Q1) Are there any particular schemes available for Direct Investments on Repatriable basis ?

A) Yes. NRIs can subscribe to the new issues of shares and convertible debentures of Indian Corporates under direct investment schemes. They can also invest in domestic mutual funds & bonds floated by public sector under-takings :

  • Under 24% scheme, Indian companies engaged in any activity including finance, hire purchase, leasing, establishment of schools & colleges, etc. (excluding agricultural /plantation activity) are permitted by RBI to invite subscription to shares, debentures from NRIs with repatriation benefits to the extent of 24% of the new issue
  • Under 40% scheme, RBI permits Indian companies engaged in the following activity to invite subscriptions of the new issues from NRIs with repatriation benefits to the extent of 40% of the issue.

    a) Industrial and Manufacturing units
    b) Hotels with 3,4 and 5 star category
    c) Hospitals and Diagnostic Centres
    d) Shipping companies
    e) Development of computer software
    f) Oil Exploration

  • Under 100% scheme, NRIs can invest in higher priority industries as listed in the annexure 3 to the statement of Industrial Policy dated July 24, 1991 of Government of India upto 100% of the new issues.

Q2) Can the dividend / Interest be remitted freely to NRI's under 24% / 40% scheme?
Please indicate the position under 100% scheme too.

A) There is no restriction on the amount of remittable dividend, in case of investment under 24% / 40% scheme.

Under 100% scheme, the dividend / interest can be remitted freely except in the case of consumer goods industries where the outflow on account of dividend is required to be balanced by export earnings of the company either in the year of declaration of dividend or in the years prior to the declaration of dividend. The requirement is valid for a period of 7 years from the commencement of commercial production.

Q3) Will I need RBI permission to invest in the above schemes ?

A) No the investee companies themselves make the necessary application to RBI at Bombay in form of ISD/ISD (R).

Q4) Do NRIs require RBI permission to sell the shares under Direct Investment Scheme?

A) SALE OF SHARES ACQUIRED UNDER DIRECT INVESTMENT SCHEME:
With effect from March 30, 1999 NRIs/PIOs/OCBs have been allowed to sell/transfer shares acquired by them under Direct Investment Scheme, on stock exchanges in India without prior permission of Reserve Bank of India.
The authorised dealers have been allowed to remit the sale proceeds of such shares sold by NRIs/PIOs/OCBs subject to following conditions:

  1. Stock Exchange broker's contract note evidencing the sale price is to be furnished.

  2. A documentary evidence is to be produced to show that the original investment was permitted on repatriation basis specifically by Reserve Bank of India or its general permission and funds were invested out of remittance from abroad or from NRE/FCNR account of the Non Resident investor.

  3. A No Objection certificate or undertaking / certificate regarding payment of Income Tax has been produced.

Q5) Is there any other equity option open for investment by NRIs ?

A) NRIs can undertake revival of sick industry units by making bulk investments to the extent of 100% either by acquiring the existing equity shares or subscribing to the new issue. The investment is fully repatriable. Applicable for this purpose in the form RSU is to be made to RBI at Bombay.

Q6) Can I invest in a company engaged in real estate ?

A)NRIs can invest upto 100% in the new issues of equity shares/convertible debentures of Indian companies engaged in the following areas:

  1. Development of Township
  2. Development of serviced plot and construction of built-up residential premises.
  3. Real estate covering construction of residential/commercial premises
  4. Financing of housing development
  5. Manufacturing of building material
  6. City and regional level urban infrastructure facility, including roads and bridges.
  • The investee company applies to RBI in form ISD (R) for inviting the above investment.
  • Repatriation of original investments is permitted after a lock-in period of 3 years.
  • Annual dividend/interest on equity/debentures can be freely repatriated, subject to payment of tax.

Q7) As an NRI, can I invest in 100% Export Oriented Units ?

A)Yes. Subject to obtaining approval from Government of India for setting up the Export Oriented Units. And in case of units being located in export process zones, subject to approval from all the Development Commissioners of the concerned zone - is required to be obtained. Thereafter application to RBI is made in the form ISD.

Q8) I would like to invest in Public Sector enterprises, am I allowed ?

A)RBI has granted general permission to NRIs to acquire shares of PSE on their bids being successful provided the holding of a single individual NRI does not exceeed 1% of the paid up capital of the BSE concern.

  • Purchase consideration/Bid money should be paid out of inward remittance or NRE/FCNR accounts.

Q9) Can NRIS invest in Air Taxi Operations ?

A) NRIs can participate in the equity of companies carrying on air taxi operations upto 100%.

  • Applications to RBI is to be made in form ISD ® by the investee company.
  • Repatriation of the investment and or dividends is possible only after expiry of 5 years of operation and only out of accumulated net foreign exchange earnings.

Q10) Can I invest my funds as Deposits with repatriation rights - in Indian companies ?

A) NRIs are permitted to place deposits with Public LImited Companies in India for a minimum period of 3 years subject to certain conditions.
The investee company applies to RBI for receiving the deposits from NRIs.

Q11) I have been holding shares of Indian Companies in the form of GDRs? Do I need to take RBI permission for sale ?

A) RBI has granted general permission for the sale/transfer of underlying shares obtained after conversion of Global Depository Receipts / American Depository Receipts by NRIs. This is applicable to sale of these shares through a Stock Exchange or the sale effected in terms of an offer made as per SEBI regulations 1997. So far the NRIs had to approach RBI for permission of sale of these shares. However, by virtue of this directive the NRIs can now effectively counter the risk of price movement against them, without waiting for specific approval.

RBI has also further clarified that all other cases of sale of shares underlying the GDR / ADR will have to be referred to RBI for permission.

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