TMI BlogForeign Exchange Management (Non-debt Instruments) Rules, 2019.X X X X Extracts X X X X X X X X Extracts X X X X ..... heir publication in the Official Gazette. 2. Definitions: - In these rules, unless the context otherwise requires:- (a) Act means the Foreign Exchange Management Act, 1999 (42 of 1999); (b) asset reconstruction company means a company registered with the Reserve Bank under section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002); (c) authorised bank shall have the meaning assigned to it in the Foreign Exchange Management (Deposit) Regulations,2016; (d) authorised dealer includes a person authorised under sub-section (1) of section 10 of the Act; (e) convertible note means an instrument issued by a startup company acknowledging receipt of money initially as debt, repayable at the option of the holder, or which is convertible into such number of equity shares of that company, within a period not exceeding five years from the date of issue of the convertible note, upon occurrence of specified events as per other terms and conditions agreed and indicated in the instrument; (f) debt instruments means all instruments other than non-debt in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uance of share warrants. (l) escrow account means an escrow account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016; (m) FDI linked performance conditions means the sector specific conditions specified in Schedule I of these rules for companies receiving foreign investment; (n) FVCI means a Foreign Venture Capital Investor incorporated and established outside India and registered with the Securities and Exchange Board of India under the Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000; (o) foreign central bank means an institution or organisation or body corporate established in a country outside India and entrusted with the responsibility of carrying out central bank functions under the law for the time being in force in that country; (p) FCNR (B) account means a Foreign Currency Non-Resident (Bank) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016; (q) FCCB or Foreign Currency Convertible Bond means a bond issued under the Issue of Foreign Currency Convertible Bonds and Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two or more enterprises which, directly or indirectly, are in a position to (i) exercise twenty-six per cent, or more of voting rights in other enterprise; or (ii) appoint more than fifty per cent of members of Board of Directors in the other enterprise; (x) hybrid securities means hybrid instruments such as optionally or partially convertible preference shares or debentures and other such instruments as specified by the Central Government from time to time, which can be issued by an Indian company or trust to a person resident outside India; (y) Indian company means a company incorporated in India; (z) IDR or Indian Depository Receipts (IDRs) means any instrument in the form of a depository receipt created by a domestic depository in India and authorised by a company incorporated outside India making an issue of such depository receipts; (aa) Indian entity shall mean an Indian company or a LLP ; (ab) investing company means an Indian company holding only investments in other Indian company/ies directly or indirectly, other than for trading of such holdings or securities; (ac) investment means to subscribe, acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated entities: public, private, listed and unlisted; (ii) capital participation in LLP; (iii) all instruments of investment recognised in the FDI policy notified from time to time; (iv) investment in units of Alternative Investment Funds (AIFs), Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvIts); (v) investment in units of mutual funds or Exchange-Traded Fund (ETFs) which invest more than fifty per cent in equity; (vi) junior-most layer (i.e. equity tranche) of securitisation structure; (vii) acquisition, sale or dealing directly in immovable property; (viii) contribution to trusts; and (ix) depository receipts issued against equity instruments; (aj) NRI or Non-Resident Indian means an individual resident outside India who is a citizen of India; (ak) OCI or Overseas Citizen of India means an individual resident outside India who is registered as an Overseas Citizen of India Cardholder under section 7A of the Citizenship Act, 1955 ( 57 of 1955); (al) resident Indian citizen means an individual who is a person resident in India and is a citizen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further that the Reserve Bank may, on an application made to it and for sufficient reasons and in consultation with the Central Government, permit a person resident outside India to make any investment in India subject to such conditions as may be considered necessary. 4. Restriction on receiving investment.- Save as otherwise provided in the Act or rules or regulations made thereunder, an Indian entity or an investment vehicle, or a venture capital fund or a firm or an association of persons or a proprietary concern shall not receive any investment in India from a person resident outside India or record such investment in its books: Provided that the Reserve Bank may, on an application made to it and for sufficient reasons and in consultation with the Central Government, permit an Indian entity or an investment vehicle, or a venture capital fund or a firm or an association of persons or a proprietary concern to receive any investment in India from a person resident outside India or to record such investment subject to such conditions as may be considered necessary. 