Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Twelfth Amendment) Regulations, 2013 - 285/2013-RB - Foreign Exchange Management

RESERVE BANK OF INDIA (Foreign Exchange Department) (Central Office) NOTIFICATION No. FEMA. 285/2013-RB Mumbai, 30 th August, 2013 Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Twelfth Amendment) Regulations, 2013 G.S.R. 597(E). 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 of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 ( Notification No. FEMA 20/2000-RB dated 3rd May, 2000 ), (hereinafter referred to as 'the principal Regulations,' namely : 1. Short Title Commencement:- (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by A Person Resident Outside India) (Twelfth Amendment) Regulations, 2013. (ii) They shall be deemed to have come into force from August 22, 2013. 2. Amendment to Regulation 14 In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 , ( Notification No. FEMA 20/2000-RB dated 3rd May 2000 ), in Regulation 14, in sub-regulation 1, a. in clause (i), in sub-clause a, the words, Company shall be considered Controlled' by resident Indian citizens if the residents Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company shall be deleted. b. in clause (i), in sub-clause b, the words, Company Controlled by non-residents means an Indian company where non-residents have the power to appoint a majority of its directors in that company shall be deleted; c. after clause (i),the following shall be added, namely; (ia) Control shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. 3. Amendment to Schedule 1 For the existing Annex B, new Annex B shall be substituted. C.D. SRINIVASAN, Chief General Manager Foot Note: (i) @It is clarified that no person will be adversely affected as a result of the retrospective effect being given to these Regulations. (ii) The Principal Regulations were published in the Official Gazette vide G.S.R. No.406 (E) dated May 8, 2000 in Part II, Section 3, sub-Section (i) and subsequently amended as under:- G.S.R.No. 158(E) dated 02.03.2001 G.S.R.No. 175(E) dated 13.03.2001 G.S.R.No. 182(E) dated 14.03.2001 G.S.R.No. 4(E) dated 02.01.2002 G.S.R.No. 574(E) dated 19.08.2002 G.S.R.No. 223(E) dated 18.03.2003 G.S.R.No. 225(E) dated 18.03.2003 G.S.R.No. 558(E) dated 22.07.2003 G.S.R.No. 835(E) dated 23.10.2003 G.S.R.No. 899(E) dated 22.11.2003 G.S.R.No. 12(E) dated 07.01.2004 G.S.R.No. 278(E) dated 23.04.2004 G.S.R.No. 454(E) dated 16.07.2004 G.S.R.No. 625(E) dated 21.09.2004 G.S.R.No. 799(E) dated 08.12.2004 G.S.R.No. 201(E) dated 01.04.2005 G.S.R.No. 202(E) dated 01.04.2005 G.S.R.No. 504(E) dated 25.07.2005 G.S.R.No. 505(E) dated 25.07.2005 G.S.R.No. 513(E) dated 29.07.2005 G.S.R.No. 738(E) dated 22.12.2005 G.S.R.No. 29(E) dated 19.01.2006 G.S.R.No. 413(E) dated 11.07.2006 G.S.R.No. 712(E) dated 14.11.2007 G.S.R.No. 713(E) dated 14.11.2007 G.S.R.No. 737(E) dated 29.11.2007 G.S.R.No. 575(E) dated 05.08.2008 G.S.R.No. 896(E) dated 30.12.2008 G.S.R.No. 851(E) dated 01.12.2009 G.S.R.No. 341 (E) dated 21.04.2010 G.S.R.No. 606(E) dated 03.08.2012 G.S.R.No. 795(E) dated 30.10.2012 G.S.R.No. 796(E) dated 30.10.2012 G.S.R. No. 797(E) dated 30.10.2012 G.S.R. No.946(E) dated 31.12.2012 G.S.R.No.344(E) dated 29.05.2013 G.S.R. No.38(E) dated 22.01.2013 G.S.R.No.515(E) dated 30.07.2013, G.S.R.No.______ dated _________, G.S.R.No.532(E) dated 05.08.2013, G.S.R. No.341(E) dated 28.05.2013 G.S.R. No.195(E) dated 01.04.2013 G.S.R.No.393(E) dated 21.06.2013, G.S.R.No.530(E) dated 05.08.2013, and G.S.R.No.______ dated _________ Annex B Sector-specific policy for foreign investment In the following sectors/activities, FDI upto the limit indicated against each sector/activity is allowed, subject to applicable laws/regulations; security and other conditionalities. In sectors/activities not listed below, FDI is permitted upto 100% on the automatic route, subject to applicable laws/regulations; security and other conditionalities. Wherever there is a requirement of minimum capitalization, it shall include share premium received alongwith the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalization requirement. Sl.No. Sector/Activity % of Cap/Equity Entry Route AGRICULTURE 1. Agriculture Animal Husbandry ( a ) Floriculture, Horticulture, Apiculture and Cultivation of Vegetables Mushrooms under controlled conditions; ( b ) Development and production of Seeds and planting material; ( c ) Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture, under controlled conditions; and ( d ) services related to agro and allied sectors Note: Besides the above, FDI is not allowed in any other agricultural sector/activity 100% Automatic 1.1 Other Conditions : I. For companies dealing with development of transgenic seeds/vegetables, the following conditions apply: ( i ) When dealing with genetically modified seeds or planting material the company shall comply with safety requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms. ( ii ) Any import of genetically modified materials if required shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992. ( iii ) The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time. ( iv ) Undertaking of business activities involving the use of genetically engineered cells and material shall be subject to the receipt of approvals from Genetic Engineering Approval Committee (GEAC) and Review Committee on Genetic Manipulation (RCGM). ( v ) Import of materials shall be in accordance with National Seeds Policy. II. The term 'under controlled conditions' covers the following: 'Cultivation under controlled conditions' for the categories of Floriculture, Horticulture, Cultivation of vegetables and Mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro-climatic conditions are regulated anthropogenically. In case of Animal Husbandry, scope of the term 'under controlled Conditions' covers - ○ Rearing of animals under intensive farming systems with stall- feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems. ○ Poultry breeding farms and hatcheries where micro-climate is controlled through advanced technologies like incubators, ventilation systems etc. In the case of pisciculture and aquaculture, scope of the term 'under controlled conditions' covers - ○ Aquariums ○ Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. In the case of apiculture, scope of the term ''under controlled conditions covers - ○ Production of honey by bee-keeping, except in forest/wild, in designated spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons. 2 Tea Plantation 2.1 Tea sector including tea plantations Note: Besides the above, FDI is not allowed in any other plantation sector/activity 100% Government 2.2 Other Condition : Prior approval of the State Government concerned in case of any future land use change. 