Q.1 What is the Portfolio Investment Scheme?

Ans. Under this scheme, NRIs are permitted to acquire shares /debentures of Indian companies or units of domestic Mutual Funds through the stock exchange/s in India.

Q. 2 What is the procedure for making applications?

Ans. 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.

Q.3 What is a designated branch?

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

Q. 4 Whether NRI can apply through more than one designated branch?

Ans. No. Each NRI has to select one branch for this purpose for investment on repatriation/ non-repatriation basis.

Q.5 Is it necessary to maintain a bank account with the designated branch through whom the application is made?

Ans. It is advisable to maintain a bank account with the designated branch for administrative convenience.

Q. 6 What is the validity period of Reserve Bank approval for the purchase of shares/debentures of Indian companies or units of domestic Mutual Funds?

Ans. Reserve Bank approval is valid for a period of five years from the date of issue. This can be renewed further by making a request by means of a simple letter.

Q.7 Is there any ceiling on the investment under the Portfolio Investment Scheme?

Ans. There is an overall ceiling of 5% 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 1% of the paid-up equity share capital/each series of convertible debentures. However, there is no ceiling on investment in domestic Mutual Funds.

Q.1 Can NRIs keep deposits with companies in India with repatriation benefits?

Ans. Yes. NRIs are permitted to keep deposits with public limited companies in India for a minimum period of three years subject to certain ceilings/conditions. Application for the purpose is required to be made by the company receiving the deposits through an authorised dealer.

Q.2 Do NRIs need permission of reserve Bank for placing funds in fixed deposits with firms/companies on non- repatriation basis?

Ans. Yes. Permission for placement of funds in fixed deposits with firms/companies in India is granted by Reserve Bank on application by the depositor or the deposit accepting firm/company, on non-repatriation basis, subject to certain ceilings/conditions.

Q.3 Are NRIs permitted to invest in Commercial Paper(CP) issued by Indian companies?

Ans. 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.

Q.1 Is permission of Reserve Bank required for sale/transfer of Government securities/units?

Ans. 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.

Q. 2 Is permission of Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs?

Ans. 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.

Q. 3 Can NRIs transfer/sell their shares/ debentures/bonds held on non-repatriation basis to residents freely?

Ans. 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.

Q. 4 What is the procedure for sale/transfer of shares/debentures/bonds held by NRIs with repatriation benefits?

Ans. 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. In other cases, applications for necessary permission is required to be made to Reserve Bank in form TS 4.

Q.5 What is the procedure to be followed by NRIs for sale/transfer of shares /debentures to residents by private arrangements?

Ans. NRIs are required to submit application in form TS 1 to Reserve Bank for sale of shares/debentures by private arrangements.

Q.6 Can shares/debentures be given away as gifts to relatives?

Ans. Yes Reserve Bank has granted general permission to NRIs to transfer, by way of gift, shares, bonds and debentures of Indian companies held by them with Reserve Bank's permission to their resident close relative/s.

[Source: Reserve Bank of India]