5. Permission for making investment by a person resident outside India. - Unless otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a rights issue or a bonus issue, provided that,- (a) the offer made by the Indian company is in compliance with the provisions of the Companies Act, 2013; (b) such issue shall not result in a breach of the sectoral cap applicable to the company; (c) the share holding on the basis of which the rights issue or the bonus issue has been made must have been acquired and held as per the provisions of these rules; (d) in case of a listed Indian company, the rights issue to persons resident outside India shall be at a price determined by the company; (e) in case of an unlisted Indian company, the rights issue to persons resident outside India shall not be at a price less than the price offered to persons resident in India; (f) such investment made through rights issue or bonus issue shall be subject to the conditions as are applicable at the time of such issue; (g) the mode of payment and attendant conditions for such transactions shall be specified by the Reserve Bank. (h). an individual who is a person resident outside India exercising a right which was issued when he or she was a person resident in India shall h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overseas corporate body may transfer by way of sale or gift the equity instruments of an Indian company or units held by him to any person resident outside India; Explanation : It shall also include transfer of equity instruments of an Indian company pursuant to liquidation, merger, de-merger and amalgamation of entities or companies incorporated or registered outside India. Provided that.- (i) prior government approval shall be obtained for any transfer in case the company is engaged in a sector which requires government approval; (ii) where the equity instruments are held by the person resident outside India on a non-repatriable basis, the transfer by way of sale where the transferee intends to hold the equity instruments on a repatriable basis, shall be in compliance with and subject to the adherence to entry routes, sectoral caps or investment limits, as specified in these rules and attendant conditionalities for such investment, pricing guidelines, documentation and reporting requirements for such transfers, as may be specified by the Reserve Bank from time to time; (2) A person resident outside India, holding equity instruments o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siding outside India as gift during the financial year does not exceed the rupee equivalent of fifty-thousand US Dollars; (vi) such other conditions as considered necessary in public interest by the Central Government. (5) A person resident outside India holding equity instruments of an Indian company containing an optionality clause in accordance with these rules and exercising the option or right, may exit without any assured return, subject to the pricing guidelines prescribed in these rules and a minimum lock-in period of one year or minimum lock-in period as prescribed in these rules, whichever is higher. (6) In case of transfer of equity instruments between a person resident in India and a person resident outside India, an amount not exceeding twenty five percent of the total consideration,- (i) may be paid by the buyer on a deferred basis within a period not exceeding eighteen months from the date of the transfer agreement; or (ii) may be settled through an escrow arrangement between the buyer and the seller for a period not exceeding eighteen months from the date of the transfer agreement; or (iii) may be indemnified by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia to secure the credit facilities being extended to such Indian company for bona fide purposes, (B) in favour of an overseas bank to secure the credit facilities being extended to such person or a person resident outside India who is the promoter of such Indian company or the overseas group company of such Indian company, (C) in favour of a non-banking financial company registered with the Reserve Bank to secure the credit facilities being extended to such Indian company for bona fide purposes, (D) subject to the authorised dealer bank satisfying itself of the compliance of the conditions stipulated by the Reserve Bank in this regard; (iii) in case of invocation of pledge, transfer of equity instruments of an Indian company or units shall be in accordance with entry routes, sectoral caps or investment limits, pricing guidelines and other attendant conditions at the time of creation of pledge. CHAPTER IV INVESTMENT BY FOREIGN PORTFOLIO INVESTOR (FPI) 10. Investment by FPI - A FPI may make investments as under:- (1) A FPI may purchase or sell equity instruments of an Indian company which is listed or to be lis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions prescribed in Schedule III. (2) A NRI or an OCI may, on non-repatriation basis, purchase or sell equity instruments of an Indian company or other securities or contribute to the capital of a LLP or a firm or proprietary concern, in the manner and subject to the terms and conditions specified in Schedule IV. Note: A NRI or an OCI may trade or invest in all exchange traded derivative contracts approved by the Securities and Exchange Board of India from time to time subject to the limits specified by Securities and Exchange Board of India and conditions prescribed in Schedule III. (3) A NRI or an OCI may purchase, hold, or sell Indian Depository Receipts (IDRs) of companies resident outside India and issued in the Indian capital market, in the manner and subject to the terms and conditions specified in Schedule X. 13. Transfer of equity instruments by NRI or OCI - A NRI or an OCI holding equity instruments of an Indian company or units in accordance with these rules may transfer such equity instruments or units so held by him in compliance with the conditions, if any, prescribed in the Schedules of these rules and subject to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurity under relevant Schedules of these rules; (ii) the gift does not exceed five percent of the paid up capital of the Indian company or each mutual fund scheme; Explanation : The five percent shall be on cumulative basis by a single person to another single person. (iii) the applicable sectoral cap in the Indian company is not breached; (iv) the donor and the donee shall be relatives within the meaning in clause (77) of section 2 of the Companies Act, 2013; (v) the value of security to be transferred by the donor together with any security transferred to any person residing outside India as gift during the financial year does not exceed the rupee equivalent of USD 50000; (vi) such other conditions as may be considered necessary in public interest by the Central Government. (4) A NRI or an OCI or an eligible investor specified under Schedule IV of these rules holding equity instruments of an Indian company or units on a non-repatriation basis, may transfer the same by way of gift to an NRI or an OCI or an eligible investor under Schedule IV of these rules who shall hold it on a non-repatriable basis. (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notes shall be in compliance with the entry route, sectoral caps, pricing guidelines and other attendant conditions for foreign investment. (3) The mode of payment and other attendant conditions for remittance of sale or maturity proceeds shall be specified by the Reserve Bank. (4) A NRI or an OCI may acquire convertible notes on non-repatriation basis in accordance with Schedule IV of these rules. (5) A person resident outside India may acquire or transfer by way of sale, convertible notes, from or to, a person resident in or outside India, provided the transfer takes place in accordance with the entry routes and pricing guidelines as prescribed for capital instruments. 