3 MINING 3.1 Mining and Exploration of metal and non metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development Regulation) Act, 1957. 100% Automatic 3.2 Coal and Lignite (1) Coal Lignite mining for captive consumption by power projects, iron steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973 100% Automatic (2) Setting up coal processing plants like washeries, 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. 100% Automatic 3.3 Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities 3.3.1 Mining and mineral separation of titanium bearing minerals ores, its value addition and integrated activities subject to sectoral regulations and the Mines and Minerals (Development and Regulation Act 1957) 100% Government 3.3.2 Other conditions : India has large reserves of beach sand minerals in the coastal stretches around the country. Titanium bearing minerals viz. Ilmenite, rutile and leucoxene, and Zirconium bearing minerals including zircon are some of the beach sand minerals which have been classified as 'prescribed substances' under the Atomic Energy Act, 1962. Under the Industrial Policy Statement 1991, mining and production of minerals classified as 'prescribed substances' and specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953 were included in the list of industries reserved for the public sector. Vide Resolution No. 8/1(1)/97-PSU/1422 dated 6 October 1998 issued by the Department of Atomic Energy laying down the policy for exploitation of beach sand minerals, private participation including Foreign Direct Investment (FDI), was permitted in mining and production of Titanium ores (Ilmenite, Rutile and Leucoxene) and Zirconium minerals (Zircon). Vide Notification No. S.O.61(E) dated 18.1.2006, the Department of Atomic Energy re-notified the list of 'prescribed substances' under the Atomic Energy Act 1962. Titanium bearing ores and concentrates (Ilmenite, Rutile and Leucoxene) and Zirconium, its alloys and compounds and minerals/concentrates including Zircon, were removed from the list of 'prescribed substances'. ( i ) FDI for separation of titanium bearing minerals ores will be subject to the following additional conditions viz.: (A) value addition facilities are set up within India along with transfer of technology; (B) disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987. ( ii ) FDI will not be allowed in mining of 'prescribed substances' listed in the Notification No. S.O. 61(E) dated 18.1.2006 issued by the Department of Atomic Energy. Clarification: (1) For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Ilmenite can be processed to produce 'Synthetic Rutile' or 'Titanium Slag' as an intermediate value added product. (2) The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is also made available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled. 4 Petroleum Natural Gas 4.1 Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies 100% Automatic 4.2 Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs. 49% Automatic MANUFACTURING 5 Manufacture of items reserved for production in Micro and Small Enterprises (MSEs) 5.1 FDI in MSEs [as defined under Micro, Small And Medium Enterprises Development Act, 2006 (MSMED, Act 2006)] will be subject to the sectoral caps, entry routes and other relevant sectoral regulations. Any industrial undertaking which is not a Micro or Small Scale Enterprise, but manufactures items reserved for the MSE sector would require Government route where foreign investment is more than 24% in the capital. Such an undertaking would also require an Industrial License under the Industries (Development Regulation) Act, 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production and in accordance with the provisions of section 11 of the Industries (Development Regulation) Act, 1951. 6 DEFENCE 6.1 Defence Industry subject to Industrial license under the Industries (Development Regulation) Act, 1951 26% Up to 26% Government. Above 26% to Cabinet Committee on Security (CCS) on case to case basis, which ensure access to modern and 'state-of-art' technology in the country. 6.2 Other conditions : ( i ) Licence applications will be considered and licences given by the Department of Industrial Policy Promotion, Ministry of Commerce Industry, in consultation with Ministry of Defence. ( ii ) The applicant should be an Indian company/partnership firm. ( iii ) The management of the applicant company/partnership should be in Indian hands with majority representation on the Board as well as the Chief Executives of the company/partnership firm being resident Indians. ( iv ) Full particulars of the Directors and the Chief Executives should be furnished along with the applications. ( v ) The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an established R D base. ( vi ) There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the non-resident investor taking into account the category of weapons and equipment that are proposed to be manufactured. ( vii ) There would be a three-year lock-in-period for transfer of equity from one non-resident investor to another non-resident investor (including NRIs erstwhile OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the Government. ( viii ) The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipment and overall requirements would be made available to the extent possible. ( ix )The capacity norms for production will be provided in the licence based on the application as well as the recommendations of the Ministry of Defence, which will look into existing capacities of similar and allied products. ( x ) Import of equipment for pre-production activity including development of prototype by the applicant company would be permitted. ( xi ) Adequate safety and security procedures would need to be put in place by the licensee once the licence is granted and production commences. These would be subject to verification by authorized Government agencies. ( xii ) The standards and testing procedures for equipment to be produced under licence from foreign collaborators or from indigenous R D will have to be provided by the licensee to the Government nominated quality assurance agency under appropriate confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Self-certification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals. ( xiii ) Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. ( xiv ) Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence. These items may also be sold to other Government entities under the control of the Ministry of Home Affairs and State Governments with the prior approval of the Ministry of Defence. No such item should be sold within the country to any other person or entity. The export of manufactured items would be subject to policy and guidelines as applicable to Ordnance Factories and Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons /entities other than the Central of State Governments with the prior approval of the Ministry of Defence. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence. (xv) Investment by Foreign Institutional Investors (FIIs) through portfolio investment is not permitted. ( xvi ) All applications seeking permission of the Government for FDI in defence would be made to the Secretariat of the Foreign Investment Promotion Board (Fin) in the Department of Economic Affairs. ( xvii ) Applications for FDI upto 26% will follow the existing procedure with proposals involving inflows in excess of Rs. 1200 crore being approved by Cabinet Committee on Economic Affairs (CCEA). Applications seeking permission of the Government for FDI beyond 26%, will in all cases be examined additionally by the Department of Defence Production (DoDP) from the point of view particularly of access to modern and 'state-of-art' technology. ( xviii ) Based on the recommendation of the DoDP and FIPB, approval of the Cabinet Committee on Security (CCS) will be sought by the DoDP in respect of cases which are likely to result in access to modern and 'state-of-art' technology in the country. ( xix ) Proposals for FDI beyond 26% with proposed inflow in excess of Rs. 1200 crores, which are to be approved by CCS will not require further approval of the Cabinet Committee of Economic Affairs (CCEA). ( xx ) Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement. SERVICES SECTOR INFORMATION SERVICES 7 Broadcasting 7.1 Broadcasting Carriage Services 7.1.1 (1) Teleports (setting up of up-linking HUBs/Teleports); (2) Direct to Home (DTH); (3) Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability); (4) Mobile TV ; (5) Headend-in-the Sky Broadcasting Service (HITS) 74% Automatic up to 49% Government route beyond 49% and up to 74% 7.1.2 Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs). 49% Automatic 7.2 Broadcasting Content Services 7.2.1 Terrestrial Broadcasting FM (FM Radio), subject to such terms and conditions, as specified from time to time, by Ministry of Information Broadcasting, for grant of permission for setting up of FM Radio stations. 26% Government 7.2.2 Up-linking of 'News Current Affairs' TV Channels 26% Government 7.2.3 Up-linking a Non-'News Current Affairs' TV Channels/Down- linking of TV Channels 100% Government 7.3 FDI for Up-linking/Down-linking TV Channels will be subject to compliance with the relevant Up-linking/Down-linking Policy notified by the Ministry of Information Broadcasting from time to time. 7.4 Foreign investment (FI) in companies engaged in all the aforestated services will be subject to relevant regulations and such terms and conditions, as may be specified from time to time, by the Ministry of Information and Broadcasting. 7.5 The foreign investment (FI) limit in companies engaged in the aforestated activities shall include, in addition to FDI, investment by Foreign Institutional Investors (FIls), Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign entities. 7.6 Foreign investment in the aforestated broadcasting carriage services will be subject to the following security conditions/terms: Mandatory Requirement for Key Executives of the Company ( i ) The majority of Directors on the Board of the Company shall be Indian Citizens. ( ii ) The Chief Executive Officer (CEO), Chief Officer In-charge of technical network operations and Chief Security Officer should be resident Indian Citizens. Security Clearance of Personnel ( iii ) The Company, all Directors on the Board of Directors and such key executives like Managing Director /Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), shareholders who individually hold 10% or more paid-up capital in the company and any other category, as may be specified by the Ministry of Information and Broadcasting from time to time, shall require to be security cleared. In case of the appointment of Directors on the Board of the Company and such key executives like Managing Director /Chief Executive Officer, Chief Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer (CTO), Chief Operating Officer (COO), etc., as may be specified by the Ministry of Information and Broadcasting from time to time, prior permission of the Ministry of Information and Broadcasting shall have to be obtained. It shall be obligatory on the part of the company to also take prior permission from the Ministry of Information and Broadcasting before effecting any change in the Board of Directors. ( iv ) The Company shall be required to obtain security clearance of all foreign personnel likely to be deployed for more that 60 days in a year by way of appointment, contract, and consultancy or in any other capacity for installation, maintenance, operation or any other services prior to their deployment. The security clearance shall be required to be obtained every two years. Permission vis-a-vis Security Clearance ( v ) The permission shall be subject to permission holder/licensee remaining security cleared throughout the currency of permission. In case the security clearance is withdrawn the permission granted is liable to be terminated forthwith. ( vi ) In the event of security clearance of any of the persons associated with the permission holder/licensee or foreign personnel is denied or withdrawn for any reasons whatsoever, the permission holder/licensee will ensure that the concerned person resigns or his services terminated forthwith after receiving such directives from the Government, failing which the permission/license granted shall be revoked and the company shall be disqualified to hold any such Permission/license in future for a period of five years. Infrastructure/Network/Software related requirement ( vii ) The officers/officials of the licensee companies dealing with the lawful interception of Services will be resident Indian citizens. ( viii ) Details of infrastructure/network diagram (technical details of the network) could be provided, on a need basis only, to equipment suppliers/manufactures and the affiliate of the licensee company. Clearance from the licensor would be required if such information is to be provided to anybody else. ( ix ) The