Purchase/sale of shares and/or convertible debentures
Remittance of sale proceeds of shares / convertible debentures
Investment by certain other
investors
SCHEDULE 3
Report to Reserve Bank
Remittance/credit of sale/maturity proceeds of shares and/or debentures
SCHEDULE 4
SCHEDULE 5
SCHEDULE 6
Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) Regulations, 2000
SCHEDULE 2
[See Regulation 5 (2)]
Purchase/sale of shares and/or convertible debentures of an Indian
company by a registered Foreign Institutional Investor under Portfolio
Investment Scheme
- Purchase/sale of shares and/or convertible debentures
- A registered Foreign Institutional Investor (FII) may purchase the
shares and convertible debentures of an Indian company under Portfolio
Investment Scheme.
- The purchase of shares /convertible debentures under sub-paragraph
(1) shall be made through registered broker on recognized stock exchange
in India.
(Above sub-paragraphs (1) & (2) has been substituted vide Notification No.
FEMA 108/2004-RB, DT. 01/01/2004)
Pre-Revised "
- A registered Foreign Institutional Investor (FII) may, through the
Securities and Exchange Board of India, apply to the Reserve Bank for
permission to purchase the shares and convertible debentures of an Indian
company under Portfolio Investment Scheme. The permission may be granted by
Reserve Bank subject to such terms and conditions as may be considered
necessary.
- The registered FII permitted by the Reserve Bank under sub-paragraph 1,
shall purchase the shares/convertible debentures of an Indian company
through registered brokers on recognised stock exchanges in India."
- The amount of consideration for purchase of shares / debentures shall be
paid out of inward remittance from abroad through normal banking channels or
out of funds held in an account maintained with the designated branch of an
authorised dealer in India, in accordance with these Regulations.
- The total holding by each FII/SEBI approved sub-account of FII shall not
exceed 10% (ten per cent) of the total paid-up equity capital or 10% (ten
per cent) of the paid-up value of each series of convertible debentures
issued by an Indian company and the total holdings of all FIIs/sub-accounts
of FIIs put together shall not exceed 24 per cent of paid-up equity capital
or paid up value of each series of convertible debentures.
Provided that the limit of 24% referred to in this paragraph may be
increased up to the sectoral cap/statutory ceiling, as applicable, by the
Indian company concerned by passing a resolution by its Board of Directors
followed by passing of a special resolution to that effect by its General
Body.
(Above provisions has been substituted vide Notification No. FEMA
45/2001-RB, dt. 20/9/2001)
Pre-Revised "Provided that the limit of 24 per cent
referred to in this paragraph may be increased to 49 per cent
by the Indian company concerned by passing a resolution by its Board of
Directors followed by passing of a special resolution to that effect by its
General Body."
(Above bold word had been amended vide Notification No. FEMA
41/2001-RB, dated 2nd March, 2001)
Explanation:
For arriving at the ceiling on holdings of FIIs, shares/ convertible
debentures acquired both through primary as well as secondary market will be
included. However, the ceiling will not include investment made by FII
through off-shore Funds, Global Depository receipts and Euro-Convertible
Bonds.
- A registered FII is permitted to purchase shares/convertible debentures
of an Indian company through offer/private placement, subject to the ceiling
specified in sub-paragraph (4) of this paragraph and the Indian company is
permitted to issue such shares;
Provided that –
- in case of Public Offer, the price of the shares to be issued is not
less than the price at which shares are issued to residents, and
- in case of issue by private placement, the price is not less than
the price arrived in terms of SEBI guidelines or guidelines issued by
erstwhile Controller of Capital Issues, as applicable.
(Above sub-paragraph (5) has been substituted vide Notification No. FEMA
94/2003-RB, DT. 18/06/2003)
"
- A registered FII may also be permitted to purchase shares/ convertible
debentures of an Indian company through private placement/ arrangement,
subject to the ceilings specified in sub-paragraph (4) of this paragraph. "
- A registered Foreign Institutional Investor may open a Foreign
Currency Account and/or a Special Non-Resident Rupee Account with a
designated branch of an authorized dealer for routing the receipt and
payment for transaction relating to purchase and sale of
shares/convertible debentures under this Scheme, subject to the
following conditions:
- The Account shall be funded by inward remittance through normal
banking channels or by credit of sale proceeds (net of taxes) of the
shares/convertible debentures sold on stock exchange.
