Tag Archives: FDI

insurance companies – foreign investment

Insurance Regulatory Development Authority (IRDA) has made few changes to the Indian Insurance Companies (Foreign Investment) Rules, 2015. Some of the salient features are enumerated below.

Rule 4 has been amended: Rule 4 hitherto said “

An Indian Insurance Company shall ensure that its ownership and control shall remain at all
times in the hands of resident Indian entities

Now the amended version reads as follows:

“4. (1) In an Indian Insurance Company having foreign investment,—
(a) a majority of its directors,
(b) a majority of its Key Management Persons, and
(c) at least one among the chairperson of its Board, its managing director and its Chief Executive Officer, shall be Resident Indian Citizens.
Explanation.—For the purposes of this rule and rule 9, the expression “Key Management Person” shall have the same meaning as assigned to it in guidelines made by the Authority on corporate governance for insurers in India.
(2) Every Indian Insurance Company having foreign investment, existing on or before the date of commencement of the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2021, shall within one year from such commencement, comply with the requirements of the provisions of sub-rule (1).
4A. In an Indian Insurance Company having foreign investment exceeding forty-nine per cent.,—
(a) for a financial year for which dividend is paid on equity shares and for which at any time the solvency margin is less than 1.2 times the control level of solvency, not less than fifty per cent. of the net profit for the financial year shall be retained in general reserve; and
(b) not less than fifty per cent. of its directors shall be independent directors, unless the chairperson of its Board is an independent director, in which case at least one-third of its Board shall comprise of independent directors

Rule 5 which presently allowed FDI proposals in the insurance sector under automatic route upto 49% has been amended to provide for automatic approvals upto 74%.

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FDI on news through digital media

DPIIT (Department for Promotion of Industry & Internal Trade) clarification dated 16th October, 2020 on FDI policy for uploading/ streaming of news and current affairs through digital media.

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FDI in defence sector

Revised Press Note no. 4 dated 17th September, 2020 issued by Department for Promotion of Industry and Internal Trade.

  1. Present Position
  2. 5.2.6.1 Defence Industry subject to Industrial license under the Industries
    (Development & Regulation) Act, 1951 and Manufacturing of small
    arms and ammunition under the Arms Act, 1959
    100% Automatic up to 49% Government route beyond 49% wherever it is likely to result in access to modern technology or for other reasons to be recorded
    5.2.6.2 Other Conditions
    i. Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require Government approval.
    ii. Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.
    iii. Foreign investment in the sector is subject to security clearance and guidelines of the M/ o Defence.
    iv. Investee company should be structured to be self-sufficient in areas of product design and development. The investee/joint venture company along with manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.
  3. Revised Position
    The Government of India has reviewed the extant FDI policy in Defence sector and the policy will now be read as under:
    5.2.6 Defence Industry subject to Industrial license under the
    Industries (Development & Regulation) Act, 1951 and Manufacturing of small arms and ammunition under the Arms Act, 1959
    100% Automatic up to 74% Government route beyond 74% wherever it is likely to result in access to modern technology or for other reasons to be
    recorded
    5.2.6.2 Other Conditions
    i. FDI up to 74% under automatic route shall be permitted for companies seeking new industrial licenses.
    ii. Infusion of fresh foreign investment up to 49%, in a company not seeking industrial license or which already has Government approval for FDI in Defence, shall require mandatory submission of a declaration with the Ministry of Defence in case change in equity/shareholding pattern or transfer of stake by existing investor to new foreign investor for FDI up to 49%, within 30 days of such change. Proposals for raising FDI beyond 49% from such companies will require Government approval.
    iii. Licence applications will be considered by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.
    iv. Foreign investment in the sector is subject to security clearance by the Ministry of Home Affairs and as per guidelines of the Ministry of Defence.
    v. Investee company should be structured to be self-sufficient in the areas of product design and development. The investee/joint venture company along with the manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.
    vi. Foreign Investments in the Defence Sector shall be subject to scrutiny on grounds of National Security and Government reserves the right to review any foreign investment in the Defence Sector that affects or may affect national security.
  4. The above decision will take effect from the date of FEMA notification.

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Export credit

RBI has vide its circular dated 23rd May, 2020 here decided to increase maximum permissible period of pre shipment and post shipment export credit sanctioned by banks from one year to 15 months. Earlier they had allowed a period of 15 months for realisation and repatriation of export proceeds into India from the stipulated 9 months. This is obviously to mitigate the difficulties arising out of covid pandemic.