Company shall not transfer the subscribers' databases to any person/place outside India unless permitted by relevant Law. ( x ) The Company must provide traceable identity of their subscribers. Monitoring, Inspection and Submission of Information ( xi ) The Company should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location as and when required by Government. ( xii ) The company, at its own costs, shall, on demand by the government or its authorized representative, provide the necessary equipment, services and facilities at designated place(s) for continuous monitoring or the broadcasting service by or under supervision of the Government or its authorized representative. ( xiii ) The Government of India, Ministry of Information Broadcasting or its authorized representative shall have the right to inspect the broadcasting facilities. No prior permission/intimation shall be required to exercise the right of Government or its authorized representative to carry out the inspection. The company will, if required by the Government or its authorized representative, provide necessary facilities for continuous monitoring for any particular aspect of the company's activities and operations. Continuous monitoring, however, will be confined only to security related aspects, including screening of objectionable content. ( xiv ) The inspection will ordinarily be carried out by the government of India, Ministry of Information Broadcasting or its authorized representative after reasonable notice, except in circumstances where giving such a notice will defeat the very purpose of the inspection. ( xv ) The company shall submit such information with respect to its services as may be required by the Government or its authorized representative, in the format as may be required, from time to time. ( xvi ) The permission holder/licensee shall be liable to furnish the Government of India or its authorized representative or TRAI or its authorized representative, such reports, accounts, estimates, returns or such other relevant information and at such periodic intervals or such times as may be required. ( xvii ) The service providers should familiarize/train designated officials of the government or officials of TRAI or its authorized representative(s) in respect of relevant operations/features of their systems. National Security Conditions ( xviii ) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. The Government of India, Ministry of Information and Broadcasting shall have the right to temporarily suspend the permission of the permission holder/Licensee in public interest or for national security for such period or periods as it may direct. The company shall immediately comply with any directives issued in this regard failing which the permission issued shall be revoked and the company disqualified to hold any such permission, in future, for a period or five years. ( xix ) The company shall not import or utilize any equipment, which are identified as unlawful and/or render network security vulnerable. Other conditions ( xx ) Licensor reserves the right to modify these conditions or incorporate new conditions considered necessary in the interest of national security and public interest or for proper provision of broadcasting services. ( xxi ) Licensee will ensure that broadcasting service installation carried out by it should not become a safety hazard and is not in contravention of any statute, rule or regulation and public policy. 8 Print Media 8.1 Publishing of Newspaper and periodicals dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) Government 8.2 Publication of Indian editions of foreign magazines dealing with news and current affairs 26% (FDI and investment NRIs/PIOs/FII) Government 8.2.1 Other Conditions: ( i ) 'Magazine', for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. ( ii ) Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information Broadcasting on 4.12.2008. 8.3 Publishing /printing of Scientific and Technical Magazines /specialty journals /periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 100% Government 8.4 Publication of facsimile edition of foreign newspapers 100% Government 8.4.1 Other Conditions: ( i ) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. ( ii ) Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. ( iii ) Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information Broadcasting on 31.3.2006, as amended from time to time. 9 Civil Aviation 9.1 The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services/Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. For the purposes of the Civil Aviation sector: ( i ) 'Airport' means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934; ( ii ) Aerodrome means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto; ( iii ) Air transport service means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights; ( iv ) Air Transport Undertaking means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward; ( v ) Aircraft component means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment; ( vi ) Helicopter means a heavier-than -air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis; ( vii ) Scheduled air transport service means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public; ( viii ) Non-Scheduled Air Transport service means any service which is not a scheduled air transport service and will include Cargo airlines; ( ix ) Cargo airlines would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation; ( x ) Seaplane means an aeroplane capable normally of taking off from and alighting solely on water; ( xi ) Ground Handling means (i) ramp handling, (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling. 9.2 Airports ( a ) Greenfield projects 100% Automatic ( b ) Existing projects 100% Automatic upto 74% Government route beyond 74% 9.3 Air Transport Services (1) Scheduled Air Transport Service/Domestic Scheduled Passenger Airline 49% FDI (100% for NRIs) Automatic (2) Non-Scheduled Air Transport Service 74% FDI (100% for NRIs) Automatic upto 49% Government route beyond 49% and upto 74% (3) Helicopter services /seaplane services requiring DGCA approval 100% Automatic 9.3.1 Other Conditions ( a ) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane services. ( b ) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services, as per the limits and entry routes mentioned above. ( c ) Foreign airlines are also, henceforth, allowed to invest, in the capital of Indian companies, operating scheduled and non-scheduled air transport services, upto the limit of 49% of their paid-up capital. Such