NRI Investment in Shares & Securities

	Government Securities / Units
	Can NRIs invest their funds in Government securities or Units of Unit Trust of India(UTI)?
	Yes. NRIs are freely permitted to invest their funds in Government securities or Units of UTI through authorised dealers. Units can also be purchased directly from UTI.

	Can NRIs make investments in National Savings Certificates issued by Post Offices in India?
	Yes. Investments in National Savings Certificates can be made by NRIs subject to the terms and conditions applicable to the sale/issue of such certificates. However, NRIs are not permitted to invest in bearer securities like Indira Vikas Patra/Kisan Vikas Patra.

	Can Government securities/units be freely transferred or sold?
	Yes, provided the transfers/sales are arranged through an authories dealer. Units can, however, be repurchased directly by UTI.

	Are sale/maturity proceeds of Government securities/Units/National Savings Certificates allowed to be repatriated abroad?
	If such securities were purchased out of funds remitted from abroad or out of NRE/FCNR accounts, sale/maturity proceeds can be repatriated. Sale/maturity proceeds of securities purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be remitted abroad. Interest earned during the financial year 1994- 95 and onwards can, however, be remitted to the extent permitted by Reserve Bank. (See Answers to Questions Below)

	Company Shares / Debentures
	Can NRI's invest in companies in India?
	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 exchanges in India. These facilities are granted both on repatriation and non repatriation basis.

	(a) Direct Investment without Repatriation Benefits
	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 any 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/bonus 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 houses). 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 individuals make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institution on non/repatriation basis?
	Yes.

	Can Overseas Corporate Bodies make similar investments in mutual funds on non-repatriation basis?
	OCBs can make such investments only in domestic public/ private sector Mutual Funds. They can also make investments in Money Market Mutual Funds.

	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 income or 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: 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; 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; The entire income earned during the financial year 1996-97 and onwards. 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.

	What is the procedure to be followed for seeking repatriation in such cases?
	NRIs should designate a branch of an authorised 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 alongwith 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.

	(b) Direct Investment with Repatriation Benefits
	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/40% scheme/100% scheme. They can also invest in the schemes of domestic Mutual Funds floated by public/private sector institutions/companies and bonds issued by public sector undertakings, Non-resident investors are not required to apply for permission to invest but the company concerned will have to obtain permission from Reserve Bank.
	What is 24% Scheme?
	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 by Reserve Bank to issue shares/debentures to NRIs with repatriation benefits to the extent of 24% of the new issue.

	What is 40% Scheme?
	Under the 40% Scheme, Indian companies engaged or proposing to engage in the following activities are allowed by Reserve Bank to issue shares/debentures to NRIs with repatriation benefits to the extent of 40% of the new issue. Industrial and Manufacturing units Hotels with 3, 4 or 5 star category Hospitals and diagnostic centres Shipping companies Development of computer software Oil exploration services

	Is remittance of interest/dividend to NRI investors freely allowed under the 24% /40% 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 authorised dealers under the posers delegated to them.

	What are the specified industries under the 100% Scheme?
	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 investment made under the 100% Scheme freely remittable to the NRIs abroad?
	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, This requirement is enforced for a period of seven years from the commencement of commercial production.

	How does an NRI obtain permission of Reserve Bank for investment under the 24% or 40% or 100% Scheme?
	The NRI investor need not apply to Reserve Bank. Application for necessary permission under the schemes should be made by the Indian company/firm to the Central Office of Reserve Bank in Mumbai in form ISD/ISD(R).

	Besides the 24%, 40% and 100% Schemes is there any other scheme for investment by NRIs in the equity of Indian companies?
	Yes. NRIs are permitted to undertake revival of sick industrial units by making bulk investment in them to the extent of 100 per cent either by way of purchase of existing equity shares or in the form of subscription to new equity issues.

	Is the capital brought into India for revival of a sick Industrial unit allowed to be repatriated?
	Yes.

	How can an NRI obtain permission of Reserve Bank for investment in a sick industrial unit?
	Application for necessary permission should be made by the Indian company to the Central Office of Reserve Bank in Mumbai in form RSU.

	Under the existing Industrial Policy, investment by foreign collaborators upto 51% of the equity is allowed by Reserve Bank on repatriation basis in certain high priority industries. Can NRIs take up the balance 49% equity in such cases on repatriation basis?
	Yes.

	Can NRIs make investments in companies engaged in real estate development in India?
	Yes. Investment upto 100% in the new issue of equity shares/convertible debentures of Indian companies engaged in the followed areas is allowed- i) Development of serviced plots and construction of built up residential premises; ii) Real estate covering construction of residential and commercial premises including business centres and offices; iii) Development of township; iv) City and region level urban infrastructure facilities including roads and bridges; v) Manufacture of building material; vi) Financing of housing development.

	What is the procedure for obtaining Reserve Bank permission in this regard?
	Applications for the purpose should be made by the concerned Indian company to the Central Office of Reserve Bank in Mumbai in form ISD(R).

