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TMI BlogForeign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Tenth Amendment) Regulations, 2015X X X X Extracts X X X X X X X X Extracts X X X X ..... lication in the Official Gazette 2. Amendment of the Regulation In the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, (Notification No.FEMA 20/2000-RB dated 3rd May 2000), (A) in Regulation 14, (i) in sub-regulation 1, in the existing clause '(x)' the following shall be inserted, namely: "Explanation: (i) Total Foreign Investment shall include all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under Schedule 1, Schedule 2, Schedule 2A, Schedule 3, Schedule 6, Schedule 8, Schedule 9 and Schedule 10 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000. (ii) Foreign Currency Convertible Bonds (FCCB) and Depository Receipts (DR) having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident outside India resulting from any conversion of any debt instrument under any arrangement shall be reckoned as foreign investment." (ii) in sub-regulation 3, the existing cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment under the composite cap. Sectoral cap is as per table appended below. d. Total foreign investment, direct and/or indirect, in an entity will not exceed the sectoral/statutory cap. e. Foreign investment in sectors under Government approval route resulting in transfer of ownership and/or control of Indian entities from resident Indian citizens to non-resident entities will be subject to Government approval. Foreign investment in sectors under automatic route but with conditionalities, resulting in transfer of ownership and/or control of Indian entities from resident Indian citizens to non-resident entities, will be subject to compliance of such conditionalities. f. Notwithstanding anything contained in paragraphs (a), (b) and (e) above, portfolio investment upto aggregate foreign investment level of 49% or sectoral/statutory cap, whichever is lower, will not be subject to either Government approval or compliance of sectoral conditions, as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of materials shall be in accordance with National Seeds Policy. II. The term 'under controlled conditions' covers the following: (i) 'Cultivation under controlled conditions' for the categories of Floriculture, Horticulture, Cultivation of vegetables and Mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where micro- climatic conditions are regulated anthropogenically. (ii) In case of Animal Husbandry, scope of the term 'under controlled conditions' covers - (a) 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 as prescribed by the National Livestock Policy 2013 and in conformity with the existing 'Standard Operating Practices and Minimum Standard Protocol." (b) Poultry breeding farms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s likely to result in access to modern and 'state-of-art' technology in the country. Note: (i) The above limit of 49% is composite and includes all kinds of foreign investments i.e. Foreign Direct Investment (FDI), Foreign Institutional Investors (FIIs), Foreign Portfolio Investors (FPIs), Non Resident Indians (NRIs) and Foreign Venture Capital Investors (FVCI) regardless of whether the said investments have been made under Schedule 1 (FDI), 2 (FII), 2A (FPI), 3 (NRI),6 (FVCI) and 8 (QFI) of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations. (ii) Portfolio investment by FPIs/FIIs/NRIs and investments by FVCIs together will not exceed 24% of the total equity of the investee/joint venture company. Portfolio investments will be under automatic route. 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 and Ministry of External Affairs. ii. The applicant company seeking permission of the Government for FDI up to 49% should be an Indian company owned and controlled by resident Indian cit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Self-certification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals. xiii. Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. xiv. The Licensee shall be allowed to sell Defence items to Government entities under the control of Ministry of Home Affairs (MHA), State Governments, Public Sector Undertakings (PSUs) and other valid Defence Licensed Companies without prior approval of the Department of Defence Production (DoDP). However, for sale of the items to any other entity, the Licensee shall take prior permission from the Department of Defence Production, Ministry of Defence. xv. All applications seeking permission of the Government for FDI in defence would be made to the Secretariat of Foreign Investment Promotion Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with the relevant Uplinking/ Down-linking Policy notified by the Ministry of Information & Broadcasting from time to time. 6.4 Foreign Investment (FI) in companies engaged in all the aforestated services will be subject to relevant regulations and such terms and conditions, as may be specified from time to time, by the Ministry of Information and Broadcasting. 6.5 The foreign investment (FI) limit in companies engaged in the afore stated activities shall include, in addition to FDI, investment by Foreign Institutional Investors (FIIs), Foreign Portfolio Investors(FPIs), Non-Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), [ Depository Receipts issued under Schedule 10 of these Regulations with equity shares or compulsorily and mandatorily convertible preference shares or compulsory and mandatorily convertible debentures or warrant or any other security in which foreign direct investment can be made in terms of Schedule1 of the principal Regulations, as underlying] (GDRs) and convertible preference shares held by foreign entities.] 