19. Merger or demerger or amalgamation of Indian companies .- (1) Where a scheme of merger or amalgamation of two or more Indian companies or a reconstruction by way of demerger or otherwise of an Indian company, has been approved by the National Company Law Tribunal (NCLT) or competent authority, the transferee company or the new company, as the case may be, may issue equity instruments to the existing holders of the transferor company resident outside India, subject to the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a person resident outside India shall not be less than,- (i) the price worked out in accordance with the Securities and Exchange Board of India guidelines in case of a listed Indian company; (ii) the price at which a preferential allotment of shares can be made under the Securities and Exchange Board of India Guidelines, as applicable, in case of a listed Indian company or in case of a company going through a delisting process as per the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009; (iii) the valuation of equity instruments done as per any internationally accepted pricing methodology for valuation on an arm s length basis duly certified by a Chartered Accountant or a Merchant Banker registered with the Securities and Exchange Board of India or a practising Cost Accountant, in case of an unlisted Indian company. (c) transferred by a person resident outside India to a person resident in India shall not exceed : (i) the price worked out in accordance with the relevant Securities and Exchange Board of India guidelines in case of a listed Indian company; (ii) the price at which a preferent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by a person resident outside India shall be made otherwise than in accordance with these rules , the conditions prescribed in the relevant Schedule and as specified by the Reserve Bank. (b) An authorised dealer may allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India : Provided that - (i) the security was held by the seller on repatriation basis; and (ii) either the security has been sold in compliance with the pricing guidelines or the Reserve Bank s approval has been obtained in other cases for sale of the security and remittance of the sale proceeds thereof. 23. Downstream investment - (1) Indian entity which has received indirect foreign investment shall comply with the entry route, sectoral caps, pricing guidelines and other attendant conditions as applicable for foreign investment. Explanation : Downstream investment by an LLP not owned and not controlled by resident Indian citizens or owned or controlled by persons resident outside India is allowed in an Indian company operating in sectors where foreign investment up to one hundred percent is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accruals and for this purpose, internal accruals shall mean profits transferred to reserve account after payment of taxes. Further raising of debt and its utilisation shall be in compliance with the Act, rules or regulations made thereunder. (5) Equity instrument of an Indian company held by another Indian company which has received foreign investment and is not owned and not controlled by resident Indian citizens or is owned or controlled by persons resident outside India may be transferred to- (a) a person resident outside India, subject to the reporting requirements as specified by the Reserve Bank. (b) a person resident in India subject to adherence to pricing guidelines; (c) an Indian company which has received foreign investment and is not owned and not controlled by resident Indian citizens or owned or controlled by persons resident outside India. (6) The first level Indian company making downstream investment shall be responsible for ensuring compliance with the provisions of these rules for the downstream investment made by it at second level and so on and so forth and such first level company shall obtain a certificate to thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtue of their shareholding or management rights or shareholders agreement or voting agreement and for the purpose of LLP, control shall mean the right to appoint majority of the designated partners, where such designated partners, with specific exclusion to others, have control over all the policies of an LLP; (e) company controlled by resident Indian citizens means an Indian company, the control of which is vested in resident Indian citizens and/ or Indian companies which are ultimately owned and controlled by resident Indian citizens and LLP controlled by resident Indian citizens shall mean an LLP, the control of which is vested in resident Indian citizens and/ or Indian entities, which are ultimately owned and controlled by resident Indian citizens; (f) company controlled by persons resident outside India shall mean an Indian company that is controlled by persons resident outside India and LLP controlled by persons resident outside India shall mean an LLP that is controlled by persons resident outside India; (g) downstream investment shall mean investment made by an Indian entity which has total foreign investment in it, or an Investment V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property:- (i) in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these rules ;or (ii) from a person resident in India; (d) transfer any immovable property in India to a person resident in India; (e) transfer any immovable property other than agricultural land or farm house or plantation property to an NRI or an OCI. 25. Joint acquisition by the spouse of a NRI or an OCI : A person resident outside India, not being an NRI or an OCI, who is a spouse of an NRI or an OCI may acquire one immovable property (other than agricultural land or farm house or plantation property), jointly with his or her NRI or OCI spouse : Provided that - (a) consideration for transfer, shall be made out of - (i) funds received in India through banking channels by way of inward remittance from any place outside India; or (ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquisition of immovable property in India is paid out of funds remitted from abroad through banking channels. 