Investment Opportunities for Non-Resident Indians (NRIs)
NRIs can make direct investments in proprietary/partnership concerns in India as also in the primary issues of shares/debentures of Indian companies.
They can also make portfolio investments, i.e. purchase of shares/debentures of Indian companies through stock exchanges in India. These facilities are available on both repatriation and non-repatriation basis.
In order to facilitate NRIs to set up new companies in India, the Reserve Bank of India (RBI) vide its Notification NO. FERA 143/93 RB dated 26th April 1993, has granted general permission to NRIs to subscribe to the Memorandum and Articles of Association and to take up the shares of Indian companies for their incorporation.
The general permission empowers such Indian companies to issue shares to NRIs, provided that the company is not engaged into activity relating to agricultural and plantation.
Direct Investment
- NRIs are permitted to make direct investment in partnership/ proprietorship concerns in India as also by way of subscription to shares/ debentures of Indian companies. They are also permitted to place funds in company deposits.
- Investments made will either be on repatriation or on non-repatriation basis depending on the terms and conditions applicable under the existing schemes for NRI investment.
- Wherever the investments are allowed with repatriation benefits, the funds for the purpose should be received by inward remittances from abroad or from the investor’s NRE/FCNR Accounts. However, in respect of investment on non repatriation basis, funds in NRO Accounts could also be used.
Portfolio Investment
- NRIs/OCBs have to obtain prior permission of RBI to acquire shares/debentures of Indian companies and units of domestic Mutual Funds on both repatriation and non-repatriation basis through stock exchanges in India.
- The application for permission is to be submitted to RBI through a designated Bank branch in one of the prescribed forms. RBI approval is valid for a period of 5 years from the date of issue. Regulations regarding Portfolio Investment (i.e. investment through Stock Exchange) in shares/debentures by NRIs /OCBs have been explained below:
- Portfolio investment in shares/debentures by NRIs/OCBs are permitted only though designated branches of authorized dealers preferably located at centres having stock exchanges. Authorized dealers should inform the names of such branches to Central Office of Reserve Bank and obtain approval. Non-resident investors can also authorize Indian residents or stock exchange brokers as their agents in India to purchase/sell shares on their behalf under the schemes but all transactions should be routed through the designated branch of authorized dealer.
- NRIs/OCBs will be permitted to make portfolio investment in shares/debentures (convertible and non-convertible) of Indian companies, with or without repatriation benefits provided the purchase is made through a stock exchange and also through designated branch of an authorized dealer. NRIs/OCBs are required to designate only one branch authorized by Reserve Bank for this purpose.
- Investment in equity shares and convertible debentures will be permitted subject to an overall ceiling of
10% of the total paid-up equity capital of the company concerned; and
10% of the total paid-up value of each series of the convertible debentures issued by the company concerned for all NRIs/OBCs taken together both on repatriation and on non-repatriation basis. - The purchase of shares and debentures under the scheme is required to be made at the ruling market price.
- NRIs/ OCBs intending to invest on non-repatriation basis should submit their applications in the prescribed form, through a designated branch of an authorized dealer to purchase shares/debentures of Indian companies, securities (other than bearer securities) of the Central or State Government and Treasury Bills on behalf of the NRI/OCB subject to the condition that the payment of such investment is received through inward remittance or from the investors NRE/FCNR/NRO/NRSR account. The general permission granted by Reserve Bank would be initially valid for a period of five years. Authorized dealers may themselves renew the permission granted by Reserve Bank to individual NRIs as well as OCBs for a period of five years at a time.
- NRIs and OCBs intending to invest with repatriation benefits should submit their application through a designated branch of an authorized dealer in prescribed form. Reserve Bank will grant general permission to the designated branch for purpose of shares/debentures of Indian companies, securities (other than bearer securities) of the Central or any other State Government and Treasury Bills subject to the conditions that:
The payment is received through an inward remittance in foreign exchange or by debit to the investor’s NRE/FCNR account.
Investment made by any single NRI/OCB investor in equity/preference shares and convertible debentures of any listed Indian company does not exceed 5% of its total paid-up equity or preference capital or 5% of the total paid up value of each series of convertible debentures issued by it.
NRIs/OCBs take delivery of the shares/convertible debentures purchased and give delivery of the shares/convertible debentures sold under the scheme.
The general permission granted by Reserve Bank will be valid initially for a period of five years. Authorized dealers may themselves renew the permission granted by Reserve Bank to individual NRIs as well as OCBs for a further period of five years at a time. - Shares/debentures purchased by NRIs/OCBs should be held and registered in the name of either the investor himself or an authorized dealer or the latters nominee/s. Shares/debentures can be purchased by NRIs in joint names with other NRIs with permission of Reserve Bank.