Surprisingly RBI has not given any leeway in filing of the form FC-GPR online which is an FDI form and which is supposed to be filed within one month of allotment, but RBI has chosen to fine companies for delay in the filing knowing well that with the covid pandemic, office functioning have been disrupted worldwide with the result that getting access to documents from the office has proven to be extremely difficult. And the form FC-GPR is a totally user unfriendly form in fact i would categorise the RBI FIRMS as the worst ever e-governance system of the government of India. The form asks for too much of documents which in the present circumstances proved very difficult to retrieve from offices which have been closed due to the covid pandemic.

Sometimes, i feel that RBI acts in a childish, amateurish fashion not realizing the problems of businesses.

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FDI – new rule

Ministry of Commerce, Department for promotion of trade & industry has laid down a new rule, whereby FDI has been restricted to a government approval route in case the FDI is from a country which shares a land border with India or where the beneficial owner of such FDI resides in such country which shares a land border with India. The restriction also applies to transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, wherein the beneficial ownership is with a resident in a country which shares land border with India, then such transfer will also require government approval.

Presently, there are 6 countries which share land border with India – Myanmar, Bangladesh, China, Pakistan, Nepal, Bhutan.

Click to access pn3_2020.pdf

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FDI in aviation sector

PIB press release dated 4th march 2020

To permit foreign investment upto 100% by those NRIs, who are Indian Nationals, in case of M/s Air India Ltd., the Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi has approved to amend the extant FDI Policy to permit Foreign Investment (s) in M/s Air India Ltd by NRIs, who are Indian Nationals, upto to 100% under automatic route.

As per the present FDI Policy, 100% FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic upto 49% and Government route beyond 49%).  However, for NRIs 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline.  Further, FDI is subject to the condition that Substantial Ownership & Effective Control (SOEC) shall be vested in Indian Nationals as per aircraft rules, 1937.  However, for M/s Air India Ltd., as per the present policy, foreign investment(s) in M/s Air India Ltd. Including that of foreign Airline(s) shall not exceed 49%, either directly or indirectly, subject to the condition that substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals.  Therefore, although 100% FDI is permitted under automatic route for NRIs in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline, it is restricted to be only 49% in case of M/s Air India.

 

Benefits:

In light of the proposed strategic disinvestment of 100% of M/s Air India Ltd. by the Government of India, M/s Air India Ltd. will have no residual Government ownership and will be completely privately owned, it has been decided that foreign investment in M/s Air India Ltd be brought on a level playing field with other scheduled airline operators.  The amendment in FDI policy will permit foreign investment in M/s Air India Ltd at par with other Scheduled Airline Operators i.e. upto 100% in M/s Air India Ltd by those NRIs, who are Indian Nationals.  The proposed changes in FDI Policy will enable foreign investment by NRIs into M/s Air India Ltd. upto 100%, under automatic route.

Above amendment to the FDI Policy are meant to liberalise and simplify the FDI policy to provide ease of doing business in the country.  Leading to largest FDI inflows and thereby contributing to growth of investment, income and employment.

 

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Relaxations in FDI policy

Vide DIPP Press Note

Radical Changes in FDI Regime in Construction Development Sector

Following changes have been made in the FDI policy on Construction Development sector:

i. Conditions of area restriction of floor area of 20,000 sq. mtrs in construction development projects and minimum capitalization of US $ 5 million to be brought in within the period of six months of the commencement of business, have been removed.

ii. Each phase of the construction development project would be considered as a separate project for the purposes of FDI policy.

iii. A foreign investor will be permitted to exit and repatriate foreign investment before the completion of project under automatic route, provided that a lock-in-period of three years, calculated with reference to each tranche of foreign investment has been completed.

