marketing grp 3.pptx

7/29/2019 marketing grp 3.pptx

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Foreign Exchange Management Act(FEMA)

PRESENTED BY:MARKETING GROUP 3


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The Foreign Exchange Management Act(FEMA) is a 1999Indian law "to consolidate and amend the law relating to foreignexchange with the objective of facilitating external trade and payments

and for promoting the orderly development and maintenance offoreign exchange market in India".

It was passed in the winter session of Parliament in 1999, replacing theForeign Exchange Regulation Act (FERA).

It enabled a new foreign exchange management regime consistent withthe emerging framework of the World Trade Organization (WTO).

It is another matter that the enactment of FEMA also brought with itthe Prevention of Money Laundering Act of 2002, which came intoeffect from 1 July 2005.


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To promote foreign payments and trade in the country.

To unite and revise all the laws that relate to foreign exchange

To encourage the orderly maintenance and development of the foreign

exchange market in India.

OBJECTIVES


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SWITCH FROM FERA TO FEMA ?????????????

FERA, in place since 1974, did not succeed in restricting activities such asthe expansion of transnational corporations (TNCs).The concessions made to FERA in 1991-1993 showed that FERA was onthe verge of becoming redundant.

After the amendment of FERA in 1993, it was decided that the act wouldbecome the FEMA. This was done in order to relax the controls on foreign

exchange in India, as a result of economic liberalization.

FEMA served to make transactions for external trade (exports andimports) easier transactions involving current account for external tradeno longer required RBIs permission.

The deals in Foreign Exchange were to be managed instead ofregulated. The switch to FEMA shows the change on the part of thegovernment in terms of foreign capital


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Person resident in IndiaAs per section 2(v) of FEMA, Person resident in India means

(i) a person residing in Indiafor more than one hundred andeighty-two days during the course of the preceding financialyear but does not include

(A) aperson who has gone out of India or who stays outside

India, ineither case

(a)for or on taking up employment outside India, or

(b) forcarrying on outside India a business or vocation outsideIndia,Or

(c)for any other purpose, in such circumstances as wouldindicatehis intention to stay outside India for an uncertain period;

FEW DEFINATIONS


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(B) a personwho has come to or stays in India, ineither case, otherwise

than(a)for or on taking up employment in India, or

(b) forcarrying on in India a business or vocation inIndia, or

(c)for any other purpose, in such circumstances aswould indicate his intention to stay in India for anuncertain period;

To be treated as a person resident in India underFEMA, a person has not only to satisfy the conditionof the period of stay (being more than 182 days duringthe preceding financial year) but has to also comply

with the condition of the purpose/intention of stay


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This provision equally applies to foreign citizen as well.

(ii) any person orbody corporate registered or incorporated in

India,

(iii) an office, branch or agency in India owned or controlled bya personresident outside India,

(iv) an office, branch or agency outside India owned orcontrolled by a personresident in India.

As per section 2(w) of FEMA, Person resident outside India meansa personwho is not resident in India.


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Definition of NRI:

For the purposes of (i) FEM (Deposit) Regulations, (ii) FEM(Investment in Firmor Proprietary Concern in India) Regulations, (iii) FEM(Transfer or Issue ofSecurity by a Person Resident Outside India) Regulations,and (iv) FEM(Borrowing and Lending In Rupees) Regulations:

Non-resident Indian (NRI) means a person resident outsideIndia who is a citizen of India or is a person of Indian origin.

For the purposes of FEM (Remittance of Assets) Regulations:Non-resident Indian (NRI) means a person resident outsideIndia who is a citizen ofIndia.


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For the purposes of (i) FEM (Deposit) Regulations, (ii)

FEM (Borrowing andLending In Rupees) Regulations, and (iii) FEM(Remittance of Assets)Regulations

Person of Indian Origin means a citizen of any countryother than Bangladesh orPakistan, if (a) he at any time held Indian passport; or(b) he or either of his parents

or any of his grand-parents was a citizen of India byvirtue of the Constitution ofIndia or the Citizenship Act, 1955 (57 of 1955); or (c) the

person is a spouse of anIndian citizen or a person referred to in sub-clause (a)or (b).

