Recent Developments on FDI in India

Barun kumar

PGDM 2011-13 .

Agenda
Foreign Investment in India- Schematic Representation FDI Policy & options for Foreign Entity/Person in India Prohibited Sectors Sector/Activity: % of FDI Cap/Equity: Automatic Route / Approval Route Recent Changes/Developments: FIIs & NRIs FVCI Qualified Foreign Investor (QFI) Limited Liability Partnerships (LLPs) Delegation of Compounding Powers Import of capital goods; Pre-operative/pre-incorporation expenses Credit of sale proceeds to NRE / FCNR(B) accounts FIIs in Commodity Exchanges Operating lease outside Non Banking Finance Companies (NBFC) Single Brand Retail Pharmaceutical Sector Liaison / Branch Office in India Transfer of capital instruments RBI approval not required Escrow Account Pledge of shares of company incorporated in India e-filing for FIPB approval

Foreign Investment in IndiaSchematic Representation

Foreign Investments

Foreign Direct Investments

Foreign Portfolio Investments

Foreign Venture Capital Investments

Other Investments (G-Sec, NCDs, etc)

Investments on nonrepatriable basis

Automatic Route

Govt. Route/
FIPB/ CCEA

FIIs

NRIs, PIOs

SEBI Regd. FVCIs

FIIs/Q FIs

NRIs, PIO

NRIs, PIO

Persons Resident Outside India

VCF, IVCUs

FEM (Transfer or Issue of Security by a Person resident Outside India) Regulations, 2000: FEMA 20
Sch. 1 Foreign Direct Investment (FDI) Scheme; Issue of ADR, GDR and IDR. Registered FIIs under Portfolio Investment Scheme NRIs on Repatriation and/or Non- Repatriation Basis under Portfolio Investment Scheme NRIs non repatriation basis A non-resident Indian or a registered FII or a Foreign Central Bank may purchase securities, other than shares or convertible debentures of an Indian company. Qualified Foreign Investors (QFIs) A Foreign Venture Capital Investor in a Venture Capital Fund or an Indian Venture Capital Undertaking

Sch. 2
Sch. 3

Sch. 4
Sch. 5

Sch. 6

FDI Policy
FDI means investment by non-resident entity/person resident outside India in the capital of the Indian company under Schedule 1 of FEMA 20

Department of Industrial Policy and Promotion, Ministry of Commerce & Industry, Government of India (DIPP) issues Circular on Consolidated FDI Policy which was last updated on April 10, 2012 Master Circular on Foreign Investments in India Dated July 01, 2011 Master Circular on Updated as on January 20, 2012 Compounding of Contraventions, & External Commercial Borrowings and Trade Credits In case of any conflict between FDI Circular and FEMA Regulations, the relevant FEMA Notification will prevail. The procedural instructions are issued by the Reserve Bank of India vide A.P.Dir. (Series) circulars

Who can invest under FDI?

A person resident outside India and a non-resident entity
A citizen of Bangladesh or an entity incorporated in Bangladesh NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan Erstwhile OCBs Unincorporated entity outside India

Other than a citizen of Pakistan or an entity incorporated in Pakistan

Under the Government route On repatriation basis, if remittance received in free foreign exchange through normal banking channels Derecognized w.e.f. September 16, 2003 Not allowed to invest in India

Options For Foreign Entity/Person for business activities in India

Company (inc. sec 25 companies) Limited Liability Partnership Venture Capital Fund (VCF) Trusts other than VCF

Other Entities e.g. HUF, AOPs

Liaison Office/Representative Office/Project Office / Branch Office to undertake specified activities

Partnership Firm / Proprietary Firm:

By NRI and PIO: On non-repatriation basis: (Not engaged in any agricultural/plantation or real estate business /print media sector) On repatriation basis

Subject to prior permission of RBI in consultation with the Government of India. Generally not permitted by FIPB Subject to prior approval of RBI in consultation with the Government of India. Generally not permitted by FIPB

Other than NRIs/PIO:

Prohibited Sectors
FDI is prohibited in: (a) Retail Trading (except single brand product retailing) (b) Lottery Business including Government /private lottery, online lotteries, etc. (c) Gambling and Betting including casinos etc. (d) Chit funds (e) Nidhi company (f) Trading in Transferable Development Rights (TDRs) (g) Real Estate Business or Construction of Farm Houses (other than Construction Development: Townships, Housing, Built-up infrastructure) (h) Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes (i) Activities / sectors not open to private sector investment e.g. Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems) Agriculture sector other than Floriculture, Horticulture, Apiculture, Cultivation of vegetables & Mushrooms; Development & production of seeds & planting material; Services related to agro & allied sectors Plantation sector other than Tea sector including tea plantation. Foreign technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also completely prohibited for Lottery Business and Gambling and Betting activities

Sector/Activity: % of FDI Cap/Equity Automatic Route

Agriculture & Animal Husbandry Floriculture, Horticulture, Apiculture, Cultivation of vegetables & Mushrooms; Development & production of seeds & planting material; Services related to agro & allied sectors: (100% - Automatic) Mining and Exploration of metal & non-metal ores: (100% - Automatic) Coal and Lignite: (100% - Automatic) Petroleum & Natural Gas Sector: (100% - Automatic) Manufacturing: (100% - Automatic) Pharmaceuticals: Greenfield: 100% - Automatic Airports: Greenfield projects: (100% - Automatic) Air Transport Services: Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline: (49% FDI; 100% for NRIs Automatic) Helicopter services/ seaplane services requiring DGCA approval: (100% - Automatic) Maintenance and Repair organizations; flying training institutes; and technical training institutions: (100% - Automatic) Construction Development: Townships, Housing, Built-up infrastructure: (100% - Automatic) Industrial Parks new and existing: (100% - Automatic) Cash & Carry trading Wholesale Trading/ Wholesale Trading (including sourcing from MSEs): (100% Automatic) E-commerce activities; (100% - Automatic) Insurance: (26% - Automatic) Non-Banking Finance Companies (NBFC): 18 specified activities (100% - Automatic):(i) Merchant Banking; (ii) Under Writing; (iii) Portfolio Management Services; (iv) Investment Advisory Services; (v) Financial Consultancy; (vi) Stock Broking; (vii) Asset Management; (viii) Venture Capital; (ix) Custodian Services; (x) Factoring (xi) Credit Rating Agencies; (xii) Leasing & Finance; (xiii) Housing Finance; (xiv) Forex Broking; (xv) Credit Card Business; (xvi) Money Changing Business; (xvii) Micro Credit; (xviii) Rural Credit

 Manufacture of items reserved for production in Micro and Small Enterprises (MSEs as defined under Micro, Small And Medium Enterprises Development Act, 2006): Any industrial undertaking which is not a MSE, but manufactures items reserved for the MSE sector where foreign investment is more than 24% in the capital Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities: (100% - Government) Defence: (26% - Government) Pharmaceuticals: Existing companies: 100% - Government Terrestrial Broadcasting FM (FM Radio): (20% -FDI, NRI & PIO Investment and portfolio investment Government) Cable Network subject to Cable Television Network Rules, 1994: (49% - FDI, NRI & PIO investment and portfolio investment Government) Directto-Home: (49% - FDI, NRI & PIO investment and portfolio investment - Within this limit, FDI component not to exceed 20% - Government) Setting up hardware facilities such as up-linking, HUB etc. (1) Setting up of Up-linking HUB/ Teleports: (49% (FDI & FII) Government) (2) Up-linking a Non-News & Current Affairs TV Channel: (100% - Government) (3) Up-linking a News & Current Affairs TV Channel: (26% (FDI & FII) Government) Print Media: Publishing of Newspaper and periodicals dealing with news and current affairs: (26% (FDI and investment by NRIs/PIOs/FII) Government) Publication of Indian editions of foreign magazines dealing with news and current affairs: (26% (FDI and investment by NRIs/PIOs/FII) Government)

Sector/Activity: % of FDI Cap/Equity Approval Route Tea Plantation: (100% - Government)

Sector/Activity: % of FDI Cap/Equity Approval Route Publishing/printing of Scientific and Technical Magazines/specialty journals/ periodicals: (100% Government) Publication of facsimile edition of foreign newspapers: (100% - Government) Courier service: (100% - Government) Satellites Establishment and operation: (74% - Government) Private Security Agencies: (49% - Government) Test marketing: (100% - Government) Single Brand product trading: (51% to 100% - Government) Financial Services: Foreign investment in other financial services, other than specified activities, would require prior approval of the Government e.g. payment and authorization system for on-line payment related services (on line gateway system), Cash ATM Network, Primary Dealer in India Asset Reconstruction Company (ARC): (49% of paid-up capital of ARC Government) Commodity Exchanges: (49% (FDI & FII) [Investment by Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26%] - Government only for FDI; FIIs under Automatic Route) Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations: (49% (FDI & FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital] - Government only for FDI; FIIs under Automatic Route) Credit Information Companies: (49% (FDI & FII) Government) Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks: (20% - FDI and Portfolio Investment Government)