28. Acquisition by a long-term visa holder - A person being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority communities in those countries, namely, Hindus, Sikhs, Buddhists, Jains, Parsis and Christians who is residing in India and has been granted a Long Term Visa (LTV) by the Central Government may purchase only one residential immovable property in India as dwelling unit for self-occupation and only one immovable property for carrying out self-employment subject to the following conditions, namely :- (a) the property shall not be located in and around restricted or protected areas so notified by the Central Government and cantonment areas; (b) the person submits a declaration to the Revenue Authority of the district where the property is located, specifying the source of funds and that he or she is residing in India on LTV; (c) the registration documents of the property shall mention the nationality and the fact that such person is on LTV; (d) the property of such person may be attached or confiscated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the said loan and not any other loan. 30. Prohibition on transfer of immovable property in India - (1) Save as otherwise provided in the Act or rules, no person resident outside India shall transfer any immovable property in India: Provided that:- (a) the Reserve Bank may, for sufficient reasons, permit the transfer subject to such conditions as may be considered necessary; (b) a bank which is an authorised dealer may, subject to the directions issued by the Reserve Bank in this behalf, permit a person resident in India or on behalf of such person to create charge on his immovable property in India in favour of an overseas lender or security trustee, to secure an external commercial borrowing availed under the provisions of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000; (c) an authorised dealer in India being the Indian correspondent of an overseas lender may, subject to the directions issued by the Reserve Bank in this regard, create a mortgage on an immovable property in India owned by an NRI or an OCI, being a director of a company outside India, for a loan to be availed by the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed in this Schedule. (b) A person resident outside India may purchase equity instruments of a listed Indian company on a stock exchange in India: Provided that - (i) the person resident outside India making the investment has already acquired control of such company in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 and continues to hold such control; (ii) the amount of consideration may be paid as per the mode of payment specified by the Reserve Bank or out of the dividend payable by Indian investee company in which the person resident outside India has acquired and continues to hold the control in accordance with SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 provided the right to receive dividend is established and the dividend amount has been credited to a specially designated noninterest bearing rupee account for acquisition of shares on the recognised stock exchange. (c) A wholly owned subsidiary set up in India by a non-resident entity, operating in a sector where 100 percent foreign investment is allowed in the automatic route and there are no FDI linked perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erve Bank. (2) Sectors prohibited for FDI.- (a) Lottery business including Government or private lottery, online lotteries, etc. (b) Gambling and betting including casinos, etc. (c) Chit funds (d) Nidhi company (e) Trading in Transferable Development Rights (f) Real estate business or construction of farm houses Explanation: For the purpose of this rule, real estate business shall not include development of townships, construction of residential or commercial premises, roads or bridges and Real Estate Investment Trusts (REITs) registered and regulated under the SEBI (REITs) Regulations, 2014. (g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes. (h) Activities or sectors not open to private sector investment e.g. (I) Atomic energy and (II) Railway operations (other than permitted activities mentioned in paragraph (3) of Schedule I) (i) Foreign technology collaborations in any form including licensing for franchise, trademark, brand name, management contract is also prohibited for lottery business and gambling and betting activitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um received along with the face value of the equity instrument, only when it is received by the company upon issue of such instruments to the person resident outside India and the amount paid by the transferee during post-issue transfer beyond the issue price of the capital instrument, shall not be taken into account while calculating minimum capitalization requirement. (v) (A) Foreign Investment in investing companies not registered as Non-Banking Financial Companies with the Reserve Bank and in core investment companies (CICs), both engaged in the activity of investing in the capital of other Indian entities, shall require prior approval of the Government . Note: Compliance to these rules by the core investment companies is in addition to the compliance of the regulatory framework prescribed to such companies as NBFCs under the Reserve Bank of India Act, 1934 and regulations framed thereunder. (v) (B) Foreign investment in investing companies registered as Non-Banking Financial Companies (NBFCs) with the Reserve Bank, shall be under 100% automatic route. (vi) For undertaking activities which are under automatic route and without FDI linked per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions covers the following: Cultivation under controlled conditions for the categories of Floriculture, Horticulture, Cultivation of vegetables and mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically. 