P.I.O


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FEM (Investment in Firm or Proprietary Concern inIndia) Regulations

Person of Indian Origin means a citizen of anycountry other than Bangladesh or

Pakistan or Sri Lanka, if(a) he at any time held Indian passport; or

(b) he or eitherof his parents or any of hisgrandparents was a citizen of India by virtue of theConstitution of India or the Citizenship Act, 1955 (57 of

1955); or(c) the person is a spouse of an Indian citizen or aperson referred to in sub-clause (a) or (b).


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FEM (Acquisition and Transfer of ImmovableProperty In India) Regulations

2(c) Person of Indian origin means an individual(not being a citizen of Pakistanor Bangladesh or Sri Lanka or Afghanistan orChina or Iran or Nepal or Bhutan), who (i) at any

time, held Indian passport; or (ii) who or either ofwhose father ormother or whose grandfather orgrandmother was a citizen of India by virtue ofthe Constitution of India or the Citizenship Act,1955 (57 of 1955). Spouse of an Indian citizen or a

person referred to in sub-clause (i) or (ii) isexcluded


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Accordingly, for the purposes of FEM (Investment in Firm orProprietaryConcern in India) Regulations, Sri Lanka is also excluded from the

definitionof PIO.For the purposes of FEM (Acquisition and Transfer of ImmovableProperty InIndia) Regulations, individuals being citizens of Sri Lanka or

Afghanistan or

China or Iran or Nepal or Bhutan are also excluded from the definitionof PIO


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FACILITIES AVAILABLE TO NRI & PIO

Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) are

allowed to invest in the primary and secondary capital markets in Indiathrough the portfolio investment scheme (PIS). Under this scheme,FIIs/NRIs can acquire shares/debentures of Indian companies throughthe stock exchanges in India.

The ceiling for overall investment for FIIs is 24 per cent of the paid upcapital of the Indian company and 10 per centfor NRIs/PIOs. The limitis 20 per cent of the paid up capital in the case of public sector banks,including the State Bank of India

The ceiling of 24 per cent for FII investment can be raised up tosectoral cap/statutory ceiling, subject to the approval of the board andthe general body of the company passing a special resolution to thateffect. And the ceiling of 10 per cent for NRIs/PIOs can be raised to 24per cent subject to the approval of the general body of the companypassing a resolution to that effect


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THE EQUITY SHARES AND CONVERTIBLE DEBENTURES OF THECOMPANIES WITHIN THE PRESCRIBED CEILINGS ARE

AVAILABLE FOR PURCHASE UNDER PIS SUBJECT TO:

the total purchase of all NRIs/PIOs both, onrepatriation and non-repatriation basis, being withinan overall ceiling limit of (a) 24 per cent of thecompany's total paid up equity capital and (b) 24 per

cent of the total paid up value of each series ofconvertible debenture; and

the investment made on repatriation basis by any

single NRI/PIO in the equity shares and convertibledebentures not exceeding five per cent of the paid upequity capital of the company or five per cent of thetotal paid up value of each series of convertibledebentures issued by the company.


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MONITORING FOREIGN INVESTMENTS

The Reserve Bank of India monitors the ceilings onFII/NRI/PIO investments in Indian companies on adaily basis. For effective monitoring of foreigninvestment ceiling limits, the Reserve Bank has fixed

cut-off points that are two percentage points lower thanthe actual ceilings. The cut-off point, for instance, isfixed at 8 per cent for companies in which NRIs/ PIOscan invest up to 10 per cent of the company's paid up

capital. The cut-off limit for companies with 24 per centceiling is 22 per cent and for companies with 30 per centceiling, is 28 per cent and so on. Similarly, the cut-offlimit for public sector banks (including State Bank ofIndia) is 18 per cent.