- The funds in the account shall be utilized for purchase of
shares convertible debentures in accordance with the provisions of
paragraph 1 of this Scheme or for remittance outside India.
- The funds from Foreign Currency Account of the registered FII
may be transferred to Special Non-Resident Rupee account of the same
FII and vice-versa.
(Above paragraph 2 has been substituted vide NTF. NO. FEMA 108/2004-RB, DT.
01/01/2004)
Pre-Revised "
- Maintenance of account by a registered FII for routing transactions of
purchase and sale of shares / convertible debentures
The Reserve Bank may, on application, permit a registered Foreign
Institutional Investor to open a Foreign Currency Account and/or a
Non-resident Rupee Account with a designated branch of an authorised dealer
for routing the receipt of and payment for transactions relating to purchase
and sale of shares / convertible debentures under this Scheme, subject to
the following conditions:-
- The account shall be funded by inward remittance through normal
banking channels or by credit of sale proceeds (net of taxes) of the
shares / convertible debentures sold on stock exchange.
- The funds in the account shall be utilised for purchase of shares /
convertible debentures in accordance with the provisions of paragraph 1
of this Scheme or for remittance outside India.
- The funds from Foreign Currency Account of the registered FII may be
transferred to Non-Resident Rupee account of the same FII and vice a
versa. "
-
Remittance of sale proceeds of shares / convertible debentures
The designated branch of an authorised dealer may allow remittance of net
sale proceeds (after payment of taxes) or credit the net amount of sale
proceeds of shares / convertible debentures to the foreign currency account
or a Non-resident Rupee Account of the registered Foreign Institutional
Investor concerned.
- Investment by certain other investors
- A domestic asset management company or portfolio manager, who is
registered with SEBI, as a foreign institutional investor for managing
the fund of a sub-account may make investment under the Scheme on behalf
of
- a person resident outside India who is a citizen of a foreign
state, or
- a body corporate registered outside India;
Provided such investment is made out of funds raised or collected or
brought from outside through normal banking channel.
(Above sub-paragraph (1) has been substituted vide Nofication No. FEMA
108/2004-RB, DT. 01/01/2004)
Pre-Revised "
- Reserve Bank may, subject to such terms and conditions as it may
consider necessary permit a domestic asset management company or portfolio
manager who is registered with SEBI as a foreign institutional investor for
managing the funds of a sub-account, to make investment under the Scheme on
behalf of:-
- a person resident outside India who is a citizen of a foreign state
,or
- a body corporate registered outside India ,
Provided such investment is made out of funds raised or collected or brought
from outside India through normal banking channel, ]
[ DELETED
- The application to Reserve Bank for permission under sub-paragraph
- may be made through SEBI. ]
- Investments permitted to be made under sub-paragraph (1) shall not
exceed 5% (five per cent) of the total paid-up equity capital or 5%
(five per cent) of the paid-up value of each series of convertible
debentures issued by an Indian company, and shall also not exceed the
over-all ceiling specified in sub-paragraph (4) of paragraph 1 of this
Schedule.
(Above sub-paragraph (2) has been deleted & (3) re-numbered as (2) vide
Notification No. FEMA 108/2004-RB, DT. 01/01/2004)
SCHEDULE 3
[See Regulation 5 (3) (i)]
Purchase/sale of shares and/or convertible debentures by an NRI
[Old, NRI/OCB] on a Stock Exchange In India on repatriation and/or
non-repatriation basis under Portfolio Investment Scheme
(In above heading bold words has been substituted vide
Notification No. FEMA 46/2001-RB, dated 29/11/2001)
- A Non-resident Indian (NRI) may purchase/sell shares and/or convertible
debentures of an Indian company, through a registered broker on a recognised
stock exchange, subject to the following conditions :
Pre-Revised "
- A Non-resident Indian (NRI) or an Overseas Corporate Body
(OCB) may purchase/sell shares and/or convertible debentures of
an Indian company, through a registered broker on a recognised stock
exchange, subject to the following conditions :]
(In above [para 1.] the above bold words has been substituted
vide Notification No. FEMA 46/2001-RB, dated 29/11/2001)
- NRIs may purchase and sell shares/convertible debentures under
the Portfolio Investment Scheme through a branch designated by an
Authorised Dealer for the purpose and duly approved by the Reserve
Bank of India.