Sector/Activity: % of FDI Cap/Equity Automatic + Approval Route FDI limit in Headend-in-the-Sky (HITS) Broadcasting Service: (74% - total direct and indirect
foreign investment including portfolio and FDI - Automatic up to 49%; Government route beyond 49% and up to 74%) Airports: Existing projects: (100% - Automatic up to 74%; Government route beyond 74%) Air Transport Services: Non-Scheduled Air Transport Service: (74% FDI; 100% for NRIs Automatic up to 49%; Government route beyond 49% and upto 74%) Ground Handling Services subject to sectoral regulations and security clearance: (74% FDI; 100% for NRIs - Automatic up to 49%; Government route beyond 49% and up to 74%) Telecom services: (74% - Automatic up to 49%; Government route beyond 49% and up to 74%) ISP with gateways; (b) ISPs not providing gateways i.e. without gate-ways (both for satellite and marine cables); (c) Radio paging; and (d) End-to-End bandwidth: (74% - Automatic up to 49%; Government route beyond 49% and up to 74%) (a) Infrastructure provider providing dark fibre, right of way, duct space, tower (IP Category I); (b)Electronic Mail; (c)Voice Mail; (100% - Automatic up to 49%; Government route beyond 49%) Banking Private sector: (74 % including investment by FIIs - Automatic up to 49%; Government route beyond 49% and up to 74%)

Recent Changes/Developments
Individual holding: aggregate limit for FIIs 24% Aggregate limit: 24% can be increased to the sectoral cap/statutory ceiling by Special Resolution of Shareholders and prior intimation to RBI along with Certificate from the Company Secretary stating compliance of FEMA, and FDI Policy Aggregate under FDI and Portfolio Investment Scheme should be within the above caps Permitted through IPOs and private placement NRIs NRIs Through designated Ads up to 5 % of the paid- up capital Aggregate: Up to 10 % which can be raised to 24 per cent by Special Resolution of Shareholders and prior intimation to RBI along with Certificate from the Company Secretary stating compliance of FEMA, and FDI Policy Shares purchased under Portfolio Investment Scheme cannot be transferred by way of sale under private arrangement (except NRIs can transfer shares acquired under PIS to close relatives)

FIIs FIIsNRIs & 10% of the capital and

FVCI
SEBI registered FVCIs are allowed to: Invest upto 100% by way of private arrangement or purchase from a third party in eligible securities of: Indian Venture Capital Undertaking (IVCU) and may also set up a domestic asset management company to manage the fund Domestic Venture Capital Fund registered under the SEBI (Venture Capital Fund) Regulations, 1996 Invest in securities on a recognised exchange subject to provisions of SEBI Regulations, 2000 stock (FVCI)

Invest under the FDI Scheme subject to FDI Policy & FEMA Regulations

Qualified Foreign Investor (QFI)

QFI shall mean a person resident in a country that is compliant
with Financial Action Task Force (FATF) standards and that is a signatory to International Organization of Securities Commission's (IOSCO's) Multilateral Memorandum of Understanding, Such person is not resident in India, Such person is not registered with SEBI as Foreign Institutional Investor or Sub-account, and FVCI Explanation- For the purposes of this clause: the term Person shall carry the same meaning under Section 2(31) of the Income Tax Act, 1961 the phrase resident in India shall carry the same meaning as in the Income Tax Act, 1961 resident in a country, other than India, shall mean resident as per the direct tax laws of that country.

