A.P. (DIR Series) Circular No.01
July 04, 2013
All Category I Authorised Dealer banks
Foreign Investment in India Guidelines for calculation of total foreign investment in Indian companies, transfer of ownership and control of Indian companies and downstream investment by Indian companies
Attention of Authorised Dealer Category I (AD Category-I) banks is invited to Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified by the Reserve Bank vide Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to time.
2. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India had, vide Press Notes 2 and 3 (2009 series) dated February 13, 2009, issued guidelines for calculation of total foreign investment, i.e., direct and indirect foreign investment in Indian companies and 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. Further, DIPP, vide their Press Note 2 (2012 series) dated July 31, 2012, had made certain other changes. The Consolidated FDI Policy Circular 1 of 2013 dated April 5, 2013, available at www.dipp.gov.in comprehensively incorporates the contents of the Press Notes.
3. (i) The regulatory framework comprises:
(B) concept of direct and indirect foreign investment;
(C) method of calculation of total foreign investment;
(D) guidelines for establishment of Indian companies and transfer of ownership or control of Indian companies, from resident Indian citizens and Indian companies to non-resident entities, in sectors with caps;
(E) downstream investment by an Indian company which is not owned and/or controlled by resident entity/ies.
These guidelines, summarised in the Annex, shall come into force from the date(s) mentioned in the Notification No.FEMA.278/2013-RB dated June 07, 2013 and notified vide G.S.R.393(E) dated June 21, 2013.
(ii) Any foreign investment already made in accordance with the guidelines in existence prior to February 13, 2009 would not require any modification to conform to these guidelines. All other investments, after the said date, would come under the ambit of these new guidelines.
(iii) As regards investments made between February 13, 2009 and the date of publication of the FEMA notification, Indian companies shall be required to intimate, within 90 days from the date of this circular, through an AD Category I bank to the concerned Regional Office of the Reserve Bank, in whose jurisdiction the Registered Office of the company is located, detailed position where the issue/transfer of shares or downstream investment is not in conformity with the regulatory framework now being prescribed. Reserve Bank shall consider treating such cases as compliant with these guidelines within a period of six months or such extended time as considered appropriate by RBI in consultation with Government of India.
4. AD Category – I banks may bring the contents of the circular to the notice of their customers/constituents concerned.
5. As stated above, Reserve Bank has since amended the Regulations and notified vide Notification No. FEMA.278/2013-RB dated June 07, 2013 and notified vide G.S.R.393(E) dated June 21, 2013.
6. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
(Rudra Narayan Kar)
Chief General Manager-In-Charge
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