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RBI Notification Circulars Notifications Under FEMA NTF. NO. FEMA 20/2000-RB DT. 03/05/2000

NTF. NO. FEMA 20/2000-RB DT. 03/05/2000

Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000

In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 ( 42 of 1999), the Reserve Bank makes the following regulations to prohibit, restrict or regulate, transfer or issue security by a person resident outside India, namely:

Short title and commencement :-

(1) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a person Resident outside India) (First Amendment) Regulation, 2003.

(2) They shall come into force on their publication in the Official Gazette.

(Above sub-regulation (1) & (2) has been amended vide Ntf. No. FEMA 85/2003-RB, Dt. 17/01/2003)

[Old
1.

(Above sub-regulations (i) & (ii) has been amended vide Ntf. No. FEMA 46/2001-RB, dated 29/11/2001)

(1) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2001.

(2) They shall come into force with immediate effect.]

(Above sub-regulations (1) & (2) had been amended vide Ntf. No. FEMA 45/2001-RB, dated 20/09/2001)

(Above sub-regulations (i) & (ii) had been amended vide Ntf. No. FEMA 41/2001-RB, dated 2nd March, 2001)

(Above sub-regulations (i) & (ii) had been amended vide Ntf. No. FEMA 35/2001-RB, dated 16th February, 2001)

2.

Definitions :-

In these Regulations, unless the context requires otherwise, -

i.: 'Act' means the Foreign Exchange Management Act,1999 (42 of 1999);

ii.: 'Capital' means equity shares, preference shares, convertible preference shares, and convertible debentures;

iii.: 'registered Foreign Institutional Investor (FII)' means the foreign institutional investor registered with SEBI;

iiia.: 'Foreign Venture Capital Investor' means an investor incorporated and established outside India which proposes to make investment in Venture Capital Fund(s) or Venture Capital Undertaking(s) in India and is registered with SEBI under SEBI (Foreign Venture Capital Investors) Regulations, 2000;

(Above clause iiia. has been inserted vide Ntf. No. FEMA 32/2000-RB, dated 26th December, 2000)

iv.: 'Government approval' means approval from the Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion, Government of India or as the case may be , Foreign Investment Promotion Board (FIPB) of the Government of India,

v.: 'Indian company' means a company incorporated in India;

va.: 'Indian Venture Capital Undertaking' means a company incorporated in India whose shares are not listed on a recognized stock exchange in India and which is not engaged in an activity under the negative list specified by SEBI;"

(Above clause va. has been inserted vide Ntf. No. FEMA 32/2000-RB, dated 26th December, 2000)

vi.: 'Investment on repatriation basis' means an investment the sale proceeds of which are, net of taxes, eligible to be repatriated out of India, and the expression 'Investment on non-repatriation basis', shall be construed accordingly;

vii.: Joint Venture (JV) and Wholly Owned Subsidiary shall have the meanings respectively assigned to them in the Foreign Exchange Management (Transfer and Issue of Foreign Security) Regulations, 2000;

viii.: 'Non-resident Indian (NRI)', 'Overseas Corporate Body (OCB)', shall have the meanings respectively assigned to them in the Foreign Exchange Management (Deposit) Regulations,2000.

ix.: 'SEBI' means the Securities and Exchange Board of India established under the Securities and Exchange Board of India Act, 1992 ( 15 of 1992);

x.: 'Secretariat for Industrial Assistance" means Secretariat for Industrial Assistance in the Department of Industrial Policy and Promotion , Ministry of Commerce and Industry, Govt. of India;

xi.: 'Transferable Development Rights (TDR)' shall have the same meaning as assigned to it in the Regulations made under sub-section (2) of section 6 of the Act;

xia.: 'Venture Capital Fund' means a fund established in the form of a trust, a company including a body corporate and registered under the Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996 which has a dedicated pool of capital raised in a manner specified under the said Regulations and which invests in venture Capital Undertakings in accordance with the said Regulations;"

(Above clause xia. has been inserted vide Ntf. No. FEMA 32/2000-RB, dated 26th December, 2000)

xii.: The words and expressions used but not defined in these Regulations shall have the same meanings respectively assigned to them in the Act.

3.: Restriction on issue or transfer of Security by a person resident outside India :-

Save as otherwise provided in the Act, or rules or regulations made thereunder, no person resident outside India shall issue or transfer any security:-

Provided that a security issued prior to, and held on, the date of commencement of these Regulations, shall be deemed to have been issued under these Regulations and shall accordingly be governed by these Regulations;

Provided further that the Reserve Bank may, on an application made to it and for sufficient reasons, permit a person resident outside India to issue or transfer any security, subject to such conditions as may be considered necessary.