2. Plantation 2.1 (a) Tea sector including tea plantations (b) Coffee plantations (c) Rubber plantations (d) Cardamom plantations (e) Palm oil tree plantations (f) Olive oil tree plantation Note: Foreign investment is not allowed in any plantation sector/ activity other than those listed above . 100% Automatic 2.2 Other Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987. (b) Foreign investment will not be allowed in mining of prescribed substances listed in the Notification No. S.O. 61(E), dated 18.1.2006, issued by the Department of Atomic Energy. Clarification: (i) For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Ilmenite can be processed to produce Synthetic Rutile or Titanium Slag as an intermediate value added product. (ii) The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such industries within the country. Thus, if with the technology transfer, the objective of this Rules can be achieved, the conditions prescribed at (a)(i) above shall be deemed to be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r other reasons to be recorded. 6.2 Other Conditions (a) Fresh foreign investment within the permitted automatic route, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, shall require Government approval. (b) Licence applications will be considered and licences shall be given by the Department of Industrial Policy and Promotion, Ministry of Commerce Industry, in consultation with Ministry of Defence and Ministry of External Affairs. (c) Foreign investment in this sector is subject to security clearance and guidelines of the Ministry of Defence. (d) Investee company should be structured to be self-sufficient in areas of product design and development. The investee/ joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India. 7. Broadcasting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant regulations and such terms and conditions, as may be specified from time to time, by the Ministry of Information and Broadcasting. (b) Foreign investment in the afore-stated broadcasting carriage services shall be subject to the terms and conditions as may be specified by the Ministry of Information and Broadcasting, from time to time, in this regard. (c) Licensee shall ensure that broadcasting service installation carried out by it shall not become a safety hazard and is not in contravention of any statute, rule or regulations and public policy. (d) In the l and B sector where the sectoral cap is up to 49 percent, the company should be owned and controlled by resident Indian citizens or Indian companies which are owned and controlled by resident Indian citizens. (i) For this purpose, the equity held by the largest Indian shareholder shall be at least 51 percent of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined in section 4A of the Companies Act, 1956 or Section 2 (72) of the Companies Act, 2013, as the case may be and the term `largest Indian shareholder' us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zine or specialty journals or periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 100% Government 8.4 Publication of facsimile edition of foreign newspapers 100% Government 8.4.1 Other conditions: (a) Foreign investment shall be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. (b) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 2013. (c) Publication of facsimile edition of foreign newspaper shall also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign news ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation; (j) Seaplane means an aeroplane capable normally of taking off from and alighting solely on water; (k) Ground Handling means (i) ramp handling, (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling 9.2 Airports (a) Greenfield projects 100% Automatic (b) Existing projects 100% Automatic 9.3 Air Transport Services (a) (i) Scheduled Air Transport Service/ Domestic Scheduled Passenger Ai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) the Chairman and at least two-thirds of the Directors of which are citizens of India; and (3) the substantial ownership and effective control of which is vested in Indian citizens. (iv) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such foreign investment shall be cleared from security view point before deployment; and (v) All technical equipment that might be imported into India as a result of such foreign investment shall require clearance from the relevant authority in the Ministry of Civil Aviation. (d) In addition to the above conditions, foreign investment in M/s Air India Limited shall be subject to the following conditions: (i) Foreign investment in M/s Air India Ltd., including that of foreign airline(s), shall not exceed 49% either directly or indirectly. (ii) Substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals. Note: (4) The sectoral caps or entry routes, mentioned at paragraph 9.3(a) and 9.3(b) above, are applicable in the situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eloped plots shall mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available. (f) The Indian investee company shall be responsible for obtaining all necessary approvals, including those of the building or layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/ bye-Laws/ regulations of the State Government or Municipal or Local Body concerned. (g) The State Government or Municipal or Local Body concerned, which approves the building or development plans, shall monitor compliance of the above conditions by the developer. Note: (1) Foreign investment is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs). (2) Condition of lock-in period shall not apply to Hotels and Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... linquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (v) any transaction, by acquiring capital instruments in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property. (7) Real estate broking services shall be excluded from the definition of real estate business and 100% foreign investment is allowed in real estate broking services under automatic route. 