A.D.(M.A. Series) Circular No.21, June 18, 1999

Simplification of procedures applicable to Non-residents of
Indian Nationality(NRIs)/Persons of Indian Origin
(PIOs)/Overseas Corporate Bodies (OCBs)
Reserve Bank had introduced certain modifications to the provisions of Exchange Control Manual (ECM) through issue of A.D.(M.A. Series) Circular No.9 dated 30th March 1999.The consequential amendments to the relevant provisions may be carried out as indicated below:

Sr. No.	Paragraph of ECM	Subject	Nature of amendment to be carried out in the ECM	Item No. of AD(MA) Circular No.9/1999
	Volume I
1)	10C.9	Investment in Domestic Public Sector and Private Sector Mutual Funds	Existing paragraph may be replaced as per Slip 1.	1
2)	10C.10	Deposits with companies	Existing sub-paragraph (i) may be replaced as per Slip 2 and the relevant entry in the Index of the Chapter may be amended as per the heading of the Slip.	2
3)	10C.14	Investment in Air Taxi Operations	Existing paragraph may be replaced as per Slip 3.	3
4)	10C.16A	Investment in the Scheme of Domestic Mutual Funds	Existing paragraph may be replaced as per Slip 4.	1
5)	10C.19	Deposit with companies	Existing paragraph may be replaced as per Slip 5 and the relevant entry in the Index of the Chapter may be amended as per the heading of the Slip.	2
6)	10C.27(ii)	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.	Existing sub-paragraph (ii) may be replaced as per Slip 6 and the words "and Direct Investment Scheme" may be added at the end of the heading of paragraph 10C.27 as also in the Index of the Chapter.	4
7)	10C.28	General exemption for transfer of Rupee securities by Non-residents as Gift	Existing paragraph 10C.28 may be renumbered as sub-paragraph (i). New sub-paragraph (ii) may be added as per Slip 7.	5
8)	10D.8	Loans from Non-resident Relatives	Existing paragraph 10D.8 may be replaced as per Slip 8 and the relevant entry in the Index may be amended as per the heading of the paragraph indicated in the Slip.	6
9)	11E.6	General permission for Acquisition/ Disposal of Residential/Commercial Properties by Foreign Citizens of Indian Origin	New sub-paragraph ‘D‘ may be added after ‘C’ as per Slip No.9	7
	Volume II Appendix III
10)	Reserve Notification	Bank Acceptance of rupee Deposits from NRIs/OCBs	A new Notification No.F.E.R.A.196/99-RB dated 30th March 1999 may be inserted as per Slip 10 under Section 9.	2
11)	-do-	Loans from NRIs	Under Section 9, the existing Notification No.F.E.R.A.175/97-RB dated 27th February 1997 may be cancelled and a fresh Notification No.F.E.R.A.200/ 99-RB dated 30th March 1999 may be inserted as per Slip 11.	6
12)	Reserve Notification	Bank Investment in Mutual Funds	A new Notification No.F.E.R.A.195/99-RB dated 30th March 1999 may be inserted as per Slip 12 under Section 19.	1
13)	-do-	Air Taxi Operations	A new Notification No.F.E.R.A.197/99-RB dated 30th March 1999 may be inserted as per Slip 13 under Section 19.	3
14)	-do-	Sale/Transfer of shares/bonds/debentures	Existing Notification No.F.E.R.A.150/93-RB dated 26th April 1993 under Section 19 may be replaced as per Slip 14.	4
15)	-do-	Gifting of shares/bonds/debentures by NRIs	Existing Notification No.F.E.R.A.151/93-RB dated 26th April 1993 under Section 19 may be replaced as per Slip No.15.	5
16)	-do-	Acquisition/Holding, etc. of Immovable Property in India by Foreign Citizens of Indian Origin	Existing Notification No.F.E.R.A.152/93-RB dated 26th May 1993 under Section 31 may be replaced as per Slip 16.	7

4. The directions contained in this circular have been issued under Section 73(3) of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.

Yours faithfully,

B. MAHESHWARAN
Chief General Manager


Encls: 16 slips

Slip 1
[AD/MA/21/1999]
[Vide item No.1 of AD/MA/9/1999]

Investment in Domestic Public Sector
and Private Sector Mutual Funds
10C.9 (i) Reserve Bank by its Notification No.F.E.R.A.195/99-RB dated 30th March 1999 has granted general permission under Sections 19(1)(d) and 19(1)(a) read with Section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 to domestic Mutual Funds referred to in clause (23D) of Section 10 of the Income Tax Act, 1961:-

a) to issue units or any other similar instrument on non-repatriation basis under the schemes floated by them with the approval of the Securities and Exchange Board of India to NRIs/OCBs subject to the conditions mentioned under (ii) below;

b) to send such units/instruments out of India to the place of residence or location, as the case may be, of the NRI/OCB concerned; and

c) to make payment to non-resident investors, on repurchase of units or other instruments subject to the conditions mentioned in (iii) below.