(Above sub-paragraph (i) has been substituted vide Notification No..
FEMA 94/2003-RB, DT. 18/06/2003)
Pre-Revised "
- the NRI [Old NRI/OCB] designates a branch of an authorised dealer
for routing his [Old his/its] transactions relating to purchase and
sale of shares/convertible debentures under this Scheme, and routes
all such transactions only through the branch so designated;"
- the paid-up value of shares of an Indian company, purchased by
each NRI [Old NRI or OCB] both on repatriation and on
non-repatriation basis, does not exceed 5 percent of the paid-up
value of shares issued by the company concerned;
- the paid-up value of each series of convertible debentures
purchased by each NRI [Old NRI or OCB] both on repatriation and
non-repatriation basis does not exceed 5 percent of the paid-up
value of each series of convertible debentures issued by the company
concerned;
- the aggregate paid-up value of shares of any company purchased
by all NRIs [Old NRIs and OCBs] does not exceed 10 percent of the
paid up capital of the company and in the case of purchase of
convertible debentures the aggregate paid-up value of each series of
debentures purchased by all NRIs [Old NRIs and OCBs] does not exceed
10 percent of the paid-up value of each series of convertible
debentures;
Provided that the aggregate ceiling of 10 per cent referred to in
this clause may be raised to 24 per cent if a special resolution to
that effect is passed by the General Body of the Indian company
concerned;
- the NRI [Old NRI or OCB] investor takes delivery of the shares
purchased and gives delivery of shares sold;
- payment for purchase of shares and/or debentures is made by
inward remittance in foreign exchange through normal banking
channels or out of funds held in NRE/FCNR account maintained in
India if the shares are purchased on repatriation basis and by
inward remittance or out of funds held in NRE/FCNR/NRO/NRNR/NRSR
account of the NRI [Old NRI/OCB] concerned maintained in India where
the shares/debentures are purchased on non-repatriation basis;
- Omitted
Pre-Revised " vii) the Overseas Corporate Body (OCB) informs the
designated branch of the authorised dealer immediately on the
holding/interest of NRIs in the OCB becoming less than 60 per cent."
(In above [sub-para. (i) to (vi)] the above old bold words has been
substituted by new bold words and omitted [sub-para. (vii)] vide
Notification No. FEMA 46/2001-RB, dated 29/11/2001)
- Report to Reserve Bank
The link office of the designated branch of an authorised dealer
referred to in paragraph 1 shall furnish to the Chief General
Manager, RBI, ECD, Central Office, Mumbai, a report on daily basis
on PIS transactions undertaken by it, such report to be furnished on
line or on floppy or in hard copy in a format supplied by Reserve
Bank.
(Above para. 2. has been substituted vide Notification no. FEMA
46/2001-RB, dated 29/11/2001)
Pre-Revised "
- Report to Reserve Bank
The link office of the designated branch of an authorised dealer
referred to in paragraph 1, shall furnish to the Chief General
Manager, Reserve Bank of India (ECD), Central Office, Mumbai a
report on daily basis giving the following details -
- Name of the Non resident Indian, or OCB.
- Company-wise number of shares and/or debentures and paid-up value
thereof , purchased and/or sold by each NRI /OCB.]
-
Remittance/credit of sale/maturity proceeds of shares and/or
debentures.
The net sale/maturity proceeds (after payment of taxes) of shares
and/or debentures of an Indian company purchased by NRI or OCB under
this scheme, may be allowed by the designated branch of an
authorised dealer referred to in paragraph 1,
- to be credited to NRO account of the NRI/OCB investor where the
payment for purchase of shares and/or debentures sold was made out
of funds held in NRO account or where the shares and/or debentures
were purchased on non-repatriation basis, or
- at the NRI or OCB investor’s option, to be remitted abroad or
credited to his/its NRE/FCNR/NRO account of the NRI, where shares
and/or debentures were purchased on repatriation basis.
