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TMI BlogFDI REGULATORY FRAMEWORKX X X X Extracts X X X X X X X X Extracts X X X X ..... anagement of the direct investment enterprise. In India the 'lasting interest' is not evinced by any minimum holding of percentage of equity capital/shares/voting rights in the investment enterprise. Direct investment allows the direct investor to gain to the access of direct investment enterprise which it might otherwise be unable to do. The objectives of direct investment are different from those of portfolio investment whereby investors do not generally expect to influence the management of the enterprise. 1.3 It is the policy of the Government of India to attract and promote productive FDI from non-residents in activities which significantly contribute to industrialization and socio-economic development. FDI is encouraged in enterprises to significantly expand employment and livelihood opportunities, enhance economic value of products, promote welfare of consumers, increase exports and/or transfer technologies in all economic activities. FDI supplements the domestic capital and technology. 1.4 The Legal basis: Foreign Direct Investments by non-resident in resident entities through transfer or issue of security to person resident outside India is a 'Capital account tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are as follows :- 2.1 'FEMA' means the Foreign Exchange management Act 1999 (42 of 1999) (FEMA) . 2.2 '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). 2.3 'Authorised Bank' means a bank including a co-operative bank (other than an authorized dealer) authorized by the Reserve Bank to maintain an account of a person resident outside India. 2.4 'Authorised Dealer' means a person authorized as an authorized dealer under sub-section (1) of section 10 of FEMA . 2.5 'AD Category-I Bank' means a Bank( commercial, State or urban cooperative) which is an Authorized Dealer and allowed to deal in all current and capital account transactions by RBI from time to time. 2.6 'Authorised person' means a authorized dealer, money changer, offshore banking unit or any other person for the time being authorized under Sub-section (a) of Section 10 of FEMA 2.7 'B2B e-commerce' means business entities buying from and selling to each other online. 2.8 'Capital' means equity shares, compulsorily and man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red with SEBI under SEBI (Foreign Venture Capital Investors) Regulations 2000'. 2.12 'FIPB' means the Foreign Investment Promotion Board constituted by the Government of India. 2.13 'FDI' means foreign investment in the paid up capital of the Indian company not being Foreign Portfolio Investment. 2.14 'Government route' means that investment in resident entities by non-resident entities can be made only with the prior approval from FIPB, Ministry of Finance or SIA, DIPP as the case may be. 2.15 'Government of India' means Department of Economic Affairs, Ministry of Finance or Department of IPP, Ministry of Commerce Industry. 2.16 'Indian Company' means a company registered or incorporated in India as per the Indian Companies Act, 1956. 2.17 Investment on repatriable basis means investment the sale proceeds of which are net or taxes eligible to be repatriated out of India and the expression 'investment are on repatriable basis' shall be construed accordingly. 2.18 'Joint Venture' (JV) means an Indian entity formed, registered or incorporated in accordance with the laws and regulations in India in which a foreign entity makes a foreign investment 2.19 'Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia; or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period; (ii) any person or body corporate registered or incorporated in India, (iii) an office, branch or agency in India owned or controlled by a person resident outside India, (iv) an office, branch or agency outside India owned or controlled by a person resident in India. 2.23'Person resident outside India' means a person who is not resident in India. 2.24'Previous Venture/tie-up condition' means that the investor has previous/existing venture or tie-up in India as on January 12, 2005, through investment / technology collaboration agreement in the same field in which the Indian company, whose shares are being issued, is engaged, he has to obtain prior permission of Foreign Investment Promotion Board (FIPB), to acquire the shares. This restriction is, however, not applicable to the issue of shares for investments to be made by: (i) Venture Capital Funds registered with the Securities and Exchange Board of India (SEBI). (b) or Investments by International/Multinational Financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CE OF INVESTMENT IN INDIA 3.1 A non-resident entity (other than a citizen of Pakistan) or an entity incorporated outside India, (other than an entity incorporated in Pakistan) can invest in India, subject to the FDI Regulation of the Government of India. A person who is a citizen of Bangladesh or an entity incorporated in Bangladesh can invest in India under the FDI Regulation, under the Government route. 