investment would be subject to the following conditions: ( i ) It would be made under the Government approval route. ( ii ) The 49% limit will subsume FDI and FII investment. ( iii ) The investments so made would need to comply with the relevant regulations of SEBI, such as the Issue of Capital and Disclosure Requirements (ICDR) Regulations/Substantial Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules and regulations. ( iv ) A Scheduled Operator's Permit can be granted only to a company: ( a ) that is registered and has its principal place of business within India; ( b ) the Chairman and at least two-thirds of the Directors of which are citizens of India; and ( c ) the substantial ownership and effective control of which is vested in Indian nationals. ( v ) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such investment shall be cleared from security view point before deployment; and ( vi ) All technical equipment that might be imported into India as a result of such investment shall require clearance from the relevant authority in the Ministry of Civil Aviation. Note: The FDI limits/entry routes, mentioned at paragraphs 9.3(1) and 9.3(2) above, are applicable in the situation where there is no investment by foreign airlines. ( d ) The policy mentioned at (c) above is not applicable to M/s Air India Limited. 9.4 Other services under Civil Aviation sector (1) Ground Handling Services subject to sectoral regulations and security clearance 74% FDI (100% for NRIs) Automatic upto 49% Government route beyond 49% and upto 74% (2) Maintenance and Repair organizations; flying training institutes; and technical training institutions 100% Automatic 10 Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898 and excluding the activity relating to the distribution of letters. 100% Automatic 11 Construction Development: Townships, Housing, Built-up infrastructure 11.1 Townships, housing, built-up infrastructure and construction-development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure) 100% Automatic 11.2 Investment will be subject to the following conditions : (1) Minimum area to be developed under each project would be as under : ( i ) In case of development of serviced housing plots, a minimum land area of 10 hectares ( ii ) In case of construction-development projects, a minimum built-up area of 50,000 sq.mts ( iii ) In case of a combination project, any one of the above two conditions would suffice (2) Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company. (3) Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. Original investment means the entire amount brought in as FDI. The lock-in period of three years will be applied from the date of receipt of each instalment/tranche of FDI or from the date of completion of minimum capitalization, whichever is later. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB. (4) At least 50% of each such project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots. For the purpose of these guidelines, 'undeveloped plots' will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. (5) The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government/Municipal/Local Body concerned. (6) The investor/investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/Municipal/Local Body concerned. (7) The State Government/Municipal/Local Body concerned, which approves the building/development plans, would monitor compliance of the above conditions by the developer. Note: ( i ) The conditions at (1) to (4) above would not apply to Hotels Tourism, Hospitals, Special Economic Zones (SEZs), Education Sector, Old age Homes and investment by NRIs. ( ii ) FDI is not allowed in Real Estate Business. 12 Industrial Parks new and existing 100% Automatic 12.1 ( i ) Industrial Park is a project in which quality infrastructure in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity. ( ii ) Infrastructure refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning. ( iii ) Common Facilities refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. ( iv ) Allocable area in the Industrial Park means- ( a ) in the case of plots of developed land - the net site area available for allocation to the units, excluding the area for common facilities. ( b ) in the case of built up space - the floor area and built up space utilized for providing common facilities. ( c ) in the case of a combination of developed land and built-up space - the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities. ( v ) Industrial Activity means manufacturing; electricity; gas and water supply; post and telecommunications; software publishing, consultancy and supply; data processing, database activities and distribution of electronic content; other computer related activities; basic and applied R D on bio-technology, pharmaceutical sciences/life sciences, natural sciences and engineering; business and management consultancy activities; and architectural, engineering and other technical activities. 12.2 FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 11 above, provided the Industrial Parks meet with the undermentioned conditions : ( i ) it would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area; ( ii ) the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area. 13 Satellites Establishment and operation 13.1 Satellites Establishment and operation, subject to the sectoral guidelines of Department of Space /ISRO 74% Government 14 Private Security Agencies 49% Government 15 Telecom services (including Telecom Infrastructure Providers Category-l) All telecom services including Telecom Infrastructure Providers Category-I, viz. Basic, Cellular, United Access Services, Unified license (Access services), Unified License, National/International Long Distance, Commercial V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS), All types of ISP licences, Voice Mail/Audiotex/UMS, Resale of IPLC, Mobile Number Portability Services, Infrastructure Provider Category-I (providing dark fibre, right of way, duct space, tower) except Other Service Providers. 100% Automatic upto 49% Above 49% Government. 