6.6 Foreign investment in the aforestated broadcasting carriage services will be subject to the following security conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services terminated forthwith after receiving such directives from the Government, failing which the permission/license granted shall be revoked and the company shall be disqualified to hold any such Permission/license in future for a period of five years. Infrastructure/Network/Software related requirement (vii) The officers/officials of the licensee companies dealing with the lawful interception of Services will be resident Indian citizens. (viii) Details of infrastructure/ network diagram (technical details of the network) could be provided on a need basis only, to equipment suppliers/manufactures and the affiliate of the licensee company. Clearance from the licensor would be required if such information is to be provided to anybody else. (ix) The Company shall not transfer the subscribers' databases to any person/place outside India unless permitted by relevant Law. (x) The Company must provide traceable identity of their subscribers. Monitoring, Inspection and Submission of Information (xi) The Company should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch period or periods as it may direct. The company shall immediately comply with any directives issued in this regard failing which the permission issued shall be revoked and the company disqualified to hold any such permission, in future, for a period of five years. (xix) The company shall not import or utilize any equipment, which are identified as unlawful and/or render network security vulnerable. Other conditions (xx) Licensor reserves the right to modify these conditions or incorporate new conditions considered necessary in the interest of national security and public interest or for proper provision of broadcasting services. (xxi) Licensee will ensure that broadcasting service installation carried out by it should not become a safety hazard and is not in contravention of any statute, rule or regulation and public policy. 7. Print Media 7.1 Publishing of newspaper and periodicals dealing with news and current affairs 26% Government 7.2 Publication of Indian editions of foreign magazines dealing with news and current affairs 26% Government 7.2.1 Other conditions (i) 'Magazine', for the purpose of these guidelines, will be defined as a periodical pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her such service consists of a single flight or series of flights; (iv) "Air Transport Undertaking" means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward; (v) "Aircraft component" means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment; (vi) "Helicopter" means a heavier than air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis; (vii) "Scheduled air transport service" means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public; (viii) "Non-Scheduled air Transport service" means any service which is not a scheduled air transport service and will include Cargo airlines; (ix) "Cargo airlines" would mean such airlines which meet the conditions as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an nationals. (v) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air transport services, as a result of such investment shall be cleared from security view point before deployment; and (vi) All technical equipment that might be imported into India as a result of such investment shall require clearance from the relevant authority in the Ministry of Civil Aviation. Note: (i) The FDI limits/entry routes, mentioned at paragraph 8.3(1) and 8.3(2) above, are applicable in the situation where there is no investment by foreign airlines. (ii) The dispensation for NRIs regarding FDI up to 100% will also continue in respect of the investment regime specified at paragraph 8.3.1(c) (ii) above. (iii) The policy mentioned at 8.3.1(c) above is not applicable to M/s Air India Limited 8.3.2 Foreign Airlines in the capital of the Indian companies, operating schedule and nonscheduled air transport services 49% (100% for NRIs) Government 8.4 Other Services under Civil Aviation Sector (1)Ground Handling Services subject to sectoral regulations and security clearance 74% (100% for NRIs) Automatic upto 49%; Government Route beyond 49% and up to 74% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "developed plots" will mean plots where trunk infrastructure i.e. roads, water supply, street lighting, drainage and sewerage, have been made available. (F) The Indian investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/ Municipal/Local Body concerned. (G) The State Government/ Municipal/ Local Body concerned, which approves the building / development plans, will monitor compliance of the above conditions by the developer. Note: (i) It is clarified that FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs). "Real estate business" will have the same meaning as provided in FEMA Notification No. 1/2000-RB dated May 03, 2000 read with RBI Master Circular i.e. dealing in land and immovable property with a vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and distribution of power, air conditioning. (iii) "Common Facilities" refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), railway line/sidings including electrified railway lines and connectivities to the main railway line, water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. (iv) "Allocable area" in the Industrial Park means- (a) in the case of plots of developed land - the net site area available for allocation to the units, excluding the area for common facilities. (b) in the case of built up space - the floor area and built-up space utilized for providing common facilities. (c) in the case of a combination of developed land and built-up space - the net site and floor area available for allocation to the units excluding the site ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esale Trading (including sourcing from MSEs) 100% Automatic 15.1.1 Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, imply sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ ex-bonded warehouse business sales and B2B e-Commerce. 15.1.2 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. (2) FDI in Single Brand product retail trading would be subject to the following conditions: (a) Products to be sold should be of a 'Single Brand' only. (b) Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. (c) 'Single Brand' product-retail trading would cover only products which are branded during manufacturing. (d) A non-resident entity or entities, whether owner of the brand or otherwise, shall be permitted to undertake 'single brand' product retail trading in the country for the specific brand, directly or through a legally tenable agreement, with the brand owner for undertaking single brand product retail trading. The onus for ensuring compliance with this condition will rest with the Indian entity carrying out single-brand product retail trading in India. The investing entity shall provide evidence to this effect at the time of seeking approval, including a copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded. (ii) Minimum amount to be brought in, as FDI, by the foreign investor, would be US $ 100 million. (iii) At least 50% of total FDI brought in the first tranche of US $ 100 million, shall be invested in 'back-end infrastructure' within three years, where 'back-end infrastructure' will include capital expenditure on all activities, excluding that on front-end units; for instance, back-end infrastructure will include investment made towards processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, warehouse, agriculture market produce infrastructure