3.2 Investments from Nepal Bhutan: NRI's, resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in shares and convertible debentures of Indian companies on repatriation basis, subject to the condition that the amount of consideration for such investment shall be paid only by way of inward remittance in free foreign exchange through normal banking channels. 3.3 OCBs have been derecognized as a class of Investors in India with effect from September 16, 2003. Erstwhile OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh investments under FDI Regulation as incorporated non-resident entities, with the prior approval of Government of India if the investment is through Government route; a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanism) Scheme, 1993 and guidelines issued by the Government of India thereunder from time to time. (ii) A company can issue ADRs/GDRs if it is eligible to issue shares to persons resident outside India under the FDI Regulations. However, an Indian listed company, which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue ADRs/GDRs. (iii) Unlisted companies, which have not yet accessed the ADR/GDR route for raising capital in the international market, would require prior or simultaneous listing in the domestic market, while seeking to issue such overseas instruments. Unlisted companies, which have already issued ADRs/GDRs in the international market, have to list in the domestic market on making profit or within three years of such issue of ADRs/GDRs, whichever is earlier. ADRs / GDRs are issued on the basis of the ratio worked out by the Indian company in consultation with the Lead Manager to the issue. The proceeds so raised have to be kept abroad till actually required in India. Pending repatriation or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilty Scheme: A limited two-way Fungibility scheme has been put in place by the Government of India for ADRs / GDRs. Under this Scheme, a stock broker in India, registered with SEBI, can purchase shares of an Indian company from the market for conversion into ADRs/GDRs based on instructions received from overseas investors. Re-issuance of ADRs / GDRs would be permitted to the extent of ADRs / GDRs which have been redeemed into underlying shares and sold in the Indian market. (ii) Sponsored ADR/GDR issue: An Indian company can also sponsor an issue of ADR/GDR. Under this mechanism, the company offers its resident shareholders a choice to submit their shares back to the company so that on the basis of such shares, ADRs / GDRs can be issued abroad. The proceeds of the ADR / GDR issue is remitted back to India and distributed among the resident investors who had offered their Rupee denominated shares for conversion. These proceeds can be kept in Resident Foreign Currency (Domestic) accounts in India by the resident shareholders who have tendered such shares for conversion into ADRs / GDRs. 5.0 ELIGIBILITY OF INVESTMENTS IN RESIDENT ENTITIES 5.1 Investment in an Indian Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 180 days from the date of receipt of the inward remittance or by debit to the NRE/FCNR (B) account of the non-resident investor. In case, the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be. Non-compliance with the above provision would be reckoned as a contravention under FEMA and could attract penal provisions. In exceptional cases, refund of the amount of consideration outstanding beyond a period of 180 days from the date of receipt may be considered by the RBI, on the merits of the case. 6.2 Issue price of shares - price of shares issued to persons resident outside India under the FDI Regulations, shall be on the basis of SEBI guidelines in case of listed companies. In case of unlisted companies, valuation of shares has to be done by a Chartered Accountant in accordance with the guidelines issued by the erstwhile Controller of Capital Issues (CCI). 6.3 Foreign Cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany under buyback and/or capital reduction scheme of the company. However, this General Permission is not available in case of transfer of shares / debentures, from a Resident to a Non-Resident/Non-Resident India, of an entity engaged in any activity in the financial services sector (i.e. Banks, NBFCs, ARCs, CICs, Insurance, infrastructure companies in the securities market such as Stock Exchanges, Clearing Corporations, and Depositories, Commodity Exchanges, etc.). (ii) The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a Know Your Customer(KYC) check by the remittance receiving AD Category - I bank at the time of receipt of funds. In case, the remittance receiving AD Category - I bank is different from the AD Category - I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category - I bank carrying out the transaction along with the Form FC-TRS. (iii) Escrow: AD Category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be enclosed. Reserve Bank considers the following factors while processing such applications: (a) The proposed transferee (donee) is eligible to hold such security under Schedules 1, 4 and 5 of Notification No. FEMA 20/2000-RB dated May 3, 2000 , as amended from time to time. (b) The gift does not exceed 5 per cent of the paid-up capital of the Indian company/each series of debentures/each mutual fund scheme. (c) The applicable sectoral cap limit in the Indian company is not breached. (d) The transferor (donor) and the