4.: Restriction on an Indian entity to issue security to a person resident outside India or to record a transfer of security from or to such a person in its books :-

Save as otherwise provided in the Act or Rules or Regulations made thereunder, an Indian entity shall not issue any security to a person resident outside India or shall not record in its books any transfer of security from or to such person:-

Provided that the Reserve Bank may, on an application made to it and for sufficient reasons, permit an entity to issue any security to a person resident outside India or to record in its books transfer of security from or to such person, subject to such conditions as may be considered necessary.

5.

Permission for purchase of shares by certain persons resident outside India :-

Schedule 1.

A.P. (DIR Series) Cir. No. 45/2002-03-RB

Schedule 2.

(In sub-regulation 2. above clause added vide Ntf. No. FEMA 35/2001-RB, dated 16th February, 2001)

(Above sub-regulation (3) has been substituted vide Ntf. No. FEMA 46/2001-RB, dated 29/11/2001)

[Old

Schedule 3;

Schedule 4.]

(In sub-regulation 3. above clause added vide Ntf. No. FEMA 35/2001-RB, dated 16th February, 2001)

Schedule 5.

Schedule 6.

(Above clause 5. has been inserted vide Ntf. No. FEMA 32/2000-RB, dated 26th December, 2000)

(In sub-regulation 5. above clause added vide Ntf. No. FEMA 35/2001-RB, dated 16th February, 2001)

Ntf. No. FEMA 85/2003-RB

6.

Acquisition of right shares :-

7.

Issue and acquisition of shares after merger or de-merger or amalgamation of Indian companies :-

8.

Issue of shares under Employees Stock Options Scheme to persons resident outside India :-

9.

Transfer of shares and convertible debentures of an Indian company by a person resident outside India :-

1.: Subject to the provisions of sub-regulation (2), a person resident outside India holding the shares or debentures of an Indian company in accordance with these Regulations, may transfer the shares or debentures so held by him, in compliance with the conditions specified in the relevant Schedule of these regulations.

2.: i) A person resident outside India, not being a non-resident Indian or an overseas corporate body, may transfer by way of sale, the shares or convertible debentures held by him to any person resident outside India:-

Provided that the person to whom the shares are being transferred has obtained prior permission of Central Government to acquire the shares if he has previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied field in which the Indian company whose shares are being transferred is engaged.

ii) A non-resident Indian or an overseas corporate body may transfer by way of sale, the shares or convertible debentures held by him or it to another non-resident Indian or an overseas corporate body only.

iii) A person resident outside India may transfer any security held by him, to a person resident in India by way of gift.

10.

Prior permission of Reserve Bank in certain cases for transfer of security :-

form TS 1

Explanation:

11.

Remittance of sale Proceeds :-

Provided -

a) the security was held by the seller on repatriation basis;

b) either the security has been sold on a recognised stock exchange in India through a stock broker at the ruling market price as determined on the floor of the exchange, or the Reserve Bank's approval has been obtained in other cases for sale of the security and remittance of the sale proceeds thereof; and

c) a no objection/tax clearance certificate from the Income Tax authority has been produced.

(P.R. GOPALA RAO)
Executive Director

SCHEDULE I

[See Regulation (5) (1)]

Foreign Direct Investment Scheme

1.

Purchase by a person resident outside India of equity/preference/convertible preference shares and convertible debentures issued by an Indian company

2.: Automatic Route of Reserve Bank for Issue of shares by an Indian company

(1)

An Indian company which is not engaged in any activity, or in manufacturing of item included in Annexure 'A' to this Schedule, may issue shares or convertible debentures to a person resident outside India, referred to in paragraph 1 upto the extent specified in Annexure B, subject to compliance with the provisions of the Industrial Policy and Procedures as notified by Secretariat for Industrial Assistance (SIA) in the Ministry of Commerce and Industry, Govt. of India, from time to time.

Explanation:

A company which proposes to embark on expansion programme to undertake activities or manufacture items included in Annexure B to this schedule may issue shares or debentures out of fresh capital proposed to be issued by it for the purpose of financing expansion programme , upto the extent indicated in Annexure B, subject to compliance with the provisions of this paragraph.

(2): A trading company incorporated in India may issue shares or convertible debentures to the extent of 51 per cent of its capital, to persons resident outside India referred to paragraph 1, subject to the condition that remittance of dividend to the shareholders outside India is made only after the company has secured registration as an Export/Trading/Star Trading /Super Trading House from the Directorate General of Foreign Trade, Ministry of Commerce, Government of India, New Delhi.

(3): A company which is a small scale industrial unit and which is not engaged in any activity or in manufacture of items included in Annexure A, may issue shares or convertible debentures to a person referred to in paragraph 1, to the extent of 24% of its paid-up capital;

Provided that such a company may issue shares in excess of 24% of its paid up capital if

(a) it has given up its small scale status;

(b) it is not engaged or does not propose to engage in manufacture of items reserved for small scale sector, and

(c) it complies with the ceilings specified in Annexure B.