11. Industrial Parks 100% Automatic 11.1 For the purpose of this sector: (a) Industrial Park is a project in which quality infrastructure in the form of plots of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Foreign investment in Industrial Parks shall not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 10 above, provided the Industrial Parks meet with the undermentioned conditions: (a) it shall comprise of a minimum of 10 units and no single unit shall occupy more than 50 percent of the allocable area; (b) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66 percent of the total allocable area. 12. Satellites - Establishment and operation Satellites Establishment and operation, subject to the sectoral guidelines of Department of Space/ ISRO 100% Government 13. Private Security Agencies 49% Government 14. Telecom services (including Telecom Infrastructure Providers Categor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les and B2B e-Commerce. 15.1.2 Other Conditions (a) For undertaking WT', requisite licenses/ registration/ permits, as specified under the relevant Acts or Regulations or Rules or Orders of the State Government or Government Body or Government Authority or Local Self-Government Body under that State Government shall be obtained. (b) Except in cases of sales to Government, sales made by the wholesaler shall be considered as 'cash and carry wholesale trading/ wholesale trading' with valid business customers, only when WT is made to the following entities: (i) Entities holding sales tax or VAT registration or service tax or excise duty or Goods and Services Tax (GST) registration; or (ii) Entities holding trade licenses i.e. a license or registration certificate or membership certificate or registration under Shops and Establishment Act, issued by a Government Authority or Government Body/ Local Self-Government Authority, reflecting that the entity or person holding the license or registration certificate or membership certificate, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Other Conditions: (a) E-commerce means buying and selling of goods and services including digital products over digital electronic network; (b) E-commerce entity means a company incorporated under Companies Act 1956 or the Companies Act, 2013 (c) Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly; (d) Market place model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. (e) Digital and electronic network shall include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc. (f) Marketplace e-commerce entity shall be permitted to enter into transactions with sellers registered on its platform on B2B basis. (g) E-commerce marketplace may provide support services to sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities. (o) No e-commerce marketplace entity shall mandate any seller to sell any of their product exclusively on its platform. (p) All existing investments shall have to be in compliance with the above conditions from the date of issue of this Notification. Note: Foreign investment is not permitted in inventory based model of e-commerce. 15.2.4 Sale of services through e-commerce shall be under automatic route subject to the sector specific conditions, applicable laws/ regulations, security and other conditionalities. 15.3 Single Brand Product Retail Trading Foreign investment in Single Brand Product Retail Trading (SBRT) is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. 100% Automatic up to 49%; Government route beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remental sourcing shall mean the increase in terms of value of such global sourcing from India for that single brand (in INR terms) in a particular financial year from India over the preceding financial year, by the non-resident entities undertaking single brand retail trading, either directly or through their group companies. After completion of this 5 years period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India s operation, on an annual basis. Note: (1) Conditions mentioned at (b) and (d) above shall not be applicable for undertaking SBRT of Indian brands. (2) Indian brands should be owned and controlled by resident Indian citizens and/ or companies which are owned and controlled by resident Indian citizens. (3) Sourcing norms shall not be applicable up to three years from commencement of the business i.e. opening of the first store for entities undertaking single brand retail trading of products having 'state-of-art' and 'cutting-edge' technology and where local sourcing is not possible. Thereafter, condition mentioned at 15.3.1(e) above shall be applicable. A Committee u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers co-operatives shall also be considered in this category. The procurement requirement shall have to be met, in the first instance, as an average of five years total value of the manufactured/ processed products purchased, beginning 1 st April of the year during which the first tranche of foreign investment is received. Thereafter, it shall have to be met on an annual basis. (e) Self-certification is required by the company, to ensure compliance of the conditions at serial nos. (b), (c) and (d) above, which could be cross-checked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors. (f) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the respective State Governments, and may also cover an area of 10 kms. Around the municipal or urban agglomeration limits of such cities; retail locations shall be restricted to conforming areas as per the Master or Zonal Plans of the concerned cities and provision sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les and regulations. (c) Duty Free Shop entity shall not engage into any retail trading activity in the Domestic Tariff Area of the country. 