(i) Indian companies intending to remit dividend to their non-resident shareholders should make an application to an authorised dealer in Form RCD 1, supported by the particulars of non-resident shareholding in form RCD 2 and other documents prescribed in the form. Authorised dealers may allow the remittance of dividend in accordance with the procedure mentioned below.
(a) Authorised dealers should verify the particulars with reference to the documents submitted in support of the non-resident shareholding and satisfy themselves that necessary permission of the Reserve Bank has been obtained by the non-resident shareholders in terms of Section 29(1)(b) or 29(4)(a) of the Act for purchase/holding of the shares and/or the company has permission under Section 19(1) of the Act for issue of shares to the non-residents and that the terms of the permission do not prohibit remittance of dividend.
(b) Authorised dealers should also verify that the certificate given in Part B of the form RCD 1 has been properly completed by the companys auditors and specifically confirm on form A2 that they have verified the Reserve Banks approval for purchase/holding/issue of the shares held by the non-resident beneficiary and it does not prohibit the remittance of dividend.
(c) Authorised dealers should separately forward one copy of the application in form RCD 1 (without its enclosures) to the office of Reserve Bank within whose jurisdiction the Head/Registered Office of the company is situated, after completing the certificate in Part C thereof.
(d) The Indian company/authorised dealers should ensure that the reference number, date, etc. of Reserve Banks permission and the repatriable/non-repatriable nature of the shares/debentures/bonds held by the concerned non-residents are incorporated on the counterfoil of the dividend warrants.
(ii) As Indian companies are required to remit dividend to all their non-resident shareholders through the normal banking channels, it is not necessary for them to prepare individual dividend warrants for despatch to such non-resident shareholders. However, dividends due to non-resident shareholders who are not eligible for having the amounts remitted to them abroad or those who wish to have the dividend paid in India for credit to their non-resident accounts, may be paid by issuing individual dividend warrants to their mandatee bankers in India for credit to their Ordinary Non-resident Rupee (NRO) accounts. In cases where dividend is to be credited to NRO accounts of the non-resident investors, there is no need to follow the procedure in sub-paragraph (i) above.
(iii) As regards the remittance of interim dividend, application may be made by the company in India to the authorised dealer by letter (in duplicate) enclosing only the form RCD 2 and a copy of the Board Resolution approving the payment of interim dividend. Authorised dealers may allow the remittance of interim dividend subject to what has been stated in paragraph (i) above.
(iv) As regards non-resident investment in consumer goods industries, the Government/Reserve Bank would stipulate that the dividend outflow should be balanced with inflow on account of export earnings. The balancing is required to be done for a period of 7 years from the date of commencement of commercial production. Reserve Banks permission is also necessary for carrying on agricultural/plantation activities by FERA companies in terms of Section 29(1)(a) of FERA 1973. Before allowing remittance of dividend in such cases, authorised dealers should verify that items C and D of Part B in the auditors certificate in form RCD1 have been properly completed by the companys auditors.
(v) Investment in companies engaged in export trading activity is permitted by Reserve Bank provided the company registers itself as an Export/Trading/Star Trading House. Authorised dealers should, therefore, before allowing the remittance of dividend by such companies ensure that the company has attained the status of an Export/Trading/Star Trading House.
(vi) In the case of investments by Foreign Institutional Investors (FIIs), Reserve Bank authorises the designated branch of an authorised dealer to credit the net amount of dividend on the shares purchased to the special non-resident rupee account [see paragraph 10B.4(iii)]. It will, therefore, be in order for companies to pay the dividend amounts to the designated branches of FIIs by way of dividend warrant together with a statement, under the signature of an authorised official, showing the number of shares held by the non-resident shareholder, face value, rate of dividend declared, year/period to which it relates, gross dividend, tax deducted at source, net dividend, and the particulars of Reserve Banks approval under Section 19(1)/29(1)(b) of FERA, 1973 for issue/purchase of shares.