QFIs investment in equity shares

QFIs are permitted to invest through SEBI registered Depository Participants (DPs) in: equity shares of listed Indian companies through recognized brokers on recognized stock exchanges in India equity shares of Indian companies which are offered to public in India in terms of the relevant and applicable SEBI guidelines/regulations Acquire right shares or bonus shares

equity shares on account of stock split / consolidation / amalgamation / demerger / such corporate actions subject to the prescribed investment limits

Conditions to be met by QFIs

The entities having opaque structure(s) such that the details of ultimate/end beneficiary are not accessible or where the beneficial owners are ring fenced from each other or where the beneficial owners are ring fenced with regard to enforcement shall not be allowed to open demat account as QFI
The DP shall ensure that equity shares held by QFI are free from all encumbrances including pledge or lien etc. at all times QFIs to submit combined PAN-cum-KYC form as notified by CBDT

Sale of equity shares by QFIs

QFIs are also permitted to sell the equity shares so acquired subject to the relevant SEBI guidelines QFIs are allowed to tender equity shares in open offer in accordance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; SEBI (Delisting of Equity Shares) Regulations, 2009; and in case of buy-back by listed companies in accordance with SEBI (Buyback of Securities) Regulations, 1998

Investment Limits for QFIs

The individual and aggregate investment limits for the QFIs shall be 5% and 10% respectively of the paid up capital of an Indian company These limits shall be over and above the FII and NRI investment ceilings prescribed under the Portfolio Investment Scheme for foreign investment in India In case there are composite sectoral caps under the extant FDI policy, these limits for QFI investment in equity shares shall also be within such overall FDI sectoral caps The onus of monitoring and compliance of these limits shall remain jointly and severally with the respective QFIs, DPs and the respective Indian companies (receiving such investment)

Treatment of dividend on equity shares held by QFIs

Dividend payments on equity shares held by QFIs can either be: directly remitted to the designated overseas bank accounts of QFIs or credited to the single rupee pool bank account In case dividend payments are credited to the single rupee pool bank account, they shall be remitted to the designated overseas bank accounts of the QFIs within five working days (including the day of credit of such funds to the single rupee pool bank account) Within these five working days, the dividend payments can be also utilized for fresh purchases of equity shares under this scheme, if so instructed by the QFI

Limited Liability Partnerships (LLPs)

FDI in LLPs: Prior approval from FIPB Sectors/activities where 100% FDI allowed No FDI-linked performance related conditions (such as Non Banking Finance Companies or Development of Townships, Housing, Built-up infrastructure and Construction-development projects etc.) Only by way of cash consideration Indian company having FDI, permitted to make downstream investment in LLP only if both the company as well as the LLP is operating in sectors where 100% FDI allowed, through automatic route Restrictions to LLPs with FDI: Not in agricultural/plantation activity, print media or real estate business Not eligible to make any downstream investment Not permitted to avail ECBs FIIs and FVCIs not permitted to invest in LLPs Conversion of a company with FDI, into an LLP, allowed only if above stipulations are met and with the prior approval of FIPB

Reporting of FDI Inflow

Form Advance Reporting Form Supporting

Time period

FIRC/s not later evidencing than 30 receipt of days from remittance the date of KYC report on receipt non-resident investor

Action by Regional Office Non-compliance concerned Allotment of Contravention Unique under FEMA Identification Number (UIN) for Attract penal the amount provisions reported

Reporting of Issue of Fresh Shares /Bonus /Right Shares /ESOP/ Convertible Debentures / Convertible Preference Shares /Conversion of ECB / Royalty / Lumpsum Technical Know-how Fee / Import of Capital Goods by SEZs /Preoperative/Pre-incorporation Expenses
Form Supporting Time period not later than 30 days from the date of receipt Action by Regional Office Non-compliance concerned Taking on Contravention record the under FEMA shareholding pattern Attract penal provisions

Form FC- A certificate from GPR duly Company Secretary of filled up and the company signed by A certificate from MD/Director SEBI registered /Secretary of Merchant Banker or Company Chartered Accountant

 Time frame for issue of shares

Capital instruments should be issued within 180

days from the date of receipt of the inward remittance or by debit to the NRE/FCNR (B) account Else refunded to non-resident investor
Transfer of Shares (From Resident to a Non-

resident and viceversa)

File

form FC-TRS with RBI through authorised dealer within 60 days of receipt of consideration

Onus on transferor / transferee, resident in India

Annual return on Foreign Liabilities and Assets along with audited balance sheet
Discontinuation of the Part B of Form FC-GPR Capture the statistics relating to Foreign Direct Investment (FDI), both inward and outward Submitted by July 15 of every year to the Director, Balance of Payment Statistics Division, Department of Statistics and Information Management (DSIM), Reserve Bank of India, Mumbai To be submitted by all Indian companies which have received FDI and/or made FDI abroad in the previous year(s) including the current year If Balance sheet not audited: Submit information based on un-audited figures. The balance sheet may be forwarded in due course The Annex II to A.P. (DIR Series) Circular No.45 dated 15th March, 2011 gives the concepts and definitions useful in filling the Annual Return on Foreign Liabilities and Assets.

