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TMI BlogConsolidated FDI PolicyX X X X Extracts X X X X X X X X Extracts X X X X ..... Caps on Investments 4.4 Entry conditions on Investment 4.5 Other conditions on Investment besides entry conditions 4.6 Downstream Investment by Indian Companies 4.7 Guidelines for consideration of FDI Proposals by FIPB 4.8 Constitution of FIPB 4.9 Approval Levels for cases under Government Route 4.10 Cases which do not require fresh Approval CHAPTER-5 POLICY ON ROUTE, CAPS AND ENTRY CONDITIONS 5.1 PROHIBITION ON INVESTMENT IN INDIA 5.2 SECTOR-SPECIFIC POLICY FOR FDI AGRICULTURE 5.2.1 Agriculture Animal Husbandry 5.2.2 Tea plantation INDUSTRY MINING 5.2.3 Mining MANUFACTURING 5.2.4 Manufacture of items reserved for production in Micro and Small Enterprises (MSEs) 5.2.5 Defence Industry POWER 5.2.6 Electric Generation, Transmission, Distribution and Trading SERVICES SECTOR 5.2.7 Civil Aviation Sector 5.2.8 Asset Reconstruction Companies 5.2.9 Banking -Private sector 5.2.10 Banking- Public Sector 5.2.11 Broadcasting 5.2.12 Commodity Exchanges 5.2.13 Development of Townships, Housing, Built-up infrastructure and Construction-development projects 5.2.14 Credit Information Companies (CIC) 5.2.15 Industrial Parks both setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t investor) with the objective of establishing a 'lasting interest' in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor. The motivation of the direct investor is a strategic long term relationship with the direct investment enterprise to ensure the significant degree of influence by the direct investor in the management of the direct investment enterprise. Direct investment allows the direct investor to gain access to the 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. In the Indian context, FDI is defined in Para 2.1.12 of this Circular. 1.1.4 It is the policy of the Government of India to attract and promote productive FDI in activities which significantly contribute to industrialization and socio-economic development. FDI supplements domestic capital and technology. 1.1.5 The Legal basis: Foreign Direct Investment by non-resident in resident entities through transfer or issue of security to person resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of interpretation, the relevant FEMA notification will prevail. 1.1.9 Reference to any statute or legislation made in this Circular shall include reference to any modifications, amendments or re-enactments thereof. CHAPTER 2: DEFINITIONS 2.1 DEFINITIONS: The definitions of terms used in this circular are as follows:- 2.1.1 'AD Category-I Bank' means a bank( Scheduled Commercial, State or Urban Cooperative) which is authorized under Section 10(1) of FEMA to undertake all current and capital account transactions according to the directions issued by the RBI from time to time. 2.1.2 'Authorized 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 2.1.3 'Authorized Dealer' means a person authorized as an authorized dealer under sub-section (1) of section 10 of FEMA . 2.1.4 'Authorized Person' means an 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 to deal in foreign exchange or foreign securities. 2.1.5 'Capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bond issued by an Indian company expressed in foreign currency, the principal and interest of which is payable in foreign currency. FCCBs are issued in accordance with the Foreign Currency Convertible Bonds and ordinary shares (through depository receipt mechanism) Scheme 1993 and subscribed by a non-resident entity in foreign currency and convertible into ordinary shares of the issuing company in any manner, either in whole, or in part. 2.1.12 'FDI' means investment by non-resident entity/person resident outside India in the capital of the Indian company under Schedule 1 of FEMA (Transfer or Issue of Security by a Person Resident Outside India) Regulations 2000 . 2.1.13 'FEMA' means the Foreign Exchange Management Act 1999 (42 of 1999) . 2.1.14 'FIPB' means the Foreign Investment Promotion Board constituted by the Government of India. 2.1.15 'Foreign Institutional Investor'(FII) means an entity established or incorporated outside India which proposes to make investment in India and which is registered as a FII in accordance with the SEBI (FII) Regulations 1995. 2.1.16 'Foreign Venture Capital Investor' (FVCI) means an investor incorporated and established outsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd in DIPP, Ministry of Commerce Industry, Government of India. 2.1.29 'Person' includes (i) an individual (ii) a Hindu undivided family, (iii) a company (iv) a firm (v) an association of persons or a body of individuals whether incorporated or not, (vi) every artificial juridical person, not falling within any of the preceding sub-clauses, and (vii) any agency, office, or branch owned or controlled by such person. 2.1.30 'Person of Indian Origin' (PIO) means a citizen of any country other than Bangladesh or Pakistan, if (i) he at any time held Indian Passport (ii) he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or (iii) the person is a spouse of an Indian citizen or a person referred to in sub-clause (i) or (ii). 