Further, transfer of stake from one non-resident to another nonresident, without repatriation of investment will neither be subject to any lock-in period nor to any government approval. Nonetheless, exit is permitted at any time if project or trunk infrastructure is completed before the lock-in period.

iv. FDI is not permitted in an entity which is engaged or proposes to engage in real estate business, construction of farm houses and trading in transferable development rights (TDRs). Real Estate Business will mean as ‘dealing in land and immovable property with a view to earning profit therefrom and does not include development of townships, construction of residential/ commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships. Further, earning of rent/ income on lease of the property, not amounting to transfer, will not amount to real estate business.’

v. Condition of lock-in period will not apply to Hotels &Tourist Resorts, Hospitals, Special Economic Zones (SEZs), Educational Institutions, Old Age Homes and investment by NRIs.

vi. 100% FDI under automatic route is permitted in completed projects for operation and management of townships, malls/ shopping complexes and business centres. Consequent to foreign investment, transfer of ownership and/or control of the investee company from residents to non-residents is also permitted. However, there would be a lock-in-period of three years, calculated with reference to each tranche of FDI, and transfer of immovable property or part thereof is not permitted during this period.

vii.”Transfer”, in relation to FDI policy on the sector, includes,— (a) the sale, exchange or relinquishment of the asset ; or (b) the extinguishment of any rights therein ; or (c) the compulsory acquisition thereof under any law ; or (d) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or (e) any transaction, by acquiring shares in a company or by way of any agreement or any arrangement or in any other manner whatsoever, which has the effect of transferring, or enabling the enjoyment of, any immovable property.

2. Foreign Investment in Defence Sector up to 49% Under Automatic Route

As per extant FDI policy in the Defence Sector, foreign investment up to 49% is permitted under Government approval route. Foreign investment above 49% is also permitted, subject to approval of Cabinet Committee on Security (CCS) on case to case basis, wherever the investment is likely to result in access to modern and ‘stateof-art’ technology in the country. Portfolio investment and investment by FVCIs is restricted to 24% only. In this regard, the following changes have inter-alia been brought in the FDI policy on this sector:

i. Foreign investment up to 49% will be under automatic route.

ii. Portfolio investment and investment by FVCIs will be allowed up to permitted automatic route level of 49%.

iii. Proposals for foreign investment in excess of 49% will be considered by Foreign Investment Promotion Board (FIPB).

iv. In case of infusion of fresh foreign investment within the permitted automatic route level, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, Government approval will be required.

3. New Sectoral Caps & Entry Routes in Broadcasting Sector

FDI policy on Broadcasting sector has also been amended. New sectoral caps and entry routes are as under: Sector/Activity New Cap and Route 6.2.7.1.1

(1)Teleports(setting up of up-linking HUBs/Teleports);

(2)Direct to Home (DTH);

(3)Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability);

(4)Mobile TV;

(5)Headend-in-the Sky Broadcasting Service(HITS)

6.2.7.1.2 Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs)) 6.2.7.2 Broadcasting Content Services 6.2.7.2.1

100% (Up to 49% -Automatic route Beyond 49% – under Government route)

Terrestrial Broadcasting FM (FM Radio),

6.2.7.2.2 Up-linking of ‘News & Current Affairs’ TV Channels

49% Government Route

6.2.7.2.3 Up-linking of Non-‘News & Current Affairs’ TV Channels

100% Automatic route Down-linking of TV Channels

4. Full Fungibility of Foreign Investment Permitted in Banking- Private Sector

Government has decided to introduce full fungibility of foreign investment in Banking Private sector. Accordingly, FIIs/FPIs/QFIs, following due procedure, can now invest up to sectoral limit of 74%, provided that there is no change of control and management of the investee company.

5. 100% Foreign Investment Permitted in Coffee/Rubber/Cardamom/Palm Oil & Olive Oil Plantations

As per the present FDI policy on the Plantation sector, only tea plantation is open to foreign investment. In line with this sector, the government has decided to open certain other plantation activities namely; coffee, rubber, cardamom , palm oil tree and olive oil tree plantations also for 100% foreign investment. Foreign investment in the plantation sector would henceforth be under automatic route.

6. Investment by Companies/Trusts/Partnerships Owned & Controlled by NRIs on Non-Repatriation Basis to be Treated as Domestic Investment

Non-Resident Indians (NRIs) have special dispensation for investment in construction development and civil aviation sector. Further, investment made by Non-Resident Indians under schedule 4 of FEMA (Transfer or issue of Security by Persons Resident Outside India) Regulations is deemed to be domestic investment at par with the investment made by residents. In order to attract larger investments, which are possible through incorporated entities only, the special dispensation of NRIs has now been also extended to companies, trusts and partnership firms, which are incorporated outside India and are owned and controlled by NRIs. Henceforth, such entities owned and controlled by NRIs will be treated at par with NRIs for investment in India.

7. Permitting Manufacturers to Undertake Wholesale and/or Retail, Including Through E-Commerce Without Government Approval

It has been decided that a manufacturer will be permitted to sell its product through wholesale and/or retail, including through e-commerce without Government approval.

