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NRIs are permitted to make direct investments in proprietary/partnership concerns in India as also in shares/debentures of Indian companies. They are also permitted to make portfolio investments i.e. purchase of shares/debentures of Indian companies through stock exchange/s in India. These facilities are granted both on repatriation and non-repatriation basis.

Q.1 Is permission of Reserve Bank required for NRIs to invest in proprietary/partnership concerns on non-repatriation basis?

Ans No. Reserve Bank has granted general permission to non-resident individuals of Indian nationality/origin to invest by way of capital contribution in any proprietary or partnership concern in India on non-repatriation basis provided the investee concern is not engaged in agricultural/plantation activity or real estate business. This facility is, however, not available to OCBs.

Q.2 Is permission of Reserve Bank required for making investments in new issues of Indian companies on non-repatriation basis?

Ans. No. Indian companies have been granted general permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights issue provided the investee company is not engaged in agricultural/plantation activity or real estate business (excluding real estate development i.e. development of property and construction of house) or chit fund or is not a Nidhi company.

Q.3 Are any formalities required to be completed by NRIs for getting the benefit of the above general permission?

Ans. No. However, the firms/companies concerned are required to file declarations with Reserve Bank in form DIN giving particulars of the investments made, within ninety days from the date of the investment.

Q.4 Can NRI/OCBs make investments in domestic public/private sector Mutual Funds or Money Market Mutual Funds floated by commercial banks and public/private sector financial institutions on non-repatriation basis?

Ans. Yes.

Q.5 Can NRIs make investments in non-convertible debentures of Indian companies?

Ans. Yes. Applications for necessary permission should be made to Reserve Bank (Central Office) by the concerned Indian company in form ISD.

Q.6 Can NRIs purchase existing shares/debentures of Indian companies by private arrangement?

Ans. Yes. Reserve Bank permits NRIs, on application in form FNC 7, to purchase shares/debentures of existing Indian companies on non-repatriation basis. An undertaking about non-repatriation is to be given in form NRU.

Q.7 Is it necessary for a resident, holding securities in Indian companies, to secure any approval from Reserve Bank on his becoming a non-resident for holding such securities?

Ans. No. Reserve Bank has granted general permission to companies in India to enter the overseas addresses of the shareholders in their books in such cases provided the companies obtain undertakings from the holders that they will not seek repatriation of any sale proceeds of the security.

Q.8 Is income/interest earned on investments/deposits held in India by NRIs on non-repatriation basis allowed to be repatriated?

Ans. Yes. Income/interest accruing during the financial year 1994-95 and onwards on bank deposits and investments held by NRIs with non-repatriation benefits will be eligible for repatriation as under:
(a) Up to U.S. $ 1,000 or its equivalent in full and one-third of the balance income earned during the financial year 1994-95;
(b) Up to U.S. $ 1,000 or its equivalent in full and two-third of the balance income earned during the financial year 1995-96;
(c) The entire income earned during the financial year 1996-97 and onwards.

Note: The investment/principal amount of deposits made/held on non-repatriation basis (will, however, not be allowed to be repatriated abroad. Further funds held in NRSR accounts and/or interest/income accrued on funds held in these accounts will not be be allowed to be repatriated abroad.

Q.9 What is the procedure to be followed for seeking repatriation in such cases?

Ans. NRIs should designate a branch of an authorised dealer through whom the remittance of income is to be made and make an application in form RCI to the designated branch giving details of incomes earned during the previous financial year alongwith a Chartered Accountant's Certificate. The designated branch will allow the remittance of net amount (i.e. after payment of tax) or credit it to NRE/FCNR account of the applicant.

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