15.1.1 Other condition : FDI upto 100% with 49% under automatic route and beyond 49% through FIPB route subject to observance of licensing and security conditions by licensee as well as investors as notified by the Department of Telecommunications (DoT) from time to time. 16 TRADING 16.1 (i) Cash Carry Wholesale Trading /Wholesale Trading (including sourcing from MSEs) 100% Automatic 16.1.1 Definition: Cash Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce. 16.1.2 Guidelines for Cash Carry Wholesale Trading/Wholesale Trading (WT): ( a ) For undertaking WT, requisite licenses /registration /permits, as specified under the relevant Acts/Regulations /Rules /Orders of the State Government /Government Body /Government Authority/Local Self-Government Body under that State Government should be obtained. ( b ) Except in case of sales to Government, sales made by the wholesaler would be considered as 'cash carry wholesale trading/wholesale trading' with valid business customers, only when WT are made to the following entities: (I) Entities holding sales tax /VAT registration /service tax /excise duty registration; or (II) Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/Government Body/Local Self-Government Authority, reflecting that the entity/person holding the license/registration certificate/membership certificate, as the case may be, is itself/himself/herself engaged in a business involving commercial activity; or (III) Entities holding permits/license etc. for undertaking retail trade (like tehbazari and similar license for hawkers) from Government Authorities /Local Self Government Bodies; or (IV) Institutions having certificate of incorporation or registration as a society or registration as public trust for their self consumption. Note: An Entity, to whom WT is made, may fulfill any one of the 4 conditions. ( c ) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. ( d ) WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture. ( e ) WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. ( f ) A Wholesale /Cash carry trader cannot open retail shops to sell to the consumer directly. 16.2 E-commerce activities 100% Automatic E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to e-commerce as well. 16.3 Test marketing - Activity deleted - -- 16.4 Single Brand product retail trading 100% Upto 49% Automatic. Above 49% Government. (1) Foreign Investment in Single Brand product retail trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. (2) FDI in Single Brand product retail trading would be subject to the following conditions: ( a ) Products to be sold should be of a 'Single Brand' only. ( b ) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. ( c ) 'Single Brand' product-retail trading would cover only products which are branded during manufacturing. ( d ) A non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake single brand product retail trading in the country, for the specific brand, directly or through a legally tenable agreement, with the brand owner for undertaking single brand product retail trading. The onus for ensuring compliance with this condition will rest with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy of the licensing/franchise/sub-licence agreement, specifically indicating compliance with the above condition. The requisite evidence should be filed with the RBI for the automatic route and SIA/FIPB for cases involving approval. ( e ) In respect of proposals involving FDI beyond 51%, sourcing of 30% of the value of goods purchased, will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen in all sectors. The quantum of domestic sourcing will be self-certified by the company, to be subsequently checked, by statutory auditors from the duly certified accounts which the company will be required to maintain. This procurement requirement would have to be met, in the first instance, as an average of five years; total value of the goods purchased, beginning 1st April of the year during which the first tranche of FDI is received, Thereafter, it would have to be met on an annual basis. For the purpose of ascertaining the sourcing requirement, the relevant entity would be the company, incorporated in India, which is the recipient of FDI for the purpose of carrying out single-brand product retail trading. ( f ) Retail trading, in any form, by means of e-commerce, would not be permissible for companies with FDI, engaged in the activity of single brand retail trading. (3) Applications seeking permission of the Government for FDI exceeding 49% in a company which proposes to undertake single brand retail trading in India would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy Promotion. The applications would specifically indicate the product/product categories which are proposed to be sold under a 'Single Brand'. Any addition to the product/product categories to be sold under 'Single Brand' would require a fresh approval of the Government. In case of FDI upto 49% the product categories proposed to be sold except food products would be provided to the RBI. (4) Applications would be processed in the Department of Industrial Policy Promotion, to determine whether the proposed investments satisfies the notified guidelines, before being considered by the FIPB for Government approval. 16.5 Multi Brand Retail Trading 51% Government FDI in multi brand retail trading, in all products, will be permitted, subject to the following conditions: ( i ) Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded. ( ii ) Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million. ( iii ) At least 50% of total FDI brought in the first tranche of US $ 100 million, shall be invested in 'backend infrastructure' within three years, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of back-end infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon its business requirements. ( iv ) At least 30% of the value of procurement of manufactured/processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in plant machinery not exceeding US $ 2.00 million. This valuation refers to the value at the time of installation, without providing for depreciation. The 'small industry' status would be reckoned only at the time of first engagement with the retailer and such industry shall continue to qualify as a 'small industry' for this purpose, even if it outgrows the said investment of US $ 2.00 million, during the course of its relationship with the said retailer. Sourcing from agricultural co-operatives and farmers' co-operatives would also be considered in this category. The procurement requirement would have to be met, in the first instance, as an average of five years' total value of the manufactured/processed products purchased, beginning 1st April of the year during which the first tranche of FDI is received. Thereafter, it would have to be met on an annual basis. ( v ) Self-certification by the company, to ensure compliance of the conditions at serial nos. (ii), (iii) and (iv) above, which could be cross-checked, as and when required. Accordingly, the investors shall maintain accounts, duly certified