(4): Notwithstanding anything contained in clause (3) an Export Oriented Unit or a Unit in Free Trade Zone or in Export Processing Zone or in a Software Technology Park or in an Electronic Hardware Technology Park may issue shares or convertible debentures to a person resident outside India referred to in paragraph 1 in excess of 24 per cent provided it complies with the ceilings specified in Annexure B.

3.: Issue of shares by a company requiring the Government approval

A company which is engaged or proposes to engage in any activity specified in Annexure 'A' or which proposes to issue shares to a person resident outside India beyond the sectoral limits stipulated in Annexure 'B' or which is otherwise not eligible to issue shares to a person resident outside India, may issue shares to a person resident outside India referred to in paragraph 1, provided it has secured prior approval of Secretariat for Industrial Assistance or, as the case may be of the Foreign Investment Promotion Board of the Government of India and the terms and conditions of such an approval are complied with.

4.

Issue of Shares by International offering through ADR and/or GDR

Annexure 'C',

Annexure 'D'

Cir.No.69/2002-03,

4A.

(4B)

(Above para 4A. & 4B has been added vide Ntf. No. FEMA 41/2001-RB, dated 2nd March, 2001)

5.

Issue price

Price of shares issued to persons resident outside India under this Schedule, shall not be less than

6.

Dividend Balancing

Where a company is engaged in any of the industries in the consumer goods sector, specified in Annexure E, or in any other activity where the condition of dividend balancing has been stipulated in terms of the provisions of Industrial Policy and Procedures notified by Secretariat for Industrial Assistance, the cumulative outflow of foreign exchange on account of payment of dividend over a period of seven years from the date of commencement of commercial production to investors outside India shall not exceed cumulative amount of export earning of the company during those years.

Provided that

7.: Rate of Dividend on Preference Shares

The rate of dividend on preference shares or convertible preference shares issued under these Regulations shall not exceed 300 basis points over the Prime Lending Rate of State Bank of India prevailing as on the date of the Board meeting of the company in which issue of such shares is recommended.

8.

Mode of payment for shares issued to persons resident outside India

A company in India issuing shares or convertible debentures under this Schedule to a person resident outside India shall receive the amount of consideration for such shares -

9.: Report by the Indian company

(1)

An Indian company issuing shares or convertible debentures in accordance with these Regulations shall submit to Reserve Bank,

form FC-GPR

10.: Permission for retaining share subscription money received from persons resident outside India in a foreign currency account

Reserve Bank may, on an application made to it and on being satisfied that it is necessary so to do, permit an Indian company issuing shares to persons resident outside India under this Schedule, to retain the subscription amount in a foreign currency account, subject to such terms and conditions as it may stipulate.

Annexure A
(See paragraph 2)

(A) List of Activities for which Automatic Route of RBI for investment by person resident outside India is not available

1. Domestic Airlines
2. Petroleum Sector (except for private sector oil refining)
3. Investing companies in Infrastructure & Services Sector
4. Defence and Strategic Industries
5. Atomic Minerals
6. Print Media
7. Broadcasting
8. Postal services
9. Courier Services
10. Establishment and Operation of satellite
11. Development of Integrated Township
12. Tea Sector

(B) List of activities or items for which FDI is prohibited.

1. Retail Trading
2. Atomic Energy
3. Lottery Business
4. Gambling and Betting
5. Housing and Real Estate business
6. Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisiculture and Cultivation of vegetables, mushrooms etc. under controlled conditions and services related to agro and allied sectors) and Plantations (Other than Tea plantations)

Annexure B
(See paragraph 2)
Sectoral cap on Investments by persons resident outside India