(ii) The general permission to issue units referred to in (i)(a) above is subject to the following conditions:-

a) The Mutual Funds should comply with the terms and conditions stipulated by the Securities and Exchange Board of India.

b) The amount representing investment should be received by inward remittance through normal banking channels or by debit to the NRE/FCNR/NRO/NRSR account of the non-resident investor maintained with an authorised dealer in India.

(iii) The general permission to make payment of interest/dividend and maturity proceeds on repurchase of units referred to in (i)(c) above is subject to the following conditions:-

a) Where the investment is made by remittance from abroad through normal banking channels or by debit to NRE/FCNR/NRO account of the non-resident investor the interest/dividend and maturity proceeds may be credited to the NRO or NRSR account of the non-resident investor, as desired by him.

b) Where the investment is made by debit to NRSR account of the non-resident investor the dividend/interest and maturity proceeds may be credited to NRSR account only of the non-resident investor.

c) The net dividend/interest income as well as maturity proceeds on repurchase of units may be credited to NRO/NRSR account, as the case may be.

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Slip 2
[AD/MA/21/1999]
[vide item No.2 of AD/MA 9/1999]

Acceptance of deposits by proprietorship concerns/
firms/companies in India on non-repatriation basis
10C.10 By its Notification No.F.E.R.A.196/99-RB dated 30th March 1999 Reserve Bank has granted general permission to a proprietorship concern or a firm in India to accept deposits from NRIs/PIOs on non-repatriation basis and to Indian companies (including non-banking finance companies registered with Reserve Bank) to accept deposits from NRIs/PIOs/OCBs on non-repatriation basis subject to the following conditions:-

a) The period of deposits should not exceed three years.

b) The rate of interest on such deposits should not exceed the ceiling rate prescribed form time to time under the companies (Acceptance of Deposit) Rules, 1975.

c) The amount representing the deposit should be received through normal banking channels or by debit to depositors’ NRE/FCNR/NRO/NRSR account maintained with an authorised dealer in India.

d) In case the deposit is placed out of inward remittance or out of funds held in investor’s NRE/FCNR/NRO accounts maintained with an authorised dealer in India, the maturity proceeds/interest may be credited to NRO/NRSR account of the non-resident depositor, as desired by him. If, however, the deposit is placed out of funds held in NRSR account of the depositor, interest as well as maturity proceeds should be credited to NRSR account only.

e) The amount of deposit on maturity will not be allowed to be remitted abroad.

f) The acceptance of deposit should be in compliance with the other applicable laws, rules and regulations issued by Government of India or the Reserve Bank or the SEBI or any other competent authority as applicable.

g) The concern or the firm or the company accepting the deposit should not utilise the funds representing the deposits in agricultural/plantation activities and real estate business or for relending or should not invest such funds in any other concern/firm/company engaged in or proposing to engage in agricultural/plantation activities or real estate business.

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Slip 3
[AD/MA/21/1999]
[Vide item No.3 of AD/MA/9/1999]

Investment in Air Taxi Operations
10C.14 (i) NRIs/OCBs are permitted to set up Indian companies with 100 per cent equity participation for carrying on Air Taxi Operations in terms of the guidelines issued by the Director General of Civil Aviation for Air Taxi Operations.

(ii) Reserve Bank, vide its Notification No.F.E.R.A.197/99-RB dated 30th March 1999, has granted general permission under Sections 19(1)(d), 19(1)(a) and 29(1)(b) of the Foreign Exchange Regulation Act, 1973 to Indian companies to issue and export shares/convertible debentures to NRI/OCB investors upto 100 per cent of paid-up capital as also to NRI/OCB investors to acquire shares/convertible debentures of the Indian companies. As a result of the general permission, Indian companies seeking investment from NRI/OCB investors under the scheme may issue shares/convertible debentures subject to the following conditions:-

i) the company concerned should comply with the conditions stipulated by the Director General of Civil Aviation or the competent authority concerned in the letter of approval issued to the company for carrying on Air Taxi operations in India ;

ii) in the case of issue of shares by an existing listed company the price of the issue is worked out according to SEBI guidelines and is duly certified by the company’s statutory auditors and in the case of any other company, calculation of fair value of shares (as per erstwhile CCI guidelines) is made by an independent Chartered Accountant ;

iii) payment for the shares issued to NRIs/PIOs/OCBs is received by remittance from abroad through normal banking channels or out of funds held in the investor’s NRE/FCNR account maintained with an authorised dealer in India ;

iv) the company should submit to Reserve Bank, not later than 30 days from the date of receipt of remittance, a report containing the following :

a) Name of the investor;

b) Country of residence;

c) Date of receipt of remittance;

d) Name and address of the authorised dealer in India through whom the remittance is received;

v) the company issuing the shares should submit a report to Reserve Bank in form ISD(R), not later than 30 days from the date of issue, together with the documents specified in the Notification referred to above.

