NRIs are permitted to invest in shares / convertible debentures of Indian companies, by Reserve Bank of India, under Portfolio Investment Scheme (PIS), in secondary market through a registered broker on a recognized Stock Exchange. Reserve Bank of India, vide A.P. (DIR Series) Circular No. 13 dated November 29, 2001 has prohibited OCBs to invest under PIS in India. Further, the OCBs that have already made investments under PIS have been allowed to continue to hold such shares / convertible debentures till such time these are sold on the stock exchange.
The guidelines of Reserve Bank of India in respect of ceiling on investments are as under:
Investment in shares of a company, by each NRI (both on repatriation and non-repatriation basis) shall not exceed 5% of the paid-up value of shares of the company concerned.
Investment in convertible debentures of a company, by each NRI (both on repatriation and non-repatriation basis) shall not exceed 5% of the paid-up value of convertible debentures in each series, issued by the company concerned.
Aggregate investments by NRIs will be subject to a 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 convertible debentures issued by the company concerned.
Some Indian companies shall however raise the ceiling of 10% to 24% or such ceilings a may be decided by the companies, by passing a special resolution in the General body of the company.
In case of investments on repatriation basis, the payment for purchase of shares / debentures should be by way of debit to the investor's NRE account.
In case of investments on non-repatriation basis, the payment for purchase of shares / debentures shall be by way of debit to the investor's NRO account also.
The net sale / maturity proceeds of shares / convertible debentures, after payment of taxes, shall be credited only to the investor?s NRO account if the investment was made on non-repatriation basis and shall be remitted abroad / credited to the investor's NRE / NRO account if the investment was made on repatriation basis.
Note:
Transactions covered under PIS:
Only secondary market purchase and sales of shares / convertible debentures of Indian companies by NRI's are within the ambit of the PIS scheme.
Transactions excluded from the ambit of PIS:
Securities purchased as a resident individual are not covered under this scheme.
Derivative segment transactions or Mutual fund unit purchases are not within the ambit of the PIS scheme.
Shares purchased through IPO's (Initial public offers)