proposed transferee (donee) are close relatives as defined in Section 6 of the Companies Act, 1956, as amended from time to time. The current list is reproduced in Annex . (e) The value of security to be transferred together with any security already transferred by the transferor, as gift, to any person residing outside India does not exceed the rupee equivalent of USD 25,000 during the calendar year. (f) Such other conditions as stipulated by Reserve Bank in public interest from time to time. 6.6 Conversion of ECB/Lumpsum Fee/Royalty/Import of capital goods by SEZs into Equity. (i) Indian companies have been granted general permission for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of rights share is not automatically available to OCBs. However bonus shares can be issued to erstwhile OCBs without the approval of RBI. 7.3 Additional allocation of rights share by residents to non-residents - Existing non-resident shareholders are allowed to apply for issue of additional shares/convertible debentures/preference shares over and above their rights share entitlements. The investee company can allot the additional rights share out of unsubscribed portion, subject to the condition that the overall issue of shares to non-residents in the total paid-up capital of the company does not exceed the sectoral cap. 7.4 Acquisition of shares under Scheme of Merger/Amalgamation - Mergers and amalgamations of companies in India are usually governed by an order issued by a competent Court on the basis of the Scheme submitted by the companies undergoing merger/amalgamation. Once the scheme of merger or amalgamation of two or more Indian companies has been approved by a Court in India, the transferee company or new company is allowed to issue shares to the shareholders of the transferor company resident outside India, subject to the conditions that: (i) the percen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment by FIIs(holding as on March 31), NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and convertible preference shares, convertible Currency Debentures regardless of whether the said investments have been made under Schedule 1, 2, 3 and 6 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations . 8.3 Guidelines for calculation of total foreign investment i.e. direct and indirect foreign investment in an Indian company. (i) Counting the Direct Foreign Investment: All investment directly by a non-resident entity into the Indian company would be counted towards foreign investment. (ii) Counting of indirect foreign Investment: (a) The foreign investment through the investing Indian company would not be considered for calculation of the indirect foreign investment in case of Indian companies which are 'owned and controlled' by resident Indian citizens and/or Indian Companies which are owned and controlled by resident Indian citizens . (b) For cases where condition (a) above is not satisfied or if the investing company is owned or controlled by 'non resident entities', the entire investment by the investing co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-holders which have an effect on the appointment of the Board of Directors or on the exercise of voting rights or of creating voting rights disproportionate to shareholding or any incidental matter thereof, such agreements will have to be informed to the approving authority. The approving authority will consider for determining ownership and control such inter-se agreements when considering the case for granting approval for foreign investment. (c) In all sectors attracting sectoral caps, the balance equity i.e. beyond the sectoral foreign investment cap, would specifically be beneficially owned by/held with/in the hands of resident Indian citizens and Indian companies, owned and controlled by resident Indian citizens. (d) In the I B and Defense sectors where the sectoral cap is less than 49%, the company would need to be 'owned and controlled' by resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens. (1) For this purpose, the equity held by the largest Indian shareholder would have to be at least 51% of the total equity, excluding the equity held by Public Sector Banks and Public Financial Institutions, as defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Automatic Route, the foreign investor or the Indian company does not require any approval from the Reserve Bank or Government of India for the investment. Under the Government Route, prior approval of the Government of India through Foreign Investment Promotion Board (FIPB) is required. (ii) Investment would be subject to the 'Previous/existing venture/tie-up condition'. (iii) Guidelines for transfer of ownership or control of Indian companies in sectors with caps from resident Indian citizens to non-resident entities in sectors with caps: (a) In sectors with caps, including interalia defence production, air transport services, ground handling services, asset reconstruction companies, private sector banking, broadcasting, commodity exchanges, credit information companies, insurance, print media, telecommunications and satellites, Government approval/FIPB approval would be required in all cases where: (b) An Indian company is being established with foreign investment and is owned by a non-resident