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Once the aggregate net purchases of equity shares of thecompany by FIIs/NRIs/PIOs reach the cut-off point, which is

2% below the overall limit, the Reserve Bank cautions alldesignated bank branches so as not to purchase any moreequity shares of the respective company on behalf ofFIIs/NRIs/PIOs without prior approval of the Reserve Bank.The link offices are then required to intimate the Reserve Bank

about the total number and value of equity shares/convertibledebentures of the company they propose to buy on behalf ofFIIs/NRIs/PIOs. On receipt of such proposals, the ReserveBank gives clearances on a first-come-first served basis till suchinvestments in companies reach 10 / 24 / 30 / 40/ 49 per cent

limit or the sectoral caps/statutory ceilings as applicable. Onreaching the aggregate ceiling limit, the Reserve Bank advisesall designated bank branches to stop purchases on behalf oftheir FIIs/NRIs/PIOs clients. The Reserve Bank also informsthe general public about the `caution and the `stop purchasein these companies through a press release.


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Change of residential status from resident outside India to residentinIndia

As per section 6(4) of FEMA, a person resident inIndia may hold, own, transfer or invest in foreigncurrency, foreign security or any immovable propertysituated outside India if such currency, security orproperty was acquired, held or owned by such person

when he was resident outside India or inherited

from a person who was resident outside India.


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CHANGE OF RESIDENTIAL STATUS FROM RESIDENT ININDIA TO RESIDENT OUTSIDE INDIA

As per section 6(5) of FEMA, a person resident outsideIndia may hold, own, transfer or invest in Indiancurrency, security or any immovable property situated inIndia if such currency, security or property was acquired,

held or owned by such person when he was resident inIndia or inherited from a person who was resident inIndia.

Any fresh investments in shares or expansion of theactivities of the companies in which investment is made

would be subject to the prevailing sectoral FDI cap andconditionality's. Further, sale proceeds of the assets

would have to be deposited in the NRO Account anddisposal thereof would be as per the applicable guidelines


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CAPITAL ACCOUNT TRANSACTIONS & CURRENTACCOUNT TRANSACTIONS

Under Foreign Exchange Management Act, 1999(FEMA), all transactions involving foreign exchangehave been classified either as capital or currentaccount transactions. Foreign exchange means

foreign currency and includes, (i) deposits, creditsand balances payable in any foreign currency, (ii)drafts, travellers cheques, letters of credit or bills ofexchange, expressed or drawn in Indian currency butpayable in any foreign currency, and (iii) drafts,travellers cheques, letters of credit or bills ofexchange drawn by banks, institutions or personsoutside India, but payable in Indian currency.


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As per Section 2(j) of FEMA, Current Account Transaction means atransactionother than a capital account transaction and without prejudice to thegenerality of the foregoing such transaction includes,

(i) Payments due in connection withforeign trade, other currentbusiness,services, and short-term banking and credit facilities in the ordinarycourse of business,

(ii) Payments due as interest on loans and as net income frominvestments,

(iii) Remittances forliving expenses of parents, spouse and childrenresiding

abroad, and

(iv) Expenses in connection withforeign travel, education and medicalcare ofparents, spouse and children


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Current Account Transactions

Few Examples Payment for imports of goods

Remittance of interest on investment made andfunds borrowed from abroad after tax deductions

Remittance of Dividend if the investment wasallowed without any condition

Booking with Airlines/Shipping

Salary/remuneration to Foreign Directors subjectto restrictions in any other law

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Restrictions on Current Account

TransactionsThe following requires prior approval of RBI:

Gifts and Donations above USD 5000

Corporate Donation above 1 % of Foreign Exchange Earning during 3previous years or USD 5 million, whichever is less

Commission to Agents abroad for sale of residential/commercial plotsin India above 5 % of Inward Remittance or USD 25000 , whichever ishigher

Consultancy Charges paid abroad for more than USD 1 million

Reimbursement of Pre-incorporation expenses above 5% of FDI orUSD 1 lac whichever is higher

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Prohibited Current Account Transactions

Drawal of exchange for travel to or with residents of Nepal/Bhutan

Commission on export to Joint Venture (JV) / Wholly OwnedSubsidiary(WOS) Abroad,

Commission on Rupee Trade

Call back Charges

Remittance out of Lottery, racing etc.