(Above paragrph 3 has been substituted vide Notification No. FEMA
94/2003-RB, DT. 18/06/2003)
Pre-Revised"
- Remittance/credit of sale/maturity proceeds of shares and/or
debentures
The net sale/maturity proceeds (after payment of taxes) of shares
and/or debentures of an Indian company purchased by NRI or OCB under
this Scheme, may be allowed by the designated branch of an
authorised dealer referred to in paragraph 1,
- to be credited to NRSR account of the NRI or OCB investor where
the payment for purchase of shares and/or debentures sold was made
out of funds held in NRSR account, or
- at the NRI or OCB investor’s option, to be credited to his/its
NRO or NRSR account, where the shares and/or debentures were
purchased on non-repatriation basis, or
- at the NRI or OCB investor’s option, to be remitted abroad or
credited to his/its NRE/ FCNR/ NRO/NRSR account, where shares and/or
debentures were purchased on repatriation basis.]
SCHEDULE 4
[See Regulation 5 (3) (ii)]
Purchase and sale of shares/ convertible debentures by a
Non-resident Indian (NRI) or an Overseas Corporate Body (OCB), on
non-repatriation basis
- Prohibition on purchase of shares/ convertible debentures of
certain companies
No purchase of shares or convertible debentures of an Indian company shall
be made under this Scheme if the company concerned is a Chit Fund or a Nidhi
company or is engaged in agricultural/plantation activities or real estate
business or construction of farm houses or dealing in Transfer of
Development Rights.
Explanation: For the purpose of this paragraph, real estate business shall
not include development of township, construction of residential/ commercial
premises, roads, bridges, etc.
- Permission to purchase and/or sell shares/ convertible
debentures of an Indian company
Subject to paragraph 1, a Non-resident Indian or an Overseas Corporate Body
may, without any limit, purchase on non-repatriation basis, shares or
convertible debentures of an Indian company issued whether by public issue
or private placement or right issue.
Provided that the person to whom the shares are being transferred, has
obtained prior permission of Central Government to acquire the shares if he
has previous venture or tie up in India through investment in shares or
debentures or a technical collaboration or a trade mark agreement or
investment by whatever name called in the same field or allied field in
which the Indian company whose shares are being transferred is engaged.
Provided further that this restriction shall not apply to the transfer of
shares to International financial institutions such as Asian Development
Bank(ADB), International Finance Corporation(IFC), Commonwealth Development
Corporation (CDC), Deutsche Entwicklungs Gescelscchaft(DEG) and transfer of
shares of an Indian company engaged in Information Technology sector.
(Above two proviso has been added vide Notification No. FEMA 94/2003-RB, DT.
18/06/2003)
- Method of payment for purchase of shares/ convertible debentures
The amount of consideration for purchase of shares or convertible debentures
of an Indian company on non-repatriation basis, shall be paid by way of
inward remittance through normal banking channels from abroad or out of
funds held in NRE/FCNR /NRO/NRSR/NRNR account maintained with an authorised
dealer or as the case may be with an authorised bank in India.
Provided that in the case of an NRI/OCB resident in Nepal and Bhutan, the
amount of consideration for purchase of shares or convertible debentures of
an Indian company on non-repatriation basis, shall be paid only by way of
inward remittance in foreign exchange through normal banking channels.
- Sale/ Maturity proceeds of shares or convertible debentures
- The sale/maturity proceeds (net of applicable taxes) of shares or
convertible debentures purchased under this Scheme shall be credited
only to NRSR account where the purchase consideration was paid out of
funds held in NRSR account and to NRO or NRSR account at the option of
the seller where the purchase consideration was paid out of inward
remittance or funds held in NRE/FCNR/NRO/NRNR account.
- The amount invested in shares or convertible debentures under this
Scheme and the capital appreciation thereon shall not be allowed to be
repatriated abroad.
SCHEDULE 5
[See Regulation 5 (4)]
Purchase and sale of securities other than shares or convertible
debentures of an Indian company by a person resident outside India.