Reporting of issue/transfer of participating interest/right in oil fields to a non-resident as an FDI transaction Issue/transfer of participating interest/rights
in oil fields to a non-resident shall be treated as Foreign Direct Investment (FDI) transaction under the extant FDI policy & FEMA Regulations

Transfer of participating interest/rights will be reported as other category under Para 7 of revised Form FC-TRS Issuance of participating interest/rights will be reported as other category of instruments under Para 4 of Form FC-GPR

Delegation of Compounding Powers under FEMA by RBI to its Regional Offices

a) b) Amount of Contravention Delay in reporting of Bhopal, Bhubaneshwar, Below Rupees inward remittance Chandigarh, Guwahati, One Crore only Delay in filing of form Jaipur, Jammu, Kanpur, FC-GPR after allotment Kochi, Patna and Panaji of shares Delay in reporting of Ahmedabad, Bangalore, Without any inward remittance, Chennai, Hyderabad, limit Delay in filing of form Kolkata, Mumbai and FC-GPR after allotment New Delhi of shares Delay in issue of shares beyond 180 days Contraventions Regional Offices

Details required in application form for Compounding

An undertaking for not under investigation of any agency such as DOE, CBI, etc., Copy of the Memorandum and Articles of Association Latest audited balance sheet Contravention relating to Foreign Direct Investment in India
Name of the applicant; Date of incorporation; Nature of activities under taken; Brief particulars about the foreign investor; Details of foreign inward remittances received by Applicant Company from date of incorporation till date ; Copies of Balance Sheet during the period of receipt of share application money and allotment of shares; Nature of contravention and reasons for the contravention

Contravention relating to External Commercial Borrowing

Name of the applicant; Date of incorporation; Nature of activities under taken; Brief particulars about the foreign lender; Is the applicant an eligible borrower?; Is the lender eligible lender?; Is the lender an equity holder?; What is the level of his holding at the time of loan agreement?; Details of ECB: Date of Loan agreement; Amount in Foreign Currency and Indian Rupee; Rate of interest; Period of loan; Repayment particulars; Details of draw down; Amount in Foreign Currency; Details of Utilization of ECB in Foreign Currency and Indian Rupee; Nature of contravention and reasons for the contravention

Contravention relating to Overseas Investment

Name of the applicant; Date of incorporation; Nature of activities under taken; Name of Overseas entity; Date of incorporation of overseas entity; Nature of activities under taken by overseas entity; Nature of entity- WOS/JV; Details of remittance sent- Date of remittance; Amount in FCY and in INR; Details of other financial Commitment; Details of UIN applied and received; Date of receipt of share certificate; Approval of other regulators if required; Details of APRs submitted: For the period ended; date of submission; Nature of contravention and reasons for the contravention; All supporting documents may be submitted.

Contravention relating to Branch/Liaison Office in India

Name of the applicant; Date of incorporation; Date of approval for opening of Liaison Office/ Branch Office; Validity period of the approval; Nature of activities under taken; income and expenditure of the LO/BO; Dates of submission of Annual activity Certificates; Nature of contravention and reasons for the contravention; All supporting documents may be submitted.

Conversion of shares other than cash

Transaction Conversion of ECB due for payment or not Nature of permission General permission

Conditions to be fulfilled
activity covered under Automatic Route

or obtained FIPB approval post conversion equity within the sectoral cap pricing of shares adhered to

Against lump sum technical knowhow fee, royalty

subject to entry route, sectoral cap & General permission pricing guidelines compliance with applicable tax laws

Share Swap

FIPB approval

Irrespective of the amount, valuation of shares to be made by a Category I Merchant Banker registered with SEBI or an Investment Banker outside India registered with appropriate regulatory authority in the host country FIPB approval for Indian leg of FDI