Bogus Prizes / Fictitious Schemes etc.

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Import of Goods & Services

Import of Goods and Services is also a Current Account Transactionand is freely permitted however few procedures are required to befollowed as

Obtaining of Import License if required

Opening of Letter of Credit

CA Certificate for deduction of TDS for payment made outside

Gold may be imported by nominated agencies/banks on consignmentbasis

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Export of Goods & Services

Exporter should make proper Declaration in prescribedforms to Authorised Dealers

Declaration is not required in case Trade Samples, Baggage,Gifts less than 5 lacs etc.

Export of Goods on following requires prior approval

Lease/hire

Counter Trade

Export on Elongated Credit Terms

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As per Section 2(e) of FEMA, Capital Account Transaction means atransactionwhich alters the assets or liabilities, including contingent liabilities.

i.e.

(a) Transfer or issue of any foreign security by a person resident in India oroutside in India;

(b) Transfer or issue of any security or foreign security by any branch, office or

agency in India of a person resident outside India;

(c) Any borrowing or lending in rupees in whatever form or by whatever namecalled between a person resident in India and a person resident outside India;

d) Deposits between persons resident in India and persons resident outside

India;


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(e) Export, import or holding of currency or currency notes;

(f ) Transfer of immovable property outside India, other than a lease not

exceeding five years, by a person resident in India;

(g) Giving of a guarantee or surety in respect of any debt, obligation or otherliability incurred :

(i) by a person resident in India and owed to a person resident outside India;

or(ii) by a person resident outside India.

TransferAs per Section 2(ze) of FEMA, transfer includes sale, purchase, exchange,

mortgage, gift, loan or any other form of transfer of right.


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Master Circulars

Master Circulars are consolidated instructions covering Act,Regulations, Rules, Circulars and Notifications, and are issued onJuly 01 every year with sunset clause of one year. Any changesaffected during the year are consolidated in next Master Circular.As at present, Reserve bank has issued following Master Circulars(indicative list):

Foreign Investment in India,

Direct Investment by Residents in Joint Venture (JV) / WhollyOwned Subsidiary(WOS) Abroad,

External Commercial Borrowings and Trade Credits,


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Export of Goods and Services,

Import of Goods and Services

Establishment of Liaison - Branch - Project Offices in India by ForeignEntities

Opening of Branch-Subsidiary-Joint Venture-Representative office.

Miscellaneous Remittances from India Facilities for Residents,

Remittance Facilities for Non-Resident Indians - Persons of Indian Origin -Foreign Nationals,

Non-Resident Ordinary Rupee (NRO) Account, and

Compounding of Contraventions under FEMA, 199


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Facilities available to NRI & PIO Bank Accounts: NRE A/C, FCNR A/C, NRO A/C

Repatriation Limit: upto USD 1 million per year from NROAccount

Housing Loans: can obtain Housing Loans for purchasingproperty in India

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Acquisition of Immovable Property

by NRI & PIO in India Permitted to purchase Residential and Commercial Property without

RBIS Permission

No Limitation on the Number / size of the Property

Purchase of Agricultural Land/ Plantation Property/ Farm Housesrequires RBI Permission

PIO should not be a citizen of Pakistan , Bangladesh , Sri Lanka ,Afghanistan , China , Iran , Nepal , Bhutan

Citizen of above Countries not permitted to acquire ImmovableProperty except by way of Lease for less than five years withoutpermission of RBI

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Acquisition by NRI & PIO in India Contd.Payment can be made by NRI / PIO out of

Funds remitted to India through normal banking channel

or

Funds held in NRE / FCNR / NRO account maintained inIndia

No payment can be made either by traveler'scheque or by foreign currency notes and also nopayment can be made outside India.