- Permission to Foreign Institutional Investors for purchase of
securities
A registered Foreign Institutional Investor may purchase, on repatriation
basis, dated Government securities/treasury bills, listed non-convertible
debentures/ bonds, commercial papers, Pre-Revised-" non-convertible
debentures/bonds " issued by an Indian company and units of domestic mutual
funds either directly from the issuer of such securities or through a
registered stock broker on a recognised stock exchange in India;
(In above paragraph 1, words "listed non-convertible debentures/ bonds,
commercial papers" has been substituted vide Notification No. FEMA
145/2005-RB, DT. 06/01/2006)
Provided that
- the FII shall restrict allocation of its total investment between
equity and debt instruments (including dated Government Securities and
Treasury Bills in the Indian capital market) in the ratio of 70:30, and
- if the FII desires to invest upto 100 per cent in dated Government
Securities including Treasury Bills, non-convertible debentures/bonds
issued by an Indian company, it shall form a 100% debt fund and get such
fund registered with SEBI.
- Permission to Non-resident Indian and Overseas Corporate Body
for purchase of securities
- A Non-resident Indian or an Overseas Corporate Body may, without
limit, purchase on repatriation basis,
- Government dated securities (other than bearer securities)
or treasury bills or units of domestic mutual funds;
- bonds issued by a public sector undertaking(PSU) in India;
- shares in Public Sector Enterprises being dis-invested by the
Government of India, provided the purchase is in accordance with the
terms and conditions stipulated in the notice inviting bids.
- A Non-resident Indian or an Overseas Corporate Body may, without
limit, purchase on non-repatriation basis, dated Government securities
(other than bearer securities), treasury bills, units of domestic mutual
funds, units of Money Market Mutual Funds in India, or National
Plan/Savings Certificates.
- A Multilateral Development Bank which is specifically permitted by
Government of India to float rupee bonds in India may purchase
Government dated securities.
(Above sub-paragraph 3. has been added vide Notification No. FEMA
106/2003-RB, DT. 27/10/2003)
- Method of payment of purchase consideration
- A registered Foreign Institutional Investor who purchases securities
under the provisions of this Schedule shall make the payment for
purchase of such securities either by inward remittance through normal
banking channels or out of funds held in Foreign Currency Account or
Non-resident Rupee Account maintained by the Foreign Institutional
Investor with a designated branch of an authorised dealer with the
approval of Reserve Bank in terms of paragraph 2 of Schedule 2.
- A Non-resident Indian or an Overseas Corporate Body who purchases
securities on repatriation basis, under sub-paragraph (1) of paragraph 2
of this Schedule, shall make payment either by inward remittance through
normal banking channels or out of funds held in his/its NRE/FCNR
account.
- A Non-resident Indian or an Overseas Corporate Body who purchases
securities on non-repatriation basis, under sub-paragraph (2) of
paragraph 2 of this Schedule, shall make payment either by inward
remittance through normal banking channels or out of funds held in
his/its NRE/FCNR/NRO/NRSR/NRNR account.
- A Multilateral Development Bank which purchases Government dated
securities under this Schedule, shall make payment either by inward
remittance through normal banking channels or out of funds held in the
account opened with the specific approval of RBI.
(Above sub-paragraph 4. has been added vide Notification No FEMA
106/2003-RB, DT. 27/10/2003)
- Permission for Sale of Securities
A person resident outside India who has purchased securities in accordance
with this Schedule may (a) sell such securities through a registered stock
broker on a recognised stock exchange or (b) tender units of mutual funds to
the issuer for repurchase or for payment of maturity proceeds or (c) tender
Government securities/treasury bills to the Reserve Bank for payment of
maturity proceeds.
- Remittance/credit of sale/maturity proceeds
- In the case of a registered Foreign Institutional Investor who has
sold securities in accordance with paragraph 4, the designated branch of
an authorised dealer referred to in sub-paragraph (1) of paragraph 3 may
allow remittance of net sale/ maturity proceeds (after payment of taxes)
or credit the net amount of sale/ maturity proceeds of such securities
to the foreign currency account or Non-resident Rupee Account of the FII
investor maintained in accordance with the provisions of paragraph 2 of
Schedule 2.