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Slip 4
[AD/MA/21/1999]
[Vide item No.1 of AD/MA/9/1999]

Investment in schemes of Domestic Mutual Funds
10C.16A (i) Reserve Bank by its Notification No.F.E.R.A.195/99-RB dated 30th March 1999 has granted general permission under Sections 19(1)(d) and 19(1)(a) read with Section 9(1)(a) of the Foreign Exchange Regulation Act, 1973 to domestic Mutual Funds referred to in clause (23D) of Section 10 of the Income Tax Act, 1961:-

a) to issue units or any other similar instrument on repatriation basis under the schemes floated by them with the approval of the Securities and Exchange Board of India subject to the conditions mentioned under (ii) below;

b) to send such units/instruments out of India to their place of residence or location, as the case may be, of the non-resident investor; and

c) to make payment to non-resident investors, on repurchase of units or other instruments.

(ii) The general permission to issue units referred to in (i)(a) above is subject to the following conditions:-

a) The Mutual Fund should comply with the terms and conditions stipulated by the Securities and Exchange Board of India.

b) The amount representing investment should be received by inward remittance through normal banking channels or by debit to the NRE/FCNR account of the non-resident investor maintained with an authorised dealer in India.

(iii) The net amount representing the dividend/interest and maturity proceeds may be remitted through normal banking channels or credited to NRE/FCNR/NRO/NRSR account of the non-resident investor, as desired by him.

(iv) Authorised dealers may allow the credit of net amount of dividend/interest or the maturity proceeds/repurchase value to the NRE/FCNR account of the non-resident investor or allow remittance thereof only on production of a certificate from the Mutual Fund that the investment was made out of inward remittance from abroad or from the funds held in NRE/FCNR account of the investor maintained with an authorised dealer in India and subject to compliance with the provisions of paragraph 3B.10.

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Slip 5
[AD/MA/21/1999]
[Vide item No.2 of AD/MA/9/1999]

Acceptance of deposits by Indian
companies on repatriation basis
10C.19 By its Notification No.F.E.R.A.196/99-RB dated 30th March 1999 Reserve Bank has granted general permission to Indian companies (including non-banking finance companies registered with Reserve Bank) to accept deposits from NRIs/PIOs/OCBs with repatriation benefits subject to the following conditions:-

i) The deposits are accepted under a public deposit scheme.

ii) The amount representing the deposit is received by inward remittance through normal banking channels or by debit to depositors’ NRE/FCNR account with an authorised dealer in India.

iii) The rate of interest on deposits shall not exceed the ceiling rate prescribed from time to time under the Companies (Acceptance of Deposit) Rules, 1975.

iv) The maturity period of deposit should not exceed 3 years.

v) If the deposit accepting company is a non banking financial company, it should have obtained adequate credit rating as prescribed by the Department of Non-Banking Supervision of Reserve Bank.

vi) The aggregate amount of deposits accepted by the company should not exceed 35% of its net owned funds.

vii) The company accepting the deposit should comply with the laws, rules, regulations issued by Government of India, Reserve Bank, the Company Law Board or any other competent authority as applicable.

viii) The company accepting deposits should not utilise the funds representing such deposits for undertaking agricultural/plantation activities or real estate business or for investing in other concern/firm/company engaged in or proposing to engage in these activities or for relending.

ix) The maturity proceeds/interest, net of taxes, may be credited to NRE/FCNR/NRO account of the non-resident depositor.

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Slip 6
[AD/MA/21/1999]
[Vide item No.4 of AD/MA/9/1999]

10C.27 (ii) Reserve Bank by its Notification No.F.E.R.A.150/93-RB dated 26th April 1993 read with Notification No.F.E.R.A.198/99-RB dated 30th March 1999 has exempted sale/transfer of shares, bonds or debentures of Indian companies registered in India previously purchased/acquired by NRIs/PIOs/OCBs with repatriation benefits under the Direct 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 on the following conditions:

(a) The transferor had purchased/acquired such shares/bonds/debentures in accordance with the terms and conditions of the permission granted under clause (d) of sub-section (1) of Section 19 of the Foreign Exchange Regulation Act, 1973.

and

(b) The shares/bonds/debentures are sold in the stock market through a member of a recognised 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.

