Amit Guin*
The
Government has taken various steps to promote investments by Indians living
abroad, in India. The Government plays a pivotal role in investment promotion,
through dissemination of information on the investment climate and
opportunities in India and by advising prospective investors including the
Non-Resident Indians (NRIs) about the investment policies and procedures and
opportunities.
For
the purpose of investments in India, it should be known that a NRI is a person residing
outside India, but who is a citizen of India or is a Person of Indian Origin. A
Person of Indian Origin is one who or whose ancestors was an Indian national
and who is presently holding any other country’s citizenship/nationality.
The
Government has a liberal and transparent policy for Foreign Direct Investment,
including investments from NRIs, wherein most of the sectors are open to FDI
under the automatic route. NRIs can make investment in India under various
schedules of Foreign Exchange Management (Issue or Transfer of Security by a
Person Resident outside India) Regulations, 2000 as amended from time to time.
Investment under FDI Scheme contained in Schedule 1 of these Regulations,
permits 100 per cent NRI investments, under the automatic route, in the sector
of townships, housing, built-up infrastructure and construction-development
projects (which include, but are not restricted to, housing, commercial
premises, hotels, resorts, hospitals, educational institutions, recreational
facilities, city and regional level infrastructure), without the
conditionalities attached to FDI in such projects. It also grants a special
dispensation for NRI investments in the sectors of Scheduled Air Transport
Services/Domestic Scheduled Passenger Airlines, Non-Scheduled Air Transport
Services, Ground Handling Services, wherein 100 per cent NRI investment is
allowed under the automatic route.
Along
with these, NRIs can also invest in share/convertible debentures of an Indian
company under FDI scheme subject to terms and conditions specified in Schedule
1 to Notification No. FEMA 20. An NRI can purchase and sell shares/convertible
debentures of an Indian company on both repatriation and non-repatriation basis
under Portfolio Investment Scheme (PIS), through registered broker or
recognised Stock Exchanges in India. The individual limit for NRI under PIS is
five per cent of the paid up capital/paid up value of each series of
convertible debentures of an Indian company and aggregate limit for all NRIs
taken together is one per cent of the paid up capital/paid up value of the
company. This limit can be increased by the Indian company to 24 per cent by
passing a Board resolution and special Annual General Meeting resolution. Apart
from this, an NRI, barring certain sectors, according to Schedule 4 to
Notification No. FEMA 20, may without any limit purchase on non-repatriation
basis shares/convertible debentures of an Indian company whether by public
issue or private placement or right issue.
In
terms of Schedule 5 to Notification No. FEMA 20, an NRI 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 PSU in India; non-convertible debentures of a company incorporated in
India; bonds/units issued by Infrastructure Debt Funds, Perpetual debt
instruments and debt capital instruments issued by banks in India and shares in
Public Sector Enterprises being dis-invested by the Government. According to
the terms of the same Schedule, a NRI 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. However, NRIs have not being given the permission to invest in
small savings or Public Provident Fund (PPF).
The
Government, in order to promote NRIs to bring in money into India, extended
some more facilities to them. Banks are free to determine the interest rates on
both savings deposits and term deposits of maturity of one year and above under
the Non-Resident External (NRE) deposits and savings deposits under
Non-Resident Ordinary (NRO) account. An NRE account is one which can be opened
only by the non-resident himself and not through the holder of the power of
attorney. Only NRIs can become joint account holders in the case of NRE
account. On the other hand, NRO accounts may be held jointly with residents and
/or with NRIs. Along with this, the banks may also sanction Rupee loans in
India or foreign currency loans outside India to either the account holder or
third party to the extent of the balance in the NRE/ Foreign Currency Non
Resident (Bank) account, subject to the margin requirements. To help NRIs to
maintain FCNR deposits in other currency as well, since October 2011, FCNR (B)
accounts have been permitted to be opened in any freely convertible currency. Moreover,
NRIs are, since September 2011, also eligible to open NRE/FCNR account with
resident.
The
Government has also set up ‘Invest India’, a joint venture company between the
Department of Industrial Policy and Promotion and Federation of Indian Chambers
of Commerce and Industry, as a not-for-profit, single window facilitator, for
prospective overseas investors, to act as a structured mechanism for attracting
investment. On the other hand, the Ministry of Overseas Indian Affairs has
established Overseas Indian Facilitation Centre to facilitate potential NRIs
and overseas corporate bodies of overseas Indians which want to invest in
India. OIFC has organised several investment and interactive meets/roadshows in
different countries. It has also organised ‘Market Place’ during the annual
Pravasi Bharatiya Divas event in India. The annual and regional PBDs have also
provided a platform for facilitation of investment by overseas Indians.
(PIB Features.)
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*The author is a freelance writer.
Disclaimer:
The views expressed by the author in this article are his own and do not
necessarily reflect the views of PIB.
SS-30/SF-30/01-02-2013
RTS/HSN