- In the case of a Non-resident Indian or an Overseas Corporate Body
who has sold securities in accordance with paragraph 4, the net sale/
maturity proceeds (after payment of taxes) of such securities, may be
- credited only to NRSR account of the NRI investor where the
payment for purchase of securities sold was made out of funds held
in NRSR account, or
- credited, at the NRI or OCB investor’s option, to his/its NRO or
NRSR account, where the payment for the purchase of the securities
sold was made out of funds held in NRO account, or
- remitted abroad or at the NRI or OCB investor’s option, credited
to his/its NRE/FCNR /NRO/NRSR/NRNR account, where the securities
were purchased on repatriation basis in accordance with
sub-paragraph (1) of paragraph 2 and the payment for purchase of the
securities sold was made by inward remittance through normal banking
channels or out of funds held in NRE/FCNR account.
- in the case of sale of Government dated securities by a Multilateral
Development Bank, the net maturity proceeds (after payment of taxes) may
be remitted abroad or credited to fund account opened with the prior
permission of the Reserve Bank.
(Above Clouse (iii) has been added vide Notification No. FEMA 106/2003-RB,
DT. 27/10/2003)
SCHEDULE 6
[See Regulation 5(5)]
Investment in an Indian Venture Capital Undertaking by a
registered Foreign Venture Capital Investor
- Investment by Foreign Venture Capital Investor.
- A registered Foreign Venture Capital Investor (FVCI) may, through
the Securities and Exchange Board of India, apply to the Reserve Bank of
permission to invest in Indian Venture Capital Undertaking (IVCU) or in
a VCF or in a scheme floated by such VCFs. Permission may be granted by
Reserve Bank subject to such terms and conditions as may be considered
necessary
- The registered FVCI permitted by Reserve Bank under sub-paragraph
(1), may purchase equity/ equity linked instruments/ debt/ debt
instruments, debentures of a IVCU or of a VCF through Initial Public
Offer or Private Placement or in units of schemes/funds set up by a VCF.
- The amount of consideration for investment in VCFs/IVCUs shall be
paid out of inward remittance from abroad through normal banking
channels or out of funds held in an account maintained with the
designated branch of an authorised dealer in India in accordance with
Para 2.
- Maintenance of account by the registered FVCI for investment in
IVCUs/ VCFs or schemes/funds set up by the VCFs.
The Reserve Bank may, on applications, permit a FVCI which has received 'in
principle' registration from SEBI to open a Foreign Currency Account and/or
a Rupee Account with a designated branch of an authorised dealer with the
following permissible transactions:
- Crediting inward remittance received through normal banking channels
or the sale proceeds (net of taxes) of investments.
- Making investment in accordance with the provisions of paragraph 1
above.
- transferring funds from the Foreign Currency Account of the FVCI to
their own Rupee account.
- Remitting funds from the Foreign Currency of rupee account subject
to payment of applicable taxes.
- Meeting local expenses of the FVCI.
- Forward Cover
Authorised Dealers may offer forward cover to FVCIs to the extent of total
inward remittance. In case the FVCI has made any remittance by liquidating
some investments, original cost of the investments will be deducted from the
eligible cover.
- Valuation of Investments
The FVCI may acquire by purchase or otherwise or sell shares/convertible
debentures/units or any other investment held by it in the IVCUs or VCFs or
schemes/funds set up by the VCFs at a price that is mutually acceptable to
the buyer and the seller/issuer. The FVCI may also receive the proceeds
arising of the liquidation of VCFs or schemes/funds set up by the VCFs.
- Adherence to SEBI Guidelines
FVCIs shall abide by the relevant regulations/guidelines issued by
Securities and Exchange Board.
(Above SCHEDULE 6 has been added vide Notifiction No. FEMA
32/2000-RB, dated 26th December, 2000)
FORM TS 1
Sd/-
(D.P. Sarda)
Executive Director
(Note:- see
1. AP(DIR Sr.)Cir. No.13/2001-RB, dt.29/11/2001
2. AP(DIR Sr.)Cir. No.21/2002-RB, dt. 13/02/2002)