2.1.31 'Person resident in India' means - (i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include - (A) A person who has gone out of India or who stays outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied under the Regulations; and (iii) invests in accordance with the Regulations CHAPTER 3: ORIGIN TYPE, ELIGIBILITY, CONDITIONS AND ISSUE/TRANSFER OF INVESTMENT 3.1 WHO CAN INVEST IN INDIA ? 3.1.1 A non-resident entity (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy. A citizen of Bangladesh or an entity incorporated in Bangladesh can invest in India under the FDI Policy, only under the Government route. 3.1.2 NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the capital 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. 3.1.3 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 Policy as incorporated non-resident entities, with the prior approval of Government of India if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived on or after May 1, 2007 are considered as debt. Accordingly all norms applicable for ECBs relating to eligible borrowers, recognized lenders, amount and maturity, end-use stipulations, etc. shall apply. Since these instruments would be denominated in rupees, the rupee interest rate will be based on the swap equivalent of London Interbank Offered Rate (LIBOR) plus the spread as permissible for ECBs of corresponding maturity 3.2.3 The inward remittance received by the Indian company vide issuance of DRs and FCCBs are treated as FDI and counted towards FDI. 3.2.4 Issue of shares by Indian Companies under FCCB/ADR/GDR (i) Indian companies can raise foreign currency resources abroad through the issue of FCCB/DR (ADRs/GDRs), in accordance with the Scheme for issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India there under 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 Policy. However, an Indian listed company, which is not eligible to raise funds from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Erstwhile OCBs who are not eligible to invest in India and entities prohibited from buying, selling or dealing in securities by SEBI will not be eligible to subscribe to ADRs / GDRs issued by Indian companies. (viii) The pricing of ADR / GDR issues should be made at a price determined under the provisions of the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India and directions issued by the Reserve Bank, from time to time. (ix) The pricing of sponsored ADRs/GDRs would be determined under the provisions of the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the Government of India and directions issued by the Reserve Bank, from time to time. 3.2.5 (i) Two-way Fungibility 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business (i.e. dealing in land and immovable property with a view to earning profit or earning income there from) or engaged in Print Media. 3.3.3 FDI in Trusts: FDI in Trusts other than VCF is not permitted. 3.3.4 FDI in other Entities: FDI in resident entities other than those mentioned above is not permitted. 3.4 CONDITIONS ON ISSUE/TRANSFER OF SHARES 3.4.1 The capital instruments should be issued within 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 capital 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 would attract penal provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock exchange or a merchant banker registered with SEBI. (e) A person resident in India can transfer by way of sale, shares/convertible debentures (including transfer of subscriber's shares), of an Indian company in sectors other than financial services sectors (i.e. Banks, NBFC, Insurance, ARCs, CICs, infrastructure companies in the securities market viz. Stock Exchanges, Clearing Corporations, and Depositories, Commodity Exchanges, etc.) under private arrangement to a person resident outside India, subject to the guidelines given in Annex-2. (f) General permission is also available for transfer of shares/convertible debentures, by way of sale under private arrangement by a person resident outside India to a person resident in India, subject to the guidelines given in Annex-2. (g) The above General Permission also covers transfer by a resident to a nonresident of shares/convertible debentures of an Indian company, engaged in an activity earlier covered under the Government Route but now falling under Automatic Route, as well as transfer of shares by a non-resident to an Indian company under buyback and/or capital reduction scheme of the company. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany whose capital instruments are being transferred falls outside the automatic route and the approval of the Government has been obtained for the said transfer. (d) The transfer is to take place at a price which falls outside the pricing guidelines specified by the Reserve Bank from time to time. (e) Transfer of capital instruments where the non-resident acquirer proposes deferment of payment of the amount of consideration, prior approval of the Reserve Bank would be required, as hitherto. Further, in case approval is granted for a transaction, the same should be reported in Form FC-TRS , to an AD Category - I bank for necessary due diligence, within 60 days from the date of receipt of the full and final amount of consideration. (ii) The transfer of capital instruments of companies engaged in sectors falling under the Government Route from residents to non-residents by way of sale or otherwise requires Government approval followed by permission from RBI. (iii) A