Fdi circular 2014

Department of Industrial Policy and
Promotion
Ministry of Commerce and Industry
Government of India
Consolidated FDI Policy
(Effective from April 17, 2014)

1
Government of India
Ministry of Commerce & Industry
Department of Industrial Policy & Promotion
(FC Section)
Consolidated FDI Policy Circular of 2014
Subject: Consolidated FDI Policy.
The “Consolidated FDI Policy” is attached.
2. This circular will take effect from April 17, 2014.
(Anjali Prasad)
Additional Secretary to the Government of India
D/o IPP F. No. 5(1)/2014-FC.I Dated the 17.04.2014
Copy forwarded to:
1. Press Information Officer, Press Information Bureau- for giving wide publicity to the
above circular.
2. NIC, DIPP for uploading the circular on DIPP's website.
3. Department of Economic Affairs, Ministry of Finance, New Delhi.
4. Reserve Bank of India, Mumbai.
5. Hindi Section for Hindi Translation.

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Index
Description Page
Chapter-1 Intent and Objective 5
1.1 Intent and Objective 5
Chapter-2 Definitions 6
2.1 Definitions 6
Chapter-3 General Conditions on FDI 12
3.1 Who Can Invest in India? 12
3.2. Entities into which FDI can be made 14
3.3 Types of Instruments 16
3.4 Issue/Transfer of Shares 19
3.5 Specific Conditions in Certain Cases 26
3.6 Entry Routes for Investment 29
3.7 Caps on Investments 30
3.8 Entry Conditions on Investment 30
3.9 Other Conditions on Investment Besides Entry Conditions 30
3.10 Foreign Investment into/downstream Investment by Indian Companies 31
Chapter-4 Calculation of Foreign Investment 33
4.1 Total Foreign Investment i.e. Direct and Indirect Foreign Investment in Indian
Companies
33
Chapter-5 Foreign Investment Promotion Board (FIPB) 37
5.1 Constitution of FIPB 37
5.2 Levels of Approvals for Cases under Government Route 37
5.3 Cases Which do not Require Fresh Approval 37
5.4 Online Filing of Applications for FIPB/Government’s Approval 38
Chapter-6 Sector Specific Conditions on FDI 39
6.1 Prohibited Sectors 39
6.2 Permitted Sectors 39

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Agriculture 40
6.2.1 Agriculture & Animal Husbandry 40
6.2.2 Tea Plantation 42
Mining and Petroleum & Natural Gas 42
6.2.3 Mining 42
6.2.4 Petroleum & Natural Gas 44
Manufacturing 45
6.2.5 Manufacture of items reserved for production in Micro and Small Enterprises
(MSEs)
45
6.2.6 Defence 45
Services Sector 48
Information Services 48
6.2.7 Broadcasting 48
6.2.8 Print Media 53
6.2.9 Civil Aviation 54
6.2.10 Courier Services 57
6.2.11 Construction Development: Townships, Housing, Built-up infrastructure 57
6.2.12 Industrial Parks- new and existing 59
6.2.13 Satellites- establishment and operation 60
6.2.14 Private Security Agencies 60
6.2.15 Telecom Services 60
6.2.16 Trading 61
Financial Services 67
6.2.17 Financial Services 67
6.2.17.1 Asset Reconstruction Companies 67
6.2.17.2 Banking- Private Sector 68
6.2.17.3 Banking- Public Sector 70
6.2.17.4 Commodity Exchanges 70
6.2.17.5 Credit Information Companies (CIC) 71
6.2.17.6 Infrastructure Company in the Securities Market 72
6.2.17.7 Insurance 72
6.2.17.8 Non-Banking Finance Companies (NBFC) 73

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Others 75
6.2.18 Pharmaceuticals 75
6.2.19 Power Exchanges 75
Chapter-7 Remittance, Reporting and Violation 77
7.1 Remittance and Repatriation 77
7.2 Reporting of FDI 78
7.3 Adherence to Guidelines/Orders and Consequences of Violation 80
Annexures
Annex-1 Form FC-GPR 83
Annex-2 Terms and conditions for transfer of capital instruments from resident to non-
resident and vice-versa
91
Annex-3 Documents to be submitted by a person resident in India for transfer of shares to a
person resident outside India by way of gift
95
Annex-4 Definition of "relative" as given in Section 6 of Companies Act, 1956 96
Annex-5 Report by the Indian company receiving amount of consideration for issue of
shares/convertible debentures under the FDI scheme
97
Annex-6 Know Your Customer (KYC) Form in respect of the non-resident investor 99
Annex-7 Form Annual Return on Foreign Liabilities and Assets 100
Annex-8 Form FC-TRS 108
Annex-9 Form DR 115
Annex-10 Form DR - Quarterly 117
Annex-11 ‘No Non-Compete Clause’ Certificate 118

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Chapter 1: Intent and Objective
1.1 Intent and Objective
1.1.1 It is the intent and objective of the Government of India to attract and promote foreign
direct investment in order to supplement domestic capital, technology and skills, for
accelerated economic growth. Foreign Direct Investment, as distinguished from
portfolio investment, has the connotation of establishing a ‘lasting interest’ in an
enterprise that is resident in an economy other than that of the investor.
1.1.2 The Government has put in place a policy framework on Foreign Direct Investment,
which is transparent, predictable and easily comprehensible. This framework is
embodied in the Circular on Consolidated FDI Policy, which may be updated every
year, to capture and keep pace with the regulatory changes, effected in the interregnum.
The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce &
Industry, Government of India makes policy pronouncements on FDI through Press
Notes/Press Releases which are notified by the Reserve Bank of India as amendments
to the Foreign Exchange Management (Transfer or Issue of Security by Persons
Resident Outside India) Regulations, 2000 (notification No.FEMA 20/2000-RB dated
May 3, 2000). These notifications take effect from the date of issue of Press Notes/
Press Releases, unless specified otherwise therein. In case of any conflict, the relevant
FEMA Notification will prevail. The procedural instructions are issued by the Reserve
Bank of India vide A.P. (DIR Series) Circulars. The regulatory framework, over a
period of time, thus, consists of Acts, Regulations, Press Notes, Press Releases,
Clarifications, etc.
1.1.3 The present consolidation subsumes and supersedes all Press Notes/Press
Releases/Clarifications/Circulars issued by DIPP, which were in force as on April 16,
2014 and reflects the FDI Policy as on April 17, 2014. This Circular accordingly will
take effect from April 17, 2014 and will remain in force until superseded in totality or
in part thereof. Reference to any statute or legislation made in this Circular shall
include modifications, amendments or re-enactments thereof.
1.1.4 Notwithstanding the rescission of earlier Press Notes/Press
Releases/Clarifications/Circulars, anything done or any action taken or purported to
have been done or taken under the rescinded Press Notes/Press
Releases/Clarifications/Circulars prior to April 17, 2014, shall, in so far as it is not
inconsistent with those Press Notes/Press Releases/Clarifications/Circulars, be deemed
to have been done or taken under the corresponding provisions of this circular and shall
be valid and effective.

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Chapter 2: Definitions
2.1 Definitions
2.1.1 ‘AD Category-I Bank’ means a bank (Scheduled Commercial, State or Urban
Cooperative) which is authorized under Section 10(1) of FEMA to undertake all
current and capital account transactions according to the directions issued by
the RBI from time to time.
2.1.2 ‘Authorized Bank’ means a bank including a co-operative bank (other than an
authorized dealer) authorized by the Reserve Bank to maintain an account of a
person resident outside India.
2.1.3 ‘Authorized Dealer’ means a person authorized as an authorized dealer under
sub-section (1) of section 10 of FEMA.
2.1.4 ‘Authorized Person’ means an authorized dealer, money changer, offshore
banking unit or any other person for the time being authorized under sub-
section (a) of section 10 of FEMA to deal in foreign exchange or foreign
securities.
2.1.5 ‘Capital’ means equity shares; fully, compulsorily & mandatorily convertible
preference shares; fully, compulsorily & mandatorily convertible debentures.
Note: Warrants and partly paid shares can be issued to person/(s) resident
outside India only after approval through the Government route1
.
2.1.6 ‘Capital account transaction’ means a transaction which alters the assets or
liabilities, including contingent liabilities, outside India of persons resident in
India or assets or liabilities in India of persons resident outside India, and
includes transactions referred to in sub-section (3) of section 6 of FEMA.
2.1.7 ‘Control’ shall include the right to appoint a majority of the directors or to
control the management or policy decisions including by virtue of their
shareholding or management rights or shareholders agreements or voting
agreements.
2.1.8 ‘Depository Receipt’ (DR) means a negotiable security issued outside India by
a Depository bank, on behalf of an Indian company, which represent the local
Rupee denominated equity shares of the company held as deposit by a
Custodian bank in India. DRs are traded on Stock Exchanges in the US,
Singapore, Luxembourg, etc. DRs listed and traded in the US markets are
known as American Depository Receipts (ADRs) and those listed and traded
1
Review of FDI policy to include warrants and partly-paid shares is under consideration of the Government.

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anywhere/elsewhere are known as Global Depository Receipts (GDRs).
2.1.9 ‘Erstwhile Overseas Corporate Body’ (OCB) means a company, partnership
firm, society and other corporate body owned directly or indirectly to the extent
of at least sixty percent by non-resident Indians and includes overseas trust in
which not less than sixty percent beneficial interest is held by non-resident
Indians directly or indirectly but irrevocably and which was in existence on the
date of commencement of the Foreign Exchange Management (Withdrawal of
General Permission to Overseas Corporate Bodies (OCBs) ) Regulations, 2003
(the Regulations) and immediately prior to such commencement was eligible to
undertake transactions pursuant to the general permission granted under the
Regulations.
2.1.10 ‘Foreign Currency Convertible Bond’ (FCCB) means a bond issued by an
Indian company expressed in foreign currency, the principal and interest of
which is payable in foreign currency. FCCBs are issued in accordance with the
Foreign Currency Convertible Bonds and ordinary shares (through depository
receipt mechanism) Scheme, 1993 and subscribed by a non-resident entity in
foreign currency and convertible into ordinary shares of the issuing company in
any manner, either in whole, or in part.
2.1.11 ‘FDI’ means investment by non-resident entity/person resident outside India in
the capital of an Indian company under Schedule 1 of Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2000 (Original notification is available at
http://rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=174 Subsequent
amendment notifications are available at
http://rbi.org.in/Scripts/BS_FemaNotifications.aspx).
2.1.12 ‘FEMA’ means the Foreign Exchange Management Act, 1999 (42 of 1999)
(http://finmin.nic.in/law/index.asp).
2.1.13 ‘FIPB’ means the Foreign Investment Promotion Board constituted by the
Government of India.
2.1.14 ‘Foreign Institutional Investor’(FII) means an entity established or
incorporated outside India which proposes to make investment in India and
which is registered as a FII in accordance with the Securities and Exchange
Board of India (SEBI) (Foreign Institutional Investor) Regulations 1995.

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2.1.15 ‘Foreign Portfolio Investor’(FPI)2
means a person registered in accordance
with the provisions of Securities and Exchange Board of India (SEBI) (Foreign
Portfolio Investors) Regulations, 2014, as amended from time to time.
2.1.16 ‘Foreign Venture Capital Investor’ (FVCI) means an investor incorporated
and established outside India, which is registered under the Securities and
Exchange Board of India (Foreign Venture Capital Investor) Regulations, 2000
{SEBI(FVCI) Regulations} and proposes to make investment in accordance
with these Regulations.
2.1.17 ‘Government route’ means that investment in the capital of resident entities by
non-resident entities can be made only with the prior approval of Government
(FIPB, Department of Economic Affairs (DEA), Ministry of Finance or
Department of Industrial Policy & Promotion, as the case may be).
2.1.18 ‘Group Company’ means two or more enterprises which, directly or
indirectly, are in a position to:
(i) exercise twenty-six percent or more of voting rights in other enterprise;
or
(ii) appoint more than fifty percent of members of board of directors in the
other enterprise.
2.1.19 ‘Holding Company’ would have the same meaning as defined in Companies
Act, 1956.
2.1.20 ‘Indian Company’ means a company incorporated in India under the
Companies Act, 1956.
2.1.21 ‘Indian Venture Capital Undertaking’ (IVCU) means an Indian company:
(i) whose shares are not listed in a recognised stock exchange in India;
(ii) which is engaged in the business of providing services, production or
manufacture of articles or things, but does not include such activities or sectors
which are specified in the negative list by the SEBI, with approval of Central
Government, by notification in the Official Gazette in this behalf.
2.1.22 ‘Investing Company’ means an Indian Company holding only investments in
other Indian company/(ies), directly or indirectly, other than for trading of such
holdings/securities.
2
For details please refer to SEBI (FPI) Regulations, 2014 and the Foreign Exchange Management (Transfer or Issue of Security
by a Person Resident outside India) (Second Amendment) Regulations, 2014 notified vide Notification No. FEMA.297/2014-
RB dated March 13, 2014 and A.P. (DIR Series) Circular No.112 dated March 25, 2014. Wherever the words or acronyms FPI,
FII or QFI occur in this document, the meaning and implications must be according to the above Regulations/Notifications,
particularly during the transition period as prescribed in these Regulations.

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2.1.23 ‘Investment on repatriable basis’ means investment, the sale proceeds of
which, net of taxes, are eligible to be repatriated out of India and the expression
‘investment on non-repatriable basis’ shall be construed accordingly.
2.1.24 ‘Joint Venture’ (JV) means an Indian entity incorporated in accordance with
the laws and regulations in India in whose capital a non-resident entity makes
an investment.
2.1.25 ‘Limited Liability Partnership’ means a Limited Liability Partnership firm,
formed and registered under the Limited Liability Partnership Act, 2008.
2.1.26 ‘Non-resident entity’ means a ‘person resident outside India’ as defined under
FEMA.
2.1.27 ‘Non-Resident Indian’ (NRI) means an individual resident outside India who
is a citizen of India or is a person of Indian origin.
2.1.28 A company is considered as 'Owned’ by resident Indian citizens if more than
50% of the capital in it is beneficially owned by resident Indian citizens and / or
Indian companies, which are ultimately owned and controlled by resident
Indian citizens;
2.1.29 ‘Person’ includes-
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals whether incorporated or
not,
(vi) every artificial juridical person, not falling within any of the preceding
sub-clauses, and
(vii) any agency, office, or branch owned or controlled by such person.
2.1.30 ‘Person of Indian Origin’ (PIO) means a citizen of any country other than
Bangladesh or Pakistan, if
(i) he at any time held Indian Passport; or
(ii) he or either of his parents or any of his grandparents was a citizen of
India by virtue of the Constitution of India or the Citizenship Act, 1955
(57 of 1955); or
(iii) the person is a spouse of an Indian citizen or a person referred to in sub-
clause (i) or (ii).

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2.1.31 ‘Person resident in India’ means-
(i) a person residing in India for more than one hundred and eighty-two
days during the course of the preceding financial year but does not
include-
(A)A person who has gone out of India or who stays outside India, in
either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation outside
India, or
(c) for any other purpose, in such circumstances as would indicate
his intention to stay outside India for an uncertain period;
(B) A person who has come to or stays in India, in either case, otherwise
than-
(a) for or on taking up employment in India; or
(b) for carrying on in India a business or vocation in India, or
(c) for any other purpose, in such circumstances as would indicate
his intention to stay in India for an uncertain period;
(ii) any person or body corporate registered or incorporated in India,
(iii) an office, branch or agency in India owned or controlled by a person
resident outside India,
(iv)an office, branch or agency outside India owned or controlled by a
person resident in India.
2.1.32 ‘Person resident outside India’ means a person who is not a Person resident in
India.
2.1.33 ‘Portfolio Investment Scheme’ means the Portfolio Investment Scheme
referred to in Schedules 2, 2A & 3 of FEMA (Transfer or Issue of Security by a
Person Resident Outside India) Regulations, 2000.
2.1.34 ‘A Qualified Foreign Investor’ (QFI) means a non-resident investor (other
than SEBI registered FII and SEBI registered FVCI) who meets the KYC
requirements of SEBI for the purpose of making investments in accordance
with the regulations/orders/circulars of RBI/SEBI.
2.1.35 ‘RBI’ means the Reserve Bank of India established under the Reserve Bank of
India Act, 1934.
2.1.36 ‘Resident Entity’ means ‘Person resident in India’ excluding an individual.
2.1.37 ‘Resident Indian Citizen’ shall be interpreted in line with the definition of

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‘person resident in India’ as per FEMA, 1999, read in conjunction with the
Indian Citizenship Act, 1955.
2.1.38 ‘SEBI’ means the Securities and Exchange Board of India established under the
Securities and Exchange Board of India Act, 1992.
2.1.39 ‘SEZ’ means a Special Economic Zone as defined in Special Economic Zone
Act, 2005.
2.1.40 ‘SIA’ means Secretariat of Industrial Assistance in DIPP, Ministry of
Commerce & Industry, Government of India.
2.1.41 ‘Transferable Development Rights’ (TDR) means certificates issued in
respect of category of land acquired for public purposes either by the Central or
State Government in consideration of surrender of land by the owner without
monetary compensation, which are transferable in part or whole.
2.1.42 ‘Venture Capital Fund’ (VCF) means a Fund established in the form of a
trust, a company including a body corporate and registered under Securities and
Exchange Board of India (Venture Capital Fund) Regulations, 1996, which
(i) has a dedicated pool of capital;
(ii) raised in the manner specified under the Regulations; and
(iii) invests in accordance with the Regulations.

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Chapter 3: General Conditions on FDI
3.1 Who Can Invest in India?
3.1.1 A non-resident entity can invest in India, subject to the FDI Policy except in those
sectors/activities which are prohibited. However, a citizen of Bangladesh or an entity
incorporated in Bangladesh can invest only under the Government route. Further, a citizen
of Pakistan or an entity incorporated in Pakistan can invest, only under the Government
route, in sectors/activities other than defence, space and atomic energy and
sectors/activities prohibited for foreign investment.
3.1.2 NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted
to invest in the capital of Indian companies on repatriation basis, subject to the condition
that the amount of consideration for such investment shall be paid only by way of inward
remittance in free foreign exchange through normal banking channels.
3.1.3 OCBs have been derecognized as a class of investors in India with effect from September
16, 2003. Erstwhile OCBs which are incorporated outside India and are not under the
adverse notice of RBI can make fresh investments under FDI Policy as incorporated non-
resident entities, with the prior approval of Government of India if the investment is
through Government route; and with the prior approval of RBI if the investment is
through Automatic route.
3.1.4 (i) An FII/FPI may invest in the capital of an Indian company under the Portfolio
Investment Scheme which limits the individual holding of an FII/FPI below 10% of the
capital of the company and the aggregate limit for FII/FPI/QFI investment to 24% of
the capital of the company. This aggregate limit of 24% can be increased to the sectoral
cap/statutory ceiling, as applicable, by the Indian company concerned through a
resolution by its Board of Directors followed by a special resolution to that effect by its
General Body and subject to prior intimation to RBI. The aggregate FII/FPI/QFI
investment, in the FDI and Portfolio Investment Scheme, should be within the above
caps.
(ii) An Indian company which has issued shares to FIIs/FPIs under the FDI Policy for
which the payment has been received directly into company’s account should report
these figures separately under item no. 5 of Form FC-GPR (Annex-1).
(iii) A daily statement in respect of all transactions (except derivative trade) has to be
submitted by the custodian bank in floppy/soft copy in the prescribed format directly to
RBI and also uploaded directly on the OFRS web site
(https://secweb.rbi.org.in/ORFSMainWeb/Login.jsp).

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3.1.5 Only registered FIIs/FPIs and NRIs as per Schedules 2, 2A and 3 respectively of
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2000, can invest/trade through a registered broker in the
capital of Indian Companies on recognised Indian Stock Exchanges.
3.1.6 A SEBI registered Foreign Venture Capital Investor (FVCI) may contribute up to
100% of the capital of an Indian Venture Capital Undertaking (IVCU) and may also set
up a domestic asset management company to manage the fund. All such investments
can be made under the automatic route in terms of Schedule 6 to Notification No.
FEMA 20. A SEBI registered FVCI can invest in a domestic venture capital fund
registered under the SEBI (Venture Capital Fund) Regulations, 1996. Such investments
would also be subject to the extant FEMA regulations and extant FDI policy including
sectoral caps, etc. SEBI registered FVCIs are also allowed to invest under the FDI
Scheme, as non-resident entities, in other companies, subject to FDI Policy and FEMA
regulations.
Further, FVCIs are allowed to invest in the eligible securities (equity, equity linked
instruments, debt, debt instruments, debentures of an IVCU or VCF, units of
schemes/funds set up by a VCF) by way of private arrangement/purchase from a third
party also, subject to terms and conditions as stipulated in Schedule 6 of Notification
No. FEMA 20 / 2000 -RB dated May 3, 2000 as amended from time to time. It is also
being clarified that SEBI registered FVCIs would also be allowed to invest in securities
on a recognized stock exchange subject to the provisions of the SEBI (FVCI)
Regulations, 2000, as amended from time to time, as well as the terms and conditions
stipulated therein.
3.1.7 Qualified Foreign Investors (QFls) investment in equity shares:
3.1.7.1 QFls are permitted to invest through SEBI registered Depository Participants (DPs)
only in equity shares of listed Indian companies through recognized brokers on
recognized stock exchanges in India as well as in equity shares of Indian companies
which are offered to public in India in terms of the relevant and applicable SEBI
guidelines/regulations. QFls are also permitted to acquire equity shares by way of right
shares, bonus shares or equity shares on account of stock split/consolidation or equity
shares on account of amalgamation, demerger or such corporate actions subject to the
prescribed investment limits. QFIs are allowed to sell the equity shares so acquired
subject to the relevant SEBI guidelines.
3.1.7.2 The individual and aggregate investment limits for the QFls shall be 5% and 10%
respectively of the paid up capital of an Indian company. These limits shall be within

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FPI aggregate limits. Further, wherever 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.
3.1.7.3 Dividend payments on equity shares held by QFls can either be directly remitted to the
designated overseas bank accounts of the QFIs or credited to the single non-interest
bearing Rupee account.
3.2 Entities into which FDI can be made
3.2.1 FDI in an Indian Company:Indian companies can issue capital against FDI.
3.2.2 FDI in Partnership Firm/Proprietary Concern:
(i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India
can invest in the capital of a firm or a proprietary concern in India on non-repatriation
basis provided;
(a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO
account maintained with Authorized Dealers/Authorized banks.
(b) The firm or proprietary concern is not engaged in any agricultural/plantation or
real estate business or print media sector.
(c) Amount invested shall not be eligible for repatriation outside India.
(ii) Investments with repatriation option: NRIs/PIO may seek prior permission of Reserve
Bank for investment in sole proprietorship concerns/partnership firms with repatriation
option. The application will be decided in consultation with the Government of India.
(iii) Investment by non-residents other than NRIs/PIO: A person resident outside India
other than NRIs/PIO may make an application and seek prior approval of Reserve
Bank for making investment in the capital of a firm or a proprietorship concern or any
association of persons in India. The application will be decided in consultation with the
Government of India.
(iv) Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern
engaged in any agricultural/plantation activity or real estate business or print media.
3.2.3 FDI in Venture Capital Fund (VCF): FVCIs are allowed to invest in Indian Venture
Capital Undertakings (IVCUs)/Venture Capital Funds (VCFs)/other companies, as
stated in paragraph 3.1.6 of this Circular. If a domestic VCF is set up as a trust, a
person resident outside India (non-resident entity/individual including an NRI) can
invest in such domestic VCF subject to approval of the FIPB. However, if a domestic
VCF is set-up as an incorporated company under the Companies Act, 1956, then a
person resident outside India (non-resident entity/individual including an NRI) can
invest in such domestic VCF under the automatic route of FDI Scheme, subject to the

15
pricing guidelines, reporting requirements, mode of payment, minimum capitalization
norms, etc.
3.2.4 FDI in Trusts: FDI in Trusts other than VCF is not permitted.
3.2.5 FDI in Limited Liability Partnerships (LLPs): FDI in LLPs is permitted, subject to
the following conditions:
(a) FDI will be allowed, through the Government approval route, only in LLPs
operating in sectors/activities where 100% FDI is allowed, through the
automatic route and there are no FDI-linked performance conditions (such as
'Non Banking Finance Companies' or 'Development of Townships, Housing,
Built-up infrastructure and Construction-development projects' etc.).
(b) LLPs with FDI will not be allowed to operate in agricultural/plantation activity,
print media or real estate business.
(c) An Indian company, having FDI, will be permitted to make downstream
investment in an LLP only if both-the company, as well as the LLP- are
operating in sectors where 100% FDI is allowed, through the automatic route
and there are no FDI-linked performance conditions.
(d) LLPs with FDI will not be eligible to make any downstream investments.
(e) Foreign Capital participation in LLPs will be allowed only by way of cash
consideration, received by inward remittance, through normal banking channels
or by debit to NRE/FCNR account of the person concerned, maintained with an
authorized dealer/authorized bank.
(f) Investment in LLPs by Foreign Portfolio Investors (FPIs) and Foreign Venture
Capital Investors (FVCIs) will not be permitted. LLPs will also not be
permitted to avail External Commercial Borrowings (ECBs).
(g) In case the LLP with FDI has a body corporate that is a designated partner or
nominates an individual to act as a designated partner in accordance with the
provisions of Section 7 of the LLP Act, 2008, such a body corporate should
only be a company registered in India under the Companies Act, 1956 and not
any other body, such as an LLP or a trust.
(h) For such LLPs, the designated partner "resident in India", as defined under the
'Explanation' to Section 7(1) of the LLP Act, 2008, would also have to satisfy
the definition of "person resident in India", as prescribed under Section 2(v)(i)
of the Foreign Exchange Management Act, 1999.