Authorised dealers may in such cases allow the remittance of net sale proceeds of such shares/bonds/debentures sold by NRIs/PIOs/OCBs on stock exchange subject to the following conditions:-

a) The shares are sold on stock exchange and broker’s contract note showing the sale price is produced.

b) A documentary evidence is produced to show that the original investment was permitted on repatriation basis specifically by Reserve Bank or was covered under the general permission granted by Reserve Bank and was made out of funds remitted from abroad in foreign exchange or out of funds held in NRE/FCNR account of the non-resident investor.

c) A no objection certificate from Income Tax authorities or undertaking/certificate regarding payment of income-tax (cf. paragraph 3B.10 of ECM) is produced.

Where the amount of capital gains tax is not immediately determinable, the designated branch/authorised 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 realisation of the sale proceeds. The excess amount, if any, representing capital gain should be kept by the designated branch/authorised dealer in a separate NRO account of the seller or in a suspense account. The designated branch/authorised 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.

NOTE: Under the provisions of the Income-tax Act 1961, authorised dealers are required to deduct income-tax at the rate as applicable form time to time of the long-term capital gains accruing to NRIs on the transfer of specified assets which include shares/bonds/debentures of Indian companies, Government securities and any other notified assets. The amount of capital gains is to be arrived at on the basis of a formula laid down by Government. The tax deducted at source is required to be paid into Government treasury or the office of Reserve Bank, State Bank or any other nationalised bank authorised for the purpose, within one week from the date of deduction of tax.

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Slip 7
[AD/MA/21/1999]
[Vide item No.5 of AD/MA/9/1999]

10C.28 (ii) By its Notification No.F.E.R.A.151/93-RB dated 26th April 1993 read with Notification No.F.E.R.A.199/99-RB dated 30th March 1999, Reserve Bank has exempted transfer, by way of gift, of any, rupee security, share, bond or debenture of a company registered in India made by a non-resident Indian or person of Indian origin to a registered charitable trust in India provided -

a) such share, bond or debenture was held by the transferor, with the special or general permission of the Reserve Bank,

and

b) provisions of any other law, as applicable, including Foreign Contribution (Regulation) Act, 1976 are duly complied with.

Note:- "Charitable Trust" means a trust created or an institution established for charitable purposes and duly registered under the laws in India.

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Slip 9
[AD/MA/21/1999]
[Vide item No.7 of AD/MA/9/1999]

11E.6(i)D. Transfer by way of gift to registered
Charitable Trusts/Organisations in India
By amending its Notification No.F.E.R.A.152/93-RB dated 26th May 1993 vide its Notification No.F.E.R.A.201/99-RB dated 30th March 1999 Reserve Bank has granted general permission to non-resident persons (foreign citizens) of Indian origin (PIOs) to transfer, by way of gift, immovable property held by them in India provided:-

a) it is effected between relatives; or

b) it is effected in favour of Charitable trust;

c) provisions of any other law, including Foreign Contribution (Regulation) Act, 1976, as applicable, are duly complied with;

d) gift tax liability, if any, is duly discharged.

Note: "Charitable Trust" means a trust created or an institution established for charitable purposes and duly registered under the laws in India.

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Slip 8
[AD/MA/21/1999]
[Vide item No.6 of AD/MA/9/1999]

General Permission for Resident Individuals/
Proprietorship Concerns/Partnership Firms
for raising Rupee Loans from Non-residents of
Indian Nationality/Persons of Indian Origin
10D.8 By its Notification No.F.E.R.A.200/99-RB dated 30th March 1999 Reserve Bank has granted general permission to resident individuals/proprietorship concerns/partnership firms to avail of interest bearing loans from NRIs/PIOs on non-repatriation basis subject to the following conditions:-

i) Such loans may be granted out of funds remitted from abroad in foreign exchange by NRIs/PIOs through normal banking channels or out of NRE/FCNR/NRO/NRSR accounts maintained by them with authorised dealers in India.

ii) The rate of interest on such loans should not exceed two percentage points over the Bank Rate prevailing on the date of granting the loan.

iii) The maturity period of the loan should not exceed 3 years.

iv) In cases where the amount of loan was received by way of remittance from abroad through normal banking channel or out of funds held in the lender’s NRE/FCNR/NRO account maintained with an authorised dealer in India, payment of interest/repayment of loan should be made by credit to NRO/NRSR account of the non-resident lender with an authorised dealer in India, as desired by him. In cases where such loan was granted out of funds held in NRSR account of the lender, payment of interest/repayment of loan should be made by credit to NRSR account only of the lender maintained with an authorised dealer in India.

v) The amount of loan will not be allowed to be repatriated abroad.

vi) The amount of loan should not be utilised for the purpose of carrying on agricultural/plantation activities, purchase of immovable property, shares, debentures, bonds or for relending.

Applications for availing of loans from NRIs/PIOs on non-repatriation basis but which do not fall within the above criteria or for loans on repatriation basis, should be referred to Reserve Bank for prior approval giving full details such as name/address of lender, loan amount, rate of interest, purpose and period of the loan, repayment schedule, etc.