person resident in India, who intends to transfer any capital instrument, by way of gift to a person resident outside India, has to obtain prior approval from Reserve Bank. While forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for issue of shares/preference shares against lump sum technical know-how fee, royalty, under automatic route or SIA/FIPB route, subject to pricing guidelines as per the provision of para 3.4.2 above and compliance with applicable tax laws. 3.5 ISSUE OF INSTRUMENTS 3.5.1 Issue of Rights/Bonus Shares - FEMA provisions allow Indian companies to freely issue Rights/Bonus shares to existing non-resident shareholders, subject to adherence to sectoral cap, if any. However, such issue of bonus / rights shares has to be in accordance with other laws/statutes like the Companies Act, 1956, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (in case of listed companies), etc. The offer on right basis to the persons resident outside India shall be: (a) in the case of shares of a company listed on a recognized stock exchange in India, at a price as determined by the company; (b) in the case of shares of a company not listed on a recognized stock exchange in India, at a price which is not less than the price at which the offer on right basis is made to resident shareholders. 3.5.2 Prior permission of RBI for Rights issue to erstwhile O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn in terms of relevant regulations issued by the SEBI, and (b) The face value of the shares to be allotted under the scheme to the non-resident employees does not exceed 5 per cent of the paid-up capital of the issuing company. (ii) Unlisted companies have to follow the provisions of the Companies Act, 1956. The Indian company can issue ESOPs to employees who are resident outside India, other than to the citizens of Pakistan. ESOPs can be issued to the citizens of Bangladesh with the prior approval of the FIPB. (iii) The issuing company is required to report the details of such issues to the Regional Office concerned of the Reserve Bank, within 30 days from the date of issue of shares. 3.5.6 Share Swap: In cases of investment by way of swap of shares, irrespective of the amount, valuation of the shares will have to be made by a Category I Merchant Banker registered with SEBI or an Investment Banker outside India registered with the appropriate regulatory authority in the host country. Approval of the Foreign Investment Promotion Board (FIPB) will also be a prerequisite for investment by swap of shares. CHAPTER 4: CALCULATION, ENTRY ROUTE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g-cum-investing/ investing company. This exception is made since the downstream investment of a 100% owned subsidiary of the holding company is akin to investment made by the holding company and the downstream investment should be a mirror image of the holding company. This exception, however, is strictly for those cases where the entire capital of the downstream subsidy is owned by the holding company. Illustration To illustrate, if the indirect foreign investment is being calculated for Company X which has investment through an investing Company Y having foreign investment, the following would be the method of calculation: (A) where Company Y has foreign investment less than 50%- Company X would not be taken as having any indirect foreign investment through Company Y. (B) where Company Y has foreign investment of say 75% and: (I) invests 26% in Company X, the entire 26% investment by Company Y would be treated as indirect foreign investment in Company X; (II) Invests 80% in Company X, the indirect foreign investment in Company X would be taken as 80% (III) where Company X is a wholly owned subsidiary of Company Y (i.e. Company Y owns 100% shares of Company X), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholder within the meaning of Section 6 of the Companies Act, 1956. (cc) A company/ group of companies in which the individual shareholder/HUF to which he belongs has management and controlling interest. (II) In the case of an Indian company, (aa) The Indian company (bb) A group of Indian companies under the same management and ownership control. (B) For the purpose of this Clause, "Indian company" shall be a company which must have a resident Indian or a relative as defined under Section 6 of the Companies Act, 1956/ HUF, either singly or in combination holding at least 51% of the shares. (C) Provided that, in case of a combination of all or any of the entities mentioned in Sub-Clauses (i) and (ii) of clause 4.1.3(v)(d)(1) above, each of the parties shall have entered into a legally binding agreement to act as a single unit in managing the matters of the applicant company. (e) If a declaration is made by persons as per section 187C of the Indian Companies Act about a beneficial interest being held by a non resident entity, then even though the investment may be made by a resident Indian citizen, the same shall be counted as foreign investment. 4.1.4 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... boration/trademark agreement would have to be under the Government approval route through FIPB/ Project Approval Board. The onus to provide requisite justification that the new proposal would not jeopardize the existing joint venture or technology transfer/ trademark partner, would lie equally on the non-resident investor/ technology supplier and the Indian partner. 