	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 (upto 16 per cent) arising from the sale of such investment after the lick-in period of three year. Annual dividend/interest on equity shares/debentures can, however, be freely remitted subject to payment of tax.

	Are investments in Air Taxi operations permitted to be made by NRIs?
	Yes. Investments upto 100% equity participation for carrying on Air Taxi operations are permitted in terms of the guidelines issued by the Director General of Civil Aviation for Air Taxi operations. Applications for the purpose should be made to Reserve Bank (Central Office) in form ISD(R) by the concerned Indian company.

	Are there any restrictions on repatriation of the investment made under this scheme or income earned thereon?
	No. However, repatriation of the investment and /or remittance of dividend will be permitted only after the expiry of five years of operation and only out of accumulated net foreign exchange earnings.

	Can NRIs invest in non-convertible debentures on repatriation basis?
	Yes. Applications for necessary permission should be made to Reserve Bank (Central Office) by the concerned Indian company in form ISD.

	What is the procedure to be followed for making investment in the schemes of domestic Mutual Funds or public sector bonds with repatriation benefits?
	The concerned Fund/Public Sector Undertaking should obtain necessary permission from Reserve Bank for issue of units/bonds to NRIs. Applications for the purpose are required to be made to the Central Office of Reserve Bank in form ISD(R).

	Can NRIs invest in 100% Export Oriented Units on repatriation basis?
	Yes. NRIs will be permitted to invest up to 100% in 100% Export Oriented Units subject to obtaining approval from the Government of India ,Ministry of Industries (SIA) for setting up the EOU. In the case of units located in Export Processing Zones, approval from the Development Commissioner of the concerned zone is required to be obtained. Thereafter an application should be made to the concerned regional office of Reserve Bank in form ISD alongwith copy of Government approval for necessary clearance under FERA 1973.

	Can NRIs acquire shares disinvested by Government of India in Public Sector Enterprises (PSEs) by inviting sealed tenders?
	Yes. Reserve Bank has granted general permission to NRIs to acquire shares of PSEs on their bids being successful provided the holding of a single NRI investor does not exceed one per cent of the paid up capital of the PSE concerned , the purchase consideration /bid money is paid by way of remittance from abroad or by debit to his NRE/FCNR accounts.

	What is the procedure for issue of rights entitlement to NRIs?
	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. 52 and 53).

	What is the procedure required to be followed by NRIs for renunciation of rights entitlement?
	NRIs can make an application to Reserve Bank by a letter detailing therein the folio number of the shares held and the manner in which the rights are being sold.

	What is the procedure for issue of bonus shares?
	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 (Please also see Answer to Question No. 52).

	Can NRIs obtain loans abroad against the collateral of share/debentures of Indian companies?
	Yes. Authorised 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.

	(c) Portfolio Investment Scheme
	What is the Portfolio Investment Scheme?
	Under this scheme, NRIs are permitted to acquire shares /debentures of Indian companies or units of domestic Mutual Funds through the stock exchange/s in India.

	What is the procedure for making applications?
	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.

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

	Whether NRI can apply through more than one designated branch?
	No. Each NRI 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.

	What is the validity period of Reserve Bank approval for the purchase of shares/debentures of Indian companies or units of domestic Mutual Funds?
	Reserve Bank approval is valid for a period of five years from the date of issue. This can be renewed further by making a request by means of a simple letter.

	Is there any ceiling on the investment under the Portfolio Investment Scheme?
	There is an overall ceiling of 5% 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 upto 1% of the paid-up equity share capital/each series of convertible debentures. However, there is no ceiling on investment in domestic Mutual Funds.

	Company Deposits
	Can NRIs keep deposits with companies in India with repatriation benefits?
	Yes. NRIs are permitted to keep deposits with public limited companies in India for a minimum period of three years subject to certain ceilings/conditions. Application for the purpose is required to be made by the company receiving the deposits through an authorised dealer.

	Do NRIs need permission of reserve Bank for placing funds in fixed deposits with firms/companies on non- repatriation basis?
	Yes. Permission for placement of funds in fixed deposits with firms/companies in India is granted by Reserve Bank on application by the depositor or the deposit accepting firm/company, on non-repatriation basis, subject to certain ceilings/conditions.

	Are NRIs permitted to invest in Commercial Paper(CP) issued by Indian companies?
	Yes.General permission has been granted by Reserve Bank to Indian companies to issue CP to NRI individuals subject to the conditions that the amount invested will not be repatriated outside India and the CP will not be transferable.

	Sale / Transfer of Shares / Securities
	Is permission of Reserve Bank required for sale/transfer of Government securities/units?
	No. Authorised 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 favour 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. In other cases, applications for necessary permission is required to be made to Reserve Bank in form TS 4.

	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.

	Can shares/debentures be given away as gifts to relatives?
	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 permission to their resident close relative/s.