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Slip 10
[AD/MA/21/1999]
[Vide item No.2 of AD/MA/9/19999]

Notification No.F.E.R.A.196/99 RB dated 30th March 1999
In pursuance of sub-section (1) of Section 9 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), Reserve Bank hereby permits -

(1) a proprietorship concern or a firm in India to accept rupee deposits on non-repatriation basis from Non-Residents of Indian nationality or origin (NRIs), and

(2) a company incorporated in India (including a non-banking finance company registered with Reserve Bank) to accept rupee deposits on repatriation or non-repatriation basis from Non-residents of Indian nationality or origin (NRIs) or Overseas Corporate Bodies (OCBs).

Provided that -

(A) In respect of deposits accepted on repatriation basis -

(a) company receives such deposits under a public deposit scheme;

(b) the amount representing the deposits is received by inward remittance through normal banking channels or by debit to the depositor’s NRE/FCNR accounts with an Authorised Dealer in India;

(c) the rate of interest payable on deposits shall not exceed the ceiling rate prescribed from time to time under the Companies (Acceptance of Deposits) Rules, 1975;

(d) the maturity period of deposits does not exceed three years;

(e) if the deposit accepting company is a non-banking financial company, it has a credit rating as prescribed by the guidelines issued by Reserve Bank for such companies;

(f) the amount of aggregate deposits does not exceed 35% of net owned funds of the company.

(B) In respect of deposits accepted on non-repatriation basis by proprietorship concern or a firm or a company -

(a) the maturity period of deposits does not exceed three years;

(b) the rate of interest payable on deposits does not exceed the ceiling rate prescribed from time to time for payment of interest by a company under the Companies (Acceptance of Deposits) Rules, 1975;

(c) if the amount of deposits is received by inward remittance through normal banking channels or by debit to the non-resident depositor’s NRE/FCNR/NRO account with an authorised dealer in India, the payment of interest and repayment of deposit may be made by credit to the non-resident depositor’s NRO or NRSR account maintained with an authorised dealer in India. If the amount of deposit is received by debit to the non-resident depositor’s NRSR account, payment of interest and repayment of deposit shall be made by credit to NRSR account of the depositor.

(C) In respect of deposits accepted on repatriation and non-repatriation basis, the following additional conditions are fulfilled, namely -

(a) receipt of deposit is in accordance with the applicable law in India including the rules and regulations issued by Government of India or Reserve Bank or the SEBI or any other competent authority;

(b) the proprietory concern or firm or company accepting deposit does not utilise the funds representing the deposit for undertaking agricultural/plantation activities or real estate business or for lending or for investing in any other concern, firm or company engaged in or proposing to engage in agricultural/plantation activities, real estate business or for relending.

Explanation:

For the purpose of this Notification -

I. A person (not being a citizen of Pakistan or Bangladesh or Sri Lanka) shall be deemed to be of "Indian Origin", if -

i) he, at any time, held Indian passport;

or

ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);

or

iii) that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh or Sri Lanka).

II. "Overseas Corporate Body" means any overseas company, partnership firm, society and other corporate body predominantly owned directly or indirectly to the extent of atleast sixty percent by NRIs and includes overseas trust in which not less than sixty percent beneficial interest is held by NRIs, directly/indirectly but irrevocably.

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Slip 11
[AD/MA/21/1999]
(Vide item No.6 of AD/MA/9/1999]

Notification No.F.E.R.A.200/99-RB dated 30th March 1999
in supersession of Notification No.F.E.R.A.175/97-RB dated 27 February 1997
In pursuance of sub-section (1) of Section 9 of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and in supersession of its Notification No.FERA.175/97-RB dated 27th February 1997, the Reserve Bank hereby permits an individual resident in India or a proprietorship concern or a firm in India to receive rupee loans on non-repatriation basis from Non-residents of Indian nationality or origin (NRIs) -

Provided that -

(a) the amount representing the loan is received through normal banking channels or by debit to the non-resident lender’s NRE/FCNR/NRO/NRSR account with an authorised dealer in India;

(b) the maturity period of the loan does not exceed 3 years;

(c) rate of interest on loan does not exceed 2% over the Bank Rate prevailing on the date of granting the loan;

(d) the amount of loan shall not be allowed to be repatriated out of India;

(e) if the amount of loan is received by inward remittance through normal banking channels or by debit to the lender’s NRE/FCNR/NRO accounts, the payment of interest and repayment of loan may be made by credit to the lender’s NRO/NRSR account maintained with an authorised dealer in India. If the amount of loan is received by debit to the lender’s NRSR account, payment of interest and repayment of loan shall be made by credit to NRSR account of the lender;

(f) the amount of loan is not utilised by the borrower for the purpose of carrying on agricultural/plantation activities, purchase of immovable property, shares, debentures, bonds or for relending.