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Types of Accounts-

NRE (Non Resident External) Its a Rupee Account

Amount Principal as well Interest is freely repatriable

Transfer from/to FCNR A/c permitted

Any form of Account is maintainable Term Deposit permitted minimum for one and maximum

for three years

Nomination/ Joint Holding can be done in name of /with

non residentDisadvantages:

If Rupee depreciates savings of person counted in USDdepreciates

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Types of Accounts-

NRO (Non Resident Ordinary) Its a Rupee Account Current incomes in the account is freely repatriable Principal amount is repatriable upto USD 1 million Dollar

subject to applicable taxes Any form of Account is maintainable Term Deposit permitted minimum for one and maximum

for three years Nomination/ Joint Holding can be done in name of /with

resident alsoDisadvantages:If Rupee depreciates savings of person counted in USDdepreciates

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Foreign Currency Non Resident Account Maintained in Foreign Exchange

No loss or gain due to fluctuations

Both Principal & Interest are repatriable

NRI can open this account

Residents of Pakistan and Bangladesh requires prior RBI approval

Joint Account only with NRI is permissible

Can be opened with funds remitted from outside India through normalBanking Channels and those are of repatriable nature

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Foreign Currency Non Resident Account Maintained in Foreign Exchange

No loss or gain due to fluctuations

Both Principal & Interest are repatriable

NRI can open this account

Residents of Pakistan and Bangladesh requires prior RBI approval

Joint Account only with NRI is permissible

Can be opened with funds remitted from outside India through normalBanking Channels and those are of repatriable nature

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FOREIGN EXCHANGEFEMA prohibits: Dealing in or transfer of Foreign Exchange or Foreign Security to any

person other than Authorised Person

Make any payment otherwise through an authorized person to or forthe credit of any person resident outside India in any manner

receive otherwise through an authorized person, any payment by orderor on behalf of any person resident outside India in any manner.

enter into any financial transaction in India as consideration for or inassociation with acquisition or creation or transfer of a right to acquire,any asset outside India by any person

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Exemptions possession of foreign currency or foreign coins by anyperson up to such limit as the Reserve Bank may specify

foreign currency account held or operated by such person

or class of persons and the limit up to which the ReserveBank may specify

foreign exchange acquired or received before the 8th day ofJuly, 1947

foreign exchange held by a person resident in India up tosuch limit as the Reserve Bank may specify, if such foreignexchange was acquired by way of gift or inheritance from aperson referred above

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Exemptions Contd. foreign exchange acquired from employment, business,

trade, vocation, services, honorarium, gifts, inheritance orany other legitimate means up to such limit as the Reserve

Bank may specify

such other receipts in foreign exchange as the Reserve Bankmay specify

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RepatriationRepatriate to India" means bringing into India the realizedforeign exchange and-

the selling of such foreign exchange to an authorizedperson in India in exchange for rupees, or

the holding of realized amount in an account with anauthorized person in India to the extent notified by theReserve Bank,

It includes use of the realized amount for discharge of adebt or liability denominated in foreign exchange

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Manner of RepatriationIt can be done in the following manner:

Sell it to Authorised Person in India in exchange for Rupees

Retain in an account with an authorised dealer

Use it for discharge of a debt or liability denominated in

foreign exchange in the manner specified by RBI

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Surrender Any Foreign Exchange earned by a person other thanperson resident in India not used for permissible purposesshould be surrendered within 60 days of such acquisition /purchase

