USA - FAQ's

NRI's - Bank Accounts

Can NRIs acquire shares disinvested by Government of India in Public Sector Enterprises (PSEs) by inviting sealed tenders?
Yes. Reserve Bank has granted general permission to NRIs to acquire shares of PSEs on their bids being successful provided the holding of a single NRI investor does not exceed one per cent of the paid up capital of the PSE concerned, the purchase consideration/bid money is paid by way of remittance from abroad or by debit to his NRE/FCNR accounts.

What is the procedure for issue of rights entitlement to NRIs?
The concerned company should approach Reserve Bank for issue of rights entitlement to NRIs in the prescribed form if on repatriation basis. However, rights entitlement on non-repatriation basis would be covered by the general permission.

What is the procedure required to be followed by NRIs for renunciation of rights entitlement?
NRIs can make an application to Reserve Bank by a letter detailing therein the folio number of the shares held and the manner in which the rights are being sold.

What is the procedure for issue of bonus shares?
The concerned Indian company should approach Reserve Bank for issue of bonus shares to NRIs if the original investment is on repatriation basis. Issue of bonus shares in respect of investment on non-repatriation basis is covered by general permission.

Can NRIs obtain loans abroad against the collateral of shares/debentures of Indian companies?
Yes. Authorised dealer have been permitted to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies held by them, provided the concerned shares/debentures were acquired on repatriation basis.

Can sale proceeds of the shares/debentures be remitted abroad for liquidation of outstandings against such loans/overdrafts?
Yes, subject to payment of Income tax, Capital Gains tax etc. payable, if any.

What is the Portfolio Investment Scheme?
Under this scheme, NRIs/OCBs are permitted to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange/s in India.

What is the procedure for making applications?
The application is to be submitted to Reserve Bank through a designated branch of a bank in India in one of the prescribed forms, i.e. NRC/NRI/RPC/RPI. Reserve Bank issues general permission for a period of 5 years which can be renewed further by authorised dealer concerned for a period of 5 years at a time.

What is a designated branch?
Reserve Bank has authorised a few branches of each bank to conduct the business under Portfolio Investment Scheme on behalf of NRIs/OCBs. These branches are the main branches of major commercial banks located close to the stock exchange/s. NRIs/OCBs will have to route their applications through any of the designated bank branches who have authorisation from Reserve Bank.

Whether NRI/OCB can apply through more than one designated branch?
No. Each NRI/OCB has to select one branch for this purpose for investment on repatriation/non-repatriation basis.
        

Is it necessary to maintain a bank account with the designated branch through whom the application is made?
It is advisable to maintain a bank account with the designated branch for administrative convenience.

Is there any ceiling on the investment under the Portfolio Investment Scheme?
There is an overall ceiling of 10% of paid-up equity share capital of the company/paid-up value of each series of convertible debentures for purchase by NRIs/OCBs. The overall ceiling can be raised to 30% if the company concerned passes a special resolution to that effect in its general body meeting and a Board resolution.
Individually, NRIs/OCBs can make investment upto 5% of the paid-up equity share capital/each series of convertible debentures. However, there is no ceiling for investment in domestic Mutual Funds.

Can NRIs keep deposits with companies in India with repatriation benefits?
General permission to Indian companies (including non-banking finance companies registered with Reserve Bank) has been granted to accept deposits from NRIs/PIOs/OCBs with repatriation benefits subject to certain conditions.

Do NRIs need permission of Reserve Bank for placing funds in fixed deposits with firms/companies on non-repatriation basis?
No. General permission has been granted to proprietorship concern or a firm in India to accept deposits from NRIs and to Indian companies (including non-banking finance companies registered with Reserve Bank) to accept deposits from NRIs/OCBs on non-repatriation basis subject to certain conditions.

Are NRIs permitted to invest in Commercial Paper (CP) issued by Indian companies?
Yes. General permission has been granted by Reserve Bank to Indian companies to issue CP to NRI individuals subject to the conditions that the amount invested will not be repatriated outside India and the CP will not be transferable.

Is permission of Reserve Bank required for sale/transfer of Government securities/units?
No. Authorised dealers have been permitted to undertake sale of Government securities/units on behalf of NRIs without prior approval of Reserve Bank. Sale/maturity proceeds can be remitted abroad if the original investment was made out of funds remitted from abroad or funds in NRE/FCNR accounts. Otherwise, they will have to be credited to NRO account of the holder.

Is permission of Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs?
No. Transfer of shares/debentures of Indian companies by NRIs to other non-residents does not require permission of Reserve Bank. However, the transferee NRI would need permission for purchase of such shares for which an application is required to be made to Reserve Bank in form FNC 7.

Can NRIs transfer/sell their shares/debentures/bonds held on non-repatriation basis to residents freely?
Yes. General exemption has been granted by Reserve Bank for transfer/sale of shares/debentures/bonds by NRIs/OCBs through stock exchanges if such transfers are made in favour of an Indian citizen or a person of Indian origin or a company incorporated in India and sale proceeds thereof are credited to NRO account.

What is the procedure for sale/transfer of shares/debentures/bonds held by NRIs with repatriation benefits?
In the case of shares/debentures/bonds acquired by NRIs through stock exchanges under the Portfolio Investment Scheme, general exemption has been granted for transfer through stock exchanges provided the sale is arranged through the same designated branch through whom they were purchased.

General exemption has also been granted for sale/transfer of shares/bonds/debentures of Indian companies by NRIs/PIOs/OCBs through stock exchanges in cases where such transfers are made in favour of Indian citizens or Persons of Indian Origin resident in India or in favour of a company or body corporate incorporated under any law in force in India subject to certain conditions.

What is the procedure to be followed by NRIs for sale/transfer of shares/debentures to residents by private arrangements?
NRIs are required to submit application in form TS 1 to Reserve Bank for sale of shares/debentures by private arrangements.