Explanation:

For the purpose of this Notification a person (not being a citizen of Pakistan or Bangladesh or Sri Lanka) shall be deemed to be of ‘Indian Origin’, if -

i) he, at any time, held Indian passport;

or

ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);

or

iii) that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh or Sri Lanka).

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Slip 12
[AD/MA/21 /1999]
[Vide item No.1 of AD/MA/9/1999]

Notification No.F.E.R.A.195/99-RB dated 30th March 1999

Permission for issue of units of Mutual Fund to
NRIs/OCBs with repatriation/non-repatriation basis
In pursuance of clause (a) and clause (d) of sub-section (1) of Section 19 read with clause (a) of sub-section (1) of Section 9 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Reserve Bank is pleased to permit, Mutual Funds as referred to in Clause (23D) of Section 10 of Income-tax Act 1961

(a) to issue, to non-residents of Indian nationality or origin (NRIs) or Overseas Corporate Bodies (OCBs) Units or similar other instruments of Schemes approved by Securities and Exchange Board of India subject to conditions in paragraph 2;

(b) to send such units/instruments out of India to their place of residence or location as the case may be and

(c) to make payment to non-resident investor, on repurchase of units or other instruments subject to conditions in paragraph 3.

2. The general permission granted herein to issue units is subject to the following conditions:

(a) the Mutual Fund complies with terms and conditions stipulated by Securities and Exchange Board of India;

(b) In respect of investment made on repatriation basis, the amount representing the investment is received by inward remittance through normal banking channels or by debit to NRE/FCNR account of the non-resident investor maintained with an authorised dealer in India;

(c) in respect of investment made on non-repatriation basis, the amount representing the investment is received by inward remittance through normal banking channel or by debit to the NRE/FCNR/NRO/NRSR account of the non-resident investor maintained with an authorised dealer in India.

3. The general permission granted herein to repurchase units is subject to the following conditions:

(a) where the investment is made on repatriation basis, the amount representing the dividend/interest and maturity proceeds may be remitted through normal banking channel or credited to NRE/FCNR/NRO/NRSR account of the non-resident investor;

(b) where the investment is made by remittance from abroad through normal banking channels or by debit to NRE/FCNR/NRO account of the non-resident investor on non-repatriation basis the interest/dividend and maturity proceeds may be credited to the NRO/NRSR account of the non-resident investor; and,

(c) where the investment is made by debit to NRSR account of the non-resident investor the dividend/interest and maturity proceeds shall be credited to NRSR account of the non-resident investor.

Explanation:

I. A person (not being a citizen of Pakistan or Bangladesh or Sri Lanka) shall be deemed to be of 'Indian Origin', if

i) he, at any time, held Indian passport;

or

ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);

or

iii) that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh or Sri Lanka).

II. " Overseas Corporate Body" means any overseas company, partnership firm, society and other corporate body predominantly owned directly or indirectly to the extent of atleast sixty percent by NRIs and includes overseas trust in which not less than sixty percent beneficial interest is held by NRIs, directly/indirectly but irrevocably.

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Slip 13
[AD/MA/21/1999]
[Vide item No.3 of AD/MA/9/1999]

Notification No. F.E.R.A.197/99-RB dated 30th March 1999

Permission for issue of shares to NRIs/OCBs on
repatriation basis by Air-Taxi Operating Company
In pursuance of clause (a) and clause (d) of sub-section (1) of Section 19 read with clause (b) of sub-section (1) of Section 29 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Reserve Bank is pleased to permit a company incorporated in India holding a valid Air Taxi Operator’s Permit granted by the Competent Authority specified by the Government of India from time to time to issue shares or convertible debentures to the extent of 100% of its paid-up capital and subject to the conditions mentioned in paragraph 2, to non-residents of Indian nationality or origin (NRIs) or Overseas Corporate Bodies (OCBs) and to send such shares out of India to their place of residence or location, as the case may be.

2. The general permission granted herein to issue shares and or convertible debentures is subject to following conditions :

(i) the company complies with the conditions of permit granted by the competent authority for carrying on Air-Taxi operations in India and any directions/instructions issued by it from time to time;

(ii) in the case of issue of shares by an existing listed company, the price for the issue is worked out according to SEBI guidelines and is duly certified by the Company’s statutory auditors; and in the case of any other company, calculation of fair value of shares (as per erstwhile CCI guidelines) is made by an independent Chartered Accountant;

(iii) payment for the shares issued to NRIs/OCBs is received by remittance from abroad through normal banking channels or by transfer of funds held in the investor’s NRE/FCNR Account maintained with an authorised dealer in India.

(iv) approval, wherever necessary, from any authority, statutory or otherwise, is obtained by the company.