However if acquired for Foreign Travel within 90 days if theexchange is in currency and coins and 180 days if it is intravelers cheque or if the same is acquired by personresident in India

These provisions are not applicable to Foreign Currenciesof Nepal and Bhutan

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Manner of receipt in Foreign ExchangePayment for Export can be received :

in form of Draft, cheque, foreign currencynotes/travelers

cheque etc. provided the foreign currency so received issurrendered within the specified time period

by debit to FCNR /NRE Account

In rupees from the credit card servicing bank in Indiawhere payment is made via credit card

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Manner of receipt in Foreign Exchange

Contd. From a rupee account held in the name of exchange house with an

authorised dealer if the amount does not exceed Rs 2 lacs

In the form of precious metals

Payment can be received in cash from Foreign Travelers in India if thesame foreign exchange is duly surrendered

RBI also permits offsetting of export proceeds against import payables

etc. after obtaining prescribed certificate from CA/Cost Accountant inthis regard

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Manner of payment in Foreign Exchange Payment shall be made in a currency appropriate to the

country of shipment of goods

Drawal of Foreign Currency means drawal from anauthorised person and includes opening of letter of credit,use of international credit card etc. which has an effect ofcreating foreign exchange liability

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FEM (Transfer or Issue of any Foreign Security)Regulations, 2004.

Overseas investment in JV/WOS

By way of contribution to MOA of foreign entity, By purchase of existing shares,

Portfolio Investment

Investment by Indian Residents.

TRANSFER OR ISSUE OF ANY FOREIGN SECURITY BY APERSON RESIDENT IN INDIA.


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Master Circular dated 1.7.2010

Indian Party may make direct investment in JV/WOS

Automatic Route Approval Route

Indian Party

Company incorporated in India Registered partnership firm

Registered trust or society which has set up hospital in India for hospital Any other entity as notified by RBI More than one of the above shall together constitute the Indian Party

JV/WOS Abroad


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By listed Indian companies in equity, ratedbonds/fixed income securities of companies listed inforeign stock exchanges (not exceeding 50% of its net

worth of last audited Balance sheet). By Indian parties in equity or rated bonds of

companies having at least 10% shares in any listedcompany in India.

PORTFOLIO INVESTMENT


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Acquisition of foreign security by a person

resident in India General Permission

Approval Route

Liberalised Remittance Scheme


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Direct and Indirect Foreign

Investment in Indian Companies

Investment in Indian companies can be made both by non-resident as well as resident Indian entities. Any non-resident investment in an Indian company is direct foreign

investment. Investment by resident Indian entities couldagain comprise of both resident and non-residentinvestment. Thus, such an Indian company would haveindirect foreign investment if the Indian investing companyhas foreign investment in it.


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What does an FDI mean?FDI means investment by non-resident

entity/person resident outside India in thecapital of the Indian company under

Schedule 1 of FEMA .


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Who frames the FDI Policy?The Department of Industrial Policy and Promotion, Ministry of Commerce &

Industry, Government of India (DIPP) issues Circular on Consolidated FDIPolicy(FDI Circular), which was last updated on April 10, 2012

What are the Entry Routes for Investment?Investments can be made by non-residents in the equity shares/fully,compulsorily and mandatorily convertible debentures/ fully, compulsorily andmandatorily convertible preference shares of an Indian company, through theAutomatic Route and the Government Route. Under the Automatic Route, thenon-resident investor or the Indian company does not require any approvalfrom Government of India for the investment. Under the Government Route,prior approval of the Government of India is required.


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Who can invest in India? Person Resident outside India except of Pakistan Entity incorporated outside except Pakistan &

Bangladesh

Person Resident of Bangladesh & entities incorporatedthere can make investment in India in form of sharesand conv. Debentures with prior approval of RBI


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An FII may invest in the capital of an Indian Companyunder the Portfolio

Investment Scheme which limits the individual holding of anFII to 10% of the capital of the company and the aggregatelimit for FII investment to 24% of the capital of thecompany. This aggregate limit of 24% can be increased to

the sectoral cap/statutory ceiling, as applicable, by theIndian Company concerned through a resolution by itsBoard of Directors followed by a special resolution to thateffect by its General Body and subject to prior intimation toRBI. The aggregate FII investment, in the FDI and PortfolioInvestment Scheme, should be within the above caps.