8. Review of FDI Policy Conditionalities for Single Brand Retail Trading and Permitting 100% FDI in Duty Free Shops

(i) Extant FDI policy on SBRT mandates that sourcing of 30% of the value of goods purchased would be reckoned from the date of receipt of FDI. It has now been decided that sourcing requirement has to be reckoned from the opening of first store. Further, it is seen that in certain high technology segments, it is not possible for retail entity to comply with the sourcing norms. To provide opportunity to such single brand entities, it has been decided that in case of ‘state-of-art’ and ‘cuttingedge technology’ sourcing norms can be relaxed subject to Government approval.

(ii)FDI policy on the SBRT provides that, retail trading, in any form, by means of ecommerce, would not be permissible. It has been decided that an entity which has been granted permission to undertake SBRT will be permitted to undertake ecommerce activities.

(iii) It has been clarified that Indian brands are equally eligible for undertaking SBRT. It has been decided that certain conditions of the FDI policy on the sector namely; products to be sold under the same brand internationally and investment by nonresident entity/ entities as the brand owner or under legally tenable agreement with the brand owner, will not be made applicable in case of FDI in Indian brands.

(iv) An Indian manufacturer is permitted to sell its own branded products in any manner i.e. wholesale, retail, including through e-commerce platforms. For the purposes of FDI Policy Indian manufacturer would be the investee company, which is the owner of the Indian brand and which manufactures in India, in terms of value, at least 70% of its products in house, and sources, at most 30% from Indian manufacturers. Further Indian brands should be owned and controlled by resident Indian citizens and/or companies, which are owned and controlled by resident Indian citizens.

Opening of Duty Free Shops for 100% FDI under Automatic Route 100%

FDI is now permitted under automatic route in Duty Free Shops located and operated in the Customs bonded areas.

9. Permitting Same Entity to Carry Out Both Wholesale and Single Brand Retail Trading

As per the FDI policy, in wholesale cash & carry activities, 100% foreign investment is permitted under the automatic route. FDI policy on this sector further provides that a wholesale/cash & carry trader cannot open retail shops to sell to the consumer directly. It has now been decided that a single entity will be permitted to undertake both the activities of single brand retail trading (SBRT) and wholesale with the condition that conditions of FDI policy on wholesale/ cash & carry and SBRT have to be complied by both the business arms separately.

10. 100% FDI in LLPs Permitted Under Automatic Route

FDI policy on Limited Liability Partnerships (LLP) has been amended to provide that investments in LLPs will not require Government approval. 100% FDI is now permitted under the automatic route in LLPs operating in sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance conditions. Further, the terms ‘ownership and ‘control’ with reference to LLPs have also been defined.

Downstream Investment

It has been decided that in line with companies, an LLP having foreign investment will be permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions. Further, for the purposes of FDI policy, the term ‘internal accruals’ has also been defined.

11. Opening up of FDI in Regional Air Transport Service

As per the present FDI policy, foreign investment up to 49% is allowed in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline (SOP). It has now been decided that Regional Air Transport Service (RSOP) is will also be eligible for foreign investment up to 49% under automatic route.

12. Enhancing Foreign Equity Caps in Non-Scheduled Air Transport, Ground Handling Services, Satellites- establishment and operation and Credit Information Companies

Foreign Equity caps of certain sectors viz. Non-Scheduled Air Transport Service, Ground Handling Services, Satellites- establishment and operation and Credit Information Companies have now been increased from 74% to 100%. Further, sectors other than Satellites- establishment and operation have been placed under the automatic route.

13. Companies without Operations Not to Require Government Approval for FDI for Undertaking Automatic Route Sector Activities

Approval requirements in respect of companies under operation have also been relaxed. It has now been decided that for infusion of foreign investment into an Indian company which does not have any operations and also does not have any downstream investments, Government approval would not be required, for undertaking activities which are under automatic route and without FDI-linked performance conditions, regardless of the amount or extent of foreign investment.

14. Establishment and Transfer of Ownership and Control of Indian Companies

As per the FDI policy establishment and ownership or control of the Indian company in sectors/activities with caps requires Government approval. This provision has now been amended to provide that approval of the Government will be required if the company concerned is operating in sectors/ activities which are under Government approval route rather than capped sectors. Further no approval of the Government is required for investment in automatic route sectors by way of swap of shares.