�	Sector	Investment Cap	Description of Activity / Items / Conditions
1.	Private Sector Banking *	49%	Subject to guidelines issued by RBI from time to time
2.	Non-Banking Financial Companies	100%	FDI/NRI investments allowed in the following 19 NBFC activities shall be as per the levels indicated below : a) Activities covered : 1. Merchant Banking 2. Under writing 3. Portfolio Management Services 4. Investment Advisory Services 5. Financial Consultancy 6. Stock-broking 7. Asset Management 8. Venture Capital 9. Custodial Services 10. Factoring 11. Credit Reference Agencies 12. Credit Rating Agencies 13. Leasing & Finance 14. Housing Finance 15. Forex-broking 16. Credit Card Business 17. Money-changing Business 18. Micro-credit 19. Rural credit b) Minimum Capitalisation norms for fund based NBFCs i) for FDI upto 51%, US $ 0.5 million to be brought in upfront ii) If the FDI is above 51 % and upto 75 %, US $ 5 million to be brought upfront iii) If the FDI is above75 % and upto 100 %, US $ 50 million out of which $ 7.5 million to be brought in upfront and the balance in 24 months c) Minimum Capitalisation norms for non-fund based activities.Minimum Capitalisation norm of US$0.5 million is applicable in respect of non-fund based NBFCs with foreign investment. d) Foreign investors can set up 100% operating subsidiaries without the condition to disinvest a minimum of 25% of its equity to Indian entities, subject to bringing in US $ 50 million as at b) (iii) above ( without any restriction on number of operating subsidiaries without bringing in additional capital) e) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment will also be allowed to set up subsidiaries for undertaking other NBFC activities , subject to the subsidiaries also complying with the applicable minimum capital inflow i.e, (b)(i) and (b)(ii) above.f) FDI in the NBFC sector is put on automatic route subject to compliance with guidelines of the Reserve Bank of India. RBI would issue appropriate guidelines in this regard
3.	Insurance	26%	FDI upto 26% in the Insurance sector is allowed on the automatic route subject to obtaining licence from Insurance Regulatory & Development Authority(IRDA)
4.	Telecommunications	49 %	i) In basic, Cellular, Value Added Services, and Global Mobile Personal Communications by Satellite, FDI is limited to 49% subject to licencing and security requirements and adherence by the companies (who are investing and the companies in which the investment is being made ) to the license conditions for foreign equity cap and lock-in period for transfer and addition of equity and other license provisions. ii) ISPs with gateways, radio paging and end-to-end bandwidth, FDI is permitted upto74% with FDI, beyond 49% requiring Government approval. These services would be subject to licensing and security requirements iii) No equity cap is applicable to manufacturing activities. iv) FDI upto 100% is allowed for the following activities in the telecom sector: a) ISPs not providing gateways (both for satellite and submarine cables) b) Infrastructure Providers providing dark fibre (IP Category 1) c) Electronic Mail, and d) Voice Mail The above would be subject to the following conditions; FDI upto 100% is allowed subject to the condition that such companies would divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world.The above services would be subject to licencing and security requirements, wherever required. Proposal for FDI beyond 49% shall be considered by FIPB on case to case basis.
5.	Petroleum Refining (Private Sector) Petroleum Product Marketing Petroleum product pipelines	100% 100% 100 %	FDI permitted upto 100 % in case of private Indian companies. Subject to the existing sectoral policy and regulatory framework in the oil marketing sector Subject to Govt. policy and regulations
6.	Housing and Real Estate	100 %	Only NRIs are allowed to invest upto 100 % in the areas listed below : a) Development of serviced plots and construction of built-up residential premises b) Investment in real estate covering construction of residential and commercial premises including business centres and offices c) Development of townships d) City and regional level urban infrastructure facilities, including both roads and bridges e) Investment in manufacture of building materials f) Investment in participatory ventures in (a) to (e) above g) Investment in Housing finance institutions which is also opened to FDI as an NBFC
7.	Coal & Lignite	�	i) Private Indian companies setting up or operating power projects as well as coal and lignite mines for captive consumption are allowed FDI upto 100%. ii) 100% FDI is allowed for setting up coal processing plants subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. iii) FDI upto 74% is allowed for exploration or mining of coal or lignite for captive consumption. iv) In all the above cases, FDI is allowed upto 50% under the automatic route subject to the condition that such investment shall not exceed 49%of the equity of a PSU.
8.	Venture Capital Fund (VCF) and Venture Capital Company(VCC)	�	Offshore Venture Capital Funds/ companies are allowed to invest in domestic venture capital undertaking as well as other companies through the automatic route, subject only to SEBI regulations and sector specific caps on FDI.
9.	Trading	�	Trading is permitted under automatic route with FDI upto 51% provided it is primarily export activities, and the undertaking is an export house/ trading house / super trading house/ star trading house. However, under the FIPB route: (i) 100% FDI is permitted in case of trading companies for the following activities: a) exports; b) bulk imports with export/ ex-bonded warehouse sales; c) cash and carry wholesale trading; d) other import of goods or services provided at least 75% is for procurement and sale of the same group and not for third party use or onward transfer/ distribution/sales. ii) The following kinds of trading are also permitted , subject to provisions of Exim Policy. a) Companies for providing after sales services( that is not trading per se) b) Domestic trading of products of JVs is permitted at the wholesale level for such trading companies who wish to market manufactured products on behalf of their Joint ventures in which they have equity participation in India c) Trading of hi-tech items/ items requiring specialised after sales service d) Trading of items for social sector e) Trading of hi-tech, medical and diagnostic items. f) Trading of items sourced from the small scale sector under which, based on technology provided and laid down quality specifications, a company can market that item under its brand name g) Domestic sourcing of products for exports h) Test marketing of such items for which a company has approval for manufacture provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facilities commences simultaneously with test marketing. i) FDI upto 100% permitted for e-commerce activities subject to the condition that such companies would divest 26% of their equity in favour of the Indian public in five years, if these companies are listed in other parts of the world. Such companies would engage only in business to business (B2B) e-commerce and not in retail trading.
10.	Power	100%	FDI allowed upto 100 % in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. There is no limit on the project cost and quantum of foreign direct investment.
11.	Drugs & Pharmaceuticals	100 %	FDI permitted upto 100 % for manufacture of drugs and pharmaceuticals provided the activity does not attract compulsory licensing or involve use of recombinant DNA technology and specific cell/tissue targeted formulations.FDI proposals for the manufacture of licensable drugs and pharmaceuticals and bulk drugs produced by recombinant DNA technology and specific cell/tissue targeted formulations will require prior Govt. approval.
12.	Road and highways, Ports and harbours	100%	In projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbours.
13.	Hotel & Tourism	100 %	The term hotels include restaurants, beach resorts and other tourist complexes providing accommodation and/ or catering and food facilities to tourists. Tourism related industry include travel agencies, tour operating agencies and tourist transport operating agencies, units providing facilities for cultural, adventure and wild life experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment, amusement, sports and health units for tourists and Convention/Seminar units and organisations. For foreign technology agreements, automatic approval is granted if (i) Upto 3% of the capital cost of the project is proposed to be paid for technical and consultancy services including fees for architects, design, supervision, etc. (ii) Upto 3% of the net turnover is payable for franchising and marketing/publicity support fee, andUpto 10% of gross operating profit is payable for management fee, including incentive fee.
14.	Mining	74 %100 %	(i) For exploration and mining of diamonds and precious stones FDI is allowed upto 74 % under automatic route (ii) For exploration and mining of gold and silver and minerals other than diamonds and precious stones, metallurgy and processing FDI is allowed upto 100 % under automatic route (iii) Press Note 18 (1998 series) dated 14/12/98 would not be applicable for setting up 100 % owned subsidiaries in so far as the mining sector is concerned, subject to a declaration from the applicant that he has no existing joint venture for the same area and/or the particular mineral.
15.	Advertising	100 %	Advertising SectorFDI upto 100 % allowed on the automatic route
16.	Films	100 %	Film Sector(Film production, exhibition and distribution including related services/products)FDI upto 100 % allowed on the automatic route with no entry-level condition
17.	Airports	74 %	Govt approval required beyond 74 %
18.	Mass Rapid Transport Systems	100 %	FDI upto 100% is permitted on the automatic route in mass rapid transport system in all metros including associated real estate development
19.	Pollution Control & Management	100 %	In both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted on the automatic route
20.	Special Economic Zones	100 %	All manufacturing activities except: (i) Arms and ammunition ,Explosives and allied items Of defence equipments, Defence aircrafts and warships, (ii) Atomic substances, Narcotics and Psychotropic Substances and hazardous Chemicals, (iii) Distillation and brewing of Alcoholic drinks and (iv) Cigarette/cigars and manufactured tobacco substitutes.
21.	Any other Sector/Activity (if not included in Annexure A)	100 %	�

(Item 21 has been inserted vide NTF. NO. FEMA 111/2004-RB, DT. 06/03/2004)

[OLD Annexure A
(See paragraph 2)

List of activities or items for which automatic route of Reserve Bank for Investment from Persons Resident Outside India is not available

Annexure B
(See paragraph 2)

Sectoral cap on Investments by Persons Resident Outside India

	Sector	Investment Cap		Description of Activity/Items/Conditions
1.	Telecommunications	49%	i)	In basic, Cellular Mobile, paging and Value Added Services, and Global Mobile Personal Communications by Satellite subject to the licence from Department of Telecommuni-cation of Government of India.
�		100%	ii)	In manufacturing activities
2.	Housing and Real Estate	100%		ONLY NRIs/OCBs are allowed to invest in the areas listed below :
�			a)	Development of serviced plots and construction of residential premises
�			b)	Investment in real estate covering construction of residential and commercial premises including business centres and offices
�			c)	Development of townships
�			d)	City and regional level urban infrastructure facilities, including both roads and bridges.
�			e)	Investment in manufacture of building materials
�			f)	Investment in participatory ventures in (a) to (e) above
�			g)	Investment in housing finance institutions
3.	Coal and Lignite	49%	i)	in Public Sector Undertakings (PSU) and
�		50%	ii)	in other than PSUs
�				a) Where Private Indian companies are setting up or operating power projects as well as coal or lignite mines for captive consumption;
�				b) For setting up coal processing plants provided the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.
�				c) For exploration or mining of coal or lignite for captive consumption.
4.	Drugs & Pharmaceuticals	74%		For bulk drugs, their intermediaries and Formulations (except those produced by The use of recombinant DNA technology)
5.	Hotel & Tourism	51%	i)	Hotels include restaurants, beach resorts, and other tourist complexes providing accommodation and/or catering and food facilities to tourists.
�			ii)	Tourism related industry includes travel agencies, tour operating agencies and tourist transport operating agencies, units providing facilities for cultural, adventure and wild life experience to tourists, surface, air and water transport facilities to tourists, leisure, entertainment amusement, sports, and health units for tourists and Convention/ Seminar units and organisations.
6.	Mining	74%		Exploration and mining of diamonds and precious stones
�		100%		Exploration and mining of gold and silver and minerals other than diamonds and precious stones, metallurgy and processing
7.	Advertising	74%		Advertising sector
8.	Films	100%		Film industry (i.e. film financing, production, distribution, exhibition, marketing and associated activities relating to film industry) subject to the following:
�			i)	Companies with an established track record in films, TV, music, finance and insurance
�			ii)	The company should have a minimum paid up capital of US $ 10 million if it is the single largest equity shareholder and atleast US $ 5 million in other cases
�			iii)	Minimum level of foreign equity investment would be US $ 2.5 million for the single largest equity shareholder and US$ 1 million in other cases
�			iv)	Debt equity ratio of not more than 1:1 i.e., domestic borrowings shall not exceed equity
�			v)	Provisions of dividend balancing would apply.
9.	Any other sector/ activity (other than those included in Annexure A)	100%		----- ]