16 Pharmaceuticals 16.1 Greenfield 100% Automatic 16.2 Brownfield 100% Automatic up to 74%; Government route beyond 74% 16.3 Other Conditions (a) 'Non-compete' clause shall not be allowed except in special circumstances with the Government approval. (b) The prospective investor and the prospective investee are required to provide a certificate given at 16.4 along with the application submitted for Government approval. (c) Government approval may incorporate appropriate conditions for foreign investment in brownfield cases. (d) Forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ac) investigation, replacement or modification or support of the anatomy or of a physiological process; (ad) supporting or sustaining life; (ae) disinfection of medical devices; (af) control of conception; and which does not achieve its primary intended action in or on the human body or animals by any pharmacological or immunological or metabolic means, but which may be assisted in its intended function by such means; (b) an accessory to such an instrument, apparatus, appliance, material or other article; (c) in-vitro diagnostic device which is a reagent, reagent product, calibrator, control material, kit, instrument, apparatus, equipment or system, whether used alone or in combination thereof intended to be used for examination and providing information for medical or diagnostic purposes by means of examination of specimens derived from the human bodies or animals. 16.4 Certificate to be furnished by the Prospective Investor as well as the Prospective Recipient Entity It is certified that the following is the complete l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FINANCIAL SERVICES Investment in financial services, other than those indicated below, would require prior Government approval. F.1 Asset Reconstruction Companies 100% Automatic F.1.1 Other Conditions (a) Investment limit of a sponsor in the shareholding of an ARC shall be governed by the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Similarly, investment by institutional or non-institutional investors shall also be governed by the said Act. (b) FPIs can invest in the Security Receipts (SRs) issued by ARCs. FPIs may be allowed to invest up to 100 percent of each tranche in SRs issued by ARCs, subject to directions/ guidelines of Reserve Bank. Such investment shall be within the relevant regulatory cap as applicable. (c) All investments shall be subject to provisions of the Securitisation and Reconstruct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority in the home country and meeting Reserve Bank's licensing criteria shall be allowed to hold 100 percent paid-up capital to enable them to set up a whollyowned subsidiary in India. (iii) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary (iii) a subsidiary with aggregate foreign investment up to a maximum of 74 percent in a private bank. (iv) A foreign bank shall be permitted to establish a wholly-owned subsidiary either through conversion of existing branches into a subsidiary or through a fresh banking license. A foreign bank shall be permitted to establish a subsidiary through acquisition of shares of an existing private sector bank provided at least 26 percent of the paid-up capital of the private sector bank is held by residents at all times consistent with para (c) above. (v) A subsidiary of a foreign bank shall be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks. (vi) Guidelines for setting up a wholly-owned subsidiary of a foreign bank shall be issued separately by RBI. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49% Automatic F.5.1 Investment shall be subject to guidelines prescribed by the Central or State Government. F.6 Power Exchanges Power Exchanges under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010. 49% Automatic F.6.1 Other conditions (a) A person resident outside India including persons acting in concert should not hold more than 5 percent. (b) The investment shall be in compliance with Securities and Exchange Board of India Regulations, other applicable laws/ rules/ regulations, security and other conditionalities. F.7 Credit Information Companies 100% Automatic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the condition that the revenues of such entities from their primary (i.e., non-insurance related) business must remain above 50 percent of their total revenues in any financial year. (d) The provisions of paragraphs F.2.1 relating to 'Banking-Private Sector', shall be applicable in respect of bank promoted insurance companies. (e) Terms 'Control', 'Equity Share Capital', 'Foreign Direct Investment' (FDI), 'Foreign Investors', 'Foreign Portfolio Investment', 'Indian Insurance Company', 'Indian Company', 'Indian Control of an Indian Insurance Company', 'Indian Ownership', 'Non-resident Entity', 'Public Financial Institution', 'Resident Indian Citizen', 'Total Foreign Investment' will have the same meaning as provided in Notification No. G.S.R 115 (E), dated 19 th February, 2015 issued by Department of Financial Services and regulations issued by Insurance Regulatory and Development Authority of India from time to time. F.9 Pension Sector 49% Automati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion requirement, as may be decided by the Government. (d) Any activity which is specifically regulated by an Act, the foreign investment limits shall be restricted to those levels/ limit that may be specified in that Act, if so mentioned. (e) Downstream investments by any of these entities engaged in Other Financial Services that is treated as indirect foreign investment for the investee entity shall be subject to these rules. SCHEDULE II (See rule 10(1)) Investments by Foreign Portfolio Investors (1) Purchase or sale of equity instruments by Foreign Portfolio Investors (a) Purchase and sale of equity instruments.- A FPI may purchase or sell equity instruments of an Indian company listed or to be listed on a recognised stock exchange in India subject to the following conditions, namely:- (i) The total holding by each FPI or an investor group, shall be less than 10 percent of the total paid-up equity capital on a fully diluted basis or less than 10 percent of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greements or in any other manner. (iii) The FPIs investing in breach of the prescribed limit shall have the option of divesting their holdings within 5 trading days from the date of settlement of the trades causing the breach. In case the FPI chooses not to divest, then the entire investment in the company by such FPI and its investor group shall be considered as investment under Foreign Direct Investment (FDI) and the FPI and its investor group shall not make further portfolio investment in the company concerned. The FPI, through its designated custodian, shall bring the same to the notice of the depositories as well as the concerned company for effecting necessary changes in their records, within 7 trading days