Reserve Bank eases FDI norms to issue shares to NRIs

Reserve Bank eases FDI norms to issue shares to NRIs

Sep 18,2014   10:02 Hrs IST

Giving a reason to cheer to the India Inc. Reserve Bank of India (RBI) has allowed companies to issue equity shares to a resident outside India against any type of fund, subject to certain conditions like entry route, sectoral cap, pricing guidelines and compliance with the applicable tax laws. RBI reviewed the existing guidelines in consultation with the Government of India and, accordingly, decided to permit issue of equity shares against any other funds payable by the investee company, remittance of which does not require prior permission of the Government of India or Reserve Bank of India under FEMA, 1999 or any rules/ regulations framed or directions issued thereunder As per the latest RBI guidelines the equity shares shall be issued in accordance with the existing FDI guidelines on sectoral caps, pricing guidelines and the issue of equity shares under this provision shall be subject to tax laws as applicable to the funds payable and the conversion to equity should be net of applicable taxes. Earlier, an Indian company under the automatic route could issue shares/convertible debentures to a person resident outside India against lump-sum technical know-how fee, royalty External Commercial Borrowings (other than import dues deemed as ECB or Trade Credit) and import payables of capital goods by units in Special Economic Zones. Through government route, FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance. Indian companies having foreign investment approval through FIPB route do not require any further clearance from RBI for receiving inward remittance and issue of shares to the foreign investors.