16
(i) The designated partners will be responsible for compliance with all the above
conditions and also liable for all penalties imposed on the LLP for their
contravention, if any.
(j) Conversion of a company with FDI, into an LLP, will be allowed only if the
above stipulations (except clause 3.2.5(e) which would be optional in case of a
company) are met and with the prior approval of FIPB/Government.
3.2.6 FDI in other Entities: FDI in resident entities other than those mentioned above is not
permitted.
3.3 Types of Instruments
3.3.1 Indian companies can issue equity shares, fully, compulsorily and mandatorily
convertible debentures and fully, compulsorily and mandatorily convertible preference
shares subject to pricing guidelines/valuation norms prescribed under FEMA
Regulations. The price/conversion formula of convertible capital instruments should be
determined upfront at the time of issue of the instruments. The price at the time of
conversion should not in any case be lower than the fair value worked out, at the time
of issuance of such instruments, in accordance with the extant FEMA regulations [the
DCF method of valuation for the unlisted companies and valuation in terms of SEBI
(ICDR) Regulations, for the listed companies].
3.3.1.1 Equity shares, fully, compulsorily and mandatorily convertible debentures and fully,
compulsorily and mandatorily convertible preference shares without any option/right to
exit at an assured price shall be reckoned as eligible capital instruments.
3.3.1.2 Optionality clauses are allowed in equity shares, fully, compulsorily and mandatorily
convertible debentures and fully, compulsorily and mandatorily convertible preference
shares under FDI scheme, subject to the following conditions:
(a) There is a minimum lock-in period of one year or a minimum lock-in period as
prescribed under FDI Regulations, whichever is higher (e.g. defence and
construction development sector where the lock-in period of three years has
been prescribed). The lock-in period shall be effective from the date of
allotment of such capital instruments or as prescribed under the FDI Policy, e.g
for defence and construction development sectors, etc.
(b) After the lock-in period, as applicable above, and subject to FDI Policy
provisions, if any, in this regard, the non-resident investor exercising
option/right shall be eligible to exit without any assured return, as per
pricing/valuation guidelines issued by RBI from time to time.

17
3.3.2 Other types of Preference shares/Debentures i.e. non-convertible, optionally
convertible or partially convertible for issue of which funds have been received on or
after May 1, 2007 are considered as debt. Accordingly all norms applicable for ECBs
relating to eligible borrowers, recognized lenders, amount and maturity, end-use
stipulations, etc. shall apply. Since these instruments would be denominated in rupees,
the rupee interest rate will be based on the swap equivalent of London Interbank
Offered Rate (LIBOR) plus the spread as permissible for ECBs of corresponding
maturity.
3.3.3 The inward remittance received by the Indian company vide issuance of DRs and
FCCBs are treated as FDI and counted towards FDI.
3.3.4 Issue of shares by Indian Companies under FCCB/ADR/GDR
(i) Indian companies can raise foreign currency resources abroad through the issue of
FCCB/DR (ADRs/GDRs), in accordance with the Scheme for issue of Foreign
Currency Convertible Bonds and Ordinary Shares (Through Depository Receipt
Mechanism) Scheme, 1993 and guidelines issued by the Government of India there
under from time to time.
(ii) A company can issue ADRs/GDRs if it is eligible to issue shares to persons resident
outside India under the FDI Policy. However, an Indian listed company, which is not
eligible to raise funds from the Indian Capital Market including a company which has
been restrained from accessing the securities market by the Securities and Exchange
Board of India (SEBI) will not be eligible to issue ADRs/GDRs.
(iii) Unlisted companies shall be allowed to raise capital abroad without the requirement of
prior or subsequent listing in India initially for a period of two years w.e.f 11th
October,
2013, subject to the following conditions:
(a) Unlisted companies shall list abroad only on exchanges in IOSCO/FATF
compliant jurisdictions or those with which SEBI has signed bilateral
agreements;
(b) The Companies shall file a copy of the return which they submit to the
proposed exchange/regulators also to SEBI for the purpose of Prevention of
Money Laundering Act (PMLA). They shall comply with SEBI’s disclosure
requirements in addition to that of the primary exchange prior to the listing
abroad;
(c) While raising resources abroad, the listing company shall be fully compliant
with the FDI policy in force;

18
(d) The capital raised abroad may be utilized for retiring outstanding overseas debt
or for bona fide operations abroad including for acquisitions;
(e) In case the funds raised are not utilized abroad as stipulated at (d) above, such
companies shall remit the money back to India within 15 days from the date of
raising of funds and such money shall be parked only in AD Category-1 banks
recognized by RBI and may be used domestically;
(f) The ADRs/GDRs shall be issued subject to sectoral cap, entry route, minimum
capitalization norms, pricing norms, etc. as applicable as per FDI regulations
notified from time to time;
(g) The pricing of such ADRs/GDRs to be issued to a person resident outside India
shall be determined in accordance with sub-paragraph 3.3.4 (viii) below;
(h) The number of underlying equity shares offered for issuance of ADRs/GDRs to
be kept with the local custodian shall be determined upfront and ratio of
ADRs/GDRs to equity shares shall be decided upfront based on applicable FDI
pricing norms of equity shares of unlisted company;
(i) The unlisted Indian company shall comply with the instructions on downstream
investment as notified from time to time;
(j) The criteria of eligibility of unlisted company raising funds through
ADRs/GDRs shall be as prescribed by Government of India;
(iv) There are no end-use restrictions except for a ban on deployment/investment of such
funds in real estate or the stock market. There is no monetary limit up to which an
Indian company can raise ADRs/GDRs.
(v) The ADR/GDR proceeds can be utilized for first stage acquisition of shares in the
disinvestment process of Public Sector Undertakings/Enterprises and also in the
mandatory second stage offer to the public in view of their strategic importance.
(vi) Voting rights on shares issued under the Scheme shall be as per the provisions of
Companies Act, 1956 and in a manner in which restrictions on voting rights imposed
on ADR/GDR issues shall be consistent with the Company Law provisions. Voting
rights in the case of banking companies will continue to be in terms of the provisions
of the Banking Regulation Act, 1949 and the instructions issued by the Reserve Bank
from time to time, as applicable to all shareholders exercising voting rights.
(vii) Erstwhile OCBs who are not eligible to invest in India and entities prohibited from
buying, selling or dealing in securities by SEBI will not be eligible to subscribe to
ADRs/ GDRs issued by Indian companies.

19
(viii) The pricing of ADR/GDR issues should be made at a price determined under the
provisions of the Scheme of issue of Foreign Currency Convertible Bonds and
Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993 and
guidelines issued by the Government of India and directions issued by the Reserve
Bank, from time to time.
(ix) The pricing of sponsored ADRs/GDRs would be determined under the provisions of
the Scheme of issue of Foreign Currency Convertible Bonds and Ordinary Shares
(Through Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by the
Government of India and directions issued by the Reserve Bank, from time to time.
3.3.5 (i) Two-way Fungibility Scheme: A limited two-way Fungibility scheme has been put in
place by the Government of India for ADRs/GDRs. Under this Scheme, a stock broker
in India, registered with SEBI, can purchase shares of an Indian company from the
market for conversion into ADRs/GDRs based on instructions received from overseas
investors. Re-issuance of ADRs/GDRs would be permitted to the extent of
ADRs/GDRs which have been redeemed into underlying shares and sold in the Indian
market.
(ii) Sponsored ADR/GDR issue: An Indian company can also sponsor an issue of
ADR/GDR. Under this mechanism, the company offers its resident shareholders a
choice to submit their shares back to the company so that on the basis of such shares,
ADRs/GDRs can be issued abroad. The proceeds of the ADR/GDR issue are remitted
back to India and distributed among the resident investors who had offered their Rupee
denominated shares for conversion. These proceeds can be kept in Resident Foreign
Currency (Domestic) accounts in India by the resident shareholders who have tendered
such shares for conversion into ADRs/GDRs.
3.4 Issue/Transfer of Shares
3.4.1 The capital instruments should be issued within 180 days from the date of receipt of the
inward remittance received through normal banking channels including escrow account
opened and maintained for the purpose or by debit to the NRE/FCNR (B) account of
the non-resident investor. In case, the capital instruments are not issued within 180
days from the date of receipt of the inward remittance or date of debit to the
NRE/FCNR (B) account, the amount of consideration so received should be refunded
immediately to the non-resident investor by outward remittance through normal
banking channels or by credit to the NRE/FCNR (B) account, as the case may be.
Non-compliance with the above provision would be reckoned as a contravention under
FEMA and would attract penal provisions. In exceptional cases, refund of the amount

20
of consideration outstanding beyond a period of 180 days from the date of receipt may
be considered by the RBI, on the merits of the case.
3.4.2 Issue price of shares – Price of shares issued to persons resident outside India under
the FDI Policy, shall not be less than -
a. the price worked out in accordance with the SEBI guidelines, as applicable, where the
shares of the company are listed on any recognised stock exchange in India;
b. the fair valuation of shares done by a SEBI registered Merchant Banker or a Chartered
Accountant as per the discounted free cash flow method, where the shares of the
company are not listed on any recognised stock exchange in India; and
c. the price as applicable to transfer of shares from resident to non-resident as per the
pricing guidelines laid down by the Reserve Bank from time to time, where the issue of
shares is on preferential allotment.
However, where non-residents (including NRIs) are making investments in an Indian
company in compliance with the provisions of the Companies Act, 1956, by way of
subscription to its Memorandum of Association, such investments may be made at face
value subject to their eligibility to invest under the FDI scheme.
3.4.3 Foreign Currency Account – Indian companies which are eligible to issue shares to
persons resident outside India under the FDI Policy may be allowed to retain the share
subscription amount in a Foreign Currency Account, with the prior approval of RBI.
3.4.4 Transfer of shares and convertible debentures –
(i) Subject to FDI sectoral policy (relating to sectoral caps and entry routes), applicable
laws and other conditionalities including security conditions, non-resident investors
can also invest in Indian companies by purchasing/acquiring existing shares from
Indian shareholders or from other non-resident shareholders. General permission has
been granted to non-residents/NRIs for acquisition of shares by way of transfer subject
to the following:
(a) A person resident outside India (other than NRI and erstwhile OCB) may
transfer by way of sale or gift, the shares or convertible debentures to any
person resident outside India (including NRIs).
(b) NRIs may transfer by way of sale or gift the shares or convertible debentures
held by them to another NRI.
(c) A person resident outside India can transfer any security to a person resident in
India by way of gift.
(d) A person resident outside India can sell the shares and convertible debentures
of an Indian company on a recognized Stock Exchange in India through a stock

21
broker registered with stock exchange or a merchant banker registered with
SEBI.
(e) A person resident in India can transfer by way of sale, shares/convertible
debentures (including transfer of subscriber’s shares), of an Indian company
under private arrangement to a person resident outside India, subject to the
guidelines given in para 3.4.5.2 and Annex-2.
(f) General permission is also available for transfer of shares/convertible
debentures, by way of sale under private arrangement by a person resident
outside India to a person resident in India, subject to the guidelines given in
para 3.4.5.2 and Annex-2.
(g) The above General Permission also covers transfer by a resident to a non-
resident of shares/convertible debentures of an Indian company, engaged in an
activity earlier covered under the Government Route but now falling under
Automatic Route, as well as transfer of shares by a non-resident to an Indian
company under buyback and/or capital reduction scheme of the company.
(h) The Form FC-TRS should be submitted to the AD Category-I Bank, within 60
days from the date of receipt of the amount of consideration. The onus of
submission of the Form FC-TRS within the given timeframe would be on the
transferor/transferee, resident in India.
(ii) The sale consideration in respect of equity instruments purchased by a person resident
outside India, remitted into India through normal banking channels, shall be subjected
to a Know Your Customer (KYC) check by the remittance receiving AD Category-I
bank at the time of receipt of funds. In case, the remittance receiving AD Category-I
bank is different from the AD Category-I bank handling the transfer transaction, the
KYC check should be carried out by the remittance receiving bank and the KYC report
be submitted by the customer to the AD Category-I bank carrying out the transaction
along with the Form FC-TRS.
(iii) A person resident outside India including a Non-Resident Indian investor who has
already acquired and continues to hold the control in accordance with the SEBI
(Substantial Acquisition of Shares and Takeover) Regulations can acquire shares of a
listed Indian company on the stock exchange through a registered broker under FDI
scheme provided that the original and resultant investments are in line with the extant
FDI policy and FEMA regulations in respect of sectoral cap, entry route, mode of
payment, reporting requirement, documentation, etc.

22
(iv) Escrow: AD Category-I banks have been given general permission to open Escrow
account and Special account of non-resident corporate for open offers/exit offers and
delisting of shares. The relevant SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011 (SAST) Regulations or any other applicable SEBI
Regulations/provisions of the Companies Act, 1956 will be applicable. AD Category-I
banks have also been permitted to open and maintain, without prior approval of RBI,
non-interest 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 subject to the
terms and conditions specified by RBI. SEBI authorised Depository Participants have
also been permitted to open and maintain, without prior approval of RBI, Escrow
accounts for securities subject to the terms and conditions as specified by RBI. In both
cases, the Escrow agent shall necessarily be an AD Category-I bank or SEBI
authorised Depository Participant (in case of securities’ accounts). These facilities will
be applicable for both issue of fresh shares to the non- residents as well as transfer of
shares from/to the non- residents.
3.4.5 Prior permission of RBI in certain cases for transfer of capital instruments
3.4.5.1 Except cases mentioned in paragraph 3.4.5.2 below, the following cases require prior
approval of RBI:
(i) Transfer of capital instruments from resident to non-residents by way of sale where :
(a) Transfer is at a price which falls outside the pricing guidelines specified by the
Reserve Bank from time to time and the transaction does not fall under the
exception given in para 3.4.5.2.
(b) Transfer of capital instruments by the non-resident acquirer involving
deferment of payment of the amount of consideration. Further, in case approval
is granted for a transaction, the same should be reported in Form FC-TRS, to an
AD Category-I bank for necessary due diligence, within 60 days from the date
of receipt of the full and final amount of consideration.
(ii) Transfer of any capital instrument, by way of gift by a person resident in India to a
person resident outside India. While forwarding applications to Reserve Bank for
approval for transfer of capital instruments by way of gift, the documents mentioned in
Annex-3 should be enclosed. Reserve Bank considers the following factors while
processing such applications:

23
(a) The proposed transferee (donee) is eligible to hold such capital instruments
under Schedules 1, 4 and 5 of Notification No. FEMA 20/2000-RB dated May
3, 2000, as amended from time to time.
(b) The gift does not exceed 5 per cent of the paid-up capital of the Indian
company/each series of debentures/each mutual fund scheme.
(c) The applicable sectoral cap limit in the Indian company is not breached.
(d) The transferor (donor) and the proposed transferee (donee) are close relatives as
defined in Section 6 of the Companies Act, 1956, as amended from time to
time. The current list is reproduced in Annex-4.
(e) The value of capital instruments to be transferred together with any capital
instruments already transferred by the transferor, as gift, to any person residing
outside India does not exceed the rupee equivalent of USD 50,000 during the
financial year.
(f) Such other conditions as stipulated by Reserve Bank in public interest from
time to time.
(iii) Transfer of shares from NRI to non-resident.
3.4.5.2 In the following cases, approval of RBI is not required:
A. 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:
i. The original and resultant investment are in line with the extant FDI policy and
FEMA regulations in terms of sectoral caps, conditionalities (such as minimum
capitalization, etc.), reporting requirements, documentation, etc.;
ii. The pricing for the transaction 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);
and
iii. Chartered Accountants Certificate to the effect that compliance with the
relevant SEBI regulations/guidelines as indicated above is attached to the form
FC-TRS to be filed with the AD bank.
B. Transfer of shares from Resident to Non-Resident:
i) where the transfer of shares requires the prior approval of the Government
conveyed through FIPB as per the extant FDI policy provided that:
a) the requisite approval of the FIPB has been obtained; and
b) the transfer of share adheres with the pricing guidelines and documentation
requirements as specified by the Reserve Bank of India from time to time.

24
ii) where the transfer of shares attract SEBI (SAST) Regulations 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 transfer of shares does not meet the pricing guidelines under the FEMA,
1999 provided that:
a) The resultant FDI is in compliance with the extant FDI policy and FEMA
regulations in terms of sectoral caps, conditionalities (such as minimum
capitalization, etc.), reporting requirements, documentation etc.;
b) The pricing for the transaction 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); and
c) Chartered Accountants Certificate to the effect that compliance with the
relevant SEBI regulations/guidelines as indicated above is attached to the form
FC-TRS to be filed with the AD bank.
iv) where the investee company is in the financial sector provided that :
a) Any ‘fit and proper/due diligence’ requirements as regards the non-resident
investor as stipulated by the respective financial sector regulator, from time to
time, have been complied with; and
b) The FDI policy and FEMA regulations in terms of sectoral caps,
conditionalities (such as minimum capitalization, pricing, etc.), reporting
requirements, documentation etc., are complied with.
3.4.6 Conversion of ECB/Lump sum Fee/Royalty etc. into Equity
(i) Indian companies have been granted general permission for conversion of External
Commercial Borrowings (ECB) (excluding those deemed as ECB) in convertible
foreign currency into equity shares/fully compulsorily and mandatorily convertible
preference shares, subject to the following conditions and reporting requirements:
(a) The activity of the company is covered under the Automatic Route for FDI or
the company has obtained Government approval for foreign equity in the
company;
(b) The foreign equity after conversion of ECB into equity is within the sectoral
cap, if any;
(c) Pricing of shares is as per the provision of para 3.4.2 above;
(d) Compliance with the requirements prescribed under any other statute and
regulation in force; and

25
(e) The conversion facility is available for ECBs availed under the Automatic or
Government Route and is applicable to ECBs, due for payment or not, as well
as secured/unsecured loans availed from non-resident collaborators.
(ii) General permission is also available for issue of shares/preference shares against lump
sum technical know-how fee, royalty due for payment, subject to entry route, sectoral
cap and pricing guidelines (as per the provision of para 3.4.2 above) and compliance
with applicable tax laws.
(iii) Issue of equity shares under the FDI policy is allowed under the Government route for
the following:
(I) import of capital goods/ machinery/ equipment (excluding second-hand
machinery), subject to compliance with the following conditions:
(a) Any import of capital goods/machinery etc., made by a resident in India,
has to be in accordance with the Export/Import Policy issued by
Government of India/as defined by DGFT/FEMA provisions relating to
imports.
(b) The application clearly indicating the beneficial ownership and identity
of the Importer Company as well as overseas entity.
(c) Applications complete in all respects, for conversions of import
payables for capital goods into FDI being made within 180 days from
the date of shipment of goods.
(II) pre-operative/pre-incorporation expenses (including payments of rent etc.),
subject to compliance with the following conditions:
(a) Submission of FIRC for remittance of funds by the overseas promoters
for the expenditure incurred.
(b) Verification and certification of the pre-incorporation/pre-operative
expenses by the statutory auditor.
(c) Payments should be made by the foreign investor to the company
directly or through the bank account opened by the foreign investor as
provided under FEMA Regulations.
(d) The applications, complete in all respects, for capitalization being made
within the period of 180 days from the date of incorporation of the
company
General conditions:
(i) All requests for conversion should be accompanied by a special resolution of
the company.