(v) the issuer company files with the Regional Office of Reserve Bank, not later than thirty days from the date of receipt of remittance, a report containing the following -

(a) Name of the non-resident investor;

(b) Country of residence or incorporation of the non-resident investor;

(c) Date of receipt of remittance and its rupee equivalent;

(d) Name and address of the authorised dealer in India through whom the remittance is received.

(vi) The issuer company files with Regional Office of Reserve Bank, not later than thirty days from the date of issue of shares/debentures, the following -

(a) One copy of Form ISD(R) duly completed.

(b) Original Foreign Inward Remittance Certificate (FIRC) /Bank Certificate evidencing receipt of funds, from abroad or from the NRE/FCNR account, as the case may be, of the NRI/OCB.

(c) Memorandum and Articles of Association of the issuer company.

(d) Original certificate from the Chartered Accountant containing particulars of shares issued, date of issue, number of shares issued and the issue price.

(e) Certified copy of Statutory Auditor’s Certificate or the Chartered Accountant’s calculation referred to in (ii) above.

(f) Certificate in Form OAC/OAC1 indicating that NRI shareholding of atleast 60% either directly or indirectly in case of investment by OCB.

(g) Such other particulars and documents as may be required by or specified by Reserve Bank from time to time.

(h) An undertaking that the issuer company is not and shall not be engaged in agricultural/plantation activity, real estate business or as a Nidhi company.

Explanation :

I. A person (not being a citizen of Pakistan or Bangladesh or Sri Lanka) shall be deemed to be of ‘Indian Origin’, if -

i) he, at any time, held Indian passport;

or

ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);

or

iii) that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh or Sri Lanka).

II. "Overseas Corporate Body" means any overseas company, partnership firm, society and other corporate body predominantly owned directly or indirectly to the extent of atleast sixty percent by NRIs and includes overseas trust in which not less than sixty percent beneficial interest is held by NRIs, directly/indirectly but irrevocably.

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Slip 14
[AD/MA/ 21/1999]
(Vide item No.4 of AD/MA/9/1999]

Notification No. F.E.R.A.150/93-RB Dated 26th April 1993
as amended up to 30th March 1999 vide
Notification No.F.E.R.A.198/99-RB dated 30th March 1999

Sale/Transfer of Shares/Bonds/Debentures by NRIs/OCBs
with Repatriation Rights through Stock Exchange
In exercise of the powers conferred by sub-section (6) of Section 19 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Reserve Bank, being of the opinion that it is necessary and expedient in the public interest so to do, exempts from the operation of the provisions of sub-section (5) of the said section, transfer of any share, bond or debenture of a company registered in India, made by a person, who is a citizen of India or a person of Indian origin and resident outside India or an Overseas Corporate Body, in favour of a person who is a citizen of India or a person of Indian origin and resident in India, or in favour of a company or a body corporate incorporated under any law in force in India.

Provided that

(i) such share, bond or debenture was purchased by the transferor in accordance with the terms and conditions of the permission granted by the Reserve Bank to the designated branch of an authorised dealer on behalf of the transferor under clause (b) of sub-section (1) of Section 29 of the Act;

(ii) the transferor had purchased such share, bond or debenture from the stock market through a member of a recognised stock exchange in India and delivery of the share, bond or debenture so purchased has been taken by him or on his behalf by the concerned authorised dealer or its nominee;

(iia) the transferor had purchase such share, bond or debenture from a company registered in India, in accordance with the terms and conditions of the permission granted under Clause (d) of sub-sectioin (1) of Section 19 of the Act, by the Reserve Bank.

(iii) such share, bond or debenture is sold in the stock market through a member of a recognised 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 authorised dealer through which such share, bond or debenture was earlier purchased;

and

(iv) the sale proceeds are paid to the said designated branch of the authorised dealer.

Explanation:

I. A person (not being a citizen of Pakistan or Bangladesh or Sri Lanka), shall be deemed to be of 'Indian origin', if -

(i) he, at any time, held Indian passport;

or

(ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955);

or

(iii) that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh or Sri Lanka).

II. The expression "designated branch of an authorised dealer" shall mean that branch of an authorised dealer which has been approved by the Reserve Bank for purchasing shares, bonds or debentures on behalf of the transferor.

III. The expression 'Overseas Corporate Body' means any overseas company, partnership firm, society and other corporate body predominantly owned directly or indirectly to the extent of atleast 60 per cent by NRIs and includes any overseas trust in which not less than 60 per cent beneficial interest is held by NRIs directly or indirectly, but, irrevocably.