Annexure C (Form GDR/ADR(Return))

Annexure D (Form GDR/ADR(Quarterly Return))

Annexure E

(See paragraph 6 of Schedule I)

List Of 22 Industries In Respect Of Which Dividend
Balancing Is Applicable

SCHEDULE 2

[See Regulation 5 (2)]

Purchase/sale of shares and/or convertible debentures of an Indian company by a registered Foreign Institutional Investor under Portfolio Investment Scheme

1.: Purchase/sale of shares and/or convertible debentures

(1): A registered Foreign Institutional Investor (FII) may, through the Securities and Exchange Board of India, apply to the Reserve Bank for permission to purchase the shares and convertible debentures of an Indian company under Portfolio Investment Scheme. The permission may be granted by Reserve Bank subject to such terms and conditions as may be considered necessary.

(2): The registered FII permitted by the Reserve Bank under sub-paragraph 1, shall purchase the shares/convertible debentures of an Indian company through registered brokers on recognised stock exchanges in India.

(3): The amount of consideration for purchase of shares / debentures shall be paid out of inward remittance from abroad through normal banking channels or out of funds held in an account maintained with the designated branch of an authorised dealer in India, in accordance with these Regulations.

(4): The total holding by each FII/SEBI approved sub-account of FII shall not exceed 10% (ten per cent) of the total paid-up equity capital or 10% (ten per cent) of the paid-up value of each series of convertible debentures issued by an Indian company and the total holdings of all FIIs/sub-accounts of FIIs put together shall not exceed 24 per cent of paid-up equity capital or paid up value of each series of convertible debentures.

Provided that the limit of 24% referred to in this paragraph may be increased up to the sectoral cap/statutory ceiling, as applicable, by the Indian company concerned by passing a resolution by its Board of Directors followed by passing of a special resolution to that effect by its General Body.

(Above provisions has been substituted vide Ntf. No. FEMA 45/2001-RB, dt. 20/9/2001)

[Old
Provided that the limit of 24 per cent referred to in this paragraph may be increased to 49 per cent by the Indian company concerned by passing a resolution by its Board of Directors followed by passing of a special resolution to that effect by its General Body.]

(Above bold word had been amended vide Ntf. No. FEMA 41/2001-RB, dated 2nd March, 2001)

Explanation:

For arriving at the ceiling on holdings of FIIs, shares/ convertible debentures acquired both through primary as well as secondary market will be included. However, the ceiling will not include investment made by FII through off-shore Funds, Global Depository receipts and Euro-Convertible Bonds.

(5): A registered FII may also be permitted to purchase shares/ convertible debentures of an Indian company through private placement/ arrangement, subject to the ceilings specified in sub-paragraph (4) of this paragraph.

2.: Maintenance of account by a registered FII for routing transactions of purchase and sale of shares / convertible debentures

The Reserve Bank may, on application, permit a registered Foreign Institutional Investor to open a Foreign Currency Account and/or a Non-resident Rupee Account with a designated branch of an authorised dealer for routing the receipt of and payment for transactions relating to purchase and sale of shares / convertible debentures under this Scheme, subject to the following conditions:-

3.: Remittance of sale proceeds of shares / convertible debentures

The designated branch of an authorised dealer may allow remittance of net sale proceeds (after payment of taxes) or credit the net amount of sale proceeds of shares / convertible debentures to the foreign currency account or a Non-resident Rupee Account of the registered Foreign Institutional Investor concerned.

