holdings at the ruling market price through a stock
exchange at any time within the validity of the permission.While
granting permission for sale/transfer, Reserve Bank will
also authorize the designated branch/authorized dealer
to credit the sale proceeds to the NRE or FCNR account
of the seller or to remit them abroad subject to payment
of taxes on capital gains, if any. Where the amount of
capital gains tax is not immediately determinable, the
designated branch/authorized dealer may allow repatriation
of sale proceeds or credit thereof to the seller's NRE/FCNR
account to the extent of the original cost of investment
immediately on realization of the sale proceeds. The excess
amount, if any, representing capital gain should be kept
by the designated branch/authorized dealer in a separate
NRO account of the seller or in a suspense account.The
designated branch/authorized dealer may allow withdrawal
of this amount for credit to the NRE/FCNR account of the
seller or remit it abroad, on production of necessary
tax clearance certificate under Section 204 of the Income-tax
Act 1961 and after deduction of income tax at source.
|
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| General exemption for transfer of
rupee securities by non-residents as gift |
By its Notification
No. FERA.151/93-RB dated 26th April 1993, Reserve Bank has
also exempted transfer, by way of gift, of any share, bond
or debenture of a company registered in India made by a
non-resident Indian or person of Indian origin to a citizen
of India or a person of Indian origin resident in India
provided :-such share, bond or debenture was held by the
transferor with the permission of the Reserve Bank,
such transfer is between relatives as defined in Section
6 of the Companies Act, 1956. |
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| Transfer of Rupee Securities to Non-residents
as Gifts |
Transfer of rupee
shares/securities by residents to non-residents by way of
gift requires prior approval of Reserve Bank. Applications
for such transfers should be made to the concerned Office
of Reserve Bank and should, inter alia, contain the following
information:-(a) Name, address and permanent place of residence
of both the transferor and the transferee.
(b) Relationship between the transfer or and the transferee.
(c) Reason for making the gift. |
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| Recording of Overseas Address by Indian
Companies consequent on Resident Security Holder Becoming
Non-resident |
The Reserve Bank,
by its Notification No. FERA 122/92-RB dated 17th September
1992, has granted general permission to companies in India
to enter the overseas address in such cases provided the
company obtains an undertaking from the holder of any security
that he will not seek repatriation of any income, dividend
or sale proceeds of the security. The dividend/interest
earned on such securities or sale proceeds thereof should,
therefore, be credited only to the Ordinary Non-resident
Rupee (NRO) Account of the holder with a bank in India. |
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| Conversion of Holdings of Securities
into Joint Holdings Between Residents/Non-residents |
The Reserve Bank,
by its Notification No. FERA.145/93-RB dated 26th April
1993 has granted general permission to NRIs/resident Indian
citizens for conversion of their holdings in securities
issued or registered in India, into joint holdings by addition
of the names of persons of Indian nationality or origin
subject to the following conditions:-(a) An NRI may convert
his holding into joint holding by addition of name/s of
person/s of Indian nationality/origin resident in India
provided (i) transfer formalities as required under the
Companies Act, 1956 are complied with and (ii) dividend
income or sale proceeds of the securities accruing to the
person resident in India are not repatriated outside India
in the event of his becoming a non-resident sole (or joint
named) holder of the security by succession, gift or otherwise.
(b) A resident Indian citizen may convert his holding into
a joint holding by addition of name/s of an NRI/s provided
(i) the resident holder continues to be the first holder;
(ii) the joint holding is treated as non-resident holding
in the books of the company; (iii) any dividend or income
or sale proceeds becoming payable to NRIs are credited to
his NRO account and (iv) the securities are not sold or
disposed of otherwise than through a member of a recognized
stock exchange in India, except with the permission of Reserve
Bank. |
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