8 Feb 2014

Investment Opportunities for NRIs in India

The Government has taken various steps to promote investments by Indians living abroad, in India. The Government plays a pivotal role in investment promotion, through dissemination of information on the investment climate and opportunities in India and by advising prospective investors including the Non-Resident Indians (NRIs) about the investment policies and procedures and opportunities.
For the purpose of investments in India, it should be known that a NRI is a person residing outside India, but who is a citizen of India or is a Person of Indian Origin. A Person of Indian Origin is one who or whose ancestors was an Indian national and who is presently holding any other country’s citizenship/nationality.
The Government has a liberal and transparent policy for Foreign Direct Investment, including investments from NRIs, wherein most of the sectors are open to FDI under the automatic route. NRIs can make investment in India under various schedules of Foreign Exchange Management (Issue or Transfer of Security by a Person Resident outside India) Regulations, 2000 as amended from time to time. Investment under FDI Scheme contained in Schedule 1 of these Regulations, permits 100 per cent NRI investments, under the automatic route, in the sector of townships, housing, built-up infrastructure and construction-development projects (which include, but are not restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure), without the conditionalities attached to FDI in such projects. It also grants a special dispensation for NRI investments in the sectors of Scheduled Air Transport Services/Domestic Scheduled Passenger Airlines, Non-Scheduled Air Transport Services, Ground Handling Services, wherein 100 per cent NRI investment is allowed under the automatic route.
Along with these, NRIs can also invest in share/convertible debentures of an Indian company under FDI scheme subject to terms and conditions specified in Schedule 1 to Notification No. FEMA 20. An NRI can purchase and sell shares/convertible debentures of an Indian company on both repatriation and non-repatriation basis under Portfolio Investment Scheme (PIS), through registered broker or recognised Stock Exchanges in India. 
The individual limit for NRI under PIS is five per cent of the paid up capital/paid up value of each series of convertible debentures of an Indian company and aggregate limit for all NRIs taken together is one per cent of the paid up capital/paid up value of the company. This limit can be increased by the Indian company to 24 per cent by passing a Board resolution and special Annual General Meeting resolution. Apart from this, an NRI, barring certain sectors, according to Schedule 4 to Notification No. FEMA 20, may without any limit purchase on non-repatriation basis shares/convertible debentures of an Indian company whether by public issue or private placement or right issue.
In terms of Schedule 5 to Notification No. FEMA 20, an NRI may, without limit, purchase on repatriation basis, Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds; bonds issued by a PSU in India; non-convertible debentures of a company incorporated in India; bonds/units issued by Infrastructure Debt Funds, Perpetual debt instruments and debt capital instruments issued by banks in India and shares in Public Sector Enterprises being dis-invested by the Government. 
According to the terms of the same Schedule, a NRI or an Overseas Corporate Body may, without limit, purchase on non-repatriation basis, dated Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds in India, or National Plan/Savings Certificates. However, NRIs have not being given the permission to invest in small savings or Public Provident Fund (PPF).
The Government, in order to promote NRIs to bring in money into India, extended some more facilities to them. Banks are free to determine the interest rates on both savings deposits and term deposits of maturity of one year and above under the Non-Resident External (NRE) deposits and savings deposits under Non-Resident Ordinary (NRO) account. 
An NRE account is one which can be opened only by the non-resident himself and not through the holder of the power of attorney. Only NRIs can become joint account holders in the case of NRE account. On the other hand, NRO accounts may be held jointly with residents and /or with NRIs. Along with this, the banks may also sanction Rupee loans in India or foreign currency loans outside India to either the account holder or third party to the extent of the balance in the NRE/ Foreign Currency Non Resident (Bank) account, subject to the margin requirements. 
To help NRIs to maintain FCNR deposits in other currency as well, since October 2011, FCNR (B) accounts have been permitted to be opened in any freely convertible currency. Moreover, NRIs are, since September 2011, also eligible to open NRE/FCNR account with resident.
The Government has also set up ‘Invest India’, a joint venture company between the Department of Industrial Policy and Promotion and Federation of Indian Chambers of Commerce and Industry, as a not-for-profit, single window facilitator, for prospective overseas investors, to act as a structured mechanism for attracting investment. 
On the other hand, the Ministry of Overseas Indian Affairs has established Overseas Indian Facilitation Centre to facilitate potential NRIs and overseas corporate bodies of overseas Indians which want to invest in India. OIFC has organised several investment and interactive meets/roadshows in different countries. It has also organised ‘Market Place’ during the annual Pravasi Bharatiya Divas event in India. The annual and regional PBDs have also provided a platform for facilitation of investment by overseas Indians.

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