26
(ii) Government’s approval would be subject to pricing guidelines of RBI and
appropriate tax clearance.
3.5 Specific Conditions in Certain Cases
3.5.1 Issue of Rights/Bonus Shares – FEMA provisions allow Indian companies to freely
issue Rights/Bonus shares to existing non-resident shareholders, subject to adherence
to sectoral cap, if any. However, such issue of bonus/rights shares has to be in
accordance with other laws/statutes like the Companies Act, 1956, SEBI (Issue of
Capital and Disclosure Requirements) Regulations, 2009 (in case of listed companies),
etc. The offer on right basis to the persons resident outside India shall be:
(a) in the case of shares of a company listed on a recognized stock exchange in
India, at a price as determined by the company;
(b) in the case of shares of a company not listed on a recognized stock exchange in
India, at a price which is not less than the price at which the offer on right
basis is made to resident shareholders.
3.5.2 Prior permission of RBI for Rights issue to erstwhile OCBs- OCBs have been de-
recognised as a class of investors from September 16, 2003. Therefore companies
desiring to issue rights share to such erstwhile OCBs will have to take specific prior
permission from RBI. As such, entitlement of rights share is not automatically
available to erstwhile OCBs. However bonus shares can be issued to erstwhile OCBs
without the approval of RBI.
3.5.3 Additional allocation of rights share by residents to non-residents – Existing non-
resident shareholders are allowed to apply for issue of additional shares/fully,
compulsorily and mandatorily convertible debentures/fully, compulsorily and
mandatorily convertible preference shares over and above their rights share
entitlements. The investee company can allot the additional rights share out of
unsubscribed portion, subject to the condition that the overall issue of shares to non-
residents in the total paid-up capital of the company does not exceed the sectoral cap.
3.5.4 Acquisition of shares under Scheme of Merger/Demerger/Amalgamation
Mergers/demergers/ amalgamations of companies in India are usually governed by an
order issued by a competent Court on the basis of the Scheme submitted by the
companies undergoing merger/demerger/amalgamation. Once the scheme of merger or
demerger or amalgamation of two or more Indian companies has been approved by a
Court in India, the transferee company or new company is allowed to issue shares to
the shareholders of the transferor company resident outside India, subject to the
conditions that:

27
(i) the percentage of shareholding of persons resident outside India in the
transferee or new company does not exceed the sectoral cap, and
(ii) the transferor company or the transferee or the new company is not engaged in
activities which are prohibited under the FDI policy.
3.5.4.1 Issue of Non convertible/redeemable bonus preference shares or debentures
Indian companies are allowed to issue non-convertible/redeemable preference shares or
debentures to non-resident shareholders, including the depositories that act as trustees
for the ADR/GDR holders, by way of distribution as bonus from its general reserves
under a Scheme of Arrangement approved by a Court in India under the provisions of
the Companies Act, as applicable, subject to no-objection from the Income Tax
Authorities.
3.5.5 Issue of shares under Employees Stock Option Scheme (ESOPs) –
(i) Listed Indian companies are allowed to issue shares under the Employees Stock
Option Scheme (ESOPs), to its employees or employees of its joint venture or
wholly owned subsidiary abroad, who are resident outside India, other than to
the citizens of Pakistan. ESOPs can be issued to citizens of Bangladesh with the
prior approval of FIPB. Shares under ESOPs can be issued directly or through
a Trust subject to the condition that:
(a) The scheme has been drawn in terms of relevant regulations issued by
the SEBI, and
(b) The face value of the shares to be allotted under the scheme to the non-
resident employees does not exceed 5 per cent of the paid-up capital of
the issuing company.
(ii) Unlisted companies have to follow the provisions of the Companies Act, 1956.
The Indian company can issue ESOPs to employees who are resident outside
India, other than to the citizens of Pakistan. ESOPs can be issued to the citizens
of Bangladesh with the prior approval of the FIPB.
(iii) The issuing company is required to report (plain paper reporting) the details of
granting of stock options under the scheme to non-resident employees to the
Regional Office concerned of the Reserve Bank and thereafter the details of
issue of shares subsequent to the exercise of such stock options within 30 days
from the date of issue of shares in Form FC-GPR.
3.5.6 Share Swap: In cases of investment by way of swap of shares, irrespective of the
amount, valuation of the shares will have to be made by a Merchant Banker registered
with SEBI or an Investment Banker outside India registered with the appropriate

28
regulatory authority in the host country. Approval of the Government conveyed
through Foreign Investment Promotion Board (FIPB) will also be a prerequisite for
investment by swap of shares.
3.5.7 Pledge of Shares:
(A) A person being a promoter of a company registered in India (borrowing company),
which has raised external commercial borrowings, may pledge the shares of the
borrowing company or that of its associate resident companies for the purpose of
securing the ECB raised by the borrowing company, provided that a no objection for
the same is obtained from a bank which is an authorised dealer. The authorized dealer,
shall issue the no objection for such a pledge after having satisfied itself that the
external commercial borrowing is in line with the extant FEMA regulations for ECBs
and that:
i) the loan agreement has been signed by both the lender and the borrower,
ii) there exists a security clause in the Loan Agreement requiring the borrower to
create charge on financial securities, and
iii) the borrower has obtained Loan Registration Number (LRN) from the Reserve
Bank:
and the said pledge would be subject to the following conditions:
a) the period of such pledge shall be co-terminus with the maturity of the
underlying ECB;
b) in case of invocation of pledge, transfer shall be in accordance with the extant
FDI Policy and directions issued by the Reserve Bank;
c) the Statutory Auditor has certified that the borrowing company will utilized/has
utilized the proceeds of the ECB for the permitted end use/s only.
(B) Non-residents holding shares of an Indian company, can pledge these shares in favour
of the AD bank in India to secure credit facilities being extended to the resident
investee company for bonafide business purpose, subject to the following conditions:
(i) in case of invocation of pledge, transfer of shares should be in accordance with
the FDI policy in vogue at the time of creation of pledge;
(ii) submission of a declaration/ annual certificate from the statutory auditor of the
investee company that the loan proceeds will be / have been utilized for the
declared purpose;
(iii) the Indian company has to follow the relevant SEBI disclosure norms; and
(iv) pledge of shares in favour of the lender (bank) would be subject to Section 19
of the Banking Regulation Act, 1949.

29
(C) Non-residents holding shares of an Indian company, can pledge these shares 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,
subject to the following:
(i) loan is availed of only from an overseas bank;
(ii) loan is utilized for genuine business purposes overseas and not for any
investments either directly or indirectly in India;
(iii) overseas investment should not result in any capital inflow into India;
(iv) in case of invocation of pledge, transfer should be in accordance with the FDI
policy in vogue at the time of creation of pledge; and
(v) submission of a declaration/annual certificate from a Chartered Accountant/
Certified Public Accountant of the non-resident borrower that the loan proceeds
will be / have been utilized for the declared purpose.
3.6 Entry Routes for Investment:
3.6.1 Investments can be made by non-residents in the equity shares/fully, compulsorily and
mandatorily convertible debentures/fully, compulsorily and mandatorily convertible
preference shares of an Indian company, through the Automatic Route or the
Government Route. Under the Automatic Route, the non-resident investor or the Indian
company does not require any approval from Government of India for the investment.
Under the Government Route, prior approval of the Government of India is required.
Proposals for foreign investment under Government route, are considered by FIPB.
3.6.2 Guidelines for establishment of Indian companies/ transfer of ownership or
control of Indian companies, from resident Indian citizens to non-resident entities,
in sectors with caps:
In sectors/activities with caps, including inter-alia defence production, air transport
services, ground handling services, asset reconstruction companies, private sector
banking, broadcasting, commodity exchanges, credit information companies,
insurance, print media, telecommunications and satellites, Government approval/FIPB
approval would be required in all cases where:
(i) An Indian company is being established with foreign investment and is not
owned by a resident entity or
(ii) An Indian company is being established with foreign investment and is not
controlled by a resident entity or
(iii) The control of an existing Indian company, currently owned or controlled by
resident Indian citizens and Indian companies, which are owned or controlled

30
by resident Indian citizens, will be/is being transferred/passed on to a non-
resident entity as a consequence of transfer of shares and/or fresh issue of
shares to non-resident entities through amalgamation, merger/demerger,
acquisition etc. or
(iv) The ownership of an existing Indian company, currently owned or controlled by
resident Indian citizens and Indian companies, which are owned or controlled
by resident Indian citizens, will be/is being transferred/passed on to a non-
resident entity as a consequence of transfer of shares and/or fresh issue of
shares to non-resident entities through amalgamation, merger/demerger,
acquisition etc.
(v) It is clarified that these guidelines will not apply to sectors/activities where
there are no foreign investment caps, that is, 100% foreign investment is
permitted under the automatic route.
(vi) It is also clarified that Foreign investment shall include all types of foreign
investments i.e. FDI, investment by FIIs, FPIs, QFIs, NRIs, ADRs, GDRs,
Foreign Currency Convertible Bonds (FCCB) and fully, mandatorily &
compulsorily convertible preference shares/debentures, regardless of whether
the said investments have been made under Schedule 1, 2, 2A, 3, 6 and 8 of
FEMA (Transfer or Issue of Security by Persons Resident Outside India)
Regulations.
3.7 Caps on Investments
3.7.1 Investments can be made by non-residents in the capital of a resident entity only to the
extent of the percentage of the total capital as specified in the FDI policy. The caps in
various sector(s) are detailed in Chapter 6 of this circular.
3.8 Entry Conditions on Investment
3.8.1 Investments by non-residents can be permitted in the capital of a resident entity in
certain sectors/activity with entry conditions. Such conditions may include norms for
minimum capitalization, lock-in period, etc. The entry conditions in various
sectors/activities are detailed in Chapter 6 of this circular.
3.9 Other Conditions on Investment Besides Entry Conditions
3.9.1 Besides the entry conditions on foreign investment, the investment/investors are
required to comply with all relevant sectoral laws, regulations, rules, security
conditions, and state/local laws/regulations.

31
3.10 Foreign Investment into/downstream Investment by Indian Companies
3.10.1 The Guidelines for calculation of total foreign investment, both direct and indirect in
an Indian company, at every stage of investment, including downstream investment,
have been detailed in Paragraph 4.1.
3.10.2 For the purpose of this chapter,
(i) ‘Downstream investment’ means indirect foreign investment, by one Indian
company, into another Indian company, by way of subscription or acquisition,
in terms of Paragraph 4.1. Paragraph 4.1.3 provides the guidelines for
calculation of indirect foreign investment, with conditions specified in
paragraph 4.1.3 (v).
(ii) ‘Foreign Investment’ would have the same meaning as in Paragraph 4.1
3.10.3 Foreign investment into an Indian company engaged only in the activity of
investing in the capital of other Indian company/ies (regardless of its ownership or
control):
3.10.3.1 Foreign investment into an Indian company, engaged only in the activity of investing
in the capital of other Indian company/ies, will require prior Government/FIPB
approval, regardless of the amount or extent of foreign investment. Foreign investment
into Non-Banking Finance Companies (NBFCs), carrying on activities approved for
FDI, will be subject to the conditions specified in paragraph 6.2.17.8 of this Circular.
3.10.3.2 Those companies, which are Core Investment Companies (CICs), will have to
additionally follow RBI’s Regulatory Framework for CICs.
3.10.3.3 For infusion of foreign investment into an Indian company which does not have any
operations and also does not have any downstream investments, Government/FIPB
approval would be required, regardless of the amount or extent of foreign investment.
Further, as and when such a company commences business(s) or makes downstream
investment, it will have to comply with the relevant sectoral conditions on entry route,
conditionalities and caps.
Note: Foreign investment into other Indian companies would be in accordance/ compliance
with the relevant sectoral conditions on entry route, conditionalities and caps.
3.10.4 Downstream investment by an Indian company which is not owned and/or
controlled by resident entity/ies:
3.10.4.1 Downstream investment by an Indian company, which is not owned and/or controlled
by resident entity/ies, into another Indian company, would be in
accordance/compliance with the relevant sectoral conditions on entry route,

32
conditionalities and caps, with regard to the sectors in which the latter Indian company
is operating.
Note: Downstream investment/s made by a banking company, as defined in clause (c) of
Section 5 of the Banking Regulation Act, 1949, incorporated in India, which is owned
and/or controlled by non-residents/a non-resident entity/non-resident entities, under
Corporate Debt Restructuring (CDR), or other loan restructuring mechanism, or in
trading books, or for acquisition of shares due to defaults in loans, shall not count
towards indirect foreign investment. However, their 'strategic downstream investment'
shall count towards indirect foreign investment. For this purpose, 'strategic downstream
investments' would mean investment by these banking companies in their subsidiaries,
joint ventures and associates.
3.10.4.2 Downstream investments by Indian companies will be subject to the following
conditions:
(i) Such a company is to notify SIA, DIPP and FIPB of its downstream investment
in the form available at http://www.fipbindia.com within 30 days of such
investment, even if capital instruments have not been allotted along with the
modality of investment in new/existing ventures (with/without expansion
programme);
(ii) Downstream investment by way of induction of foreign equity in an existing
Indian Company to be duly supported by a resolution of the Board of Directors
as also a shareholders agreement, if any;
(iii) Issue/transfer/pricing/valuation of shares shall be in accordance with applicable
SEBI/RBI guidelines;
(iv) For the purpose of downstream investment, the Indian companies making the
downstream investments would have to bring in requisite funds from abroad
and not leverage funds from the domestic market. This would, however, not
preclude downstream companies, with operations, from raising debt in the
domestic market. Downstream investments through internal accruals are
permissible, subject to the provisions of paragraphs 3.10.3 and 3.10.4.1.

33
Chapter 4: Calculation of Foreign Investment
4.1 Total Foreign Investment i.e. Direct and Indirect Foreign Investment in Indian
Companies
4.1.1 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 could again comprise of both
resident and non-resident investment. Thus, such an Indian company would have
indirect foreign investment if the Indian investing company has foreign investment in
it. The indirect investment can also be a cascading investment i.e. through multi-
layered structure.
4.1.2 For the purpose of computation of indirect foreign investment, foreign investment in an
Indian company shall include all types of foreign investments i.e. FDI; investment by
FIIs (holding as on March 31); FPIs (holding as on March 31); QFIs (holding as on
March 31); NRIs; ADRs; GDRs; Foreign Currency Convertible Bonds (FCCB); fully,
compulsorily and mandatorily convertible preference shares and fully, compulsorily
and mandatorily convertible Debentures regardless of whether the said investments
have been made under Schedule 1, 2, 2A, 3, 6 and 8 of FEMA (Transfer or Issue of
Security by Persons Resident Outside India) Regulations, 2000.
4.1.3 Guidelines for calculation of total foreign investment i.e. direct and indirect
foreign investment in an Indian company.
(i) Counting the Direct Foreign Investment: All investment directly by a non-
resident entity into the Indian company would be counted towards foreign
investment.
(ii) Counting of indirect foreign Investment:
(a) The foreign investment through the investing Indian company would not
be considered for calculation of the indirect foreign investment in case
of Indian companies which are ‘owned and controlled’ by resident
Indian citizens and/or Indian Companies which are owned and
controlled by resident Indian citizens .
(b) For cases where condition (a) above is not satisfied or if the investing
company is owned or controlled by ‘non-resident entities’, the entire
investment by the investing company into the subject Indian Company
would be considered as indirect foreign investment, provided that, as an
exception, the indirect foreign investment in only the 100% owned
subsidiaries of operating-cum-investing/investing companies, will be

34
limited to the foreign investment in the operating-cum-investing/
investing company. This exception is made since the downstream
investment of a 100% owned subsidiary of the holding company is akin
to investment made by the holding company and the downstream
investment should be a mirror image of the holding company. This
exception, however, is strictly for those cases where the entire capital of
the downstream subsidiary is owned by the holding company.
Illustration
To illustrate, if the indirect foreign investment is being calculated for Company X which has
investment through an investing Company Y having foreign investment, the following would
be the method of calculation:
(A) where Company Y has foreign investment less than 50%- Company X would not be
taken as having any indirect foreign investment through Company Y.
(B) where Company Y has foreign investment of say 75% and:
(I) invests 26% in Company X, the entire 26% investment by Company Y would
be treated as indirect foreign investment in Company X;
(II) invests 80% in Company X, the indirect foreign investment in Company X
would be taken as 80%;
(III) where Company X is a wholly owned subsidiary of Company Y (i.e. Company
Y owns 100% shares of Company X), then only 75% would be treated as
indirect foreign equity and the balance 25% would be treated as resident held
equity. The indirect foreign equity in Company X would be computed in the
ratio of 75:25 in the total investment of Company Y in Company X.
(iii) The total foreign investment would be the sum total of direct and indirect foreign
investment.
(iv) The above methodology of calculation would apply at every stage of investment in
Indian companies and thus to each and every Indian company.
(v) Additional conditions:
(a) The full details about the foreign investment including ownership details etc. in
Indian company(s) and information about the control of the company(s) would
be furnished by the Company(s) to the Government of India at the time of
seeking approval.
(b) In any sector/activity, where Government approval is required for foreign
investment and in cases where there are any inter-se agreements
between/amongst shareholders which have an effect on the appointment of the

35
Board of Directors or on the exercise of voting rights or of creating voting
rights disproportionate to shareholding or any incidental matter thereof, such
agreements will have to be informed to the approving authority. The approving
authority will consider such inter-se agreements for determining ownership and
control when considering the case for approval of foreign investment.
(c) In all sectors attracting sectoral caps, the balance equity i.e. beyond the sectoral
foreign investment cap, would specifically be beneficially owned by/held
with/in the hands of resident Indian citizens and Indian companies, owned and
controlled by resident Indian citizens.
(d) In the I& B and Defence sectors where the sectoral cap is less than 49%, the
company would need to be ‘owned and controlled’ by resident Indian citizens
and Indian companies, which are owned and controlled by resident Indian
citizens.
(A) For this purpose, the equity held by the largest Indian shareholder would
have to be at least 51% of the total equity, excluding the equity held by
Public Sector Banks and Public Financial Institutions, as defined in
Section 4A of the Companies Act, 1956. The term ‘largest Indian
shareholder’, used in this clause, will include any or a combination of
the following:
(I) In the case of an individual shareholder,
(aa) The individual shareholder,
(bb) A relative of the shareholder within the meaning of
Section 6 of the Companies Act, 1956.
(cc) A company/group of companies in which the individual
shareholder/HUF to which he belongs has management
and controlling interest.
(II) In the case of an Indian company,
(aa) The Indian company
(bb) A group of Indian companies under the same
management and ownership control.
(B) For the purpose of this Clause, “Indian company” shall be a company
which must have a resident Indian or a relative as defined under Section
6 of the Companies Act, 1956/ HUF, either singly or in combination
holding at least 51% of the shares.

36
(C) Provided that, in case of a combination of all or any of the entities
mentioned in Sub-Clauses (I) and (II) of clause 4.1.3(v)(d)(A) above,
each of the parties shall have entered into a legally binding agreement to
act as a single unit in managing the matters of the applicant company.
(e) If a declaration is made by persons as per section 187C of the Indian
Companies Act about a beneficial interest being held by a non-resident entity,
then even though the investment may be made by a resident Indian citizen, the
same shall be counted as foreign investment.
4.1.4 The above mentioned policy and methodology would be applicable for determining the
total foreign investment in all sectors, except in sectors where it is specified in a statute
or rule there under. The above methodology of determining direct and indirect foreign
investment therefore does not apply to the Insurance Sector which will continue to be
governed by the relevant Regulation.
4.1.5 Any foreign investment already made in accordance with the guidelines in existence
prior to February 13, 2009 (date of issue of Press Note 2 of 2009) would not require
any modification to conform to these guidelines. All other investments, past and future,
would come under the ambit of these new guidelines.

37
Chapter 5: Foreign Investment Promotion Board (FIPB)
5.1 Constitution of FIPB
5.1.1 FIPB comprises of the following Secretaries to the Government of India:
(i) Secretary to Government, Department of Economic Affairs, Ministry of
Finance – Chairperson
(ii) Secretary to Government, Department of Industrial Policy &
Promotion, Ministry of Commerce & Industry
(iii) Secretary to Government, Department of Commerce, Ministry of
Commerce & Industry
(iv) Secretary to Government, Economic Relations, Ministry of External
Affairs
(v) Secretary to Government, Ministry of Overseas Indian Affairs.
5.1.2 The Board would be able to co-opt other Secretaries to the Central Government and top
officials of financial institutions, banks and professional experts of Industry and
Commerce, as and when necessary.
5.2 Levels of Approvals for Cases under Government Route
5.2.1 The Minister of Finance who is in-charge of FIPB would consider the
recommendations of FIPB on proposals with total foreign equity inflow of and below
Rs.1200 crore.
5.2.2 The recommendations of FIPB on proposals with total foreign equity inflow of more
than Rs. 1200 crore would be placed for consideration of Cabinet Committee on
Economic Affairs (CCEA).
5.2.3 The CCEA would also consider the proposals which may be referred to it by the
FIPB/the Minister of Finance (in-charge of FIPB).
5.3 Cases Which do not Require Fresh Approval
5.3.1 Companies may not require fresh prior approval of the Government i.e. Minister in-
charge of FIPB/CCEA for bringing in additional foreign investment into the same
entity, in the following cases:
(i) Entities the activities of which had earlier required prior approval of
FIPB/CCFI/CCEA and which had, accordingly, earlier obtained prior approval
of FIPB/CCFI/CCEA for their initial foreign investment but subsequently such
activities/sectors have been placed under automatic route;
(ii) Entities the activities of which had sectoral caps earlier and which had,
accordingly, earlier obtained prior approval of FIPB/CCFI/CCEA for their
initial foreign investment but subsequently such caps were removed/increased

38
and the activities placed under the automatic route; provided that such
additional investment along with the initial/original investment does not exceed
the sectoral caps; and
(iii) Additional foreign investment into the same entity where prior approval of
FIPB/CCFI/CCEA had been obtained earlier for the initial/original foreign
investment due to requirements of Press Note 18/1998 or Press Note 1 of 2005
and prior approval of the Government under the FDI policy is not required for
any other reason/purpose.
5.4 Online Filing of Applications for FIPB/Government’s Approval
5.4.1 Guidelines for e-filing of applications, filing of amendment applications and
instructions to applicants are available at FIPB’s website (http://finmin.nic.in/) and
(http://www.fipbindia.com).

39
Chapter 6: Sector Specific Conditions on FDI
6.1 Prohibited Sectors:
FDI is prohibited in:
(a) Lottery Business including Government/private lottery, online lotteries, etc.
(b) Gambling and Betting including casinos etc.
(c) Chit funds
(d) Nidhi company
(e) Trading in Transferable Development Rights (TDRs)
(f) Real Estate Business or Construction of Farm Houses
(g) Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of
tobacco substitutes
(h) Activities/sectors not open to private sector investment e.g. Atomic Energy
and Railway Transport (other than Mass Rapid Transport Systems).
Foreign technology collaboration in any form including licensing for
franchise, trademark, brand name, management contract is also prohibited for Lottery
Business and Gambling and Betting activities.
6.2 Permitted Sectors
In the following sectors/activities, FDI up to the limit indicated against each
sector/activity is allowed, subject to applicable laws/regulations; security and other
conditionalities. In sectors/activities not listed below, FDI is permitted up to 100% on
the automatic route, subject to applicable laws/regulations; security and other
conditionalities.
Wherever there is a requirement of minimum capitalization, it shall include share
premium received along with the face value of the share, only when it is received by
the company upon issue of the shares to the non-resident investor. Amount paid by the
transferee during post-issue transfer of shares beyond the issue price of the share,
cannot be taken into account while calculating minimum capitalization requirement.