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Circular 1 of 2012- Consolidated

FDI Policy Sector/Activity: (% of FDI Cap/Equity - Entry Route) Agriculture & Animal Husbandry: (100% - Automatic)a) Floriculture, Horticulture, Apiculture and Cultivation of

Vegetables & Mushrooms, under controlled conditions, asdefined.

b) Development and production of Seeds and plantingmaterial;

c) Animal Husbandry(including of breeding of dogs),Pisciculture, Aquaculture under controlled conditions, asdefined; and

d) Services related to agro and allied sectors.FDI is not allowed in any other agricultural sector/activity


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Tea Plantation: (100% - Government)

Tea sector including tea plantations.

FDI is not allowed in any other plantation sector/activity Mining: (100% - Automatic)

Petroleum & Natural Gas Sector: (100% -Automatic)

Insurance: (26% - Automatic)


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Manufacturing: (100% - Automatic)

Manufacture of items reserved for production in Microand Small Enterprises (MSEs as

defined under Micro, Small And Medium EnterprisesDevelopment Act, 2006)

Defence: (26% - Government)

Pharmaceuticals: Greenfield: 100% - Automatic

Existing companies: 100% - Government


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Private Security Agencies: (49% - Government)

Cash & Carry trading Wholesale Trading/ WholesaleTrading (including sourcing from MSEs): (100% -

Automatic) E-commerce activities; (100% - Automatic)

Single Brand product trading: (51% to 100% -Government)

Banking Private sector: (74 % including investmentby FIIs - Automatic up to 49%;

Government route beyond 49% and up to 74%)

Banking- Public Sector subject to Banking Companies

(Acquisition & Transfer ofUndertakings) Acts 1970/80. This ceiling (20%) is alsoapplicable to the State Bank of India and its associateBanks: (20% -FDI and Portfolio Investment Government)


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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 (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. AtomicEnergy and Railway Transport (other than Mass Rapid Transport Systems).


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Consolidated FDI Policy

Effective 1.4.2011. Circular no 1 of 2011 dated 31.3.2011.

Issued by Ministry of Commerce and Industry,

Department of Industrial Policy and Promotion. Consolidates into one all the prior

policies/regulations on FDI issued by RBI and DIPP.

Changes notified by RBI from time to time would

have to be complied with, in case of interpretation,the relevant FEMA notification shall prevail.

Issued with sunset clause of six months.


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Press Notes by MOC&I

Pricing norms for issue of shares to person residentoutside India.

Pricing guidelines for transfer of shares

Calculation of total foreign investment

Downstream investment by Indian co. owned andcontrolled by non-residents


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FDI Policy coverage Portfolio Investment by NRIs and PIOs. Portfolio Investment by FIIs.

Operating through an Indian company.

Investment in capital of partnership orproprietary concerns in India.

Acquisition of immovable property in India.

Sectors prohibited for FDI.

Sector specific policy for FDI FDI cap

Entry Route

Guidelines through Press notes.


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Prohibition on investment in India

Retail trading (except single brand productretailing)

Atomic energy

Lottery (all types), gambling, betting

Business of Chit fund and Nidhi company

Real estate business or construction of farm

houses Sectors not opened for private sector investment.

Trading in Transferable Development Rights.