entity or (c) An Indian company is being established with foreign investment and is controlled by a non-resident entity or (d) The control of an existing Indian c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment/investors have to also comply with all relevant sectoral laws, regulations, conditions like obtaining of licence etc. 12.2 The security related conditions as contained in specific statutes will also have to be complied with. 12.3 The State Governments/Union Territories have regulations in relations to the subjects in their legislative domain. These conditions also have to be met/complied with. 13.0 DOWNSTREAM INVESTMENT BY INDIAN COMPANIES 13.1 The Policy for downstream investment by Indian companies seeks to lay down and clarify about compliance with the Foreign investment norms on entry route, conditionalities and sectoral caps. The 'guiding principle' is that downstream investment by companies ' owned' or 'controlled' by non resident entities would require to follow the same norms as a direct foreign investment i.e. only as much can be done by way of indirect foreign investment through downstream investment in Para 8 as can be done through direct foreign investment and what can be done directly can be done indirectly under same norms. 13.2 The Guidelines for calculation of total foreign investment, both direct and indirect in an Indian company, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.5 For companies which do not have any operations and also do not have any downstream investments, for infusion of foreign investment into such companies, Government/FIPB approval would be required, regardless of the amount or extent of foreign investment. Further, as and when such company commences business(s) or makes downstream investment it will have to comply with the relevant sectoral conditions on entry route, conditionalities and caps. 13.6. For Operating-cum- investing companies and investing companies (Para 14.4) and for companies as per para 14.5 above, downstream investments can be made subject to the following conditions: (i) Such company is to notify SIA, DIPP and FIPB of its downstream investment within 30 days of such investment even if equity shares/CCPS/CCD have not been allotted along with the modality of investment in new/existing ventures (with/without expansion programme); (ii) downstream investment by way of induction of foreign equity in an existing Indian Company to be duly supported by a resolution of the Board of Directors supporting the said induction as also a shareholders Agreement if any; (iii) issue/transfer/pricing/valuation of shares sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposals. (i) The extent of foreign equity proposed to be held (keeping in view sectoral caps if any (ii) Extent of equity from the point of view whether the proposed project would amount to a holding company/wholly owned subsidiary/a company with dominant foreign investment (i.e. 76% or more) joint venture. (iii)Whether the proposed foreign equity is for setting up a new project (joint venture or otherwise) or whether it is for enlargement of foreign/NRI equity or whether it is for fresh induction of foreign equity/NRI equity in an existing Indian company. (iv) In the case of fresh induction offerings/NRI equity and/or in cases of enlargement of foreign/NRI equity, in existing Indian companies whether there is a resolution of the Board of Directors supporting the said induction/enlargement of foreign/NRI equity and whether there is a shareholders agreement or not. (v) In the case of induction of fresh equity in the existing Indian companies and/or enlargement of foreign equity in existing Indian companies, the reason why the proposal has been made and the modality for induction/enhancement (i.e. whether by increase of paid up capital/authorized capital, transfer of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CHAPTER 4: POLICY ON ROUTE , CAPS AND CONDITIONS: 16.0 PROHIBITION ON INVESTMENT IN INDIA . (i) Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not (such as Trusts) which is engaged or proposes to engage in the following activities: (a) Business of chit fund, or (b) Nidhi company, or (c) Agricultural or plantation activities, or (d) Real estate business, or construction of farm houses, or (e) Trading in Transferable Development Rights (TDRs) (f) Lottery Business, Gambling and Betting including Government /private lottery, online lotteries, casinos etc. (ii) It is clarified that "real estate business" does not include development of townships, construction of residential/commercial premises, roads or bridges educational institutions, recreational facilities, city and regional level infrastructure, townships. It is further clarified that partnership firms/proprietorship concerns having investments as per FEMA regulations are not allowed to engage in print Media sector. (iii)In addition to the above, investment in the form of FDI is also prohibited in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. 18.3 Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities. 18.3(i) 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. (ii) 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 Government of India Resolution No. 8/1(1)/97-PSU/1422 dated 6th October 1998 issued by the Department of Atomic Energy laying down the policy for exploit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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'. 