4.: Investment by certain other investors

(1)

Reserve Bank may, subject to such terms and conditions as it may consider necessary permit a domestic asset management company or portfolio manager who is registered with SEBI as a foreign institutional investor for managing the funds of a sub-account, to make investment under the Scheme on behalf of:-

(2): The application to Reserve Bank for permission under sub-paragraph (1) may be made through SEBI.

(3): Investments permitted to be made under sub-paragraph (1) shall not exceed 5% (five per cent) of the total paid-up equity capital or 5% (five per cent) of the paid-up value of each series of convertible debentures issued by an Indian company, and shall also not exceed the over-all ceiling specified in sub-paragraph (4) of paragraph 1 of this Schedule.

SCHEDULE 3

[See Regulation 5 (3) (i)]

Purchase/sale of shares and/or convertible debentures by an NRI [Old, NRI/OCB] on a Stock Exchange In India on repatriation and/or non-repatriation basis under Portfolio Investment Scheme
(In above heading bold words has been substituted vide Ntf. No. FEMA 46/2001-RB, dated 29/11/2001)

1.: A Non-resident Indian (NRI) may purchase/sell shares and/or convertible debentures of an Indian company, through a registered broker on a recognised stock exchange, subject to the following conditions :

[Old

1.

A Non-resident Indian (NRI) or an Overseas Corporate Body (OCB) may purchase/sell shares and/or convertible debentures of an Indian company, through a registered broker on a recognised stock exchange, subject to the following conditions :]

(In above [para 1.] the above bold words has been substituted vide Ntf. No. FEMA 46/2001-RB, dated 29/11/2001)

NRI

NRI/OCB

his

his/its

NRI

NRI or OCB

NRI

NRI or OCB

NRIs

NRIs and OCBs

NRIs

NRIs and OCBs

NRI

NRI or OCB

NRI

NRI/OCB

[Old

]

(In above [sub-para. (i) to (vi)] the above old bold words has been substituted by new bold words and omitted [sub-para. (vii)] vide Ntf. No. FEMA 46/2001-RB, dated 29/11/2001)

2.: Report to Reserve Bank

The link office of the designated branch of an authorised dealer referred to in paragraph 1 shall furnish to the Chief General Manager, RBI, ECD, Central Office, Mumbai, a report on daily basis on PIS transactions undertaken by it, such report to be furnished on line or on floppy or in hard copy in a format supplied by Reserve Bank.

(Above para. 2. has been substituted vide Ntf. No. FEMA 46/2001-RB, dated 29/11/2001)

[Old

2.

Report to Reserve Bank

The link office of the designated branch of an authorised dealer referred to in paragraph 1, shall furnish to the Chief General Manager, Reserve Bank of India (ECD), Central Office, Mumbai a report on daily basis giving the following details -

]

3.

Remittance/credit of sale/maturity proceeds of shares and/or debentures

The net sale/maturity proceeds (after payment of taxes) of shares and/or debentures of an Indian company purchased by NRI or OCB under this Scheme, may be allowed by the designated branch of an authorised dealer referred to in paragraph 1,

SCHEDULE 4

[See Regulation 5 (3) (ii)]

Purchase and sale of shares/ convertible debentures by a Non-resident Indian (NRI) or an Overseas Corporate Body (OCB), on non-repatriation basis

1.: Prohibition on purchase of shares/ convertible debentures of certain companies

No purchase of shares or convertible debentures of an Indian company shall be made under this Scheme if the company concerned is a Chit Fund or a Nidhi company or is engaged in agricultural/plantation activities or real estate business or construction of farm houses or dealing in Transfer of Development Rights.

Explanation: For the purpose of this paragraph, real estate business shall not include development of township, construction of residential/ commercial premises, roads, bridges, etc.

2.: Permission to purchase and/or sell shares/ convertible debentures of an Indian company

Subject to paragraph 1, a Non-resident Indian or an Overseas Corporate Body may, without any limit, purchase on non-repatriation basis, shares or convertible debentures of an Indian company issued whether by public issue or private placement or right issue.

3.: Method of payment for purchase of shares/ convertible debentures

The amount of consideration for purchase of shares or convertible debentures of an Indian company on non-repatriation basis, shall be paid by way of inward remittance through normal banking channels from abroad or out of funds held in NRE/FCNR /NRO/NRSR/NRNR account maintained with an authorised dealer or as the case may be with an authorised bank in India.

Provided that in the case of an NRI/OCB resident in Nepal and Bhutan, the amount of consideration for purchase of shares or convertible debentures of an Indian company on non-repatriation basis, shall be paid only by way of inward remittance in foreign exchange through normal banking channels.

4.

Sale/ Maturity proceeds of shares or convertible debentures

SCHEDULE 5

[See Regulation 5 (4)]

Purchase and sale of securities other than shares or convertible debentures of an Indian company by a person resident outside India.