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Slip 15
[AD/MA/21/1999]
(Vide item No.5 of AD/MA/9/1999]

Notification No. F.E.R.A.151/93-RB dated 26th April 1993
as amended upto 30th March 1999 vide
Notification No.F.E.R.A.199/99-RB dated 30th March 1999

Gifting of Shares/Bonds/Debentures by NRIs
In exercise of the powers conferred by sub-section (6) of Section 19 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), the Reserve Bank, being of the opinion that it is necessary and expedient in the public interest so to do,hereby exempts from the operation of the provisions of sub-section (5) of the said section, transfer, by way of gift, of any share, bond or debenture of a company registered in India by a person resident outside India who is a citizen of India or a person of Indian origin to a citizen of India or a person of Indian origin and resident in India or to a charitable trust:

Provided that

(i) such share, bond or debenture was held by the transferor with the permission of the Reserve Bank;

(ii) such transfer is between relatives as defined in Section 6 of the Companies Act, 1956 (1 of 1956);

and

(iii) in the case of a transfer in favour of a charitable trust, provisions of any other law, as applicable, are duly complied with.

Explanation:

I. A person (not being a citizen of Pakistan or Bangladesh or Sri Lanka), shall be deemed to be of 'Indian origin', if

(i) he, at any time, held Indian passport;

or

(ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955):

or

(iii) that person is the spouse of an Indian citizen or of a person of Indian origin (not being a citizen of Pakistan or Bangladesh or Sri Lanka).

II. "Charitable trust" means a trust created or an institution established for charitable purposes and duly registered under the laws in India.

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Slip 16
[AD/MA/21/1999]
[Vide item No.7 of AD/MA/9/1999]

Notification No. F.E.R.A.152/93-RB dated 26th May 1993
as amended upto 30th March 1999 vide
Notification No.F.E.R.A.201/99-RB dated 30th March 1999

Acquisition, Holding, etc. of Immovable Property
in India by Foreign Citizens of Indian origin
In pursuance of sub-section (1) of Section 31 of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and in supersession of its notification No. F.E.R.A.100/92-RB dated 8th January 1992, the Reserve Bank is pleased to grant general permission to foreign citizens of Indian origin, to acquire by way of purchase or inheritance and dispose of by way of sale any immovable property, not being agricultural land/farm house/plantation property, situate in India, and to acquire by way of gift and dispose of by way of sale or gift any residential property situate in India, subject to the following conditions :

1.

(a) In the case of purchase the entire consideration is paid out of foreign exchange brought into India through normal banking channel or out of the funds held in Non-Resident External (NRE) Rupee or Foreign Currency Non-Resident (FCNR) account maintained by the purchaser in India. Purchase of residential property is, however, permissible only for bona fide residential purpose of the purchaser, and it shall not be let out except where it is not immediately required for that purpose.

(b) In the case of acquisition by way of gift -

(i) it is effected between relatives;

(ii) it does not exceed two residential properties in the case of persons resident outside India;

and

(iii) gift tax liability, if any, is duly discharged.

(ba) In the case of disposal by way of gift -

(i) it is effected between rerlatives; or

(ii) it is effected in favour of a charitable trust;

(iii) provisions of any other law, as applicable, are duly complied with.

(c) The person acquiring such property submits to the Chief General Manager, Exchange Control Department, Foreign Investment Division (III), Reserve Bank of India, Central Office, Mumbai, within a period of 90 days from the date of such acquisition, a declaration in the specified form together with a true copy of the conveyance deed and a certificate from the concerned bank in India, indicating the particulars about payment of consideration amount.

2. The entire income by way of rent or the interest on the investment of sale proceeds and the entire sale proceeds of the immovable property, acquired under this notification, shall be credited to the Non-Resident Ordinary (NRO) Rupee account maintained in India.

3. Repatriation of sale proceeds -

(a) Repatriation of sale proceeds of any immovable property acquired in accordance with this notification is permissible with the prior approval of Reserve Bank -

(i) if such sale takes place after three years from the date of acquisition or from the date of payment of final instalment of consideration amount, whichever is later;

and

(ii) to the extent of consideration amount equivalent in foreign exchange paid for acquisition of the immovable property sold;

Provided that in the case of sale of residential properties, amount repatriable shall not exceed the sum of the consideration amount equivalent in foreign exchange paid for acquisition of not more than two residential properties sold.

(b) Any person, seeking repatriation of permissible portion of sale proceeds of any such immovable property, may apply to the Chief General Manager, Exchange Control Department, Foreign Investment Division (III), Reserve Bank of India, Central Office, Mumbai in the form specified, at the earliest.

Explanations :

A. A person (not being a citizen of Pakistan or Bangladesh or Afghanistan or Bhutan or Sri Lanka or Nepal) shall be deemed to be of 'Indian origin', if -

(i) he, at any time, held an Indian passport;

or

(ii) he, or his father or grandfather was a citizen of India by virtue of the Constitution of India or Citizenship Act, 1955 (57 of 1955).

B. The word "relative" shall have the meaning as given under Section 6 of the Companies Act, 1956 (1 of 1956).

C. "Chairtable Trust" means a trust created or an institution established for charitable purposes and duly registered under the laws in India.

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