4.2.2.3 The following investments, however, will be exempt from the requirement of Government approval even though the non-resident investor may be having a joint venture or technology transfer/ trademark agreement in the same field: (a) Investments to be made by Venture Capital Fund registered with the Securities and Exchange Board of India (SEBI); or (b) Investments by Multinational Financial Institutions like Asian Development Bank(ADB), International Finance Corporation(IFC), Commonwealth Finance Corporation (CDC), Deutsche Entwicklungs Gescelschaft (DEG) etc.; or (c) where in the existing joint venture, investment by either of the parties is less than 3 per cent; or (d) where the existing joint venture / collaboration is defunct or sick; or (e) for issue of shares of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts i.e. FDI, investment by FIIs, NRIs, ADRs, GDRs, Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily compulsorily convertible preference shares/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 . 4.3 CAPS ON INVESTMENTS 4.3.1 Investments can be made by non-residents in the capital of a resident entity only to the extent of the percentage of the total capital as provided/permitted in the FDI policy. Thus while investment are prohibited in some sectors/activities, there are restrictions/conditions/caps on the investment in certain other sector/activities. The caps in various sector(s)/activity are detailed out in Chapter 5 of this circular. 4.4 ENTRY CONDITIONS ON INVESTMENT 4.4.1 Investments can be permitted to be made by non-residents in the capital of a resident entity in certain sectors/activity with entry conditions. These entry conditions would be applicable for investment only by non-resident entities. Such conditions may include norms for minimum capitalization, lock-in period, etc. The entry c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ream investment comprises policy for (i) only operating companies (ii) operating-cum-investing companies (iii) only investing companies as below: (i) Only operating companies: Foreign investment in such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. (ii) Operating-cum-investing companies: (a) Foreign investment into such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps with regard to the sectors in which such companies are operating. (b) Further, the subject Indian companies into which downstream investments are made by such companies would have to comply with the relevant sectoral conditions on entry route, conditionalities and caps in regard of the sector in which the subject Indian companies are operating. (iii) Investing companies: (a) Foreign Investment in Investing Companies will require the prior Government/FIPB approval, regardless of the amount or extent of foreign investment. (b) The Indian companies into which downstream ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red that comments of the administrative ministries are placed before the Board either prior to/or in the meeting of the Board. 4.7.3 Proposals should be considered by the Board keeping in view the time frame of thirty (30) days for communicating Government decision. 4.7.4 In cases in which either the proposal is not cleared or further information is required in order to obviate delays presentation by applicant in the meeting of the FIPB should be resorted to. 4.7.5 While considering cases and making recommendations, FIPB should keep in mind the sectoral requirements and the sectoral policies vis-a-vis the proposal (s). 4.7.6 FIPB would consider each proposal in its totality 4.7.7 The Board should examine the following while considering proposals submitted to it for consideration. (i) whether the items of activity involve industrial licence or not and if so the considerations for grant of industrial licence must be gone into; (ii) whether the proposal involves any export projection and if so the items of export and the projected destinations. (iii) Whether the proposal has any strategic or defence related considerations. 4.7.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolves import of items which are either hazardous, banned or detrimental to environment (e.g. import of plastic scrap or recycled plastics). 4.7.10 No condition specific to the letter of approval issued to a non-resident investor would be changed or additional condition imposed subsequent to the issue of a letter of approval. This would not prohibit changes in general policies and, regulations applicable to the industrial sector. 4.8 CONSTITUTION OF FIPB : 4.8.1 FIPB comprises of the following Core Group of Secretaries to the Government of India: (i) Secretary to Government, Department of Economic Affairs, Ministry of Finance - Chairperson (ii) Secretary to Government, Department of Industrial Policy Promotion, Ministry of Commerce Industry (iii) Secretary to Government, Department of Commerce, Ministry of Commerce Industry (iv)Secretary to Government, Economic Relations, Ministry of External Affairs (v) Secretary to Government, Ministry of Overseas Indian Affairs. 