20.0 Cigars Cagarettes Manufacture: 100% FDI is allowed under Government route and subject to the of Industrial licence under the Industries(Development Regulation) Act 1951. 21.0 Coffee Rubber processing and warehousing : 100% FDI is allowed under the automatic route. 22.0 Defence Industry 22.1 FDI is permissible up to 26%, under Government route subject to Industrial license under the Industries (Development Regulation) Act 1951 and the following conditions: (i) Licence applications will be considered and licences given by the Department of Industrial Policy Promotion, Ministry of Commerce Industry, in consultation with Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licence is granted and production commences. These would be subject to verification by authorized Government agencies. (xiii) 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. (xiv) Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. (xv) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or: (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 appertaining 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the automatic route upto 49% and on the Government route beyond 49% and upto 74%. (c) Helicopter services/seaplane services requiring DGCA approval- FDI up to 100% allowed on the automatic route. (iv) FDI ceilings in other services under Civil Aviation sector (d) (a) Ground Handling Services- FDI up to 74% and investment by Non-resident Indians (NRI) up to 100% allowed. FDI in on the automatic route upto 49% and on the Government route beyond 49% and upto 74%. This will be subject to sectoral regulations and security clearance. (b) Maintenance and Repair organizations; flying training institutes; and technical training institutions - FDI up to 100% allowed on the automatic route. 25.4 The policy for FDI in the Civil Aviation Sector would be subject to the Aircraft Rules, 1934 as amended from time to time, Civil Aviation Requirements, and Aeronautical Information Circulars as notified by the Ministry of Civil Aviation. 26.0 Asset Reconstruction Companies: 26.1 Persons resident outside India [other than Foreign Institutional Investors (FIIs)], can invest in the equity capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank only under the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g can be allowed up to 24 per cent provided the banking company passes a special resolution to the effect in the General Body. (c) Applications for foreign direct investment (FDI route) 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 Foreign Investment Promotion Board (FIPB) under Foreign Exchange Management Act (FEMA). (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 foreign investors as well. (ii) Setting up of a subsidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations. 29.2 Cable Network: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49% for Cable Networks under Government route subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting. 29.3 Direct -to-Home: Foreign investment, including FDI, NRI and PIO investments and portfolio investments are permitted up to 49% for Direct to Home under Government route. Within the limit of 49% FDI will not exceed 20%. This will be subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting. 29.4 Setting up hardware facilities such as up-linking, HUB (i) FDI policy in the Up-linking of TV Channels is as under: a) FDI (including investment by FII) up to 49% would be permitted under the Government route for setting up Up-linking HUB/ Teleports; b) FDI up to 100% would be allowed under the Government route for up linking a Non-News Current Affairs TV Channel; c) FDI (including in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 31.3 Policy for foreign investment in Commodity Exchanges (i) Foreign investment will be allowed through a composite ceiling i.e. Foreign Direct Investment (FDI) under the FDI Scheme incorporated as Schedule 1 under regulation 5 (1) of the Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2000 (FEMA Regulations) + investment by registered Foreign Institutional Investors (FII) under the Portfolio Investment Scheme incorporated as Schedule 2 under Regulation 5(2) of the FEMA Regulations, is allowed up to 49%. (ii) FDI will be allowed under the Government route. (iii) Investment by registered FII under the Portfolio Investment Scheme will be limited to 23% and investment under the FDI Scheme will be limited to 26%. (iv) FII purchases shall be restri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investor may be permitted to exit earlier with prior approval of the Government through the FIPB. 33.3 At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor 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. 33.4 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. 