Investment in Partnership/Proprietorship Concerns

RBI has granted general permission to NRIs (and not to OCBs) to make investments in the capital of proprietary/partnership concerns in India engaged in any industrial trading or commercial activity or establishment of schools or colleges on non- repatriation basis provided such concern is not involved in any agricultural/plantation activity or real estate business.

Investment in New Issues of Shares/Debentures of Indian Companies.

RBI has granted general permission to NRIs/OCBs to make investments in new right or bonus issue of shares or convertible debentures, upto 100% in an Indian company provided the company does not carry on agricultural, plantation activities or real estate business (excluding real estate development i.e. development of property and construction of houses). However, the concerned company has to file a declaration with RBI in Form DIN giving particulars of the investments within 90 days from the date of the investment.

Purchase of Shares of Indian Companies by Private Arrangement.

NRIs/OCBs require permission of RBI for purchase of shares of Indian companies by private arrangements. For this purpose, application in Form FNC-7 together with the non-repatriation undertaking in Form NRU may be submitted by the Non-resident investor to the RBI.

Investment in Mutual Funds Floated by Public Sector Banks/ Financial Institutions.

NRIs/OCBs are permitted to invest in Mutual Funds floated by Public Sector /Financial Institutions on non-repatriation basis provided the investment is made by inward remittance of foreign exchange or debit to the investor's NRE/FCNR accounts. NRI will be permitted to invest on non repatriation basis in money market mutual funds floated by commercial banks and public sector/private sector financial institutions. The concerned mutual funds should, however, obtain necessary permission from RBI mutual funds should, however, obtain necessary permission from RBI in Form ISD. The Non-resident investors do not need separate permission from Reserve Bank of India for the purpose.

Deposits with Companies

NRIs/OCBs are permitted, subject to RBI permission, to keep deposits with firms/companies in India on non-repatriation basis. No form is prescribed for such permission.

Investment in Commercial Paper

Reserve Bank of India has granted general permission to Indian companies for issue of Commercial Paper to NRIs. Indian companies may accordingly raise deposits from NRIs through issue of commercial paper without obtaining specific permission of RBI provided the amount invested will not be allowed to be repatriated outside India and commercial paper will not be transferable. Maturity proceeds shall be deposited in the NRO account of the Non-resident investor. OCBs are not permitted to invest in commercial paper.

Investment in Certificate of Deposits with Commercial Banks.

NRIs are permitted to place funds with Commercial Banks under the scheme of Certificate of Deposits (CD). Minimum investment shall be Rs.25 lakhs for a period ranging between 91 days to one year. Maturity proceeds should be paid by credit to NRO account of Non Resident Investor. OCBs are not permitted to invest in Certificate of Deposit.

Remittance of Income on

RBI now allows income from investment/deposits held on non-repatriation basis to be repatriated in a phased manner over a 3 year period.

Source: Indian Investment Centre

Last Update: August 31, 1998