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Sectoral caps

Agriculture Agriculture and animal husbandry, -Tea plantation

Industry Mining, -Coal and lignite

Manufacturing

Items reserved for MSEs, -Alcohol distillation and brewing Cigars and cigarette -Coffee and rubber processing

Defence industry, -Drug and pharmaceutical

Industrial explosives, -Power

Service Sector Advertising and films, -Civil aviation

Banking, -Broadcasting

Commodity exchange, - Insurance

NBFCs, - Petroleum and natural gas

Print media, - Telecommunication

P tf li I t t b FII


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Portfolio Investment by FIIs

A SEBI registered FII Through authorised dealer bank

Special Non-resident Rupee Account

Sub-account holding not to exceed 10% of the totalpaid up capital

Total holding of all FIIs put together not to exceed24%( can be increased by Co. subject to sectorallimits)

Allocation of investment in equity and debt in theratio of 70:30

Shall not engage in short selling.


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Portfolio Investment by NRIs

On repatriation basis

Payment for purchases to be made through normalbanking channel

Remittance from abroad/ NRE/FCNR accounts

Through broker only

On non-repatriation basis

Payment for purchases through normal banking channel Remittance from abroad/ NRE/FCNR/NRO accounts

Through broker` only


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OPERATING THROUGH AN INDIAN COMPANY

Mode of operations Joint venture with local partner

Wholly owned subsidiary company

A i i i T f f I bl


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Acquisition or Transfer of Immovable

Property in India FEM (Acquisition and Transfer of Immovable Property in India)

Regulations, 2000.

Indian citizen/ PIO resident outside India may acquire anyimmovable property other than agricultural/plantation/farmhouse even after taking loan in India. (PIO to to bring in funds

from outside India). Citizens of Bangladesh, Sri Lanka, Afghanistan, China, Nepal,

Iran and Bhutan can not acquire without prior approval of RBI.Foreign national can acquire property by way of inheritancefrom resident Indian.

Branch of foreign company can acquire for business purposesonly.

A declaration in Form IPI to be filed with RBI within 90 days.

I t t i Fi d i t


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Investment in Firm and proprietory concern

in India

FEM (Investment in Firm or Proprietory Concern inIndia) Regulations, 2000

No investment or repatriation basis without approval

from RBI by non-residents (other than NRI/PIO)

NRI/PIO investment on repatriation basis with priorapproval of RBI.


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Borrowing or Lending in Rupee

FEM (Borrowing and Lending in Rupees)Regulations, 2000.

A resident in India may borrow in Rupee on non-

repatriation basis from a NRI/PIO subject tocertain conditions.

A company may borrow in Rupee on repatriationor non-repatriation basis from a NRI/PIO by way

of NCDs subject to certain conditions. Restriction on use of borrowed funds for

agricultural/ plantation/ real estate business.


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GUARANTEES

FEM (Guarantees) Regulations, 2000.

Guarantees which may be given by an authoriseddealer.

Guarantees which may be given by persons other than

an authorised dealer.


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Forex derivative contracts

FEM ( Foreign Exchange Derivative Contracts)Regulations, 2000.

Permission to a person resident in India to enter

into a forex derivative contract-Schedule I. Permission to a person resident outside India to

enter into a forex derivative contracts- Schedule II.

Permission to a person resident in India to enterinto a currency futures

Commodity hedge.


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Foreign currency and foreign currency accounts

FEM (Deposit) Regulations, 2000

Accounts in India in Rupees as well as foreigncurrency by persons resident outside India

NRE Account

NRO Account

Foreign national resident in India can open a

normal resident account in RupeeAccount by branch/project office of person

resident outside India with RBI permission.


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Remittance Facilities to Non-Residents

Remittance of current income

Repatriation of sale proceeds of residential propertypurchased by NRI/PIO out of foreign exchange


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Master Circulars by RBI

Direct Investment by Residents in JV/WOS abroad

Foreign Investment in India

NRO Account

Remittance facilities for Non-resident Indians/ Person ofIndian Origin/Foreign nationals

Miscellaneous remittances from India- facilities forresidents

ECB and Trade Credits

marketing grp 3.pptx

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