Conversion of shares other than cash

Import of capital goods/machinery/equipment (excluding second hand): Import in accordance with Exim Policy Independent valuation by third party entity, preferably by an independent valuer from the country of import along with documents/certificates issued by the customs authorities towards assessment of the fair-value of such imports Beneficial ownership and identity of the Importer Company as well as overseas entity Conversions into FDI being done within 180 days from date of shipment of goods Second-hand machinery has now been excluded from the purview of this provision

Pre-operative/pre-incorporation expenses (including payments of rent etc.): FIRC for remittance for expenditure incurred Verification and certification by statutory auditor Payments made directly to company. Payments made through third parties citing the absence of a bank account or similar such reasons not allowed Capitalization within 180 days
Under the Government/FIPB route, Special resolution of the company; and subject to pricing guidelines and appropriate tax clearance.

Credit of sale proceeds of Foreign Direct Investments in India to NRE / FCNR(B) accounts Sale proceeds of Foreign Investments in India were treated as eligible credit to NRE / FCNR(B) accounts, where purchase consideration was paid by NRIs/PIOs out of inward remittance or funds held in their NRE/FCNR(B) accounts.
Credit of sale proceeds of

Other recent changes

Policy for FDI in Commodity Exchanges
BEFORE Foreign Investment , within a composite (FDI & FII) cap of 49% under the Government approval route is permitted in commodity exchanges NOW Registered FIIs (under PIS) FDI Scheme

Percentage of composite cap of 49%

Government Approval

23%

26%

X
BEFORE

Non Banking Finance Companies (NBFC)

NBFC activities include the activity of Leasing & Finance where 100% induction of FDI is permitted under automatic route NOW Activity of Leasing & Finance covers Financial leases

Operating leases

Construction development

At least 50% of each such project must be developed within a period of five years from the date of obtaining all statutory clearances.

It has been clarified that the condition of 50% development of a project, within a period of 5 years, is applicable to each project; in line with Minimum area to be developed under each project.

Single Brand Retail

FDI up to 51% under Approval Route: Single Brand only. Sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. Products which are branded during manufacturing. Foreign investor should be the owner of the brand.
Additional condition for FDI beyond 51% & up to 100% under Approval Route : Mandatory sourcing of at least 30% of the value of products sold From Indian small industries/ village and cottage industries, artisans and craftsmen. 'Small industries': total investment in plant & machinery not exceeding US $ 1.00 million. At the time of installation, without providing for depreciation. If at any point in time, this valuation is exceeded, the industry shall not qualify as a 'small industry'. Compliance ensured through self-certification by the company, To be subsequently checked, by statutory auditors, from the duly certified accounts, which the company will be required to maintain.

Single Brand Retail

Procedure for approval

Application to Secretariat for Industrial Assistance (SIA), DIPP, Ministry of Industry Specifically indicate the product/ product categories

Any addition to the product/ product categories would require a fresh approval of the Government

FDI Policy in Pharmaceutical Sector

Pharmaceuticals
Type of Pharmaceutical Company % of FDI Cap/Equity Entry Route

Greenfield
Existing companies (brown field investments)

100%

Automatic

100%

Government

Liaison / Branch Office in India

Transfer of assets of Liaison / Branch Office to subsidiaries or other LO / BO or any other entity is permitted only with specific approval of Central Office of RBI. Person, being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran or China, shall establish in India, a branch office or a liaison office or a project office or any other place of business by whatever name called, with the prior permission of RBI. Foreign Non-Government Organisations (NGOs) / Non-Profit Organisations (NPOs) / Government bodies / Departments continuing to function in India, without the approval of RBI, after FEMA came into force from June 1, 2000, should approach the RBI for regularization of establishment of such offices in India. CBDT vide notification dated 06 Feb 2012 has notified Form 49C (filing of annual information) to be furnished by LO, within sixty days from the end of the financial year, duly verified by the Chartered Accountant or the person authorised in this behalf by the non-resident person, who shall be known as the Authorised Signatory.