by statutory auditors. ( vi ) Retail sales outlets may be set up only in cities with a population of more than 10 lakh as per the 2011 Census or any other cities as per the decision of the receptive State Governments, and may also cover an area of 10 kms. around the municipal/urban agglomeration limits of such cities; retail locations will be restricted to conforming areas as per the Master/Zonal Plans of the concerned cities and provision will be made for requisite facilities such as transport connectivity and parking. ( vii ) Government will have the first right to procurement of agricultural products. ( viii ) The above policy is an enabling policy only and the State Governments/Union Territories would be free to take their own decisions in regard to implementation of the policy. Therefore, retail sales outlets may be set up in those States/Union Territories which have agreed, or agree in future, to allow FDI in MBRT under this policy. The States /Union Territories which have conveyed their concurrence are as under : 1. Andhra Pradesh 2. Assam 3. Delhi 4. Haryana 5. Himachal Pradesh 1 6. Jammu Kashmir 7. Karnataka 2 8. Maharashtra 9. Manipur 10. Rajasthan 11. Uttarkhand 12. Daman Diu and Dadra and Nagar Haveli (Union Territories) The States/Union Territories, which are willing to permit establishment of retail outlets under this policy, would convey their concurrence to the Government of India through the Department of Industrial Policy Promotion and additions would be made accordingly. The establishment of the retail sales outlets will be in compliance of applicable State /Union Territory laws/regulations, such as the Shops and Establishments Act etc. ( ix ) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi brand retail trading. ( x ) Applications would be processed in the Department of Industrial Policy Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval. FINANCIAL SERVICES Foreign investment in other financial services , other than those indicated below, would require prior approval of the Government: 17 Asset Reconstruction Companies 17.1 'Asset Reconstruction Company' (ARC) means a company registered with the Reserve Bank of India under Section 3. of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Upto 100% of paid-up capital of ARC (FDI FII) Upto 49% Automatic Above 49% Government 17.2 Other conditions: ( i ) Persons resident outside India, can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank, upto 49% under the Automatic Route and beyond 49% under the Government Route. Such investments have to be strictly in the nature of FDI. Investments by FIIs are not permitted in the equity capital of ARCs. ( ii ) No sponsor shall be permitted to hold more than 50% of the shareholding in an ARC either by way of FDI or by routing through an FII. The foreign investment in ARCs are required to comply with entry route conditionality and sectoral caps. However, the total shareholding of an individual FII shall not exceed 10% of the total paid-up capital of the ARC. ( iii ) FIIs registered with SEBI can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs can invest upto 74 per cent of the paid-up value each tranche of scheme of Security Receipts issued by the ARCs. ( iv ) Any individual investment of more than 10% would be subject to provisions of section 3(3) (f) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. 18 Banking Private sector 18.1 Banking -Private sector 74% including investment by FIIs Automatic unto 49% Government route beyond 49% and upto 74% 18.2 Other conditions: (1) This 74% limit will include investment under the Portfolio Investment Scheme (PIS) by FIIs, NRIs and shares acquired prior to September 16, 2003 by erstwhile OCBs, and continue to include IPOs, Private placements, GDR/ADRs and acquisition of shares from existing shareholders. (2) The aggregate foreign investment in a private bank from all sources will be allowed upto a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26 per cent of the paid up capital will have to be held by residents, except in regard to a wholly-owned subsidiary of a foreign bank. (3) The stipulations as above will be applicable to all investments in existing private sector banks also. (4) The permissible limits under portfolio investment schemes through stock exchanges for FIIs and NRIs will be as follows: ( i ) In the case of FIIs, as hitherto, individual FII holding is restricted to 10 per cent of the total paid-up capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital, which can be raised to 49 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body. ( a ) Thus, the FII investment limit will continue to be within 49 per cent of the total paid-up capital. ( b ) In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and non-repatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-up capital both on repatriation and non-repatriation basis. However, NRI holding can be allowed upto 24 per cent of the total paid-up capital both on repatriation and non-repatriation basis provided the banking company passes a special resolution to that effect in the General Body. ( c ) Applications for foreign direct investment in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority (IRDA) in order to ensure that the 26 per cent limit of foreign shareholding applicable for the insurance sector is not being breached. ( d ) Transfer of shares under FDI from residents to non-residents will continue to require approval of RBI and Government as per para 3.6.2 of DIPP's Circular 1 of 2012 as applicable. ( e ) The policies and procedures prescribed from time to time by RBI and other institutions such as SEBI, D/o Company Affairs and IRDA on these matters will continue to apply. ( f ) RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank, if such acquisition results in any person owning or controlling 5 per cent or more of the paid-up capital of the private bank will apply to non-resident investors as well. ( ii ) Setting up of a subsidiary by foreign banks ( a ) Foreign banks will be permitted to either have branches or subsidiaries but not both. ( b ) Foreign banks regulated by banking supervisory authority in the home country and meeting Reserve Bank's licensing criteria will be allowed to hold 100 per cent paid-up capital to enable them to set up a wholly-owned subsidiary in India. ( c ) A foreign bank may operate in India through only one of the three channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a subsidiary with aggregate foreign investment upto a maximum of 74 per cent in a private bank. ( d ) A foreign bank will be permitted to