1.

Permission to Foreign Institutional Investors for purchase of securities

A registered Foreign Institutional Investor may purchase, on repatriation basis, dated Government securities/treasury bills, non-convertible debentures/bonds issued by an Indian company and units of domestic mutual funds either directly from the issuer of such securities or through a registered stock broker on a recognised stock exchange in India;

2.

Permission to Non-resident Indian and Overseas Corporate Body for purchase of securities

3.

Method of payment of purchase consideration

paragraph 2 of Schedule 2.

4.: Permission for Sale of Securities

A person resident outside India who has purchased securities in accordance with this Schedule may (a) sell such securities through a registered stock broker on a recognised stock exchange or (b) tender units of mutual funds to the issuer for repurchase or for payment of maturity proceeds or (c) tender Government securities/treasury bills to the Reserve Bank for payment of maturity proceeds.

5.

Remittance/credit of sale/maturity proceeds

paragraph 2 of Schedule 2.

SCHEDULE 6
[See Regulation 5(5)]

Investment in an Indian Venture Capital Undertaking by a registered Foreign Venture Capital Investor

1.

Investment by Foreign Venture Capital Investor.

2.

Maintenance of account by the registered FVCI for investment in IVCUs/ VCFs or schemes/funds set up by the VCFs.

The Reserve Bank may, on applications, permit a FVCI which has received 'in principle' registration from SEBI to open a Foreign Currency Account and/or a Rupee Account with a designated branch of an authorised dealer with the following permissible transactions:

3.: Forward Cover

Authorised Dealers may offer forward cover to FVCIs to the extent of total inward remittance. In case the FVCI has made any remittance by liquidating some investments, original cost of the investments will be deducted from the eligible cover.

4.: Valuation of Investments

The FVCI may acquire by purchase or otherwise or sell shares/convertible debentures/units or any other investment held by it in the IVCUs or VCFs or schemes/funds set up by the VCFs at a price that is mutually acceptable to the buyer and the seller/issuer. The FVCI may also receive the proceeds arising of the liquidation of VCFs or schemes/funds set up by the VCFs.

5.: Adherence to SEBI Guidelines

FVCIs shall abide by the relevant regulations/guidelines issued by Securities and Exchange Board.

(Above SCHEDULE 6 has been added vide Ntf. No. FEMA 32/2000-RB, dated 26th December, 2000)

Sd/-
(D.P. Sarda)
Executive Director

(Please refer NTF. NO. FEMA 125/2004-RB, DT. 27/11/2004 for further amendments in above Regulation)

(Please refer NTF. NO. FEMA 122/2004-RB, DT. 30/08/2004 for further amendments in above Regulation)

(Please refer Cir. No. 67/2003-04-RB, Dt. 06/02/2004 - Clarification regarding Automatic Route for Residual Activities under Foreign Direct Investment (FDI))

(Pl. refer CIR. NO. 63/2003-04-RB, DT. 03/02/2004 - Investment by International Financial Institutions in Govt. Securities )

(Pl. refer CIR. NO. 60/2003-04-RB, DT. 31/01/2004 - External Commercial Borrowings (ECB))

(Please refer NTF. NO. FEMA 118/2004-RB, DT. 16/06/2004 for further amendments in FEM (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000)

(Please refer NTF. NO. FEMA 111/2004-RB, DT. 06/03/2004 for further amendments in above Regulation)

(Please refer NTF. NO. FEMA 108/2004-RB, DT. 01/01/2004 for further amendments in FEM (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000)

(Please refer CIR. NO. 54/2003-04-RB, DT. 20/12/2003 - Investment by an unincorporated entity under Foreign Direct Investment (FDI) Scheme)

(Please refer NTF. NO. FEMA 106/2003-RB*, DT. 27/10/2003 for further amendments in FEM (Transfer or issue of Security by a Person Resident outside India) Regulations, 2000)

(Please refer NTF. NO. FEMA 100/2003-RB, DT. 03/10/2003 for further amendments in Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulation, 2000)

(Please refer NTF. NO. FEMA 94/2003-RB, DT. 18/06/2003 for further amendments in above Regulation)

(Please refer CIR. NO. 34/2003-04-RB, DT. 14/11/2003 - Capitalisation of Lumpsum Fee / Royalty / ECB-Liberalisation)

(Please refer Cir. No. 13/2003-04-RB, Dt. 01/09/2003)

(Please refer Cir. No. 10/2003-04-RB, Dt. 20/08/2003)

(Note:- see
1. AP(DIR Sr.) Cir. No.13/2001-RB, dt.29/11/2001
2. AP(DIR Sr.) Cir. No.21/2002-RB, dt. 13/02/2002)

(Please refer Ntf.No. FEMA 76/2002-RB, Dt. 12/11/2002 for further amendment in above Regulation)

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