4.8.2 The Board would be able to co-opt other Secretaries to the Central Government and top officials of financial institutions, banks and professional experts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttp://www.fipbindia.com). CHAPTER 5: POLICY ON ROUTE , CAPS AND ENTRY CONDITIONS: 5.1 PROHIBITION ON INVESTMENT IN INDIA . FDI is prohibited in the following activities/sectors: (a) Retail Trading (except single brand product retailing) (b) Lottery Business including Government /private lottery, online lotteries, etc. (c) Gambling and Betting including casinos etc. (d) Business of chit fund (e) Nidhi company (f) Trading in Transferable Development Rights (TDRs) (g) Real Estate Business or Construction of Farm Houses (h) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes (i) Activities / sectors not opened to private sector investment including Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems). Besides foreign investment in any form, foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also completely prohibited for Lottery Business and Gambling and Betting activities. 5.2 SECTOR-SPECIFIC POLICY FOR FDI In the following sectors/activities, FDI up to the limit indicated against each sector/activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icially. 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. *Development of seeds will be considered to be 'under controlled conditions' when seed farms/laboratories use tissue culture or any other micro-propagation techniques for development and multiplication of seeds/planting material. Seed development in the case of anthuriums, orchids and other ornamental crops in green houses/net houses/poly houses is also be included in this category. * In case of Animal Husbandry, scope of the term 'under controlled conditions' includes - • 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 microclimate is controlled through advanced technologies like incubators, ventilation systems etc. * In the case of pisci culture and aquacultur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 6th 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction and in accordance with the provisions of section 11 of the Micro, Small and Medium Enterprises Development Act 2006. 5.2.5 DEFENCE 5.2.5.1 Defence Industry subject to Industrial license under the Industries (Development Regulation) Act 1951 5 26% Government 5.2.5.2 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) Cases involving FDI will be considered by the FIPB and licences given by the Department of Industrial Policy Promotion in consultation with Ministry of Defence. (iii) The applicant should be an Indian company / partnership firm. (iv) 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. (v) Full particulars of the Directors and the Chief Executives should be furnished along with the applications. (vi) The Government reserves the right to verify the ante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Chartered and Cargo airlines. (ix)"Chartered" and "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 specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49% of paid-up capital of ARC Government 5.2.8.3 Other conditions: (i) Persons resident outside India, other than Foreign Institutional Investors (FIIs), can invest in the capital of Asset Reconstruction Companies (ARCs) registered with Reserve Bank only 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) However, FIIs registered with SEBI can invest in the Security Receipts (SRs) issued by ARCs registered with Reserve Bank. FIIs can invest upto 49 per cent of each tranche of scheme of SRs, subject to the condition that investment by a single FII in each tranche of SRs shall not exceed 10 per cent of the issue. (iii)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. 5.2.9 Banking -Private sector 5.2.9.1 Banking -Private sector 74% including investment by FIIs Automatic up to 49% Government route beyond 49% and up to 74% 5.2.9.2 Other condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment as per para 4.2.3 above 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 up to a maximum of 74 per cent in a private bank. (d) A foreign bank will be permitted to establish a wholly-owned subsidiary e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hannel down linking and distribution of television programme in C Band or Ku Band wherein all the pay channels are downlinked at a central facility (Hub/teleport) and again uplinked to a satellite after encryption of channel. At the cable headend these encrypted pay channels are downlinked using a single satellite antenna, transmodulated and sent to the subscribers by using a land based transmission system comprising of infrastructure of cable/optical fibres network. 5.2.11.4.1 FDI limit in (HITS) Broadcasting Service is subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting. 74% (total direct and indirect foreign investment including portfolio and FDI) Automatic up to 49% Government route beyond 49% and up to 74% 5.2.11.5 Setting up hardware facilities such as up-linking, HUB etc. (1) Setting up of Up-linking HUB/Teleports 49% (FDI FII) Government (2) Up-linking a Non-News Current Affairs TV Channel 100% Government (3) Up-linking a News Current Affairs TV Channel subject to the condition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2 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% ] Government 5.2.12.3 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. 