40
Sl. No. Sector/Activity % of
Equity/
FDI Cap
Entry Route
Agriculture
6.2.1 Agriculture & Animal Husbandry
a) Floriculture, Horticulture,
Apiculture and Cultivation of
Vegetables & Mushrooms under
controlled conditions;
b) Development and Production of
seeds and planting material;
c) Animal Husbandry (including
breeding of dogs), Pisciculture,
Aquaculture, under controlled
conditions; and
d) Services related to agro and allied
sectors
Note: Besides the above, FDI is not
allowed in any other agricultural
sector/activity
100% Automatic
6.2.1.1 Other Conditions:
I. For companies dealing with development of transgenic seeds/vegetables, the
following conditions apply:
(i) When dealing with genetically modified seeds or planting material the
company shall comply with safety requirements in accordance with laws
enacted under the Environment (Protection) Act on the genetically modified
organisms.
(ii) Any import of genetically modified materials if required shall be subject to
the conditions laid down vide Notifications issued under Foreign Trade
(Development and Regulation) Act, 1992.
(iii) The company shall comply with any other Law, Regulation or Policy
governing genetically modified material in force from time to time.
(iv)Undertaking of business activities involving the use of genetically
engineered cells and material shall be subject to the receipt of approvals
from Genetic Engineering Approval Committee (GEAC) and Review
Committee on Genetic Manipulation (RCGM).
(v) Import of materials shall be in accordance with National Seeds Policy.

41
Equity/
FDI Cap
Entry Route
II. The term “under controlled conditions” covers the following:
(i) ‘Cultivation under controlled conditions’ for the categories of
floriculture, horticulture, cultivation of vegetables and mushrooms is the
practice of cultivation wherein rainfall, temperature, solar radiation, air
humidity and culture medium are controlled artificially. Control in these
parameters may be effected through protected cultivation under green
houses, net houses, poly houses or any other improved infrastructure
facilities where micro-climatic conditions are regulated
anthropogenically.
(ii) In case of Animal Husbandry, scope of the term ‘under controlled
conditions’ covers –
(a) Rearing of animals under intensive farming systems with stall-
feeding. Intensive farming system will require climate systems
(ventilation, temperature/humidity management), health care and
nutrition, herd registering/pedigree recording, use of machinery,
waste management systems as prescribed by the National Livestock
Policy, 2013 and in conformity with the existing ‘Standard Operating
Practices and Minimum Standard Protocol.’
(b) Poultry breeding farms and hatcheries where micro-climate is
controlled through advanced technologies like incubators, ventilation
systems etc.
(iii)In the case of pisciculture and aquaculture, scope of the term ‘under
controlled conditions’ covers –
(a) Aquariums
(b) Hatcheries where eggs are artificially fertilized and fry are hatched
and incubated in an enclosed environment with artificial climate
control.
(iv) In the case of apiculture, scope of the term ‘under controlled conditions’
covers –
(a) Production of honey by bee-keeping, except in forest/wild, in
designated spaces with control of temperatures and climatic factors
like humidity and artificial feeding during lean seasons.

42
Equity/
FDI Cap
Entry Route
6.2.2 Tea Plantation
6.2.2.1 Tea sector including tea plantations 100% Government
Note: Besides the above, FDI is not allowed in any other plantation sector/activity.
6.2.2.2 Other Condition:
Prior approval of the State Government concerned is required in case of any future
land use change.
Mining and Petroleum & Natural Gas
6.2.3 Mining
6.2.3.1 Mining and Exploration of metal and
non-metal ores including diamond, gold,
silver and precious ores but excluding
titanium bearing minerals and its ores;
subject to the Mines and Minerals
(Development & Regulation) Act, 1957.
100% Automatic
6.2.3.2 Coal and Lignite
(1) Coal & Lignite mining for captive
consumption by power projects, iron &
steel and cement units and other
eligible activities permitted under and
subject to the provisions of Coal Mines
(Nationalization) Act, 1973.
100% Automatic
(2) Setting up coal processing plants like
washeries subject to the condition that
the company shall not do coal mining
and shall not sell washed coal or sized
coal from its coal processing plants in
the open market and shall supply the
washed or sized coal to those parties
who are supplying raw coal to coal
processing plants for washing or sizing.
100% Automatic

43
Equity/
FDI Cap
Entry Route
6.2.3.3 Mining and mineral separation of titanium bearing minerals and ores, its value
addition and integrated activities
6.2.3.3.1 Mining and mineral separation of titanium
bearing minerals & ores, its value addition
and integrated activities subject to sectoral
regulations and the Mines and Minerals
(Development and Regulation Act 1957).
100% Government
6.2.3.3.2 Other Conditions:
India has large reserves of beach sand minerals in the coastal stretches
around the country. Titanium bearing minerals viz. Ilmenite, rutile and leucoxene,
and Zirconium bearing minerals including zircon are some of the beach sand
minerals which have been classified as “prescribed substances” under the Atomic
Energy Act, 1962.
Under the Industrial Policy Statement 1991, mining and production of
minerals classified as “prescribed substances” and specified in the Schedule to the
Atomic Energy (Control of Production and Use) Order, 1953 were included in the
list of industries reserved for the public sector. Vide Resolution No. 8/1(1)/97-
PSU/1422, dated 6th
October 1998, issued by the Department of Atomic Energy,
laying down the policy for exploitation of beach sand minerals, private participation
including Foreign Direct Investment (FDI) was permitted in mining and production
of Titanium ores (Ilmenite, Rutile and Leucoxene) and Zirconium minerals (Zircon).
Vide Notification No. S.O.61(E), dated 18.1.2006, the Department of Atomic
Energy re-notified the list of “prescribed substances” under the Atomic Energy Act
1962. Titanium bearing ores and concentrates (Ilmenite, Rutile and Leucoxene) and
Zirconium, its alloys and compounds and minerals/concentrates including Zircon,
were removed from the list of “prescribed substances”.
(i) FDI for separation of titanium bearing minerals & ores will be subject to the
following additional conditions viz.:
(A) value addition facilities are set up within India along with transfer of
technology;
(B) disposal of tailings during the mineral separation shall be carried out in
accordance with regulations framed by the Atomic Energy Regulatory
Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the

44
Equity/
FDI Cap
Entry Route
Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987.
(ii) FDI will not be allowed in mining of “prescribed substances” listed in the
Notification No. S.O. 61(E), dated 18.1.2006, issued by the Department of
Atomic Energy.
Clarification:
(1) For titanium bearing ores such as Ilmenite, Leucoxene and Rutile, manufacture
of titanium dioxide pigment and titanium sponge constitutes value addition.
Ilmenite can be processed to produce 'Synthetic Rutile or Titanium Slag as an
intermediate value added product.
(2) The objective is to ensure that the raw material available in the country is
utilized for setting up downstream industries and the technology available
internationally is also made available for setting up such industries within the
country. Thus, if with the technology transfer, the objective of the FDI Policy
can be achieved, the conditions prescribed at (i) (A) above shall be deemed to
be fulfilled.
6.2.4 Petroleum & Natural Gas
6.2.4.1 Exploration activities of oil and natural
gas fields, infrastructure related to
marketing of petroleum products and
natural gas, marketing of natural gas and
petroleum products, petroleum product
pipelines, natural gas/pipelines, LNG
Regasification infrastructure, market
study and formulation and Petroleum
refining in the private sector, subject to
the existing sectoral policy and regulatory
framework in the oil marketing sector and
the policy of the Government on private
participation in exploration of oil and the
discovered fields of national oil
companies.
100% Automatic

45
Equity/
FDI Cap
Entry Route
6.2.4.2 Petroleum refining by the Public Sector
Undertakings (PSU), without any
disinvestment or dilution of domestic
equity in the existing PSUs.
49% Automatic
Manufacturing
6.2.5 Manufacture of items reserved for production in Micro and Small Enterprises
(MSEs)
6.2.5.1 FDI in MSEs (as defined under Micro, Small And Medium Enterprises
Development Act, 2006 (MSMED, Act 2006)) will be subject to the sectoral caps,
entry routes and other relevant sectoral regulations. Any industrial undertaking
which is not a Micro or Small Scale Enterprise, but manufactures items reserved for
the MSE sector would require Government route where foreign investment is more
than 24% in the capital. Such an undertaking would also require an Industrial
License under the Industries (Development & Regulation) Act, 1951, for such
manufacture. The issue of Industrial License is subject to a few general conditions
and the specific condition that the Industrial Undertaking shall undertake to export a
minimum of 50% of the new or additional annual production of the MSE reserved
items to be achieved within a maximum period of three years. The export obligation
would be applicable from the date of commencement of commercial production and
in accordance with the provisions of section 11 of the Industries (Development &
Regulation) Act, 1951.
6.2.6 Defence
6.2.6.1 Defence Industry subject
to Industrial license
under the Industries
(Development &
Regulation) Act, 1951
26% Government route up to 26%
Above 26% to Cabinet Committee on Security
(CCS) on case to case basis, wherever it is
likely to result in access to modern and ‘state-
of-art’ technology in the country.
Note: (i) Investment by Foreign Portfolio Investors FPIs/FIIs(through portfolio
investment) is not permitted.
(ii) FPI/FII(through portfolio investment) in companies holding defence
licence as on 22 August, 2013 (date of issue of Press Note 6 of 2013) will
remain capped at the level existing as on the said date. No fresh
FPI/FII(through portfolio investment) is permitted even if the level of
such investment falls below the capped level subsequently.

46
Equity/
FDI Cap
Entry Route
(i) 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.
(ii) The applicant should be an Indian company/partnership firm.
(iii) The management of the applicant company/partnership should be in Indian
hands with majority representation on the Board as well as the Chief
Executives of the company/partnership firm being resident Indians.
(iv) Full particulars of the Directors and the Chief Executives should be
furnished along with the applications.
(v) The Government reserves the right to verify the antecedents of the foreign
collaborators and domestic promoters including their financial standing and
credentials in the world market. Preference would be given to original
equipment manufacturers or design establishments, and companies having
a good track record of past supplies to Armed Forces, Space and Atomic
energy sections and having an established R & D base.
(vi) There would be no minimum capitalization for the FDI. A proper
assessment, however, needs to be done by the management of the applicant
company depending upon the product and the technology. The licensing
authority would satisfy itself about the adequacy of the net worth of the
non-resident investor taking into account the category of weapons and
equipment that are proposed to be manufactured.
(vii) There would be a three-year lock-in period for transfer of equity from one
non-resident investor to another non-resident investor (including NRIs &
erstwhile OCBs with 60% or more NRI stake) and such transfer would be
subject to prior approval of the Government.
(viii) The Ministry of Defence is not in a position to give purchase guarantee for
products to be manufactured. However, the planned acquisition programme
for such equipment and overall requirements would be made available to
the extent possible.
(ix) The capacity norms for production will be provided in the licence based on
the application as well as the recommendations of the Ministry of Defence,
which will look into existing capacities of similar and allied products.

47
Equity/
FDI Cap
Entry Route
(x) Import of equipment for pre-production activity including development of
prototype by the applicant company would be permitted.
(xi) Adequate safety and security procedures would need to be put in place by
the licensee once the licence is granted and production commences. These
would be subject to verification by authorized Government agencies.
(xii) The standards and testing procedures for equipment to be produced under
licence from foreign collaborators or from indigenous R & D will have to
be provided by the licensee to the Government nominated quality
assurance agency under appropriate confidentiality clause. The nominated
quality assurance agency would inspect the finished product and would
conduct surveillance and audit of the Quality Assurance Procedures of the
licensee. Self-certification would be permitted by the Ministry of Defence
on case to case basis, which may involve either individual items, or group
of items manufactured by the licensee. Such permission would be for a
fixed period and subject to renewals.
(xiii) Purchase preference and price preference may be given to the Public
Sector organizations as per guidelines of the Department of Public
Enterprises.
(xiv) Arms and ammunition produced by the private manufacturers will be
primarily sold to the Ministry of Defence. These items may also be sold to
other Government entities under the control of the Ministry of Home
Affairs and State Governments with the prior approval of the Ministry of
Defence. No such item should be sold within the country to any other
person or entity. The export of manufactured items would be subject to
policy and guidelines as applicable to Ordnance Factories and Defence
Public Sector Undertakings. Non-lethal items would be permitted for sale
to persons/entities other than the Central of State Governments with the
prior approval of the Ministry of Defence. Licensee would also need to
institute a verifiable system of removal of all goods out of their factories.
Violation of these provisions may lead to cancellation of the licence.
(xv) All applications seeking permission of the Government for FDI in defence
would be made to the Secretariat of Foreign Investment Promotion Board
(FIPB) in the Department of Economic Affairs.

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(xvi) Applications for FDI up to 26% will follow the existing procedure with
proposals involving inflows in excess of Rs. 1200 crore being approved by
Cabinet Committee on Economic Affairs (CCEA). Applications seeking
permission of the Government for FDI beyond 26%, will in all cases be
examined additionally by the Department of Defence Production (DoDP)
from the point of view particularly of access to modern and ‘state-of-art’
technology.
(xvii) Based on the recommendation of the DoDP and FIPB, approval of the
Cabinet Committee on Security (CCS) will be sought by the DoDP in
respect of cases which are likely to result in access to modern and ‘state-of-
art’ technology in the country.
(xviii) Proposals for FDI beyond 26% with proposed inflow in excess of Rs. 1200
crores, which are to be approved by CCS will not require further approval of
the Cabinet Committee on Economic Affairs (CCEA).
(xix) Government decision on applications to FIPB for FDI in defence industry
sector will be normally communicated within a time frame of 10 weeks
from the date of acknowledgement.
Services Sector
Information Services
6.2.7 Broadcasting
6.2.7.1 Broadcasting Carriage Services
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)
74% Automatic up to 49%
Government route beyond
49% and up to 74%

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6.2.7.1.2 Cable Networks (Other MSOs not
undertaking upgradation of networks
towards digitalization and addressability
and Local Cable Operators (LCOs))
49% Automatic
6.2.7.2 Broadcasting Content Services
6.2.7.2.1 Terrestrial Broadcasting FM (FM
Radio), subject to such terms and
conditions, as specified from time to time,
by Ministry of Information &
Broadcasting, for grant of permission for
setting up of FM Radio stations
26% Government
6.2.7.2.2 Up-linking of ‘News & Current Affairs’
TV Channels
26% Government
6.2.7.2.3 Up-linking of Non-‘News & Current
Affairs’ TV Channels/ Down-linking of
TV Channels
100% Government
6.2.7.3 FDI for Up-linking/Down-linking TV Channels will be subject to compliance with
the relevant Up-linking/Down-linking Policy notified by the Ministry of Information
& Broadcasting from time to time.
6.2.7.4 Foreign investment (FI) in companies engaged in all the aforestated services will be
subject to relevant regulations and such terms and conditions, as may be specified
from time to time, by the Ministry of Information and Broadcasting.
6.2.7.5 The foreign investment (FI) limit in companies engaged in the aforestated activities
shall include, in addition to FDI, investment by Foreign Institutional Investors
(FIIs), Foreign Portfolio Investors (FPIs), Qualified Foreign Investors(QFIs), Non-
Resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American
Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible
preference shares held by foreign entities.
6.2.7.6 Foreign investment in the aforestated broadcasting carriage services will be subject
to the following security conditions/terms:

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Mandatory Requirement for Key Executives of the Company
(i) The majority of Directors on the Board of the Company shall be Indian
citizens.
(ii) The Chief Executive Officer (CEO), Chief Officer in-charge of technical
network operations and Chief Security Officer should be resident Indian
citizens.
Security Clearance of Personnel
(iii) The Company, all Directors on the Board of Directors and such key
executives like Managing Director/Chief Executive Officer, Chief Financial
Officer (CFO), Chief Security Officer (CSO), Chief Technical Officer
(CTO), Chief Operating Officer (COO), shareholders who individually hold
10% or more paid-up capital in the company and any other category, as may
be specified by the Ministry of Information and Broadcasting from time to
time, shall require to be security cleared.
In case of the appointment of Directors on the Board of the Company and
such key executives like Managing Director/Chief Executive Officer, Chief
Financial Officer (CFO), Chief Security Officer (CSO), Chief Technical
Officer (CTO), Chief Operating Officer (COO), etc., as may be specified by
the Ministry of Information and Broadcasting from time to time, prior
permission of the Ministry of Information and Broadcasting shall have to be
obtained.
It shall be obligatory on the part of the company to also take prior
permission from the Ministry of Information and Broadcasting before
effecting any change in the Board of Directors.
(iv) The Company shall be required to obtain security clearance of all foreign
personnel likely to be deployed for more than 60 days in a year by way of
appointment, contract, and consultancy or in any other capacity for
installation, maintenance, operation or any other services prior to their
deployment. The security clearance shall be required to be obtained every
two years.
Permission vis-à-vis Security Clearance
(v) The permission shall be subject to permission holder/licensee remaining
security cleared throughout the currency of permission. In case the security

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clearance is withdrawn, the permission granted is liable to be terminated
forthwith.
(vi) In the event of security clearance of any of the persons associated with the
permission holder/licensee or foreign personnel being denied or withdrawn
for any reasons whatsoever, the permission holder/licensee will ensure that
the concerned person resigns or his services terminated forthwith after
receiving such directives from the Government, failing which the
permission/license granted shall be revoked and the company shall be
disqualified to hold any such Permission/license in future for a period of five
years.
Infrastructure/Network/Software related requirement
(vii) The officers/officials of the licensee companies dealing with the lawful
interception of services will be resident India citizens.
(viii) Details of infrastructure/network diagram (technical details of the network)
could be provided, on a need basis only, to equipment
suppliers/manufactures and the affiliate of the licensee company. Clearance
from the licensor would be required if such information is to be provided to
anybody else.
(ix) The Company shall not transfer the subscribers’ databases to any
person/place outside India unless permitted by relevant law.
(x) The Company must provide traceable identity of their subscribers.
Monitoring, Inspection and Submission of Information
(xi) The Company should ensure that necessary provision (hardware/software) is
available in their equipment for doing the lawful interception and monitoring
from a centralized location as and when required by Government.
(xii) The company, at its own costs, shall, on demand by the government or its
authorized representative, provide the necessary equipment, services and
facilities at designated place(s) for continuous monitoring or the
broadcasting service by or under supervision of the Government or its
authorized representative.
(xiii) The Government of India, Ministry of Information & Broadcasting or its
authorized representative shall have the right to inspect the broadcasting
facilities. No prior permission/intimation shall be required to exercise the

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right of Government or its authorized representative to carry out the
inspection. The company will, if required by the Government or its
authorized representative, provide necessary facilities for continuous
monitoring for any particular aspect of the company’s activities and
operations. Continuous monitoring, however, will be confined only to
security related aspects, including screening of objectionable content.
(xiv) The inspection will ordinarily be carried out by the Government of India,
Ministry of Information & Broadcasting or its authorized representative after
reasonable notice, except in circumstances where giving such a notice will
defeat the very purpose of the inspection.
(xv) The company shall submit such information with respect to its services as
may be required by the Government or its authorized representative, in the
format as may be required, from time to time.
(xvi) The permission holder/licensee shall be liable to furnish the Government of
India or its authorized representative or TRAI or its authorized
representative, such reports, accounts, estimates, returns or such other
relevant information and at such periodic intervals or such times as may be
required.
(xvii) The service providers should familiarize/train designated officials or the
Government or officials of TRAI or its authorized representative(s) in
respect of relevant operations/features of their systems.
National Security Conditions
(xviii) It shall be open to the licensor to restrict the Licensee Company from
operating in any sensitive area from the National Security angle. The
Government of India, Ministry of Information and Broadcasting shall have
the right to temporarily suspend the permission of the permission
holder/Licensee in public interest or for national security for such period or
periods as it may direct. The company shall immediately comply with any
directives issued in this regard failing which the permission issued shall be
revoked and the company disqualified to hold any such permission in future
for a period of five years.
(xix) The company shall not import or utilize any equipment, which are identified

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as unlawful and/or render network security vulnerable.
Other Conditions
(xx) Licensor reserves the right to modify these conditions or incorporate new
conditions considered necessary in the interest of national security and
public interest or for proper provision of broadcasting services.
(xxi) Licensee will ensure that broadcasting service installation carried out by it
should not become a safety hazard and is not in contravention of any statute,
rule or regulation and public policy.
6.2.8 Print Media
6.2.8.1 Publishing of newspaper and periodicals
dealing with news and current affairs
26% (FDI and
investment by
NRIs/PIOs/FII/FPI)
Government
6.2.8.2 Publication of Indian editions of foreign
magazines dealing with news and current
affairs
26% (FDI and
investment by
NRIs/PIOs/FII/FPI)
Government
(i) ‘Magazine’, for the purpose of these guidelines, will be defined as a periodical
publication, brought out on non-daily basis, containing public news or comments
on public news.
(ii) Foreign investment would also be subject to the Guidelines for Publication of
Indian editions of foreign magazines dealing with news and current affairs issued
by the Ministry of Information & Broadcasting on 4.12.2008.
6.2.8.3 Publishing/printing of scientific and
technical magazines/specialty journals/
periodicals, subject to compliance with
the legal framework as applicable and
guidelines issued in this regard from time
to time by Ministry of Information and
Broadcasting.
100% Government
6.2.8.4 Publication of facsimile edition of foreign
newspapers
100% Government

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(i) FDI should be made by the owner of the original foreign newspapers whose
facsimile edition is proposed to be brought out in India.
(ii) Publication of facsimile edition of foreign newspapers can be undertaken
only by an entity incorporated or registered in India under the provisions of
the Companies Act, 1956.
(iii) Publication of facsimile edition of foreign newspaper would also be subject
to the Guidelines for publication of newspapers and periodicals dealing with
news and current affairs and publication of facsimile edition of foreign
newspapers issued by Ministry of Information & Broadcasting on 31.3.2006,
as amended from time to time.
6.2.9 Civil Aviation
6.2.9.1 The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled
domestic passenger airlines, Helicopter services/Seaplane services, Ground
Handling Services, Maintenance and Repair organizations; Flying training institutes;
and Technical training institutions.
For the purposes of the Civil Aviation sector:
(i) “Airport” means a landing and taking off area for aircrafts, usually with
runways and aircraft maintenance and passenger facilities and includes
aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934;
(ii) “Aerodrome” means any definite or limited ground or water area intended to
be used, either wholly or in part, for the landing or departure of aircraft, and
includes all buildings, sheds, vessels, piers and other structures thereon or
pertaining thereto;
(iii) “Air transport service” means a service for the transport by air of persons,
mails or any other thing, animate or inanimate, for any kind of remuneration
whatsoever, whether such service consists of a single flight or series of
flights;
(iv) “Air Transport Undertaking” means an undertaking whose business includes
the carriage by air of passengers or cargo for hire or reward;
(v) “Aircraft component” means any part, the soundness and correct functioning
of which, when fitted to an aircraft, is essential to the continued airworthiness
or safety of the aircraft and includes any item of equipment;