33.5 The investor shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestment i.e. Foreign Direct Investment (FDI) under the FDI Scheme incorporated as Schedule 1 under regulation 5 (1) of the Foreign Exchange Management (Transfer or Issue of Security By a Person Resident Outside India) Regulations, 2000 (FEMA Regulations) + investment by registered Foreign Institutional Investors (FII) under the Portfolio Investment Scheme incorporated as Schedule 2 under Regulation 5(2) of the FEMA Regulations , is allowed up to 49% under the Government route and regulatory clearance from RBI. (iii) 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 49% for foreign investment. (iv) 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 reporting requirement; and (c) FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding. 36.0 Health and Medical Services: 100% FDI is allowed under the automatic route ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Research and experimental development on natural sciences and engineering, Business and management consultancy activities and Architectural, engineering and other technical activities. 38.4 FDI up to 100% under the automatic route is allowed both in setting up and in established industrial parks and would not be subject to the conditionalities applicable for construction development projects etc. spelt out in Para 20 above provided the Industrial Parks meet with the under-mentioned conditions: (i) it would comprise of a minimum of 10 units and no single unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity in the step down subsidiaries of 100% foreign owned holding companies may be scheduled by bringing 10 % domestic equity upfront and the balance domestic equity over a period of 24 months. (vi) Joint Venture operating NBFC's 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 (vii) below. (vii) Non- Fund based activities : US $0.5 million for all permitted non-fund based NBFC's 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 any equity it may contribute in an NBFC holding/operating company would be reckoned as domestic equity. 41.3Credit Card business includes issuance, sales, marketing design of various payment products such as credit card charge cards, debit cards, stored value cards, smart card, value added cards etc. 41.4 Venture Capital (Fund: An Foreign venture capital Investor(FCVI) may contribute upto 100% of the capital of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from time to time by Ministry of Information and Broadcasting. 43.4 Publication of facsimile edition of foreign newspapers: (i) FDI up to 100% is permitted under Government route in publication of facsimile edition of foreign newspapers provided the FDI is by the owner of the original foreign newspaper(s) 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. 44.0 Research and Development Services excluding basic Research and setting of R D/ academic institutions which would award degrees/diplomas/certificates: 100% FDI is allowed under the automatic route 45.0 Security Agencies in Private sector The 'Private Security Agencies (Regulation) Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up to 49 percent is on the automatic route and beyond that on the Government route. FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. (iv) The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. (v) FDI shall be subject to laws of India and not the laws of the foreign country/countries. 49.2 Security Conditions: (i) The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. (ii) Details of infrastructure/network diagram (technical details of the network) could be provided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee company. Clearance from the licensor (Department of Telecommunications, Government of India) would be required if such information is to be provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor/data, which the licensor may notify from time to time. (xiii) The licensee company is not allowed to use remote access facility for monitoring of content. (xiv) Suitable technical device should be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes. (xv) Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. (xvi) The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location. (xvii) The telecom service providers should familiarize/train Vigilance Technical Monitoring (VTM)/security agency officers/officials in respect of relevant operations/features of their systems. (xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix) In ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Government route. (ii) This will be subject to the condition that such companies will divest 26% of their equity in favour of Indian public in 5 years, if these companies are listed in other parts of the world. (iii) This will be subject to licensing and security requirements notified by the Ministry of Telecommunications. 50.0 Trading: 50.1 100% FDI is permitted under the automatic route for trading companies for the following activities: (i) Wholesale/cash carry trading. (ii) Trading for exports. 50.2 100% FDI is permitted under the Government route for trading companies for the following activities: (i) Trading of items sourced from small scale sector. (ii) 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 facility commences simultaneously with test marketing. 