NRI Investment in Shares & Securities

Sale / Transfer of Shares / Securities

Does NRIs need 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.

Does NRIs require permission by Reserve Bank 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.

Are NRIs permitted to 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.

How can NRIs do the sale/transfer of shares/debentures/bonds held by them 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 procedure should be followed by NRIs for sale/transfer of shares /debentures to residents by private arrangements?
NRIs are expected to submit application in form TS 1 to Reserve Bank for sale of shares/debentures by private arrangements.

Are NRIs privileged to give awway shares/debentures as gifts to relatives?
Yes. Reserve Bank has granted general permission for NRIs to transfer or present as gifts, shares, bonds and debentures of Indian companies held by them with Reserve Bank's permission to their resident close relatives.

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 invest 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 process to obtain 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).

Is 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.

Can NRIs permitted to invest in Air Taxi operations?
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 the required 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).

Are NRIs eligible to invest in 100% Export Oriented Units on repatriation basis?
Yes. NRIs will be allowed 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.

Are NRIs allowed to acquire shares disinvested by Government of India in Public Sector Enterprises (PSEs) by inviting sealed tenders?
Yes. Reserve Bank has granted general permission for 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.

How does the issue of rights entitlement done to NRIs?
For the issue of rights entitlement for NRIs, the concerned company should approach the Reserve Bank by using 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 procedure should be followed by NRIs for renunciation of rights entitlement?
An application to Reserve Bank furnished by a letter detailing therein the folio number of the shares held and the manner in which the rights are being sold should be made by the NRIs.

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).

Are NRIs allowed to 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.

Is sale proceeds of the shares/debentures allowed to 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 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 modus operandi 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 under Portfolio Investment Scheme?
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.

Can NRIs 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 there a requirement 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 period of validity 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 maximum limit 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

Are NRIs allowed to keep deposits with companies in India with repatriation benefits?
Yes. NRIs are allowed to keep deposits with public limited companies in India for a minimum

Does 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.

Can NRIs 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

Does NRIs need 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.

Does NRIs require permission by Reserve Bank 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.

Are NRIs permitted to 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.

How can NRIs do the sale/transfer of shares/debentures/bonds held by them 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 procedure should be followed by NRIs for sale/transfer of shares /debentures to residents by private arrangements?
NRIs are expected to submit application in form TS 1 to Reserve Bank for sale of shares/debentures by private arrangements.

Are NRIs privileged to give awway shares/debentures as gifts to relatives?
Yes. Reserve Bank has granted general permission for NRIs to transfer or present as gifts, shares, bonds and debentures of Indian companies held by them with Reserve Bank's permission to their resident close relatives.

logo

NRIOL.COM, the premier online community since 1997 for the Indian immigrant community provides a range of resourceful services for immigrants and visitors in America.

Contact Us

NRI Online Pvt. Ltd.

Phone : 91-80-41101026

Email:

Estd. 1997 © Copyright NRI Online Pvt. Ltd. All rights reserved worldwide.