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(vi) “Helicopter” means a heavier-than-air aircraft supported in flight by the
reactions of the air on one or more power driven rotors on substantially
vertical axis;
(vii)“Scheduled air transport service” means an air transport service undertaken
between the same two or more places and operated according to a published
time table or with flights so regular or frequent that they constitute a
recognizably systematic series, each flight being open to use by members of
the public;
(viii) “Non-Scheduled air transport service” means any service which is not a
scheduled air transport service and will include Cargo airlines;
(ix)“Cargo airlines” would mean such airlines which meet the conditions as given
in the Civil Aviation Requirements issued by the Ministry of Civil Aviation;
(x) “Seaplane” means an aeroplane capable normally of taking off from and
alighting solely on water;
(xi)“Ground Handling” means (i) ramp handling, (ii) traffic handling both of
which shall include the activities as specified by the Ministry of Civil Aviation
through the Aeronautical Information Circulars from time to time, and (iii)
any other activity specified by the Central Government to be a part of either
ramp handling or traffic handling.
6.2.9.2 Airports
(a) Greenfield projects 100% Automatic
(b) Existing projects 100% Automatic up to 74%
74%
6.2.9.3 Air Transport Services
(1)Scheduled Air Transport Service/
Domestic Scheduled Passenger Airline
49% FDI
(100% for NRIs)
Automatic
(2) Non-Scheduled Air Transport Service 74% FDI
(100% for NRIs)
Automatic up to
49%
Government route
beyond 49% and
up to 74%
(3)Helicopter services/seaplane services
requiring DGCA approval
100% Automatic

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(a) Air Transport Services would include Domestic Scheduled Passenger
Airlines; Non-Scheduled Air Transport Services, helicopter and seaplane
services.
(b) Foreign airlines are allowed to participate in the equity of companies
operating Cargo airlines, helicopter and seaplane services, as per the limits
and entry routes mentioned above.
(c) Foreign airlines are also allowed to invest in the capital of Indian companies,
operating scheduled and non-scheduled air transport services, up to the limit
of 49% of their paid-up capital. Such investment would be subject to the
following conditions:
(i) It would be made under the Government approval route.
(ii) The 49% limit will subsume FDI and FII/FPI investment.
(iii) The investments so made would need to comply with the relevant
regulations of SEBI, such as the Issue of Capital and Disclosure
Requirements (ICDR) Regulations/Substantial Acquisition of Shares
and Takeovers (SAST) Regulations, as well as other applicable rules
and regulations.
(iv) A Scheduled Operator’s Permit can be granted only to a company:
a) that is registered and has its principal place of business
within India;
b) the Chairman and at least two-thirds of the Directors of
which are citizens of India; and
c) the substantial ownership and effective control of which is
vested in Indian nationals.
(v) All foreign nationals likely to be associated with Indian scheduled
and non-scheduled air transport services, as a result of such
investment shall be cleared from security view point before
deployment; and
(vi) All technical equipment that might be imported into India as a result
of such investment shall require clearance from the relevant authority
in the Ministry of Civil Aviation.

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Note: (i) The FDI limits/entry routes, mentioned at paragraph 6.2.9.3 (1) and
6.2.9.3 (2) above, are applicable in the situation where there is no
investment by foreign airlines.
(ii) The dispensation for NRIs regarding FDI up to 100% will also continue
in respect of the investment regime specified at para 6.2.9.3.1(c)(ii)
above.
(iii)The policy mentioned at para 6.2.9.3.1 (c) above is not applicable to M/s
Air India Limited.
6.2.9.4 Other services under Civil Aviation sector
(1) 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%
(2)Maintenance and Repair organizations;
flying training institutes; and technical
training institutions.
100% Automatic
6.2.10 Courier services for carrying packages,
parcels and other items which do not
come within the ambit of the Indian Post
Office Act, 1898 and excluding the
activity relating to the distribution of
letters.
100% Automatic
6.2.11 Construction Development: Townships, Housing, Built-up infrastructure
6.2.11.1 Townships, housing, built-up
infrastructure and construction-
development projects (which would
include, but not be restricted to, housing,
commercial premises, hotels, resorts,
hospitals, educational institutions,
recreational facilities, city and regional
level infrastructure)
100% Automatic

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6.2.11.2 Investment will be subject to the following conditions:
(1) Minimum area to be developed under each project would be as under:
(i) In case of development of serviced housing plots, a minimum land area of 10
hectares
(ii) In case of construction-development projects, a minimum built-up area of
50,000 sq.mts
(iii)In case of a combination project, any one of the above two conditions would
suffice.
(2) Minimum capitalization of US $10 million for wholly owned subsidiaries and
US $ 5 million for joint ventures with Indian partners. The funds would have to
be brought in within six months of commencement of business of the Company.
(3) Original investment cannot be repatriated before a period of three years from
completion of minimum capitalization. Original investment means the entire
amount brought in as FDI. The lock-in period of three years will be applied from
the date of receipt of each installment/tranche of FDI or from the date of
completion of minimum capitalization, whichever is later. However, the investor
may be permitted to exit earlier with prior approval of the Government through
the FIPB.
(4) At least 50% of each such project must be developed within a period of five
years from the date of obtaining all statutory clearances. The investor/investee
company would not be permitted to sell undeveloped plots. For the purpose of
these guidelines, “undeveloped plots” will mean where roads, water supply,
street lighting, drainage, sewerage, and other conveniences, as applicable under
prescribed regulations, have not been made available. It will be necessary that
the investor provides this infrastructure and obtains the completion certificate
from the concerned local body/service agency before he would be allowed to
dispose of serviced housing plots.
(5) The project shall conform to the norms and standards, including land use
requirements and provision of community amenities and common facilities, as
laid down in the applicable building control regulations, bye-laws, rules, and
other regulations of the State Government/Municipal/Local Body concerned.
(6) The investor/investee company shall be responsible for obtaining all necessary

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approvals, including those of the building/layout plans, developing internal and
peripheral areas and other infrastructure facilities, payment of development,
external development and other charges and complying with all other
requirements as prescribed under applicable rules/bye-laws/regulations of the
State Government/ Municipal/Local Body concerned.
(7) The State Government/Municipal/Local Body concerned, which approves the
building/development plans, would monitor compliance of the above conditions
by the developer.
Note:
(i) The conditions at (1) to (4) above would not apply to Hotels & Tourism,
Hospitals, Special Economic Zones (SEZs), Education Sector, Old Age Homes
and investment by NRIs.
(ii) FDI is not allowed in Real Estate Business.
6.2.12 Industrial Parks – new and existing 100% Automatic
6.2.12.1 (i) “Industrial Park” is a project in which quality infrastructure in the form of plots
of developed land or built up space or a combination with common facilities, is
developed and made available to all the allottee units for the purposes of
industrial activity.
(ii) “Infrastructure” refers to facilities required for functioning of units located in
the Industrial Park and includes roads (including approach roads), water supply
and sewerage, common effluent treatment facility, telecom network, generation
and distribution of power, air conditioning.
(iii) “Common Facilities” refer to the facilities available for all the units located in
the industrial park, and include facilities of power, roads (including approach
roads), water supply and sewerage, common effluent treatment, common
testing, telecom services, air conditioning, common facility buildings, industrial
canteens, convention/conference halls, parking, travel desks, security service,
first aid center, ambulance and other safety services, training facilities and such
other facilities meant for common use of the units located in the Industrial Park.
(iv) “Allocable area” in the Industrial Park means-
(a) in the case of plots of developed land- the net site area available for
allocation to the units, excluding the area for common facilities.
(b) in the case of built up space- the floor area and built up space utilized for

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providing common facilities.
(c) in the case of a combination of developed land and built-up space- the net
site and floor area available for allocation to the units excluding the site
area and built up space utilized for providing common facilities.
(v) “Industrial Activity” means manufacturing; electricity; gas and water supply;
post and telecommunications; software publishing, consultancy and supply;
data processing, database activities and distribution of electronic content; other
computer related activities; basic and applied R&D on bio-technology,
pharmaceutical sciences/life sciences, natural sciences and engineering;
business and management consultancy activities; and architectural, engineering
and other technical activities.
6.2.12.2 FDI in Industrial Parks would not be subject to the conditionalities applicable for
construction development projects etc. spelt out in para 6.2.11 above, provided the
Industrial Parks meet with the under-mentioned conditions:
(i) it would comprise of a minimum of 10 units and no single unit shall occupy
more than 50% of the allocable area;
(ii) the minimum percentage of the area to be allocated for industrial activity
shall not be less than 66% of the total allocable area.
6.2.13 Satellites- establishment and operation
6.2.13.1 Satellites- establishment and operation,
subject to the sectoral guidelines of
Department of Space/ISRO
74% Government
6.2.14 Private Security Agencies 49 % Government
6.2.15 Telecom Services
(including Telecom Infrastructure
Providers Category-I)
All telecom services including Telecom
Infrastructure Providers Category-I, viz.
Basic, Cellular, United Access Services,
Unified License (Access Services),
Unified License, National/International
Long Distance, Commercial V-Sat, Public
Mobile Radio Trunked Services
100% Automatic up to 49%
49%

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(PMRTS), Global Mobile Personal
Communications Services (GMPCS), All
types of ISP licenses, Voice
Mail/Audiotex/UMS, Resale of IPLC,
Mobile Number Portability Services,
Infrastructure Provider Category-I
(providing dark fibre, right of way, duct
space, tower) except Other Service
Providers.
6.2.15.1 Other Condition:
FDI up to 100% with 49% on the automatic route and beyond 49% on the
government route subject to observance of licensing and security conditions by
licensee as well as investors as notified by the Department of Telecommunications
(DoT) from time to time, expect “Other Service Providers”, which are allowed
100% FDI on the automatic route.
6.2.16 Trading
6.2.16.1 Cash & Carry Wholesale
Trading/Wholesale Trading (including
sourcing from MSEs)
100% Automatic
6.2.16.1.1 Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of
goods/merchandise to retailers, industrial, commercial, institutional or other
professional business users or to other wholesalers and related subordinated service
providers. Wholesale trading would, accordingly, imply sales for the purpose of
trade, business and profession, as opposed to sales for the purpose of personal
consumption. The yardstick to determine whether the sale is wholesale or not would
be the type of customers to whom the sale is made and not the size and volume of
sales. Wholesale trading would include resale, processing and thereafter sale, bulk
imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce.
6.2.16.1.2 Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT):
(a) For undertaking WT, requisite licenses/registration/ permits, as specified
under the relevant Acts/Regulations/Rules/Orders of the State
Government/Government Body/Government Authority/Local Self-
Government Body under that State Government should be obtained.

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(b) Except in case of sales to Government, sales made by the wholesaler would
be considered as ‘cash & carry wholesale trading/wholesale trading’ with
valid business customers, only when WT are made to the following entities:
(I) Entities holding sales tax/ VAT registration/service tax/excise duty
registration; or
(II) Entities holding trade licenses i.e. a license/registration
certificate/membership certificate/registration under Shops and
Establishment Act, issued by a Government
Authority/Government Body/Local Self-Government Authority,
reflecting that the entity/person holding the license/ registration
certificate/ membership certificate, as the case may be, is itself/
himself/herself engaged in a business involving commercial
activity; or
(III) Entities holding permits/license etc. for undertaking retail trade
(like tehbazari and similar license for hawkers) from Government
Authorities/Local Self Government Bodies; or
(IV) Institutions having certificate of incorporation or registration as a
society or registration as public trust for their self consumption.
Note: An entity, to whom WT is made, may fulfill any one of the 4
conditions.
(c) Full records indicating all the details of such sales like name of entity, kind
of entity, registration/license/permit etc. number, amount of sale etc. should
be maintained on a day to day basis.
(d) WT of goods would be permitted among companies of the same group.
However, such WT to group companies taken together should not exceed
25% of the total turnover of the wholesale venture
(e) WT can be undertaken as per normal business practice, including extending
credit facilities subject to applicable regulations.
(f) A Wholesale/Cash & carry trader cannot open retail shops to sell to the
consumer directly.

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6.2.16.2 E-commerce activities 100% Automatic
6.2.16.2.1
E-commerce activities refer to the activity of buying and selling by a company
through the e-commerce platform. Such companies would engage only in Business
to Business (B2B) e-commerce and not in retail trading, inter-alia implying that
existing restrictions on FDI in domestic trading would be applicable to e-commerce
as well.
6.2.16.3 Single Brand product retail trading 100% Automatic up to 49%
Government route beyond 49%
(1) Foreign Investment in Single Brand product retail trading is aimed at attracting
investments in production and marketing, improving the availability of such
goods for the consumer, encouraging increased sourcing of goods from India,
and enhancing competitiveness of Indian enterprises through access to global
designs, technologies and management practices.
(2) FDI in Single Brand product retail trading would be subject to the following
conditions:
(a)Products to be sold should be of a ‘Single Brand’ only.
(b) Products should be sold under the same brand internationally i.e. products
should be sold under the same brand in one or more countries other than
India.
(c)‘Single Brand’ product-retail trading would cover only products which are
branded during manufacturing.
(d) A non-resident entity or entities, whether owner of the brand or otherwise,
shall be permitted to undertake ‘single brand’ product retail trading in the
country for the specific brand, directly or through a legally tenable agreement
with the brand owner for undertaking single brand product retail trading. The
onus for ensuring compliance with this condition will rest with the Indian
entity carrying out single-brand product retail trading in India. The investing
entity shall provide evidence to this effect at the time of seeking approval,
including a copy of the licensing/franchise/sub-licence agreement,
specifically indicating compliance with the above condition. The requisite
evidence should be filed with the RBI for the automatic route and SIA/FIPB
for cases involving approval.

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(e)In respect of proposals involving FDI beyond 51%, sourcing of 30% of the
value of goods purchased, will be done from India, preferably from MSMEs,
village and cottage industries, artisans and craftsmen, in all sectors. The
quantum of domestic sourcing will be self-certified by the company, to be
subsequently checked, by statutory auditors, from the duly certified accounts
which the company will be required to maintain. This procurement
requirement would have to be met, in the first instance, as an average of five
years’ total value of the goods purchased, beginning 1st
April of the year
during which the first tranche of FDI is received. Thereafter, it would have to
be met on an annual basis. For the purpose of ascertaining the sourcing
requirement, the relevant entity would be the company, incorporated in India,
which is the recipient of FDI for the purpose of carrying out single-brand
product retail trading.
(f) Retail trading, in any form, by means of e-commerce, would not be
permissible, for companies with FDI, engaged in the activity of single-brand
retail trading.
(3) Application seeking permission of the Government for FDI exceeding 49% in a
company which proposes to undertake single brand retail trading in India would
be made to the Secretariat for Industrial Assistance (SIA) in the Department of
Industrial Policy & Promotion. The applications would specifically indicate the
product/product categories which are proposed to be sold under a ‘Single Brand’.
Any addition to the product/product categories to be sold under ‘Single Brand’
would require a fresh approval of the Government. In case of FDI up to 49%, the
list of products/product categories proposed to be sold except food products
would be provided to the RBI.
(4) Applications would be processed in the Department of Industrial Policy &
Promotion, to determine whether the proposed investment satisfies the notified
guidelines, before being considered by the FIPB for Government approval.

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6.2.16.4 Multi Brand Retail Trading 51% Government
(1) FDI in multi brand retail trading, in all products, will be permitted, subject to
the following conditions:
(i) Fresh agricultural produce, including fruits, vegetables, flowers, grains,
pulses, fresh poultry, fishery and meat products, may be unbranded.
(ii) Minimum amount to be brought in, as FDI, by the foreign investor, would
be US $ 100 million.
(iii) At least 50% of total FDI brought in the first tranche of US $ 100 million,
shall be invested in 'back-end infrastructure' within three years,where
‘back-end infrastructure’ will include capital expenditure on all activities,
excluding that on front-end units; for instance, back-end infrastructure will
include investment made towards processing, manufacturing, distribution,
design improvement, quality control, packaging, logistics, storage, ware-
house, agriculture market produce infrastructure etc. Expenditure on land
cost and rentals, if any, will not be counted for purposes of backend
infrastructure. Subsequent investment in backend infrastructure would be
made by the MBRT retailer as needed, depending upon its business
requirements.
(iv) At least 30% of the value of procurement of manufactured/processed
products purchased shall be sourced from Indian micro, small and medium
industries, which have a total investment in plant & machinery not
exceeding US $ 2.00 million. This valuation refers to the value at the time
of installation, without providing for depreciation. The ‘small industry’
status would be reckoned only at the time of first engagement with the
retailer, and such industry shall continue to qualify as a ‘small industry’
for this purpose, even if it outgrows the said investmentof US $ 2.00
million during the course of its relationship with the said retailer. Sourcing
from agricultural co-operatives and farmers co-operatives would also be
considered in this category. The procurement requirement would have to
be met, in the first instance, as an average of five years’ total value of the
manufactured/processed products purchased, beginning 1st
April of the
year during which the first tranche of FDI is received. Thereafter, it would
have to be met on an annual basis.

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(v) Self-certification by the company, to ensure compliance of the conditions at
serial nos. (ii), (iii) and (iv) above, which could be cross-checked, as and
when required. Accordingly, the investors shall maintain accounts, duly
certified by statutory auditors.
(vi) Retail sales outlets may be set up only in cities with a population of more
than 10 lakh as per 2011 Census or any other cities as per the decision of
the respective State Governments, and may also cover an area of 10 kms
around the municipal/urban agglomeration limits of such cities; retail
locations will be restricted to conforming areas as per the Master/Zonal
Plans of the concerned cities and provision will be made for requisite
facilities such as transport connectivity and parking.
(vii) Government will have the first right to procurement of agricultural
products.
(viii) The above policy is an enabling policy only and the State
Governments/Union Territories would be free to take their own decisions
in regard to implementation of the policy. Therefore, retail sales outlets
may be set up in those States/Union Territories which have agreed, or agree
in future, to allow FDI in MBRT under this policy. The list of States/Union
Territories which have conveyed their agreement is at (2) below. Such
agreement, in future, to permit establishment of retail outlets under this
policy, would be conveyed to the Government of India through the
Department of Industrial Policy & Promotion and additions would be made
to the list at (2) below accordingly. The establishment of the retail sales
outlets will be in compliance of applicable State/Union Territory laws/
regulations, such as the Shops and Establishments Act etc.
(ix) Retail trading, in any form, by means of e-commerce, would not be
permissible, for companies with FDI, engaged in the activity of multi-
brand retail trading.
(x) Applications would be processed in the Department of Industrial Policy &
Promotion, to determine whether the proposed investment satisfies the
notified guidelines, before being considered by the FIPB for Government
approval.

