Ajmera Groups

NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchange/s in India. These facilities are granted both on repatriation and non-repatriation basis.

Any Resident Indian can open an account with Ajmeras. It could be either individual or sole proprietary / partnership firms or corporate. A NRI / NRO can also open an account with Ajmeras.

Is permission of Reserve Bank required for NRIs to invest in proprietary/partnership concerns on non-repatriation basis?

No. Reserve Bank has granted general permission to non-resident individuals of Indian nationality/origin to invest by way of capital contribution in any proprietary or partnership concern in India on non-repatriation basis provided the investee concern is not engaged in agricultural/plantation activity or real estate business. This facility is, however, not available to OCBs.

Is permission of Reserve Bank required for making investments in new issues of Indian companies on non-repatriation basis?

No. Indian companies have been granted general permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights issue provided the investee company is not engaged in agricultural/plantation activity or real estate business (excluding real estate development i.e. development of property and construction of house) or chit fund or is not a Nidhi company.

Are any formalities required to be completed by NRIs for getting the benefit of the above general permission?

No. However, the firms/companies concerned are required to file declarations with Reserve Bank in form DIN giving particulars of the investments made, within ninety days from the date of the investment.

Can NRI/OCBs make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institutions on non-repatriation basis?

Can NRIs make investments in non-convertible debentures of Indian companies?

Yes. Applications for necessary permission should be made to Reserve Bank (Central Office) by the concerned Indian company in form ISD.

Can NRIs purchase existing shares/debentures of Indian companies by private arrangement?

Yes. Reserve Bank permits NRIs, on application in form FNC 7, to purchase shares/debentures of existing Indian companies on non-repatriation basis. An undertaking about non-repatriation is to be given in form NRU.

Is it necessary for a resident, holding securities in Indian companies, to secure any approval from Reserve Bank on his becoming a non-resident for holding such securities?

No. Reserve Bank has granted general permission to companies in India to enter the overseas addresses of the shareholders in their books in such cases provided the companies obtain undertakings from the holders that they will not seek repatriation of any sale proceeds of the security.

Is income/interest earned on investments/deposits held in India by NRIs on non-repatriation basis allowed to be repatriated?

Yes. Income/interest accruing during the financial year 1994-95 and onwards on bank deposits and investments held by NRIs with non-repatriation benefits will be eligible for repatriation as under:
(a) Up to U.S. $ 1,000 or its equivalent in full and one-third of the balance income earned during the financial year 1994-95;
(b) Up to U.S. $ 1,000 or its equivalent in full and two-third of the balance income earned during the financial year 1995-96;
(c) The entire income earned during the financial year 1996-97 and onwards.
Note: The investment/principal amount of deposits made/held on non-repatriation basis (will, however, not be allowed to be repatriated abroad. Further funds held in NRSR accounts and/or interest/income accrued on funds held in these accounts will not be allowed to be repatriated abroad.

What is the procedure to be followed for seeking repatriation in such cases?

NRIs should designate a branch of an authorized dealer through whom the remittance of income is to be made and make an application in form RCI to the designated branch giving details of incomes earned during the previous financial year along-with a Chartered Accountant's Certificate. The designated branch will allow the remittance of net amount (i.e. after payment of tax) or credit it to NRE/FCNR account of the applicant.

What are the schemes available to NRIs for direct investments in India with repatriation benefits?

NRIs can make investments in new issues of shares/convertible debentures of Indian companies under direct investment schemes such as 24% scheme/51% scheme/100% scheme. They can also invest in the schemes of domestic Mutual Funds floated by public/private sector institutions/companies. Non-resident investors are not required to apply for permission to invest. The company concerned will have to file a declaration in Form ISD together with the required documents to Reserve Bank within 30 days from the date of issue.

Under the 24% Scheme, Indian companies engaged or proposing to engage in any activity including finance, hire purchase, leasing, trading or other services, establishment of schools/colleges, etc. (except agricultural/plantation activities) are allowed to issue shares/debentures to NRIs with repatriation benefits to the extent of 24% of the new issue.

Under the 51% Scheme, NRIs/OCBs are permitted to subscribe to new issues of equity/preference shares and convertible debentures of any new or existing company on repatriation basis provided
(a) The issue of equity/preference shares and convertible debentures to NRIs/OCBs with repatriation benefits does not exceed 51 per cent of the face value of each new issue of the company.
(b) The shares of the company are not listed on any stock exchange, and
(c) The company is engaged in manufacturing activity not being an activity specified in Annexure III to the Statement of Industrial Policy 19991 of Government of India amended from time to time.
Investment under this scheme can be made for setting up new manufacturing projects or for expansion/diversification of their existing manufacturing activities.

Is remittance of interest/dividend to NRI investors freely allowed under the 24%/51% Scheme?

Yes. There is no ceiling or restriction on the amount of remittable dividend. Remittance of interest/dividend to NRI investors will be allowed by authorized dealers under the powers delegated to them.

Under 100% Scheme, NRIs are permitted to invest in high priority industries listed in Annexure III to the Statement on Industrial Policy dated 24th July 1991 of the Government of India up to 100% of the new issue.

Is dividend/interest earned in respect of investments made under the 100% Scheme freely remittable to the NRIs abroad?

The NRI investor need not apply to Reserve Bank. Indian companies have been permitted to issue shares/convertible debentures to NRIs/OCBs. They have to file declaration in Form ISD together with the required documents to Reserve Bank within 30 days from the date of issue.

How does an NRI obtain permission of Reserve Bank for investment under the 24% or 51% or 100% Scheme?