establish a wholly-owned subsidiary either through conversion of existing branches into a subsidiary or through a fresh banking license. A foreign bank will be permitted to establish a subsidiary through acquisition of shares of an existing private sector bank provided at least 26 per cent of the paid capital of the private sector bank is held by residents at all times consistent with para (i) (b) above. ( e ) A subsidiary of a foreign bank will be subject to the licensing requirements and conditions broadly consistent with those for new private sector banks. ( f ) Guidelines for setting up a wholly-owned subsidiary of a foreign bank will be issued separately by RBI ( g ) All applications by a foreign bank for setting up a subsidiary or for conversion of their existing branches to subsidiary in India will have to be made to the RBI. (iii) At present there is a limit of ten per cent on voting rights in respect of banking companies, and this should be noted by potential investor. Any change in the ceiling can be brought about only after final policy decisions and appropriate Parliamentary approvals. 19 Banking- Public Sector 19.1 Banking- Public Sector subject to Banking Companies (Acquisition Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks. 20% (FDI and Portfolio Investment) Government 20 Commodity Exchanges 20.1 1. Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges. 2. For the purposes of this chapter, ( i ) Commodity Exchange is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities. ( ii ) recognized association means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952 ( iii ) Association means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative. ( iv ) Forward contract means a contract for the delivery of goods and which is not a ready delivery contract. ( v ) Commodity derivative means- a contract for delivery of goods, which is not a ready delivery contract; or a contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the Forward Markets Commission by the Central Government, but does not include securities. 20.2 Policy for FDI in Commodity Exchange 49% (FDI FII) [Investment by Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26% ] Automatic 20.3 Other conditions: ( i ) FII purchases shall be restricted to secondary market only and ( ii ) No non-resident investor /entity, including persons acting in concert, will hold more than 5% of the equity in these companies. ( iii ) Foreign investment in commodity exchanges will be subject to the guidelines of the Department of Consumer Affairs /Forward Markets Commission (FMC). 21 Credit Information Companies (CIC) 21.1 Credit Information Companies 74% (FDI FII) Automatic 21.2 Other Conditions: (1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. (2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI. (3) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 74% for foreign investment. (4) Such FII investment would be permitted subject to the conditions that: ( a ) No single entity should directly or indirectly hold more than 10% equity. ( b ) Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement; and ( c ) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding. 22 Infrastructure Company in the Securities Market 22.1 Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49% (FDI FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital] Automatic 22.2 Other Conditions: 22.2.1 FII can invest only through purchases in the secondary market 23 Insurance 23.1 Insurance 26% Automatic 23.2 Other Conditions: (1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1938, is allowed under the automatic route. (2) This will be subject to the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory Development Authority for undertaking insurance activities. 24 Non-Banking Finance Companies (NBFC) 24.1 Foreign investment in NBFC is allowed under the automatic route in only the following activities: ( i ) Merchant Banking ( ii ) Under Writing ( iii ) Portfolio Management Services ( iv ) Investment Advisory Services ( v ) Financial Consultancy ( vi ) Stock Broking ( vii ) Asset Management ( viii ) Venture Capital ( ix ) Custodian Services ( x ) Factoring ( xi ) Credit Rating Agencies ( xii ) Leasing Finance ( xiii ) Housing Finance ( xiv ) Forex Broking ( xv ) Credit Card Business ( xvi ) Money Changing Business ( xvii ) Micro Credit ( xviii ) Rural Credit 100% Automatic 24.2 Other Conditions: (1) Investment would be subject to the following minimum capitalisation norms: ( i ) US $ 0.5 million for foreign capital upto 51% to be brought upfront ( ii ) US $ 5 million for foreign capital more than 51% and upto 75% to be brought upfront ( iii )US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought upfront and the balance in 24 months. ( iv ) NBFCs (i) having foreign investment more than 75% and upto 100%, and (ii) with a minimum capitalisation of US$ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1 of DIPP Circular 1 of 2012 dated April 10, 2012, on Consolidated FDI Policy, therefore, shall not apply to downstream subsidiaries. ( v ) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi) below. ( vi ) Non- Fund based activities : US$ 0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition: It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company. Note: The following activities would be classified as Non-Fund Based activities: ( a ) Investment Advisory Services ( b ) Financial Consultancy ( c ) Forex Broking ( d ) Money Changing Business ( e ) Credit Rating Agencies ( vii ) This will be subject to compliance with the guidelines of RBI. Note: (i) Credit Card business includes issuance, sales, marketing design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc. ( ii ) Leasing Finance covers only financial leases and not operating leases. (2) The NBFC will have to comply with the guidelines of the relevant regulator/s, as applicable 25 Pharmaceuticals 25.1 Greenfield 100% Automatic 25.2 Existing Companies 100% Government 26 Power Exchanges 26.1 Power Exchanges under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010 49% (FDI FII) Automatic 26.2 Other conditions: ( i ) Such foreign investment would be subject to an FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital; ( ii ) FII purchases shall be restricted to secondary market only; ( iii ) No non-resident investor/entity, including persons acting in concert, will hold more than 5% of the equity in these companies; and ( iv ) The foreign investment would be in compliance with SEBI Regulations; other applicable laws/regulations; security and other conditionalities.