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(2) List of States/Union Territories as mentioned in Paragraph 6.2.16.4(1)(viii)
1. Andhra Pradesh
2. Assam
3. Delhi
4. Haryana
5. Himachal Pradesh
6. Jammu & Kashmir
7. Karnataka
8. Maharashtra
9. Manipur
10. Rajasthan
11. Uttarakhand
12. Daman & Diu and Dadra and Nagar Haveli (Union Territories)
Financial Services
6.2.17 Financial Services
Foreign investment in other financial services, other than those indicated below,
would require prior approval of the Government:
6.2.17.1 Asset Reconstruction Companies
6.2.17.1.1 ‘Asset Reconstruction Company’ (ARC)
means a company registered with the
Reserve Bank of India under Section 3 of
the Securitisation and Reconstruction of
Financial Assets and Enforcement of
Security Interest Act, 2002 (SARFAESI
Act).
100% of paid-up
capital of ARC
(FDI+FII/FPI)
Automatic up to
49%
Government route
beyond 49%
(i) Persons resident outside India can invest in the capital of Asset Reconstruction
Companies (ARCs) registered with Reserve Bank, up to 49% on the automatic
route, and beyond 49% on the Government route.
(ii) No sponsor may hold more than 50% of the shareholding in an ARC either by
way of FDI or by routing it through an FII/FPI controlled by the single sponsor.
(iii) The total shareholding of an individual FII/FPI shall be below 10% of the total
paid-up capital.
(iv) FIIs/FPIs can invest in the Security Receipts (SRs) issued by ARCs registered
with Reserve Bank. FIIs/FPIs can invest up to 74 per cent of each tranche of
scheme of SRs. Such investment should be within the FII/FPI limit on corporate

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bonds prescribed from time to time, and sectoral caps under extant FDI
Regulations should also be complied with.
(v) All investments would be subject to provisions of section 3(3) (f) of
Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002.
6.2.17.2 Banking- Private Sector
6.2.17.2.1 Banking- Private Sector 74% including
investment by
FIIs/FPIs
Automatic up to 49%
49% and up to 74%
(1) This 74% limit will include investment under the Portfolio Investment Scheme
(PIS) by FIIs/FPIs, NRIs and shares acquired prior to September 16, 2003 by
erstwhile OCBs, and continue to include IPOs, Private placements, GDR/ADRs
and acquisition of shares from existing shareholders.
(2) The aggregate foreign investment in a private bank from all sources will be
allowed up to a maximum of 74 per cent of the paid up capital of the Bank. At
all times, at least 26 per cent of the paid up capital will have to be held by
residents, except in regard to a wholly-owned subsidiary of a foreign bank.
(3) The stipulations as above will be applicable to all investments in existing private
sector banks also.
(4) The permissible limits under portfolio investment schemes through stock
exchanges for FIIs/FPIs and NRIs will be as follows:
(i) In the case of FIIs/FPIs, as hitherto, individual FII/FPI holding is restricted to
below 10 per cent of the total paid-up capital, aggregate limit for all
FIIs/FPIs/QFIs cannot exceed 24 per cent of the total paid-up capital, which
can be raised to 49 per cent of the total paid-up capital by the bank
concerned through a resolution by its Board of Directors followed by a
special resolution to that effect by its General Body.
(a) Thus, the FII/FPI/QFI investment limit will continue to be within 49 per
cent of the total paid-up capital.
(b) In the case of NRIs, as hitherto, individual holding is restricted to 5 per
cent of the total paid-up capital both on repatriation and non-repatriation
basis and aggregate limit cannot exceed 10 per cent of the total paid-up

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capital both on repatriation and non-repatriation basis. However, NRI
holding can be allowed up to 24 per cent of the total paid-up capital both
on repatriation and non-repatriation basis provided the banking company
passes a special resolution to that effect in the General Body.
(c) Applications for foreign direct investment in private banks having joint
venture/subsidiary in insurance sector may be addressed to the Reserve
Bank of India (RBI) for consideration in consultation with the Insurance
Regulatory and Development Authority (IRDA) in order to ensure that
the 26 per cent limit of foreign shareholding applicable for the insurance
sector is not being breached.
(d) Transfer of shares under FDI from residents to non-residents will
continue to require approval of RBI and Government as per para 3.6.2
above as applicable.
(e) The policies and procedures prescribed from time to time by RBI and
other institutions such as SEBI, D/o Company Affairs and IRDA on
these matters will continue to apply.
(f) RBI guidelines relating to acquisition by purchase or otherwise of shares
of a private bank, if such acquisition results in any person owning or
controlling 5 per cent or more of the paid up capital of the private bank
will apply to non-resident investors as well.
(ii) Setting up of a subsidiary by foreign banks
(a) Foreign banks will be permitted to either have branches or subsidiaries
but not both.
(b) Foreign banks regulated by banking supervisory authority in the home
country and meeting Reserve Bank’s licensing criteria will be allowed to
hold 100 per cent paid up capital to enable them to set up a wholly-
owned subsidiary in India.
(c) A foreign bank may operate in India through only one of the three
channels viz., (i) branches (ii) a wholly-owned subsidiary and (iii) a
subsidiary with aggregate foreign investment up to a maximum of 74 per
cent in a private bank.
(d) A foreign bank will be permitted to establish a wholly-owned subsidiary
either through conversion of existing branches into a subsidiary or

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through a fresh banking license. A foreign bank will be permitted to
establish a subsidiary through acquisition of shares of an existing private
sector bank provided at least 26 per cent of the paid capital of the private
sector bank is held by residents at all times consistent with para (i) (b)
above.
(e) A subsidiary of a foreign bank will be subject to the licensing
requirements and conditions broadly consistent with those for new
private sector banks.
(f) Guidelines for setting up a wholly-owned subsidiary of a foreign bank
will be issued separately by RBI.
(g) All applications by a foreign bank for setting up a subsidiary or for
conversion of their existing branches to subsidiary in India will have to
be made to the RBI.
(iii) At present there is a limit of ten per cent on voting rights in respect of
banking companies, and this should be noted by potential investor. Any
change in the ceiling can be brought about only after final policy decisions
and appropriate Parliamentary approvals.
6.2.17.3 Banking- Public Sector
6.2.17.3.1 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
6.2.17.4 Commodity Exchanges
6.2.17.4.1 (1) Futures trading in commodities are regulated under the Forward Contracts
(Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are
infrastructure companies in the commodity futures market. With a view to
infuse globally acceptable best practices, modern management skills and latest
technology, it was decided to allow foreign investment in Commodity
Exchanges.
(2) For the purposes of this chapter,
(i)“Commodity Exchange” is a recognized association under the provisions of

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the Forward Contracts (Regulation) Act, 1952, as amended from time to
time, to provide exchange platform for trading in forward contracts in
commodities.
(ii) “recognized association” means an association to which recognition for the
time being has been granted by the Central Government under Section 6 of
the Forward Contracts (Regulation) Act, 1952
(iii)“Association” means any body of individuals, whether incorporated or not,
constituted for the purposes of regulating and controlling the business of
the sale or purchase of any goods and commodity derivative.
(iv)“Forward contract” means a contract for the delivery of goods and which is
not a ready delivery contract.
(v) “Commodity derivative” means-
 a contract for delivery of goods, which is not a ready delivery contract;
or
 a contract for differences which derives its value from prices or indices
of prices of such underlying goods or activities, services, rights, interests
and events, as may be notified in consultation with the Forward Markets
Commission by the Central Government, but does not include securities.
6.2.17.4.2 Commodity Exchange 49% (FDI + FII/FPI)
[Investment by Registered FII/FPI
under Portfolio Investment Scheme
(PIS) will be limited to 23% and
Investment under FDI Scheme
limited to 26% ]
Automatic
(1) FII/FPI purchases shall be restricted to secondary market only.
(2) No non-resident investor/entity, including persons acting in concert, will
hold more than 5% of the equity in these companies.
(3) Foreign investment in commodity exchanges will be subject to the guidelines
of the Central Government/Forward Markets Commission (FMC) from time
to time.
6.2.17.5 Credit Information Companies (CIC)
6.2.17.5.1 Credit Information Companies 74%
(FDI+FII/ FPI)
Automatic

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(1) Foreign investment in Credit Information Companies is subject to the Credit
Information Companies (Regulation) Act, 2005.
(2) Foreign investment is permitted subject to regulatory clearance from RBI.
(3) Investment by a registered FII/FPI under the Portfolio Investment Scheme would
be permitted up to 24% only in the CICs listed at the Stock Exchanges, within
the overall limit of 74% for foreign investment.
(4) Such FII/FPI investment would be permitted subject to the conditions that:
(a) A single entity should directly or indirectly hold below 10% equity.
(b) Any acquisition in excess of 1% will have to be reported to RBI as a
mandatory requirement; and
(c) FIIs/FPIs investing in CICs shall not seek a representation on the Board of
Directors based upon their shareholding.
6.2.17.6 Infrastructure Company in the Securities Market
6.2.17.6.1 Infrastructure companies in Securities
Markets, namely, stock exchanges,
depositories and clearing corporations, in
compliance with SEBI Regulations
49% (FDI + FII/FPI)
[FDI limit of 26 per cent
and FII/FPI limit of 23
per cent of the paid-up
capital ]
Automatic
6.2.17.6.2 Other Condition:
FII/FPI can invest only through purchases in the secondary market.
6.2.17.7 Insurance
6.2.17.7.1 (i) Insurance Company
(ii) Insurance Brokers
(iii) Third Party Administrators
(iv) Surveyors and Loss Assessors
26%
(FDI+FII/FPI+NRI)
Automatic
(1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1938, is allowed
under the automatic route.
(2) This will be subject to the condition that Companies bringing in FDI shall obtain
necessary license from the Insurance Regulatory & Development Authority for
undertaking insurance activities.
(3) The provisions of paragraphs 6.2.17.2.2(4)(i) (c) & (e), relating to ‘Banking-
Private Sector’, shall be applicable in respect of bank promoted insurance
companies.

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(4) Indian Insurance Company is defined as a company:
(a) which is formed and registered under the Companies Act, 1956;
(b) in which the aggregate holdings of equity shares by a foreign company either
by itself or through its subsidiary companies or its nominees, do not exceed
26% paid-up equity capital of such Indian insurance company;
(c) whose sole purpose is to carry on life insurance business or general
insurance business or re-insurance business.
(5) As per IRDA (Insurance Brokers) Regulations, 2002, “insurance broker” means
a person for the time-being licensed by the Authority under regulation 11, who
for remuneration arranges insurance contracts with insurance companies and/or
reinsurance companies on behalf of his clients.
(6) As per IRDA (TPA-Health Services) Regulations, 2001, “TPA” means a Third
Party Administrator who, for the time being, is licensed by the Authority, and is
engaged, for a fee or remuneration, by whatever name called as may be specified
in the agreement with an insurance company, for the provision of health services.
(7) Surveyors and Loss Assessors will be governed by the IRDA Insurance
Surveyors and Loss Assessors (Licencing, Professional Requirements and Code
of Conduct) Regulations, 2000.
6.2.17.8 Non-Banking Finance Companies (NBFC)
6.2.17.8.1 Foreign investment in NBFC is allowed
under the automatic route in only the
following activities:
(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
100% Automatic

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(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
(1) Investment would be subject to the following minimum capitalisation norms:
(i) US $ 0.5 million for foreign capital up to 51% to be brought upfront.
(ii) US $ 5 million for foreign capital more than 51% and up to 75% to be
brought upfront.
(iii)US $ 50 million for foreign capital more than 75% out of which US $ 7.5
million to be brought upfront and the balance in 24 months.
(iv)NBFCs (i) having foreign investment more than 75% and up to 100%, and
(ii) with a minimum capitalisation of US $ 50 million, can set up step down
subsidiaries for specific NBFC activities, without any restriction on the
number of operating subsidiaries and without bringing in additional capital.
The minimum capitalization condition as mandated by para 3.10.4.1,
therefore, shall not apply to downstream subsidiaries.
(v) Joint Venture operating NBFCs that have 75% or less than 75% foreign
investment can also set up subsidiaries for undertaking other NBFC
activities, subject to the subsidiaries also complying with the applicable
minimum capitalisation norm mentioned in (i), (ii) and (iii) above and (vi)
below.
(vi)Non- Fund based activities: US $0.5 million to be brought upfront for all
permitted non-fund based NBFCs irrespective of the level of foreign
investment subject to the following condition:
It would not be permissible for such a company to set up any subsidiary
for any other activity, nor it can participate in any equity of an NBFC

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holding/operating company.
Note: The following activities would be classified as Non-Fund Based activities:
(a) Investment Advisory Services
(b) Financial Consultancy
(c) Forex Broking
(d) Money Changing Business
(e) Credit Rating Agencies
(vii) This will be subject to compliance with the guidelines of RBI.
Note: (i) Credit Card business includes issuance, sales, marketing & design of
various payment products such as credit cards, charge cards, debit cards,
stored value cards, smart card, value added cards etc.
(ii) Leasing & Finance covers only financial leases and not operating leases.
(2) The NBFC will have to comply with the guidelines of the relevant regulator/s, as
applicable.
Others
6.2.18 Pharmaceuticals
6.2.18.1 Greenfield 100% Automatic
6.2.18.2 Brownfield 100% Government
(i) ‘Non-compete’ clause would not be allowed except in special circumstances
with the approval of the Foreign Investment Promotion Board.
(ii) The prospective investor and the prospective investee are required to provide
a certificate along with the FIPB application as per Annex-11.
(iii) Government may incorporate appropriate conditions for FDI in brownfield
cases, at the time of granting approval.
6.2.19 Power Exchanges
6.2.19.1 Power Exchanges registered under the
Central Electricity Regulatory Commission
(Power Market) Regulations, 2010.
49%
(FDI+FII/FPI)
Automatic
(i) Such foreign investment would be subject to an FDI limit of 26 per cent and
an FII/FPI limit of 23 per cent of the paid-up capital;

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(ii) FII/FPI purchases shall be restricted to secondary market only;
(iii) No non-resident investor/entity, including persons acting in concert, will
hold more than 5% of the equity in these companies; and
(iv) The foreign investment would be in compliance with SEBI Regulations;
other applicable laws/regulations; security and other conditionalities.

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Chapter 7: Remittance, Reporting and Violation
7.1 Remittance and Repatriation
7.1.1 Remittance of sale proceeds/Remittance on winding up/Liquidation of
Companies:
(i) Sale proceeds of shares and securities and their remittance is ‘remittance of
asset’ governed by The Foreign Exchange Management (Remittance of Assets)
Regulations, 2000 under FEMA.
(ii) AD Category-I bank can allow the remittance of sale proceeds of a security (net
of applicable taxes) to the seller of shares resident outside India, provided the
security has been held on repatriation basis, the sale of security has been made
in accordance with the prescribed guidelines and NOC/tax clearance certificate
from the Income Tax Department has been produced.
(iii) Remittance on winding up/liquidation of Companies
AD Category-I banks have been allowed to remit winding up proceeds of
companies in India, which are under liquidation, subject to payment of
applicable taxes. Liquidation may be subject to any order issued by the
court winding up the company or the official liquidator in case of
voluntary winding up under the provisions of the Companies Act, 1956.
AD Category-I banks shall allow the remittance provided the applicant
submits:
a. No objection or Tax clearance certificate from Income Tax
Department for the remittance.
b. Auditor's certificate confirming that all liabilities in India have been
either fully paid or adequately provided for.
c. Auditor's certificate to the effect that the winding up is in
accordance with the provisions of the Companies Act, 1956.
d. In case of winding up otherwise than by a court, an auditor's
certificate to the effect that there are no legal proceedings pending in
any court in India against the applicant or the company under
liquidation and there is no legal impediment in permitting the
remittance.
7.1.2 Repatriation of Dividend: Dividends are freely repatriable without any restrictions
(net after Tax deduction at source or Dividend Distribution Tax, if any, as the case may
be). The repatriation is governed by the provisions of the Foreign Exchange

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Management (Current Account Transactions) Rules, 2000, as amended from time to
time.
7.1.3 Repatriation of Interest: Interest on fully, mandatorily & compulsorily convertible
debentures is also freely repatriable without any restrictions (net of applicable taxes).
The repatriation is governed by the provisions of the Foreign Exchange Management
(Current Account Transactions) Rules, 2000, as amended from time to time.
7.2. Reporting of FDI
7.2.1 Reporting of Inflow
(i) An Indian company receiving investment from outside India for issuing
shares/convertible debentures/preference shares under the FDI Scheme, should
report the details of the amount of consideration to the Regional Office
concerned of the Reserve Bank not later than 30 days from the date of receipt in
the Advance Reporting Form enclosed as Annex-5.
(ii) Indian companies are required to report the details of the receipt of the amount
of consideration for issue of shares/convertible debentures, through an AD
Category-I bank, together with a copy/ies of the FIRC/s evidencing the receipt
of the remittance along with the KYC report (enclosed as Annex-6) on the non-
resident investor from the overseas bank remitting the amount. The report
would be acknowledged by the Regional Office concerned, which will allot a
Unique Identification Number (UIN) for the amount reported.
7.2.2 Reporting of issue of shares
(i) After issue of shares (including bonus and shares issued on rights basis and
shares issued under ESOP)/fully, mandatorily & compulsorily convertible
debentures/fully, mandatorily & compulsorily convertible preference shares, the
Indian company has to file Form FC-GPR, enclosed in Annex-1, not later than
30 days from the date of issue of shares.
(ii) Form FC-GPR has to be duly filled up and signed by Managing
Director/Director/Secretary of the Company and submitted to the Authorized
Dealer of the company, who will forward it to the Reserve Bank. The following
documents have to be submitted along with the form:
(a) A certificate from the Company Secretary of the company certifying that:
(A) all the requirements of the Companies Act, 1956 have been complied
with;
(B) terms and conditions of the Government’s approval, if any, have been
complied with;

79
(C) the company is eligible to issue shares under these Regulations; and
(D) the company has all original certificates issued by authorized dealers in
India evidencing receipt of amount of consideration.
Note: For companies with paid up capital with less than Rs.5 crore, the above mentioned
certificate can be given by a practicing company secretary.
(b) A certificate from SEBI registered Merchant Banker or Chartered Accountant
indicating the manner of arriving at the price of the shares issued to the persons
resident outside India.
(c) The report of receipt of consideration as well as Form FC-GPR have to be
submitted by the AD Category-I bank to the Regional Office concerned of the
Reserve Bank under whose jurisdiction the registered office of the company is
situated.
(d) Annual return on Foreign Liabilities and Assets (Annex 7) should be filed on an
annual basis by the Indian company, directly with the Reserve Bank. This is an
annual return to be submitted by 15th of July every year, pertaining to all
investments by way of direct/portfolio investments/reinvested earnings/other
capital in the Indian company made during the previous years (i.e. the information
submitted by 15th
July will pertain to all the investments made in the previous years
up to March 31). The details of the investments to be reported would include all
foreign investments made into the company which is outstanding as on the balance
sheet date. The details of overseas investments in the company both under
direct/portfolio investment may be separately indicated.
(e) Issue of bonus/rights shares or stock options to persons resident outside India
directly or on amalgamation/merger/demerger with an existing Indian company, as
well as issue of shares on conversion of ECB/royalty/lumpsum technical know-how
fee/import of capital goods by units in SEZs, has to be reported in Form FC-GPR.
7.2.3 Reporting of transfer of shares
Reporting of transfer of shares between residents and non-residents and vice- versa is
to be done in Form FC-TRS (Annex 8). The Form FC-TRS should be submitted to the
AD Category-I bank, within 60 days from the date of receipt of the amount of
consideration. The onus of submission of the Form FC-TRS within the given
timeframe would be on the transferor/transferee, resident in India. The AD Category-I
bank, would forward the same to its link office. The link office would consolidate the
Form FC-TRS and submit a monthly report to the Reserve Bank.

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7.2.4 Reporting of Non-Cash
Details of issue of shares against conversion of ECB have to be reported to the
Regional Office concerned of the RBI, as indicated below:
(i) In case of full conversion of ECB into equity, the company shall report the
conversion in Form FC-GPR to the Regional Office concerned of the Reserve
Bank as well as in Form ECB-2 to the Department of Statistics and Information
Management (DSIM), Reserve Bank of India, Bandra-Kurla Complex,
Mumbai- 400 051, within seven working days from the close of month to which
it relates. The words "ECB wholly converted to equity" shall be clearly
indicated on top of the Form ECB-2. Once reported, filing of Form ECB-2 in
the subsequent months is not necessary.
(ii) In case of partial conversion of ECB, the company shall report the converted
portion in Form FC-GPR to the Regional Office concerned as well as in Form
ECB-2 clearly differentiating the converted portion from the non-converted
portion. The words "ECB partially converted to equity" shall be indicated on
top of the Form ECB-2. In the subsequent months, the outstanding balance of
ECB shall be reported in Form ECB-2 to DSIM.
7.2.5 Reporting of FCCB/ADR/GDR Issues
The Indian company issuing ADRs/GDRs has to furnish to the Reserve Bank, full
details of such issue in the Form enclosed as Annex 9, within 30 days from the date of
closing of the issue. The company should also furnish a quarterly return in the Form
enclosed as Annex 10, to the Reserve Bank within 15 days of the close of the calendar
quarter. The quarterly return has to be submitted till the entire amount raised through
ADR/GDR mechanism is either repatriated to India or utilized abroad as per the extant
Reserve Bank guidelines.
7.3 Adherence to Guidelines/Orders and Consequences of Violation
FDI is a capital account transaction and thus any violation of FDI regulations are
covered by the penal provisions of the FEMA. Reserve Bank of India administers the
FEMA and Directorate of Enforcement under the Ministry of Finance is the authority
for the enforcement of FEMA. The Directorate takes up investigation in any
contravention of FEMA.
7.3.1 Penalties
(i) If a person violates/contravenes any FDI Regulations, by way of breach/non-
adherence/non-compliance/contravention of any rule, regulation, notification,
press note, press release, circular, direction or order issued in exercise of the

81
powers under FEMA or contravenes any conditions subject to which an
authorization is issued by the Government of India/FIPB/Reserve Bank of
India, he shall, upon adjudication, be liable to a penalty up to thrice the sum
involved in such contraventions where such amount is quantifiable, or up to two
lakh Rupees where the amount is not quantifiable, and where such
contraventions is a continuing one, further penalty which may extend to five
thousand Rupees for every day after the first day during which the
contraventions continues.
(ii) Where a person committing a contravention of any provisions of this Act or of
any rule, direction or order made there under is a company (company means
any body corporate and includes a firm or other association of individuals as
defined in the Companies Act), every person who, at the time the contravention
was committed, was in charge of, and was responsible to, the company for the
conduct of the business of the company as well as the company, shall be
deemed to be guilty of the contravention and shall be liable to be proceeded
against and punished accordingly.
(iii) Any Adjudicating Authority adjudging any contraventions under 7.3.1(i), may,
if he thinks fit in addition to any penalty which he may impose for such
contravention direct that any currency, security or any other money or property
in respect of which the contravention has taken place shall be confiscated to the
Central Government.
7.3.2 Adjudication and Appeals
(i) For the purpose of adjudication of any contravention of FEMA, the Ministry of
Finance as per the provisions contained in the Foreign Exchange Management
(Adjudication Proceedings and Appeal) Rules, 2000 appoints officers of the
Central Government as the Adjudicating Authorities for holding an enquiry in
the manner prescribed. A reasonable opportunity has to be given to the person
alleged to have committed contraventions against whom a complaint has been
made for being heard before imposing any penalty.
(ii) The Central Government may appoint as per the provisions contained in the
Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules,
2000, an Appellate Authority/ Appellate Tribunal to hear appeals against the
orders of the adjudicating authority.

82
7.3.3 Compounding Proceedings
Under the Foreign Exchange (Compounding Proceedings) Rules 2000, the Central
Government may appoint ‘Compounding Authority’ an officer either from
Enforcement Directorate or Reserve Bank of India for any person contravening any
provisions of the FEMA. The Compounding Authorities are authorized to compound
the amount involved in the contravention to the Act made by the person. No
contravention shall be compounded unless the amount involved in such contravention
is quantifiable. Any second or subsequent contravention committed after the expiry of
a period of three years from the date on which the contravention was previously
compounded shall be deemed to be a first contravention. The Compounding Authority
may call for any information, record or any other documents relevant to the
compounding proceedings. The Compounding Authority shall pass an order of
compounding after affording an opportunity of being heard to all the concerns as
expeditiously and not later than 180 days from the date of application made to the
Compounding Authority. Compounding Authority shall issue order specifying the
provisions of the Act or of the rules, directions, requisitions or orders made there under
in respect of which contravention has taken place along with details of the alleged
contraventions.

83
Annex-1
Form FC-GPR
(To be filed by the company through its Authorised Dealer Category – I bank with the Regional Office of the RBI
under whose jurisdiction the Registered Office of the company making the declaration is situated as and when
shares/convertible debentures / others are issued to the foreign investor, along with the documents mentioned
in item No. 5 of the undertaking enclosed to this form. All fields are mandatory) .
Permanent Account Number
(PAN) of the investee company
given by the Income Tax
Department
Date of issue of shares /
convertible debentures/others
No.
Particulars (In Block Letters)
1. Name of the Investee Company
Address of the Registered Office of
the Investee Company with City,
District and State clearly mentioned
Telephone
Fax
e-mail
State
Registration No. given by Registrar
of Companies and Date of
Incorporation.