Will repatriation of the original investment and/or dividend income be freely permitted?

Yes. Repatriation of original investment will be permitted after a lock-in period of three years from the date of issue of the equity shares/convertible debentures. In addition, OCBs will be permitted to repatriate net profit (up-to 16 per cent) arising from the sale of such investment after the lock-in-period of three years. (This facility is, however, not available to individual NRIs.) Annual dividend/interest on equity shares/debentures can, however, be freely remitted subject to payment of tax.

What is the procedure to be followed for making investment in the schemes of domestic Mutual Funds with repatriation benefits?

Reserve Bank has granted general permission to domestic mutual funds to issue units/similar instruments to NRIs/OCBs on both repatriation basis and non-repatriation basis.

The concerned company should approach Reserve Bank for issue of rights entitlement to NRIs in the prescribed form if on repatriation basis. However, rights entitlement on non-repatriation basis would be covered by the general permission. (Please see answer to Question No.55 & 56)

What is the procedure required to be followed by NRIs for renunciation of rights entitlement?

The concerned Indian company should approach Reserve Bank for issue of bonus shares to NRIs if the original investment is on repatriation basis. Issue of bonus shares in respect of investment on non-repatriation basis is covered by general permission.

Can NRIs obtain loans abroad against the collateral of shares/debentures of Indian companies?

Yes. Authorized dealer have been permitted to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies held by them, provided the concerned shares/debentures were acquired on repatriation basis.

Can sale proceeds of the shares/debentures be remitted abroad for liquidation of outstanding against such loans/overdrafts?

Yes, subject to payment of Income tax, Capital Gains tax etc. payable, if any.

Under this scheme, NRIs/OCBs are permitted to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange/s in India.

The application is to be submitted to Reserve Bank through a designated branch of a bank in India in one of the prescribed forms, i.e. NRC/NRI/RPC/RPI. Reserve Bank issues general permission for a period of 5 years which can be renewed further by authorized dealer concerned for a period of 5 years at a time.

Reserve Bank has authorized a few branches of each bank to conduct the business under Portfolio Investment Scheme on behalf of NRIs/OCBs. These branches are the main branches of major commercial banks located close to the stock exchange/s. NRIs/OCBs will have to route their applications through any of the designated bank branches who have authorization from Reserve Bank.

No. Each NRI/OCB has to select one branch for this purpose for investment on repatriation/non-repatriation basis.

Is it necessary to maintain a bank account with the designated branch through whom the application is made?

It is advisable to maintain a bank account with the designated branch for administrative convenience.

Is there any ceiling on the investment under the Portfolio Investment Scheme?

There is an overall ceiling of 10% of paid-up equity share capital of the company/paid-up value of each series of convertible debentures for purchase by NRIs/OCBs. The overall ceiling can be raised to 30% if the company concerned passes a special resolution to that effect in its general body meeting and a Board resolution. Individually, NRIs/OCBs can make investment up-to 5% of the paid-up equity share capital/each series of convertible debentures. However, there is no ceiling for investment in domestic Mutual Funds.

Is permission of Reserve Bank required for sale/transfer of Government securities/units?

No. Authorized dealers have been permitted to undertake sale of Government securities/units on behalf of NRIs without prior approval of Reserve Bank. Sale/maturity proceeds can be remitted abroad if the original investment was made out of funds remitted from abroad or funds in NRE/FCNR accounts. Otherwise, they will have to be credited to NRO account of the holder.

Is permission of Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs?

No. Transfer of shares/debentures of Indian companies by NRIs to other non-residents does not require permission of Reserve Bank. However, the transferee NRI would need permission for purchase of such shares for which an application is required to be made to Reserve Bank in form FNC 7.

Can NRIs transfer/sell their shares/debentures/bonds held on non-repatriation basis to residents freely?

Yes. General exemption has been granted by Reserve Bank for transfer/sale of shares/debentures/bonds by NRIs/OCBs through stock exchanges if such transfers are made in favor of an Indian citizen or a person of Indian origin or a company incorporated in India and sale proceeds thereof are credited to NRO account.

What is the procedure for sale/transfer of shares/debentures/bonds held by NRIs with repatriation benefits?

In the case of shares/debentures/bonds acquired by NRIs through stock exchanges under the Portfolio Investment Scheme, general exemption has been granted for transfer through stock exchanges provided the sale is arranged through the same designated branch through whom they were purchased. General exemption has also been granted for sale/transfer of shares/bonds/debentures of Indian companies by NRIs/PIOs/OCBs through stock exchanges in cases where such transfers are made in favor of Indian citizens or Persons of Indian Origin resident in India or in favor of a company or body corporate incorporated under any law in force in India subject to certain conditions.

What is the procedure to be followed by NRIs for sale/transfer of shares/debentures to residents by private arrangements?

NRIs are required to submit application in form TS 1 to Reserve Bank for sale of shares/debentures by private arrangements.

Yes. Reserve Bank has granted general permission to NRIs to transfer, by way of gift, shares, bonds and debentures of Indian companies held by them with Reserve Bank's general/special permission to their resident close relative/s.

Can rupee securities, shares, bonds, debentures be transferred by way of gift to registered charitable trusts/organizations?

Yes. General permission has been granted by Reserve Bank to NRIs to transfer by way of gift any rupee security, share, bond or a debenture of a company registered in India held by them to a registered charitable trust/organization subject to the condition that provisions of any other laws, as applicable, including Foreign Contribution (Regulation) Act, 1976 are duly complied with.