15. Simplification of Conditionalities

Certain conditions of FDI policy on Agriculture and Animal Husbandry, and Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities have been simplified.

16. Raising the Threshold Limit for Approval by Foreign Investment Promotion Board

As per the FDI policy Foreign Investment Promotion Board (FIPB) considers proposals having total foreign equity inflow up to Rs. 3000 crore and proposals above Rs. 3000 crore are placed for consideration of Cabinet Committee on Economic Affairs (CCEA). In order to achieve faster approvals on most of the proposals, it has been decided that the threshold limit for FIPB approval may be increased to 5000 crore.

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Industrial Licence for Defence Sector

The initial validity of Industrial License for Defence sector, as per Press Note 5 (2015 series), is presently seven years, further extendable upto 10 years.

In partial modification of the above mentioned Press Note, the initial validity of Industrial License for Defence Sector is being revised to 15 years, further extendable upto 18 years for existing as well as future Licenses. However, in case a license has already expired, the Licensee has to apply afresh for issue of license. This is being done as a measure to further promote ease of doing business, in view of the long gestation period of Defence contracts to mature.

Source: PIB Release

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FDI in While Label ATM operations

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi, has given its approval to permit Foreign Direct Investment (FDI), up to 100 percent, under the automatic route, in the activity of White Label ATM (WLA) Operations subject  to the following conditions:

  1. Any non-bank entity intending to set up WLAs should have a minimum net worth of Rs. 100 crore as per the latest financial year’s audited balance sheet, which is to be maintained at all times.
  2. In case the entity is also engaged in any other 18 Non-Banking Finance Companies (NBFC) activities, then the foreign investment in the company setting up WLA, shall also have to comply with minimum capitalization norms for foreign investments in NBFC activities, as provided in Para 6.2.18.8.2 of the Consolidated FDI Policy Circular 2015.

3.    FDI in the WLAO will be subject to specific criteria and guidelines issued by RBI vide Circular No. DPSS.CO.PD. No. 2298/02.10.002/2011-2012, as amended from time to time.

Background:

One of the main objectives of the Government is to achieve financial inclusion in the country. In this regard, ATMs have been leveraged for delivery of a wide variety of banking services to customers such as the facility of accessing their accounts for dispensing cash and to carry out other financial and non-financial transactions without the need for actually visiting their bank branch. While, there has been year-on-year growth in the number of ATMs, yet their deployment has been predominantly in Tier I & II centres. To expand the reach of ATMs in Tier III to VI centres, non-banks entities were also allowed to set up ATMs, and such ATMs are known as White Label ATMs.

Till date foreign investment in White Label ATM Operations (WLAO), was being allowed only through government approval route. This required some processing time and projects were consequently delayed, dissuading investors from investing in such critical areas.

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FDI reporting on e-Biz platform

RBI has enabled online filing of form FC-TRS on the e-Biz platform vide RBI notification dated 21st August, 2015.

Salient features are:

2. With a view to promoting the ease of reporting of transactions under foreign direct investment, the Reserve Bank of India (RBI), under the aegis of the e-Biz project of the Government of India has enabled online filing of the Foreign Currency Transfer of Shares (FCTRS) returns for reporting transfer of shares, convertible debentures, partly paid shares and warrants from a person resident in India to a person resident outside India or vice versa.

3. The design of the reporting platform enables the customer to login into the eBiz portal, download the reporting form (FCTRS), complete and then upload the same onto the portal using their digitally signed certificates. The Authorised Dealer Banks (ADs) will be required to download the completed forms, verify the contents from the available documents and if necessary, call for additional information from the customer and then upload the same for RBI to process and allot the Unique Identification Number (UIN). The FCTRS services of RBI will be made operational on the e-Biz platform from August 24, 2015. The user manual for this service is Annexed to this Circular.

4. It may be noted that for the present, the online reporting on the e-Biz platform is an additional facility to the Indian residents to undertake their FCTRS reporting and the manual system of reporting as prescribed in terms of A.P. (DIR Series) Circular No.6 dated July 18, 2014 would continue till further notice.