84
Whether existing company or new
company (strike off whichever is not
applicable)
Existing company / New company
(Brownfield) ( Greenfield)
If existing company, give
registration number allotted by RBI
for FDI, if any
2. Description of the main business
activity
NIC Code
Location of the project and NIC
code for the district where the
project is located
a)Detailed address including Name,
City, District and State
b) Code for District
c) Code for State
Percentage of FDI allowed as per
FDI policy (Sectoral cap under FDI
Policy)
State whether FDI is allowed under
Automatic Route or Approval Route
(strike out whichever is not
applicable) (If under approval route,
give SIA/FIPB approval No. with
date)
Automatic Route / Approval Route

85
3 Details of the foreign investor / collaborator3
(Details of foreign residence to be
given. Indian address if any should not be given)
Name
Address
Country
Constitution / Nature of the
investing Entity
[Specify whether
1. Individual
2. Company (Please specify if
erstwhile OCB)
3. FII
4. FVCI
5. Foreign Trust
6. Private Equity Fund
7. Pension / Provident Fund
8. Sovereign Wealth Fund (SWF)
4
9. Partnership / Proprietorship
Firm
10. Financial Institution
11. NRIs / PIO
12. Others (please specify)]
Date of incorporation:
4 Particulars of Shares / Convertible Debentures /others Issued
(a) Nature and date of issue
Nature of issue Date of issue Number of shares/ convertible
debentures/others
01 IPO / FPO
02 Preferential allotment /
private placement
03 Rights
04 Bonus
05 Conversion of ECB
06 Conversion of royalty
(including lump sum
payments)
07 Conversion against import
of capital goods by units in
SEZ

If there is more than one foreign investor/collaborator, separate Annex may be included for items 3 and 4 of the Form.
2 SWF means a Government investment vehicle which is funded by foreign exchange assets, and which manages those assets
separately from the official reserves of the monetary authorities.

The investment/s is/are made by FVCI under FDI Scheme in terms of Schedule I to Notification No. FEMA 20/2000-
RB dated May 3, 2000.

86
08 ESOPs
09 Share Swap
10 Others (please specify)
Total
(b) Type of security issued
No. Nature of
security
Number Maturity Face
value
Premium Issue
Price per
security
Amount of
inflow*
01 Equity
02 Compulsorily
Convertible
Debentures
03 Compulsorily
Convertible
Preference
shares
04 Others
(please
specify)
Total
i) In case the issue price is greater than the face value please give break up of the premium received.
ii) * In case the issue is against conversion of ECB or royalty or against import of capital goods by units in
SEZ, a Chartered Accountant's Certificate certifying the amount outstanding on the date of conversion
(c) Break up of premium Amount
Control Premium
Non competition fee
Others@
Total
@
Please specify the nature
(d) Total inflow (in Rupees) on account of
issue of shares / convertible
debentures/others to non-residents
(including premium, if any) vide
(i) Remittance through AD:
(ii) Debit to NRE/FCNR/Escrow A/c with
Bank_________
(iii) Others (please specify)
Date of reporting of (i) and (ii) above to RBI
under Para 9 (1) A of Schedule I to
Notification No. FEMA 20 /2000-RB dated
May 3, 2000, as amended from time to time.

87
(e) Disclosure of fair value of shares issued**
We are a listed company and the market
value of a share as on date of the issue is*
We are an un-listed company and the fair
value of a share is*
** before issue of shares *(Please indicate as applicable)
5. Post issue pattern of shareholding
Equity Compulsorily
convertible
Preference Shares/
Debentures/others
Investor category
No.
of
shares
Amount
(Face
Value)Rs.
%
No.
of
shares
Amount
(Face
Value)Rs.
%
a) Non-Resident
01 Individuals
02 Companies
03 FIIs
04 FVCIs
05 Foreign Trusts
06 Private Equity Funds
07 Pension/ Provident Funds
08 Sovereign Wealth Funds
09 Partnership/ Proprietorship
Firms
10 Financial Institutions
11 NRIs/PIO
12 Others (please specify)
Sub Total
b) Resident
Total

The investment/s is/are made by FVCI under FDI Scheme in terms of Schedule I to Notification No. FEMA
20/2000-RB dated May 3, 2000.

88
DECLARATION TO BE FILED BY THE AUTHORISED REPRESENTATIVE OF THE INDIAN
COMPANY: (Delete whichever is not applicable and authenticate)
We hereby declare that:
1. We comply with the procedure for issue of shares / convertible debentures as laid down under
the FDI scheme as indicated in Notification No. FEMA 20/2000-RB dated 3rd
May 2000, as
amended from time to time.
2. The investment is within the sectoral cap / statutory ceiling permissible under the Automatic
Route of RBI and we fulfil all the conditions laid down for investments under the Automatic Route
namely (strike off whichever is not applicable).
a) Shares issued on rights basis to non-residents are in conformity with Regulation 6 of the
RBI Notification No FEMA 20/2000-RB dated 3rd
May 2000, as amended from time to time.
OR
b) Shares issued are bonus.
OR
c) Shares have been issued under a scheme of merger and amalgamation of two or more
Indian companies or reconstruction by way of de-merger or otherwise of an Indian company,
duly approved by a court in India.
OR
d)Shares are issued under ESOP and the conditions regarding this issue have been satisfied
3. Shares have been issued in terms of SIA /FIPB approval No.___________________ dated
____________________
4 The foreign investment received and reported now will be utilized in compliance with the
provision of a Prevention of Money Laundering Act 2002 (PMLA) and Unlawful
Activities(Prevention) Act, 1967 (UAPA). We confirm that the investment complies with the
provisions of all applicable Rules and Regulations
5. We enclose the following documents in compliance with Paragraph 9 (1) (B) of Schedule 1 to
Notification No. FEMA 20/2000-RB dated May 3, 2000:
(i) A certificate from our Company Secretary certifying that

89
(a) all the requirements of the Companies Act, 1956 have been complied with;
(b) terms and conditions of the Government approval, if any, have been complied
with;
(c) the company is eligible to issue shares under these Regulations; and
(d) the company has all original certificates issued by authorised dealers in India
evidencing receipt of amount of consideration in accordance with paragraph 8
of Schedule 1 to Notification No. FEMA 20/2000-RB dated May 3, 2000.
(ii) A certificate from SEBI registered Merchant Banker / Chartered Accountant indicating
the manner of arriving at the price of the shares issued to the persons resident outside
India.
6. Unique Identification Numbers given for all the remittances received as consideration for issue
of shares/ convertible debentures/others (details as above), by Reserve Bank.
.
.
.
(Signature of the Applicant)* :___________________________________________
(Name in Block Letters) :___________________________________________
(Designation of the signatory) :___________________________________________
Place:
Date:
(* To be signed by Managing Director/Director/Secretary of the Company)
R
R

90
CERTIFICATE TO BE FILED BY THE COMPANY SECRETARY 5
OF THE INDIAN COMPANY
ACCEPTING THE INVESTMENT:
(As per Para 9 (1) (B) (i) of Schedule 1 to Notification No. FEMA 20/2000-RB dated May 3, 2000)
In respect of the abovementioned details, we certify the following :
1. All the requirements of the Companies Act, 1956 have been complied with.
2. Terms and conditions of the Government approval, if any, have been complied with.
3. The company is eligible to issue shares / convertible debentures/others under these
Regulations.
4. The company has all original certificates issued by AD Category – I banks in India, evidencing
receipt of amount of consideration in accordance with paragraph 8 of Schedule 1 to Notification
No. FEMA 20/2000-RB dated May 3, 2000.
(Name & Signature of the Company Secretary) (Seal)
FOR USE OF THE RESERVE BANK ONLY:
Registration Number for the FC-GPR:
Unique Identification Number allotted to the
Company at the time of reporting receipt of
remittance
5
If the company doesn’t have full time Company Secretary, a certificate from practicing Company Secretary may be
submitted

91
Annex - 2
Terms and conditions for Transfer of Shares /Convertible Debentures, by way of Sale, from a Person
Resident in India to a Person Resident Outside India and from a Person Resident Outside India to a
Person Resident in India
1.1 In order to address the concerns relating to pricing, documentation, payment/ receipt and remittance in
respect of the shares/ convertible debentures of an Indian company, in all sectors, transferred by way of sale,
the parties involved in the transaction shall comply with the guidelines set out below.
1.2 Parties involved in the transaction are (a) seller (resident/non-resident), (b) buyer (resident/non-
resident), (c) duly authorized agent/s of the seller and/or buyer, (d) Authorised Dealer bank (AD) branch and
(e) Indian company, for recording the transfer of ownership in its books.
2. Pricing Guidelines
2.1 The under noted pricing guidelines are applicable to the following types of transactions:
i. Transfer of shares, by way of sale under private arrangement by a person resident in India to a person
resident outside India.
ii. Transfer of shares, by way of sale under private arrangement by a person resident outside India to a
person resident in India.
iii. Exit by non-resident investor on exercising option/right in shares or convertible debentures
2.2 Transfer by Resident to Non-resident (i.e. to foreign national, NRI, FII, FPI and incorporated non-
resident entity other than erstwhile OCB) Price of shares transferred by way of sale by resident to a non-
resident where the shares of an Indian company are:
(a) listed on a recognized stock exchange in India ,shall not be less than the price at which the preferential
allotment of shares can be made under the SEBI guidelines , as applicable, provided the same is
determined for such duration as specified therein, preceding the relevant date, which shall be the date
pf purchase or sale of shares,
(b) not listed on a recognized stock exchange in India ,shall not be less than the fair value to be determined
by a SEBI registered Merchant Banker or a Chartered Accountant as per the discounted free cash flow
method.
The price per share arrived at should be certified by a SEBI registered Merchant Banker or a Chartered
Accountant.
2.3 Transfer by Non-resident (i.e. by incorporated non-resident entity, erstwhile OCB, foreign national,
NRI, FII, FPI) to Resident
Sale of shares by a non-resident to resident shall be in accordance with Regulation 10 B (2) of Notification
No. FEMA 20/2000-RB dated May 3, 2000 which shall not be more than the minimum price at which the
transfer of shares can be made from a resident to a non-resident as given at para 2.2 above.
2.4
After the lock-in period, as applicable above, and subject to FDI Policy provisions, if any, in this
regard, the non-resident investor exercising option/right in shares or convertible debentures issued

92
under FDI Scheme shall be eligible to exit without any assured return, as per pricing/valuation
guidelines issued by RBI from time to time.
3. Responsibilities / Obligations of the parties
All the parties involved in the transaction would have the responsibility to ensure that the relevant
regulations under FEMA are complied with and consequent on transfer of shares, the relevant individual
limit/sectoral caps/foreign equity participation ceilings as fixed by Government are not breached. Settlement
of transactions will be subject to payment of applicable taxes, if any.
4. Method of payment and remittance/credit of sale proceeds
4.1 The sale consideration in respect of the shares purchased by a person resident outside India shall be
remitted to India through normal banking channels. In case the buyer is a FII,FPI, payment should be made
by debit to its Special Non-Resident Rupee Account. In case the buyer is a NRI, the payment may be made
by way of debit to his NRE/FCNR (B) accounts. However, if the shares are acquired on non-repatriation
basis by NRI, the consideration shall be remitted to India through normal banking channel or paid out of
funds held in NRE/FCNR (B)/NRO accounts.
4.2. The sale proceeds of shares (net of taxes) sold by a person resident outside India may be remitted
outside India. In case of FII/FPI, the sale proceeds may be credited to its special Non-Resident Rupee
Account. In case of NRI, if the shares sold were held on repatriation basis, the sale proceeds (net of taxes)
may be credited to his NRE /FCNR(B) accounts and if the shares sold were held on non repatriation basis,
the sale proceeds may be credited to his NRO account subject to payment of taxes.
4.3 The sale proceeds of shares (net of taxes) sold by an OCB may be remitted outside India directly if the
shares were held on repatriation basis and if the shares sold were held on non-repatriation basis, the sale
proceeds may be credited to its NRO (Current) Account subject to payment of taxes, except in the case of
OCBs whose accounts have been blocked by Reserve Bank.
5. Documentation
Besides obtaining a declaration in the enclosed Form FC-TRS (in quadruplicate), the AD branch should
arrange to obtain and keep on record the following documents:
5.1 For sale of shares by a person resident in India
i. Consent Letter duly signed by the seller and buyer or their duly appointed agent indicating the
details of transfer i.e. number of shares to be transferred, the name of the investee company whose
shares are being transferred and the price at which shares are being transferred. In case there is no
formal Sale Agreement, letters exchanged to this effect may be kept on record.
ii. Where Consent Letter has been signed by their duly appointed agent, the Power of Attorney
Document executed by the seller/buyer authorizing the agent to purchase/sell shares.

93
iii. The shareholding pattern of the investee company after the acquisition of shares by a person
resident outside India showing equity participation of residents and non-residents category-wise
(i.e. NRIs/OCBs/foreign nationals/incorporated non-resident entities/FIIs,FPIs) and its percentage
of paid up capital obtained by the seller/buyer or their duly appointed agent from the company,
where the sectoral cap/limits have been prescribed.
iv. Certificate indicating fair value of shares from a Chartered Accountant.
v. Copy of Broker’s note if sale is made on Stock Exchange
vi. Undertaking from the buyer to the effect that he is eligible to acquire shares/ convertible debentures
under FDI policy and the existing sectoral limits and Pricing Guidelines have been complied with.
vii. Undertaking from the FII/sub account to the effect that the individual FII/ Sub account ceiling as
prescribed by SEBI has not been breached, till it gets registered as FPI.
5.2. For sale of shares by a person resident outside India
i. Consent Letter duly signed by the seller and buyer or their duly appointed agent indicating the
details of transfer i.e. number of shares to be transferred, the name of the investee company whose
shares are being transferred and the price at which shares are being transferred.
ii. Where the Consent Letter has been signed by their duly appointed agent the Power of Attorney
Document authorizing the agent to purchase/sell shares by the seller/buyer. In case there is no
formal Sale Agreement, letters exchanged to this effect may be kept on record.
iii. If the sellers are NRIs/OCBs, the copies of RBI approvals evidencing the shares held by them on
repatriation/non-repatriation basis. The sale proceeds shall be credited NRE/NRO account, as
applicable.
iv. Certificate indicating fair value of shares from a Chartered Accountant.
v. No Objection / Tax Clearance Certificate from Income Tax authority/Chartered Account.
vi. Undertaking from the buyer to the effect that the Pricing Guidelines have been adhered to.
6. Reporting requirements
6.1 Reporting of transfer of shares between residents and non-residents and vice versa is to be done in
Form FC-TRS. The Form FC-TRS should be submitted to the AD Category-I bank, within 60 days from the
date of receipt of the amount of consideration. The onus of submission of the Form FC-TRS within the
given timeframe would be on the transferor / transferee, resident in India. The AD Category-I bank, would
forward the same to its link office. The link office would consolidate the Forms and submit a monthly report
to the Reserve Bank6
.
For the purpose the Authorized Dealers may designate branches to specifically handle such transactions.
These branches could be staffed with adequately trained staff for this purpose to ensure that the transactions
are put through smoothly. The ADs may also designate a nodal office to coordinate the work at these
branches and also ensure the reporting of these transactions to the Reserve Bank.
6
To the Chief General Manager-in-Charge, Reserve Bank of India, Foreign Exchange Department, Foreign Investment
Division, Central Office, Mumbai

94
6.2 When the transfer is on private arrangement basis, on settlement of the transactions, the transferee/his
duly appointed agent should approach the investee company to record the transfer in their books along with
the certificate in the Form FC-TRS from the AD branch that the remittances have been received by the
transferor/payment has been made by the transferee. On receipt of the certificate from the AD, the company
may record the transfer in its books.
6.3 The actual inflows and outflows on account of such transfer of shares shall be reported by the AD
branch in the R-returns in the normal course.
6.4 In addition the AD branch should submit two copies of the Form FC-TRS received from their
constituents/customers together with the statement of inflows/outflows on account of remittances
received/made in connection with transfer of shares, by way of sale, to IBD/FED/or the nodal office
designated for the purpose by the bank in the enclosed proforma (which is to be prepared in MS-Excel
format). The IBD/FED or the nodal office of the bank will in turn submit a consolidated monthly statement
in respect of all the transactions reported by their branches together with copies of the FC-TRS Forms
received from their branches to Foreign Exchange Department, Reserve Bank, Foreign Investment Division,
Central Office, Mumbai in soft copy (in MS- Excel) by e-mail to fdidata@rbi.org.in
6.5 Shares purchased / sold by FIIs/FPIs under private arrangement will be by debit /credit to their Special
Non-Resident Rupee Account. Therefore, the transaction should also be reported in Form LEC by the
designated bank of the FII/FPI concerned.
6.6 Shares/convertible debentures of Indian companies purchased under Portfolio Investment Scheme by
NRIs, OCBs cannot be transferred, by way of sale under private arrangement.
6.7 On receipt of statements from the AD, the Reserve Bank may call for such additional details or give
such directions as required from the transferor/transferee or their agents, if need be.

95
Annex- 3
Documents to be submitted by a person resident in India for transfer of shares to a person resident
outside India by way of gift
i. Name and address of the transferor (donor) and the transferee (donee).
ii. Relationship between the transferor and the transferee.
iii. Reasons for making the gift.
iv. In case of Government dated securities and treasury bills and bonds, a certificate issued by a
Chartered Accountant on the market value of such security.
v. In case of units of domestic mutual funds and units of Money Market Mutual Funds, a
certificate from the issuer on the Net Asset Value of such security.
vi. In case of shares and convertible debentures, a certificate from a Chartered Accountant on the
value of such securities according to the guidelines issued by Securities & Exchange Board of
India or DCF method for listed companies and unlisted companies, respectively.
vii. Certificate from the concerned Indian company certifying that the proposed transfer of shares/
convertible debentures by way of gift from resident to the non-resident shall not breach the
applicable sectoral cap/ FDI limit in the company and that the proposed number of
shares/convertible debentures to be held by the non-resident transferee shall not exceed 5 per
cent of the paid up capital of the company.
viii. An undertaking from the resident transferor that the value of security to be transferred together
with any security already transferred by the transferor, as gift, to any person residing outside
India does not exceed the rupee equivalent of USD 50,000 during a financial year*.
* RBI’s A.P. (DIR Series) Circular No. 14 Dated 15.09.2011

96
Annex - 4
Definition of "relative" as given in Section 6 of Companies Act, 1956.
A person shall be deemed to be a relative of another, if, and only if:
(a) they are members of a Hindu undivided family ; or
(b) they are husband and wife ; or
(c) the one is related to the other in the manner indicated in Schedule IA (as under)
1. Father.
2. Mother (including step-mother).
3. Son (including stepson).
4. Son's wife.
5. Daughter (including step-daughter).
6. Father's father.
7. Father's mother.
8. Mother's mother.
9. Mother's father.
10. Son's son.
11. Son's son's wife.
12. Son's daughter.
13. Son's daughter's husband.
14. Daughter's husband.
15. Daughter's son.
16. Daughter's son's wife.
17. Daughter's daughter.
18. Daughter's daughter's husband.
19. Brother (including step-brother).
20. Brother's wife.
21. Sister (including step-sister).
22. Sister's husband.
*****************************

97
Annex - 5
Report by the Indian company receiving amount of consideration for issue of shares / Convertible
debentures under the FDI Scheme
( To be filed by the company through its Authorised Dealer Category-I bank, with the Regional Office of
the Reserve Bank under whose jurisdiction the Registered Office of the company making the declaration
is situated, not later than 30 days from the date of receipt of the amount of consideration, as specified in
para 9 (I) (A) of Schedule I to Notification No. FEMA 20/2000- RB dated May 3, 2000 )
Permanent Account
Number (PAN) of the
investee company given by
the IT Department
No. Particulars (In Block Letters)
1. Name of the Indian company
Address of the Registered Office
Fax
Telephone
e-mail
2 Details of the foreign investor/ collaborator
Name
Address
Country
3. Date of receipt of funds
4. Amount In foreign currency In Indian Rupees
5. Whether investment is under Automatic
Route or Approval Route
If Approval Route, give details (ref. no.
of approval and date)
Automatic Route / Approval Route
6. Name of the AD through whom the
remittance is received
7. Address of the AD

98
A Copy of the FIRC evidencing the receipt of consideration for issue of shares/ convertible debentures as
above is enclosed.
(Authorised signatory of
the investee company)
(Stamp)
(Authorised signatory of
the AD)
(Stamp)
FOR USE OF THE RESERVE BANK ONLY:
Unique Identification Number for the remittance received:

99
Annex – 6
Know Your Customer (KYC) Form in respect of the non-resident investor
Registered Name of the Remitter / Investor
(Name, if the investor is an Individual)
Registration Number (Unique Identification
Number* in case remitter is an Individual)
Registered Address (Permanent Address if
remitter Individual)
Name of the Remitter’s Bank
Remitter’s Bank Account No.
Period of banking relationship with the remitter
* Passport No., Social Security No, or any Unique No. certifying the bonafides of the remitter
as prevalent in the remitter’s country
We confirm that all the information furnished above is true and accurate as provided by the
overseas remitting bank of the non-resident investor.
(Signature of the Authorised Official
of the AD bank receiving the remittance)
Date : Place:
Stamp :

100
Face Value ( Per Share) Market Value (Per Share)
Latest March Previous March Latest March
Ordinary/Equity Share
Annex – 7
RESERVE BANK OF INDIA
Annual Return on Foreign Liabilities and Assets as on 31 March, 20 _ _
(Return t o be fi l led un de r A.P . (D IR Series) Circular No. dated and
submitted to the Department of Statistics and Information Management, RBI, Mumbai)
Please read the guidelines/definitions carefully before filling-in the Return
(Respondents are encouraged to submit the e-form of this return, which can be downloaded
from the FEMA Forms section under the ‘Forms’ category on the RBI website,
www.rbi.org.in) The e-form is easy-to-fill with user guidance and consistency checks. The
duly filled-in e-form should be emailed.
1. Name and Address of the Indian Company:
N a m e o f t h e C o m p a n y : _______________________________
Address: _______________________________________________________
City: State:
Pin:
2. PAN Number of Company given by Income Tax Department (10 digit)
3. CIN Number allotted by Ministry of Corp. Affairs, Govt. of India (21 digit)
4. Contact Details
Contact Person
Name: Designation:
Telephone No: Fax:
e-mail: &RP 51Q ’s Web- Site (if any):
5. Account closing date (DD/MM/YYYY)
6. Nature of Business:_______________________________________________________________________
(As per National Industrial Classification (NIC) 2008 Code)
7. Whether your Company Name has changed during the last financial year (April - March) (Y/N)?
If yes, please specify the Company's old Name
Company's old Name:
Effective Date (DD/MM/YYYY)
8. Whether the Company is listed (Y/N)?
If yes, please furnish the share price on closing date of reference period
9. Identification of the reporting Company (in terms of inward FDI)
10. Whether the Company is Asset Management Company (Y/N)?
11. Whether the Company has Technical Foreign collaboration (Y/N)?
12. Whether the company has any business activity during the last financial year (April - March) (Y/N)?
(a) Subsidiary of Foreign entity (b) Associate of foreign entity
(c) Public Private Partnership (d) Special Purpose Vehicle (d)Other

101
Section II
(Financial Details)
Block 1: Financial Detail of Reporting Company
CARE: Information should be reported for all the reference period, i.e. Previous March and Latest March. If
reporting period is different from Account Closing Period, then information should be given on internal
assessment
Block 1A: Total Paid- up Capital of Indian Company:
Item
End-of Previous March End-of Latest March
Number of
Shares in actual
Amount in Rs
lakh
Number of
Shares in actual
Amount in Rs
lakh
1.0 Total Paid-up Capital
(= 1.1 + 1.2)
1.1 Total Equity & Participating
Preference Share capital
(= 1.1(a) + 1.1(b))
(a) Ordinary/Equity Share*
(b) Participating Preference Share
1.2 Non-participating Preference
Share#
2.0 Non-resident Holdings (at face value in Rs lakh)
2.1 Equity & Participating
Preference share capital
(Sum of item-1 to item-12)
1 Individuals
2 Companies
3 Foreign Institutional Investors
(FIIs)
4 Foreign Venture Capital Investors
(FVCIs)
5 Foreign Trusts
6 Private Equity Funds
7 Pension/ Provident Funds
8 Sovereign Wealth Fund (SWF)
9 Partnership/ Proprietorship firms
10 Financial Institutions
11 NRIs/PIO
12 Others non-resident holdings
2.2 Non-Participating Preference
share
3.0 Non Resident Equity & Participating Preference share capital %
Note
*In case of different class of Equity Share (class A, class B etc.), consolidated figure should be reported.
#Non-participating Preference Share do not have following rights.
(a) to receive dividend, out of surplus profit after paying the dividend to equity shareholders.
(b) to have share in surplus assets remaining after the entire capital is paid in case of winding up of the company.