from the date of settlement of the trades causing the breach. The breach of the said aggregate or sectoral limit on account of such acquisition for the period between the acquisition and sale or conversion to FDI within the prescribed time, shall not be reckoned as a contravention under these Rules. (iv) The investment by foreign Government agencies shall be clubbed with the investment by the foreign Government or its related entities for the purpose of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exchange Board of India. (2) The mode of payment and other attendant conditions for remittance of sale or maturity proceeds shall be specified by the Reserve Bank. SCHEDULE III (See rule 12(1)) Investments by Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) on repatriation basis (1) Purchase or sale of equity instruments of a listed Indian company A Non-resident Indian (NRI) or an Overseas Citizen of India (OCI) may purchase or sell equity instruments of a listed Indian company on repatriation basis, on a recognized stock exchange in India, subject to the following conditions, namely :- (a) NRIs or OCIs may purchase and sell equity instruments through a branch designated by an Authorized Dealer for the purpose; (b) The total holding by any individual NRI or OCI shall not exceed 5 percent of the total paid-up equity capital on a fully diluted basis or shall not exceed 5 percent of the paid-up value of each series of debentures or preference shares or share warrants issued by an Indian company and the total holdings of all NRIs and OCIs put together shall not exceed ten percent of the total pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India and owned and controlled by NRIs or OCIs, may purchase or contribute, as the case may be, on non-repatriation basis the following, namely:- (i) a equity instrument issued by a company without any limit either on the stock exchange or outside it; (ii) units issued by an investment vehicle without any limit, either on the stock exchange or outside it; (iii) The capital of a Limited Liability Partnership without any limit; (iv) convertible notes issued by a startup company in accordance with these rules. (b) The investment detailed at sub-paragraph (a) of paragraph (1) above shall be deemed to be domestic investment at par with the investment made by residents. (2) Purchase or sale of units of domestic mutual funds A Non-resident Indian (NRI) or an Overseas Citizen of India (OCI) may without limit purchase or sell units of domestic mutual funds on non-repatriation basis which invest more than 50% in equity. (3) Prohibition on purchase of equity instruments of certain companies. Notwithstanding anything contained in paragraph 1, a NRI or an OCI including a company, a trust and a partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) A person resident outside India (other than a citizen of Pakistan or Bangladesh)or an entity incorporated outside India (other than an entity incorporated in Pakistan or Bangladesh), not being a Foreign Portfolio Investor (FPI) or a Foreign Venture Capital Investor (FVCI), may contribute to the capital of an LLP operating in sectors or activities where foreign investment up to 100 per cent is permitted under automatic route and there are no FDI linked performance conditions. (b) Investment by way of profit share shall fall under the category of reinvestment of earnings. (c) Investment in a LLP is subject to the compliance of the conditions of Limited Liability Partnership Act, 2008. (d) A company having foreign investment, engaged in a sector where foreign investment up to 100 percent is permitted under the automatic route and there are no FDI linked performance conditions, may be converted into a LLP under the automatic route. (e) A LLP having foreign investment, engaged in a sector where foreign investment up to 100 per cent is permitted under the automatic route and there are no FDI linked performance conditions, may be converted into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dant conditions shall apply. (2) A FVCI may purchase the securities or instruments mentioned above either from the issuer of these securities/ instruments or from any person holding these securities or instruments. The FVCI may invest in securities on a recognised stock exchange subject to the provisions of the Securities and Exchange Board of India (FVCI) Regulations, 2000. (3) The FVCI may acquire, by purchase or otherwise, from, or transfer, by sale or otherwise, to, any person resident in or outside India, any security or instrument it is allowed to invest in, at a price that is mutually acceptable to the buyer and the seller/ issuer. The FVCI may also receive the proceeds of the liquidation of VCFs or of Cat-I AIFs or of schemes or funds set up by the VCFs or Cat-I AIFs. (4) The mode of payment and other attendant conditions for remittance of sale or maturity proceeds shall be specified by the Reserve Bank of India (5) List of sectors in which a Foreign Venture Capital Investor is allowed to invest is as follows :- (a) biotechnology; (b) IT related to hardware and software development; (c) nanotechnology; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manager or investment managers should be resident Indian citizens. (5) An Alternative Investment Fund Category III which has received any foreign investment shall make portfolio investment in only those securities or instruments in which a FPI is allowed to invest under the Act or rules or regulations made thereunder. (6) The mode of payment and other attendant conditions for remittance of sale or maturity proceeds shall be specified by the Reserve Bank . SCHEDULE IX (See rule 6(d)) Investment in Depository Receipts by a person resident outside India (1) Issue or transfer of eligible instruments to a foreign depository for the purpose of issuance of depository receipts by eligible person(s).- (a) Any security or unit in which a person resident outside India is allowed to invest under these rules shall be eligible instruments for issue of Depository Receipts in terms of Depository Receipts Scheme, 2014 (DR Scheme,2014). (b) A person shall be eligible to issue or transfer eligible instruments to a foreign depository for the purpose of issuance of depository receipts in accordance with the DR Scheme, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