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NRI investments now considered as domestic investments

The Union Cabinet has allowed some changes in the FDI Policy whereby NRIs are considered on par with OCIs (Overseas Citizens of India) and PIOs (Persons of Indian Origin). Secondly all NRI investments on repatriable basis will be henceforth considered as domestic investments. Since NRI has been clubbed together with OCI and PIO, that means all investments by NRIs, OCIs, PIOs on repatriable basis will be considered as domestic investments. So all reporting requirements under the relevant FEMA regulations will not be necessary in case of NRI/ OCI/ PIO investments in future. The relevant notification to the FEMA regulations is awaited, but the gist of the Press Release is as given below:

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to review of Foreign Direct Investment (FDI) Policy on investments by Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs).  Following are the amendments approved by the Cabinet to incorporated in FDI policy:

(i)           By amending relevant para, definition of NRI will be as under:

‘Non-Resident Indian’ (NRI) means an individual resident outside India who is citizen of India or is an ‘Overseas Citizen of India’ cardholder within the meaning of section 7 (A) of the Citizenship Act, 1955. ‘Persons of Indian Origin’ cardholders registered as such under Notification No. 26011/4/98 F.I. dated 19.8.2002 issued by the Central Government are deemed to be “Overseas Citizen of India’ cardholders”.

(ii)   To provide that investment by NRIs on on-repatriable basis is domestic. Following new para is approved to be added:

‘Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.’

The decision that NRI includes OCI cardholders as well as PIO cardholders is meant to align the FDI policy with the stated policy of the Government to provide PIOs and OCIs parity with Non Resident Indians (NRIs) in respect of economic, financial and educational fields. Further the decision that NRIs investment under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment made by residents, is meant to provide clarity in the FDI policy as such investment is not included in the category of foreign investment. The measure is expected to result in increased investments across sectors and greater inflow of foreign exchange remittance leading to economic growth of the country.

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Insurance FDI – sector specific conditions

RBI has issued a circular dated 8th April, 2015 which is basically reiterating the DIPP Press Note no. 3(2015) series. The sector specific conditions are as follows:

RBI circular is available at this link i.e. http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9652&Mode=0

The extant FDI policy for Insurance sector has since been reviewed and further liberalized. Accordingly, with immediate effect, FDI in Insurance sector shall be permitted up to 49% subject to the revised conditions specified in the Press Note 3 (2015 Series) dated March 2, 2015. Also, a new activity viz. “Other Insurance Intermediaries appointed under the provisions of Insurance Regulatory and Development Authority Act, 1999 (41 of 1999)” has been included within the definition of ‘Insurance’.

3. Besides, the salient changes over the existing regime include:

  1. Foreign investment in Indian insurance company shall be limited up to forty-nine percent of the paid up equity capital;
  2. Foreign direct investment up to 26 percent shall be under automatic route and beyond 26 percent and up to 49 percent shall be with Government approval;
  3. Foreign investment in the sector is subject to compliance of the provisions of the Insurance Act, 1938 and the condition that companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority of India for undertaking insurance activities.
  4. An Indian insurance company shall ensure that its ownership and control remains at all times in the hands of resident Indian entities;
  5. Foreign portfolio investment in an Indian insurance company shall be governed by the provisions of Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 and provisions of the Securities Exchange Board of India (Foreign Portfolio Investors) Regulations.
  6. Any increase of foreign investment of an Indian insurance company shall be in accordance with the pricing guidelines specified by Reserve Bank of India under the Foreign Exchange Management Act, 1999.
  7. Terms ‘Control’, ‘Equity Share Capital’, ‘Foreign Direct Investment’ (FDI), ‘Foreign Investors’, ‘Foreign Portfolio Investment’, ‘Indian Insurance Company’, ‘Indian Company’, ‘Indian Control of an Indian Insurance Company’, ‘Indian Ownership’, ‘Non-resident Entity’, ‘Public Financial Institution’, ‘Resident Indian Citizen’, ‘Total Foreign Investment’ will have the same meaning as provided in Notification No. G.S.R 115 (E), dated 19th February, 2015

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Online FDI application

Department of Economic Affairs, Ministry of Finance launched here today a new upgraded and secure user friendly web site for filing and processing of applications for Foreign Direct Investment (FD) requiring Government approval. Presently the applications are filed online at http://www.fipbindia.com which had limited features and processing capabilities.
The new website http://fipb.gov.in, which becomes operational from today, shall henceforth receive applications regarding FDI in approval route sectors.
With the introduction of the new website, applicant will have to submit only SINGLE copy of the application for records with the FIPB Secretariat instead of 15-18 copies being  filed earlier.
The initiative is part of the Government’s ongoing efforts for Good Governance by enhancing transparency and accountability in its procedures and is a step towards Minimum Government and Maximum Governance. The innovative features of the website are:

 Global Reach -Apply from anywhere in the world! Access your status from anywhere in the world!
 E-communication – communication between the applicant, FIPB and other ministries/ departments is online.
 Quicker communication- All the correspondence including updates/ decisions are communicated through SMS/emails and thus eliminating physical delivery and loss of time due to postal delays.
 Less Paperwork – Single signed copy only needed (for record) instead of present multiple sets of the application.
 SMS/email alert- Regular alerts are sent to the applicants related to the queries raised by the administrative ministries, inclusion of the proposal in the scheduled FIPB meeting and decisions.
 Transparency and security- all transactions and correspondences are recorded online and are secure.
 Query module- Any doubts? A user can raise a query online which shall be replied by the relevant ministry

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FDI online reporting

RBI has rolled out online reporting of the foreign direct investment on an e-Biz platform linked to the NIC server. Presently, advance reporting and form FC-GPR is made online, but i guess latter more services will be pushed online. Also presently both manual and online will continue until further notice and it is for corporates to take advantage of the online facility. The relevant notification dated 12th Feb 2015 is available at http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9566&Mode=0

With a view to promoting the ease of reporting of transactions under foreign direct investment, the Reserve Bank of India, under the aegis of the e-Biz project of the Government of India has enabled the filing of the following returns with the Reserve Bank of India viz.
  • Advance Remittance Form (ARF) – used by the companies to report the foreign direct investment (FDI) inflow to RBI; and
  • FCGPR Form – which a company submits to RBI for reporting the issue of eligible instruments to the overseas investor against the above mentioned FDI inflow.
3. The design of the reporting platform enables the customer to login into the e-Biz portal, download the reporting forms (ARF and FCGPR), complete and then upload the same onto the portal using their digitally signed certificates. The Authorised Dealer Banks (ADs) will be required to download the completed forms, verify the contents from the available documents, if necessary by calling for additional information from the customer and then upload the same for RBI to process and allot the Unique Identification Number (UIN). It has been decided that the ARF and FCGPR services of RBI will be operational on the e-Biz platform from February 19, 2015. The user manual for the two services is Annexedto this Circular.
4. It may be noted that for the present, the online reporting on the e-Biz platform is an additional facility to the Indian companies to undertake their ARF and FCGPR reporting and the manual system of reporting as prescribed in terms of A.P. (DIR Series) Circular No. 102 dated February 11, 2014 would continue till further notice.
5. The ADs will be required to access the e-Biz portal (which is hosted on the National Informatics Centre (NIC) servers) using a Virtual Private Network (VPN) Account obtained from NIC. The financial aspects for obtaining/using the VPN accounts is being finalised in consultation with Government of India, DIPP and NIC. The same will be informed in due course.

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FDI in defence sector –

RBI has issued a circular dated 8th December, 2014 wherein certain sector specific conditions have been laid for the FDI in defence sector. The gist of the conditions are as follows:

The extant FDI policy for defence sector has since been reviewed. Department of Industrial Policy and Promotion (DIPP) has now provided a list of defence items as finalised by Department of Defence Production, Ministry of Defence and has clarified that items not in the list would not require industrial license for defence purposes. Dual use items, having military as well as civilian applications, other than those specially mentioned in the list, would also not require Industrial License from Defence angle. Department of Defence Production, Ministry of Defence, has finalised the ‘Security Manual for Licensed Defence Industry’.

Further, on a review, effective from August 26, 2014, foreign investment i.e. FDI, FIIs, RFPIs, NRIs, FVCIs and QFIs upto 49% under government route shall be permitted in defence sector subject to the conditions specified in the Press Note 7 (2014 Series) dated August 26, 2014. Portfolio investment (RFPI/FII/NRI/QFI) and FVCI investment will not exceed 24% of the total equity of the investee company. Portfolio investment will be under automatic route.

The listed investee company engaged in defence sector, in accordance with the guidance provided by the Press Note 7 (2014 Series) , shall immediately allocate limits for portfolio investment for RFPI (including QFI and FII), NRI (not exceeding 10%) and FVCI within the default portfolio investment limit of 24% being permitted now and approach Reserve Bank, Central Office, Foreign Investment Division, Mumbai so that allocated limits can be monitored by the Reserve Bank.

A copy of the RBI circular is found here i.e. http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=9391&Mode=0

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