102
Block 1B: Profit and Loss Account (from P/L Account)
Item
Amount in Rs lakh
Previous Year
(April - March)
Latest Year
(April - March)
3.1Profit (+) /Loss (-) before tax (During the Year)
3.2 Profit (+) / Loss (-) after tax (During the Year)
3.3 Dividend (Interim & Final Dividend)
3.4 Tax on Dividend (if any)
3.5 Retained Profit (= 3.2 - 3.3 - 3.4)
Block 1C: Reserves & Surplus (from Balance Sheet)
Item
Amount in Rs lakh as at the end of
Previous March Latest March
4.1 Reserves
(Excluding Profit and Loss account balance)
4.2 Profit (+) and Loss (-) account balance
4.3 Reserve and Surplus (= 4.1 + 4.2)
4.4 Net worth of Company ( = 1.1 + 4.3)
Block 1D: Sales and Purchase made during the Financial Year
Note: To be filled in by company where single foreign direct investor holding is more than 50% in total equity
(i.e. If reporting Indian company is subsidiary of Foreign company).
Item
Amount in Rs lakh (During the year)
5.1 Domestic Sales
5.2 Exports
5.3 Total Sales ( = 5.1+ 5.2)
5.4 Domestic purchase
5.5 Imports
5.6 Total Purchase ( = 5.4 + 5.5)

103
Section III
(FOREIGN LIABILITIES)
CARE: Information should be reported for all the reference period, i.e. Previous March and Latest March. If
reporting period is different from Account Closing Period, then information should be given on internal
assessment.
2. Investments made in India:
(i) In case of listed companies, equity should be valued using share price on closing date of reference period.
(ii) In case of unlisted companies, Own Fund of Book Value (OFBV) Method should be used.
Block-2A:
Investment in India under Foreign Direct Investment (FDI) scheme (10% or more Equity Participation).
[Please furnish here the outstanding investments made under the FDI Scheme in India by Non-resident Direct
investors, who were individually holding 10 per cent or more ordinary/equity & preference shares of your
company on the reporting date]
Name of
the non-
resident
Company/
Individual
Type of Capital
Country of
non-resident
investor
Equity &
Participating
Preference
share capital
holding per
cent as at the
end of latest
year (%)
1.0 Equity Capital
( = 1.1 - 1.2)
1.1 Liabilities to Direct
Investor
1.2 Claims on Direct Investor
(Reverse investment)
2.0 Other Capital #
( = 2.1 - 2.2 )
2..1 Liabilities to Direct
Investor
Note:
(i) If the information is to be furnished for more than one investor, then add separate Block with same format
(ii) #: Other capital, item 2.1 & 2.2 of Block-2A includes all other liabilities and claims at Nominal value,
except equity and participating preference shares, (i.e. trade credit, loan, debentures, Non-participating share
capital, other accounts receivable and payables etc.) of Indian reporting company with its director investor
indicated in Block-2A.
Block 2B:
Investment in India under Foreign Direct Investment (FDI) scheme (Less than 10% Equity Holding)
[Please furnish here the outstanding investments made under the FDI Scheme in India by Non-resident Direct
investors, who were individually holding less 10 than per cent ordinary/equity and participating preference
shares of your company on the reporting date].

104
Country-wise consolidated information should be provided below:
Type of Capital
Country of
non-resident
investor
Equity &
Participating
Preference share
capital holding
per cent as at the
end of latest year
(%)
1.0 Equity Capital ( = 1.1-1.2)
1.1 Liabilities to Direct Investor
2.0 Other Capital ( = 2.1-2.2) #
2.1 Liabilities to Direct Investor
Note:
(i) If the information is to be furnished for more than one country, then add separate Block with same format.
(ii) #: Other capital, item 2.1 & 2.2 of Block-2B includes all other liabilities and claims at Nominal value,
except equity and participating preference shares, (i.e. trade credit, loan, debentures, Non-participating share
capital, other accounts receivable and payables etc.) of Indian reporting company with non-resident investors
holding less than 10 per cent equity and related parties.
2C. Portfolio Investment in India
Please furnish here the outstanding investments by non-resident investors, other than those made under Foreign
Direct Investment Scheme in India (i.e. other than those reported in Block-2A & Block-2B).
Portfolio Investment
Equity & Participating
Preference share
capital holding per cent
as at the end of latest
year (%)
1.0 Equity Securities (at Market Value)
2.0 Debt Securities ( =2.1+2.2)
2.1 Money Market Instruments
(original maturity upto1year)
2.2 Bonds and Other instruments
(original maturity more than 1year)
Please ensure that Non-resident Equity & Participating Preference share capital mentioned at item 2.1 of
block 1(A) should be reported in either Block-2A or Block-2B or Block-2C at Market Value i.e. sum of
equity % in Block-2A, Block-2B & Block-2C must be equal to the item 3.0 of Block-1A for the latest
march.

105
Section IV
(FOREIGN ASSETS)
1. Please use the exchange rate as at end-March Previous FY and end-March Latest FY (as applicable) of reporting
year while reporting the foreign Assets in Rs lakh.
2. If overseas company is listed; equity should be valued using share price on closing date of reference period.
3. If overseas company is unlisted, Own Fund of Book Value (OFBV) Method should be used for valuation of
equity investment.
Block-3: Equity Capital, Reserves & Surplus of Direct Investment Enterprise (DIE) Abroad (10% or
more equity holding by Indian Reporting company)
[Please report here the total equity of DIE, equity held by your company, reserves (excluding P&L Account)
and P&L Account of those DIEs in each of which your company hold 10% or more equity shares on the
reference date.]
Name of the
DIE
Item Currency
Amount in Foreign Currency as
at the end of (in actual)
3.1 Total Equity of DIE
3.2 Equity of DIE held by you
3.3 Reserves (Excluding P&L Account)
3.4 Profit and Loss Account balance
3.5 Reserve and Surplus ( =3.3+3.4)
3.6 Net Worth of DIE ( =3.1+3.5)
3.7 Exchange rate in Rs per unit foreign
currency*
*: Exchange rate of reporting foreign currency against Indian Rs should be given as on closing date of reference period.
FEDAI website (http://www.fedai.org.in) may be used for Exchange rates.
Block-4: Direct Investment Abroad under Overseas Direct Investment (ODI) Scheme
Block-4A: Direct Investment Abroad (10% or more equity holding)
Please furnish here the market value of outstanding investments in DIE, made by your company under the ODI Scheme,
in each of which your company hold 10% or more equity shares on the reference date.
Name of the
non-resident
DIE
Country of
Type of Capital non-resident
DIE
Equity
holding per
cent as at the
end of latest
year (%)
1.0 Equity Capital
(=1.1-1.2)
1. 1Claims on Direct
Investment Enterprise
2.0 Other Capital
( =2.1-2.2) #
2.1 Claims on Direct

106
Note:
(i) If the information is to be furnished for more than one overseas company, then ADD separate Block 3 and Block 4A with
the same format.
(ii) #: Other capital, item 2.1 & 2.2 of Block-4A includes all other liabilities and claims at Nominal value,
except equity shares, (i.e. trade credit, loan, debentures, Non-participating share capital, other accounts
receivable and payables etc.) of Indian reporting company with its DIE reported in Block-4A.
Block-4B: Direct Investment Abroad (Less than 10% equity holding).
Please furnish here the market value of outstanding investments in DIE, made by your company under the ODI
Scheme, in each of which your company hold less than 10 % equity shares on the reference date.
Country of
Type of Capital non-resident
DIE
Equity
holding per
cent as at
the end of
latest year
(%)
1.0 Equity Capital (=1.1-1.2)
1. 1Claims on Direct Investment Enterprise
1.2 Liabilities to Direct Investment Enterprise
2.0 Other Capital (=2.1-2.2) #
2.1 Claims on Direct Investment Enterprise
2.2 Liabilities to Direct Investment Enterprise
Note:
(i) If the information is to be furnish for more than one country, then use the ADD Block 4B with the same format.
(ii) # : Other capital, item 2.1 & 2.2 of Block-4B includes all other liabilities and claims at Nominal value, except equity,
(i.e. trade credit, loan, debentures, Non-participating share capital, other accounts receivable and payables etc.) of Indian
reporting company with non-resident companies where Indian company holds less than 10 per cent equity and also
with related parties.
Block-5: Portfolio Investment Abroad
Please furnish here the market value of outstanding investments in non-resident enterprises, other than those
made under ODI scheme reported in Block-4.
Portfolio Investment
Country of
non-resident
enterprise
1.0 Equity Securities (at Market Value)
2.0 Debt Securities (=2.1+2.2)
2.1 Money Market Instruments
(original maturity upto1 year)
2.2 Bonds and Other instruments
(original maturity more than 1 year)
Note:
(i) Country wise consolidated information pertaining to each type of investment should be reported separately.
(ii) If the information is to be furnish for more than one country, then use the ADD Block 5 with the same format..

107
Section V
(Other Assets and Liabilities)
Block 6: Other Investment (i.e., position with unrelated parties)
This is a residual category that includes all financial outstanding liability and claims not considered as direct investment or
portfolio investment.
Other Investment
Outstanding Liabilities with unrelated party Outstanding claims on unrelated party
Previous March Latest March Previous March Latest March
6.1 Trade Credit
6.2 Loans
6. 3 Currency & Deposits
6. 4 Other receivable and
payable accounts
[e-Form version of this Return is available on the FEMA Forms section under the ‘Forms’
category on the RBI website (www.rbi.org.in). System Requirement: MS-Excel 2003 and
above, with macro enabled]
Declaration
The foreign investment received and reported have been utilized in compliance with
the provision of a Prevention of Money Laundering Act 2002(PMLA)
and Unlawful Activities(Prevention) Act, 1967 (UAPA). We confirm that the
investment complies with the provisions of all applicable Rules and Regulations
Place: Signature and Name of the Authorized person
Date: Seal/Stamp of the Company

108
Annex – 8
Form FC-TRS
Declaration regarding transfer of shares / compulsorily and mandatorily convertible
preference shares (CMCPS) / debentures /others by way of sale from resident to non
resident / non-resident to resident
(to be submitted to the designated AD branch in quadruplicate within 60 days from the date
of receipt of funds)
The following documents are enclosed
For sale of shares / compulsorily and mandatorily convertible preference shares /
debentures / others by a person resident in India
i. Consent Letter duly signed by the seller and buyer or their duly appointed agent
and in the latter case the Power of Attorney Document.
ii. The shareholding pattern of the investee company after the acquisition of shares by a
person resident outside India.
iii. Certificate indicating fair value of shares from a Chartered Accountant.
iv. Copy of Broker's note if sale is made on Stock Exchange.
v. Declaration from the buyer to the effect that he is eligible to acquire shares /
compulsorily and mandatorily convertible preference shares / debentures/others under
FDI policy and the existing sectoral limits and Pricing Guidelines have been
complied with.
vi. Declaration from the FII/sub account to the effect that the individual FII / Sub account
ceiling as prescribed has not been breached.
Additional documents in respect of sale of shares / compulsorily and mandatorily
convertible preference shares / debentures / others by a person resident outside
India
vii. If the sellers are NRIs/OCBs, the copies of RBI approvals, if applicable, evidencing
the shares held by them on repatriation/non-repatriation basis.
viii. No Objection/Tax Clearance Certificate from Income Tax Authority/ Chartered
Account.
1 Name of the company
Address (including e-mail ,
telephone Number, Fax no)
Activity

109
NIC Code No.
2 Whether FDI is allowed under
Automatic route
Sectoral Cap under FDI Policy
3 Nature of transaction
(Strike out whichever is not
applicable)
Transfer from resident to non resident /
Transfer from non resident to resident
4 Name of the buyer
investing Entity
Specify whether
1. Individual
2. Company
3. FII
4. FVCI#
5. Foreign Trust
7. Pension/ Provident Fund
8. Sovereign Wealth Fund
(SWF
)
9. Partnership /
Proprietorship firm
11. NRIs / PIOs
12. others
Date and Place of Incorporation
Address of the buyer (including
e-mail, telephone number. Fax
no.)
5 Name of the seller
disinvesting entity
Specify whether
1. Individual
2. Company

The initial investment/s was/were made by FVCI under FDI Scheme in terms of Schedule 1 to Notification No.
FEMA.20/2000-RB dated May 3, 2000

SWF mean a Government investment vehicle which is funded by foreign exchange assets, and which manages those
assets separately from the official reserves of monetary authorities.

110
3. FII
4. FVCI
5. Foreign Trust
7. Pension/ Provident Fund
8. Sovereign Wealth Fund
(SWF
)
9. Partnership/
Proprietorship firm
11. NRIs/PIOs
12. Othersi
Date and Place of Incorporation
Address of the seller (including e-
mail, telephone Number Fax no)
6 Particulars of earlier Reserve
Bank / FIPB approvals
7 Details regarding shares / compulsorily and mandatorily convertible preference
shares (CMCPS) / debentures/ others (such as FDI compliant instruments like
participating interest rights in oil fields, etc.) to be transferred
Date of the transaction Number of
shares
CMCPS /
debentures
/others
Face
value
in Rs.
Negotiated
Price for the
transfer**in
Rs.
Amount of
consideration
in Rs.
8 Foreign Investments in the
company
No. of shares Percentage
Before the transfer
After the transfer
9. Where the shares / CMCPS /
debentures / others are listed on
Stock Exchange

The initial investment/s was/were made by FVCI under FDI Scheme in terms of Schedule 1 to Notification No.
FEMA.20/2000-RB dated May 3, 2000.

SWF mean a Government investment vehicle which is funded by foreign exchange assets, and which manages those
assets separately from the official reserves of monetary authorities.

111
Name of the Stock Exchange
Price Quoted on the Stock
exchange
Where the shares / CMCPS /
debentures / others are
Unlisted
Price as per Valuation
guidelines*
Price as per Chartered
Accountants
* / ** Valuation report (CA
Certificate to be attached)
Declaration by the transferor / transferee
I / We hereby declare that
i. The particulars given above are true and correct to the best of my/our knowledge
and belief.
ii. I/ We, was/were holding the shares compulsorily and mandatorily convertible
preference shares / debentures/ other as per FDI Policy under FERA/ FEMA
Regulations on repatriation/non repatriation basis.
iii. I/ We, am/are eligible to acquire the shares compulsorily and mandatorily
convertible preference shares / debentures /other of the company in terms of the
FDI Policy. It is not a transfer relating to shares compulsorily and mandatorily
convertible preference shares / debentures /others of a company engaged in
financial services sector or a sector where general permission is not available.
iv. The Sectoral limit under the FDI Policy and the pricing guidelines have been
adhered to.
Signature of the Declarant or
his duly authorised agent
Date:
Note:
In respect of the transfer of shares / compulsorily and mandatorily convertible preference
shares / compulsorily and mandatorily convertible debentures/ others from resident to non
resident the declaration has to be signed by the non resident buyer, and in respect of the
transfer of shares / compulsorily and mandatorily convertible preference shares /
compulsorily and mandatorily convertible debentures/ other from non-resident to resident
the declaration has to be signed by the non-resident seller.

112
Certificate by the AD Branch
It is certified that the application is complete in all respects.
The receipt / payment for the transaction are in accordance with FEMA Regulations / Reserve
Bank guidelines.
Signature
Name and Designation of the Officer
Date : Name of the AD Branch
AD Branch Code

113
Know Your Customer (KYC) Form in respect of the non-resident investor
Registered Name of the Remitter / Investor
(Name, if the investor is an Individual)
Registration Number (Unique Identification
Number* in case remitter is an Individual)
Registered Address (Permanent Address if
remitter Individual)
Name of the Remitter’s Bank
Remitter’s Bank Account No.
Period of banking relationship with the
Remitter
*Passport No., Social Security No, or any Unique No. certifying the bonafides of the
remitter as prevalent in the remitter’s country.
We confirm that all the information furnished above is true and accurate as
provided by the overseas remitting bank of the non-resident investor.
(Signature of the Authorised Official
of the AD bank receiving the remittance)
Date: Place:
Stamp :

114
Proforma
Statement of inflows/outflows on account of remittance received/made in
connection with transfer of shares / compulsorily and mandatorily
convertible preference shares / debentures/others/other, by way of sale
Category-wise
Part A - NRI/erstwhile OCB
Part B - Foreign National/non-resident incorporated entity
Part C - Foreign Institutional Investors
Inflow -Transfer from resident to non-resident
[Amount in
Rs.]
Date Name Activity NIC Name Consti Name Consti No. of Face Sale Total
of of the Code of the tution/ of the tution/ Share Value price Inflow
Trans
action
Comp
any
Buyer Natur
e of
Busin
ess of
the
Seller Natur
e of
Busin
ess of
the
s
transf
erred
per
share
Buyer Seller
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
Outflow - Transfer from non-resident to resident
[Amount in
Rs.]
Date Name Activity NIC Name Consti Name Consti No. of Face Sale Total
of of the Code of the tution/ of the tution/ Share Value price Inflow
Trans
action
Comp
any
Seller Natur
e of
Busin
essof
the
Buyer Natur
e of
Busin
essof
the
s
transf
erred
per
share
Seller Buyer
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

115
Annex –9
Form DR
[Refer to paragraph 4(2) of Schedule I]
Return to be filed by an Indian company who has arranged issue of GDR/ADR
Instructions: The Form should be completed and submitted to the Reserve Bank of India, Foreign
Investment Division, Central Office, Mumbai.
1. Name of the Company :
2. Address of Registered Office :
3. Address for correspondence :
4. Existing Business (Please give the
NIC Code of the activity in which the
company is predominantly engaged)
:
5. Details of the purposes for which
GDRs/ADRs have been raised.
If funds are deployed for overseas
investment, details thereof.
:
6. Name and address of the Depository
abroad
:
7. Name and Address of the
Lead/Manager Investment/Merchant
Banker
:
8. Name and addresses of the Sub-
Managers to the issue
:
9. Name and address of the Indian
custodians
:
10. Details of FIPB approval (Please
quote the relevant NIC Code if the
GDRs are being issued under the
Automatic Route)
:
11. Whether any overall sectoral cap for
foreign investment is applicable. If yes,
please give details.
:
12. Details of the Equity Capital
(a) Authorised Capital
(b) Issued and Paid-up Capital
(i) Held by persons Resident in
India
(ii) Held by foreign Investors other
than FIIs/NRIs/PIOs/OCBs (A
: Before Issue After Issue

116
list of foreign investors holding
more than 10 per cent of the
paid-up capital and number of
shares held by each of them
should be furnished)
(iii) Held by
NRIs/PIOs/OCBs
(iv) Held by FIIs.
Total Equity held by non –
residents
(c) Percentage of equity held by non-
residents to total paid-up capital
13. Whether issue was on private
placement basis. If yes, please give
details of the investors and
ADRs/GDRs issued to each of them.
:
14. Number of GDRs/ADRs issued :
15. Ratio of GDRs/ADRs to underlying
shares
:
16. Issue Related Expenses :
(a) Fee paid/payable to Merchant
Bankers/Lead Manager
(i) Amount (in US $ etc.)
(ii) Amount as percentage to the
total issue.
(b) Other Expenses
17. Whether funds are kept abroad. If yes,
name and address of the bank.
:
18. Details of the listing arrangement :
Name of Stock Exchange
Date of commencement of trading
Certified that all the conditions laid down by Government of India and Reserve Bank of India have
been complied with.
Sd/- Sd/-
Chartered Accountant Authorised Signatory of
the Company

117
Annex –10
Form DR - Quarterly
[Refer to paragraph 4(3) of Schedule 1]
Quarterly Return
(to be submitted to the Reserve Bank of India, Foreign Investment Division, Central Office,
Mumbai)
1. Name of the Company
2. Address
3. GDR/ADR issue launched on
4. Total No. of GDRs/ADRs issued
5. Total amount raised
6. Total interest earned till end of quarter
7. Issue expenses and commission etc.
B. Amount repatriated
9. Balance kept abroad - Details
(i) Banks Deposits
(ii) Treasury Bills
(iii) Others (please specify)
10. No. of GDRs/ADRs still outstanding
11. Company's share price at the end of
the quarter
12. GDRs/ADRs price quoted on overseas
stock exchange as at the end of the
quarter
Certified that the funds raised through GDRs/ADRs have not been invested in stock market or
real estate.
Sd/- Sd/-
Chartered Accountant Authorised Signatory of the Company

118
Annex - 11
Certificate to be Furnished by the Prospective Investor as well as the Prospective
Recipient Entity
(Para 6.2.18.3 (ii))
It is certified that the following is the complete list of all inter-se agreements,
including the shareholders agreement, entered into between foreign investor(s) and
investee brownfield pharmaceutical entity
1. ………………
2. ……………….
3. ……………….
(copies of all agreements to be enclosed)
It is also certified that none of the inter-se agreements, including the shareholders
agreement, entered into between foreign investor(s) and investee brownfield
pharmaceutical entity contain any non-compete clause in any form whatsoever.
It is further certified that there are no other contracts/agreements between the
foreign investor(s) and investee brownfield pharma entity other than those listed above.
The foreign investor(s) and investee brownfield pharma entity undertake to submit to the
FIPB any inter-se agreements that may be entered into between them subsequent to the
submission and consideration of this application.

Fdi circular 2014

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