50.3 Single Brand product trading: FDI up to 51%, under the Government route is allowed in retail trade of 'Single Brand' products. This is, inter alia, aimed at attracting investments in production and marketing, improving the availability of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Companies :AD Category - I bank can allow the remittance of sale proceeds of a security (net of applicable taxes) to the seller of shares resident outside India, provided the security has been held on repatriation basis, the sale of security has been made in accordance with the prescribed guidelines and NOC / tax clearance certificate from the Income Tax Department has been produced. 53.2 Repatriation of Dividend: Dividends are freely repatriable without any restrictions. The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as amended from time to time. 54.0 REPORTING OF FDI 54.1 Reporting of Inflow (i) An Indian company receiving investment from outside India for issuing shares / convertible debentures / preference shares under the FDI Scheme, should report the details of the amount of consideration to the Regional Office concerned of the Reserve Bank not later than 30 days from the date of receipt in the Advance Reporting Form enclosed in Annex. (ii) Indian companies are required to report the details of the receipt of the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous years up to March 31). The details of the investments to be reported would include all foreign investments made into the company which is outstanding as on the balance sheet date. The details of overseas investments in the company both under direct / portfolio investment may be separately indicated. (e) Issue of bonus/rights shares or stock options to persons resident outside India directly or on amalgamation / merger with an existing Indian company, as well as issue of shares on conversion of ECB / royalty / lumpsum technical know-how fee / import of capital goods by units in SEZs has to be reported in Form FC-GPR. 54.3 Reporting of transfer of shares Reporting of transfer of shares between residents and non-residents and vice- versa is to be done in Form FC-TRS (enclosed in Annex). The Form FC-TRS should be submitted to the AD Category - I bank, within 60 days from the date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India. The AD Category - I bank, would forward the same to its link office. The link office would consolidate the Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural or plantation property or farm house to: (a) A person resident outside India who is a citizen of India, or (b) A person of Indian origin resident outside India, or (c) A person resident in India. (ii) He may transfer agricultural land / plantation property / farm house acquired by way of inheritance, only to Indian citizens permanently residing in India. (iii) Payment for acquisition of property can be made out of: (a) Funds received in India through normal banking channels by way of inward remittance from any place outside India, or (b) Funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999 and the regulations made by Reserve Bank from time to time. (iv) Such payment cannot be made either by traveler's cheque or by foreign currency notes or by other mode other than those specifically mentioned above. (v) A person resident outside India who is a person of Indian Origin (PIO) can acquire any immovable property in India other than agricultural land / farm house / plantation property: (a) By way of purchase out of funds received by inward remittance through normal banking channels or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patriation of sale proceeds (i) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by NRI / PIO, the authorized dealer will allow repatriation of sale proceeds outside India provided: (a) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of FEMA Regulations; (b) the amount to be repatriated does not exceed (a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency Non-Resident Account or (b) the foreign currency equivalent as on the date of payment, of the amount paid where such payment was made from the funds held in Non-Resident (External) Rupee Account for acquisition of the property; and (c) In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties. (ii) In the case of sale of immovable property purchased out of Rupee funds, AD Category - I banks may allow the facility of repatriation of funds out of balances held b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any provisions of this Act or of any rule, direction or order made there under is a company (company means any body corporate and includes a firm or other association of individuals as defined in the Companies Act), every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. (iii) Any Adjudicating Authority adjudging any contraventions under 25.1.1, may, if he thinks fit in addition to any penalty which he may impose for such contravention direct that any currency, security or any other money or property in respect of which the contravention has taken place shall be confiscated to the Government of India. 56.2 Adjudication and Appeals (i)For the purpose of adjudication of any contravention of FEMA , the Government of India as per the provisions contained in the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 appoints officers of the Central Government as the Adjudicating Authorities for holding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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