Prior approval of RBI is not required anymore for transfer of capital instruments

Transfer of shares from a Non Resident to Resident under the FDI scheme where the pricing guidelines under FEMA, 1999 are not met provided that : Pricing is compliant with the specific/explicit, extant and relevant SEBI regulations / guidelines (such as IPO, Book building, block deals, delisting, exit, open offer/ substantial acquisition / SEBI SAST, buy back) Transfer of shares from Resident to Non Resident: i) where the transfer of shares requires the prior approval of the FIPB which has been obtained; and adheres to pricing guidelines. ii) where SEBI (SAST) guidelines are attracted subject to the adherence with the pricing guidelines and documentation requirements as specified by Reserve Bank of India from time to time. iii) where the pricing guidelines under the Foreign Exchange Management Act (FEMA), 1999 are not met provided that:Pricing is compliant with the specific/explicit, extant and relevant SEBI regulations / guidelines (such as IPO, Book building, block deals, delisting, exit, open offer/ substantial acquisition / SEBI SAST) iv) where the investee company is in the financial sector provided that : NOCs are obtained from respective financial sector regulators/ regulators of the investee company as well as transferor and transferee entities and such NOCs are filed along with the form FC-TRS

Escrow Account
AD Category I banks can open Escrow account and Special account of non-resident corporate for open offers / exit offers and delisting of shares. Permitted to open and maintain, without prior approval of RBI, noninterest bearing Escrow accounts in Indian Rupees in India on behalf of residents and/or non-residents, towards payment of share purchase consideration and/or provide Escrow facilities for keeping securities to facilitate FDI transactions. No fund or non-fund based facilities would be permitted. SEBI authorised Depository Participants to open and maintain, without approval of RBI, Escrow accounts for securities. Applicable for both issue of fresh shares to the non-residents as well as transfer of shares from/to the non-residents. The Escrow account shall remain operational for a maximum period of six months. The terms of the Escrow account shall be laid down strictly in the Escrow agreement, Share purchase agreement, conditions of issue of shares.

Pledge of shares of company incorporated in India

Any person being a promoter of a company registered in India (borrowing company), which has raised external commercial borrowing, may pledge the shares of the borrowing company or that of its associate resident companies for the purpose of securing the external commercial borrowing (ECB) raised by the borrowing company

Shares of an Indian company held by the non-resident investor can be pledged in favour of an Indian bank in India to secure the credit facilities being extended to the resident investee company for bona fide business purposes
Shares of the Indian company held by the non-resident investor can be pledged in favour of an overseas bank to secure the credit facilities being extended to the non-resident investor / non-resident promoter of the Indian company or its overseas group company

Instructions before you proceed with e-filing

1. Applications seeking FIPB approval as an investee or investor company for the first time are called "Fresh Applications". Applicants may, therefore, click on the "Fresh Application" link in case they are approaching FIPB for the first time. "Amendment Applications" are those which seek an amendment to the FIPB approval already granted. On submission of the Mandatory Preliminary Application, whether for Fresh or Amendment cases, a computer generated unique (FC Registration No.) number shall be allotted. Thereafter, the applicant may either use the FC Registration No. to proceed for filing the on-line application or mention this number on the hardcopy of the application to be submitted at the FIPB Facilitation Center, Near Gate No. 9, North Block, New Delhi110001 (Tel: 011 23095123/ 4031; Intercom: 5123) . The applicant must also quote this number in all future correspondences with the FIPB. For Amendment Applications which are procedural in nature, users may click "Amendment Application which is procedural in nature" and submit in the prescribed proforma. For Submission of information for intimation/ record of FIPB, including information with respect to P.N. 4/2009 user may click "Submission of information for intimation / record of FIPB" and submit in the respective format.

2. 3.

4. 5.

6.

Any query pertaining to application filed or in the process of being filed, may be asked through the link "Clarification/Query". 7. In case an applicant wishes to make a change in the recently submitted application, that has not been processed, he/she may click on the link "Updation/Additional Information Form". Additional details being sought by the FIPB may also be submitted through the same link. 8. It is mandatory to file complete details of the Directors in applications seeking FIPB approval in Telecom, Defense and Private Security Services sectors to enable capturing the inputs in the first instance for expeditious processing from the security angle. This requirement is also mandatory in case the foreign collaborator has Bangladesh, Chinese/ Hong Kong registration/links. 9. After e-filing the application, one hard copy (alternative 1+15; 18 copies in case of Defence, and Telecommunication proposals) bearing the Unique FC Registration No. generated after submitting the Mandatory Preliminary Application, in original, with all annexure should immediately be sent by post at FIPB Facilitation Center, North Block, New Delhi-110001. 10. Only the applications that are complete in all respect, filed three weeks prior to the scheduled date of the FIPB meeting, only, shall be taken up for consideration in that meeting.