5.2.13 Development of Townships, Housing, Built-up infrastructure and Construction-development projects 5.2.13.1 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 5.2.13.2 Investment to be made 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 hectare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding / 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 and SEZ's. (ii) For investment by NRIs, the conditions at (1) to (4) above would not apply. (iii) 100% FDI is allowed under the automatic route in development of Special Economic Zones (SEZ) without the conditionalities at (1) to (4) above. This will be subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce. (iv) FDI is not allowed in Real Estate Business. 5.2.14 Credit Information Companies (CIC) 5.2.14.1 Credit Information Companies 49% (FDI FII) Government 5.2.14.2 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5.2.15.2 FDI in Industrial Parks would not be subject to the conditionalities applicable for construction development projects etc. spelt out in para 5.2.13 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 shall occupy more than 50% of the allocable area; the minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area. 5.2.16 Insurance 5.2.16.1 Insurance 26% Automatic 5.2.16.2 Other Conditions: (1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1999, is allowed under the automatic route. (2) This will be subject to the condition that Companies bringing in FDI shall obtain nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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: 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. (2) Venture Capital Fund (VCF) A Foreign Venture Capital Investor (FVCI) may contribute upto 100% of the capital of an Indian Venture Capital Undertaking and may also set up a domestic asset management company to manage the fund. All such investments can be made under automatic route in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 5.2.20.4 Publication of facsimile edition of foreign newspapers 100% Government 5.2.20.4.1 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. 5.2.21 Security Agencies in Private sector 5.2.21.1 The 'Private Security Agencies (Regulation) Act, 2005' regulates the operations of private secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (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) would be required if such information is to be provided to anybody else. (iii)For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled/routed to any place outside India. (iv)The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess 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 order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories. (xx) For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security age ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5.2.24.1.2 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 ntities: (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de 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-retailing would cover only products which are branded during manufacturing. (3) Application seeking permission of the Government for FDI in retail trade of 'Single Brand' products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy Promotion. The application 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. (4) Applications would be processed in the Department of Industrial Policy Promotion, to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for Government approval. 5.2.25 Courier services for carrying packages, parcels and other items which do not come ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 , as amended from time to time. 6.1.3 Repatriation of Interest: Interest on fully, mandatorily compulsorily convertible debentures is also freely repatriable without any restrictions (net of applicable taxes). The repatriation is governed by the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 , as amended from time to time. 6.2. REPORTING OF FDI 6.2.1 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 as Annex-5. (ii) Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures, through an AD Category - I bank, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B submitted by 31st July will pertain to all the investments made in 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/demerger 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 . 6.2.3 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 (Annex-7). 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, woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es/contravenes any FDI Regulations, by way of breach/nonadherence/ non-compliance/contravention of any rule, regulation, notification, press note, press release, circular, direction or order issued in exercise of the powers under FEMA or contravenes any conditions subject to which an authorization is issued by the Government of India/FIPB/Reserve Bank of India, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contraventions where such amount is quantifiable, or up to two lakh Rupees where the amount is not quantifiable, and where such contraventions is a continuing one, further penalty which may extend to five thousand Rupees for every day after the first day during which the contraventions continues. (ii) Where a person committing a contravention of 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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