etc. Expenditure on land cost and rentals, if any, will not be counted for purposes of back-end infrastructure. Subsequent investment in the back-end infrastructure would be made by the MBRT retailer as needed, depending upon its business requirements. (iv) At least 30% of the value of procurement of manufactured/processed products purchased shall be sourced from Indian micro, small and medium industries, which have a total investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) below accordingly. The establishment of the retail sales outlets will be in compliance of applicable State/Union Territory laws/ regulations, such as the Shops and Establishments Act etc. (ix) Retail trading, in any form, by means of e-commerce, would not be permissible, for companies with FDI, engaged in the activity of multi-brand retail trading. (x) Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the proposed investment satisfies the notified guidelines, before being considered by the FIPB for Government approval. (2) List of States/Union Territories as mentioned in Paragraph 16.4.(1) (viii) 1.Andhra Pradesh 2.Assam 3.Delhi 4.Haryana 5.Himachal Pradesh 6.Jammu & Kashmir 7. Karnataka 8.Maharashtra 9.Manipur 10.Rajasthan 11.Uttarakhand 12.Daman & Diu and Dadra and Nagar Haveli (Union Territories) FINANCIAL SERVICES Foreign investment in other financial services, other than those indicated below, would require prior approval of the Government: F.1 Asset Reconstruction Companies F.1.1 'Asset Reconstruction Company' (ARC) means a company registered with the Reserve Bank of India under Section 3 of the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed 24 per cent of the total paid-up capital, which can be raised to 49 per cent of the total paid-up capital by the bank concerned through a resolution by its Board of Directors followed by a special resolution to that effect by its General Body. (a) Thus, the FII/FPI investment limit will continue to be within 49 per cent of the total paid-up capital. (b) In the case of NRIs, as hitherto, individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation and non-repatriation basis and aggregate limit cannot exceed 10 percent of the total paid-up capital both on repatriation and non-repatriation basis. However, NRI holding can be allowed up to 24 per cent of the total paid-up capital both on repatriation and non-repatriation basis provided the banking company passes a special resolution to that effect in the General Body. (c) Applications for foreign direct investment in private banks having joint venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI) for consideration in consultation with the Insurance Regulatory and Development Authority (IRDA) in order to ensure that the 49 per cent limit of foreign shareholdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy decisions and appropriate Parliamentary approvals. F.3 Banking - Public Sector F.3.1 Banking - Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts, 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate banks. 20% Government F.4 Commodity Exchanges F.4.1 (i) Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges. 2. For the purposes of this Chapter, (i) "Commodity Exchange" is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities. (ii) "Recognized association" means an association to which recognition for the time being has been granted by the Central Government under section 6 of the Forward Contracts (Regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Loss Assessors (v) Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) 49% Automatic upto 26%,; Government route beyond 26% and upto 49% F.7.2 Other Conditions: (a) No Indian insurance company shall allow the aggregate holdings by way of total foreign investment in its equity shares by foreign investors, including portfolio investors, to exceed forty-nine percent of the paid up equity capital of such Indian insurance company. (b)Foreign direct investment proposals which take the total foreign investment in the Indian insurance company above 26 percent and up to the cap of 49 percent shall be under Government route. (c) Foreign investment in the sector is subject to compliance of the provisions of the Insurance Act, 1938 and the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority of India for undertaking insurance activities. (d)An Indian insurance company shall ensure that its ownership and control remains at all times in the hands of resident Indian entities referred to in Notification No.G.S.R 115 (E), dated 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... using Finance (xiv) Forex Broking (xv) Credit Card Business (xvi) Money Changing Business (xvii) Micro Credit (xviii) Rural Credit 100% Automatic F.8.2 Other Conditions (1) Investment would be subject to the following minimum capitalisation norms: (i) US $0.5 million for foreign capital up to 51 % to be brought upfront. (ii) US $ 5 million for foreign capital more than 51 % and up to 75% to be brought upfront. (iii) US $ 50 million for foreign capital more than 75% out of which US $ 7.5 million to be brought upfront and the balance in 24 months. (iv) NBFCs (i) having foreign investment more than 75% and up to 100%, and (ii) with a minimum capitalisation of US$ 50 million, can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1 of DIPP Circular 1 on Consolidated FDI Policy, therefore, shall not apply to downstream subsidiaries. (v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I Regulations; other applicable laws/regulations; security and other conditionalities. F.10 Pension Sector 49% Automatic up to 26%; Government route beyond 26% and up to 49 % 16. Pharmaceuticals 16.1 Greenfield 100% Automatic 16.2 Brown Field 100% Government 16.3 Other Conditions (iv) 'Non-compete' clause would not be allowed except in special circumstances with the approval of the Foreign Investment Promotion Board. (v) The prospective investor and the prospective investee are required to provide a certificate along with the FIPB application. (vi) Government may incorporate appropriate conditions for FDI in brownfield cases, at the time of granting approval. Note : i. FDI upto 100% under the automatic route is permitted for manufacturing of medical devices. The abovementioned conditions will, therefore, not be applicable to greenfield as well as brownfield projects of this industry. ii. Medical device means :- a) Any instrument, apparatus, appliance, implant, material or other article, whether used alone or in combination, including the software, intended by its manufacturer to be used specially for human beings or animals for one or more of the specific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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