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Purchase and sale of securities other than shares or convertible debentures of an Indian
company by a person resident outside India
[Schedule 5: Regulation 5 (4) of Foreign Exchange Management (Transfer or issue of security by a person
resident outside India) Regulations, 2000]
Permission to Foreign Institutional Investors for purchase of securities(Clause: 1)
A registered Foreign Institutional Investor may purchase, on repatriation basis, dated Government securities/treasury bills, non-convertible debentures/bonds issued by an Indian company and units of domestic mutual funds either directly from the issuer of such securities or through a registered stock broker on a recognised stock exchange in India;
Provided that
the FII shall restrict allocation of its total investment between equity and debt instruments (including dated Government Securities and Treasury Bills in the Indian capital market) in the ratio of 70:30, and if the FII desires to invest upto 100 per cent in dated Government Securities including Treasury Bills, non-convertible debentures/bonds issued by an Indian company, it shall form a 100% debt fund and get such fund registered with SEBI.
Permission to Non-resident Indian and Overseas Corporate Body for purchase of securities (Clause: 2)
A Non-resident Indian or an Overseas Corporate Body may, without limit, purchase on repatriation basis,
Government dated securities (other than bearer securities) or treasury bills or units of domestic mutual funds; bonds issued by a public sector undertaking(PSU) in India; shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids. A Non-resident Indian or an Overseas Corporate Body may, without limit, purchase on non-repatriation basis, dated Government securities (other than bearer securities), treasury bills, units of domestic mutual funds, units of Money Market Mutual Funds in India, or National Plan/Savings Certificates.
Method of payment of purchase consideration(Clause: 3)
A registered Foreign Institutional Investor who purchases securities under the provisions of this Schedule shall make the payment for purchase of such securities either by inward remittance through normal banking channels or out of funds held in Foreign Currency Account or Non-resident Rupee Account maintained by the Foreign Institutional Investor with a designated branch of an authorised dealer with the approval of Reserve Bank in terms of paragraph 2 of Schedule 2. A Non-resident Indian or an Overseas Corporate Body who purchases securities on repatriation basis, under sub-paragraph (1) of paragraph 2 of this Schedule, shall make payment either by inward remittance through normal banking channels or out of funds held in his/its NRE/FCNR account. A Non-resident Indian or an Overseas Corporate Body who purchases securities on non-repatriation basis, under sub-paragraph (2) of paragraph 2 of this Schedule, shall make payment either by inward remittance through normal banking channels or out of funds held in his/its NRE/FCNR/NRO/NRSR/NRNR account.
Permission for Sale of Securities(Clause: 4)
A person resident outside India who has purchased securities in accordance with this Schedule may
sell such securities through a registered stock broker on a recognised stock exchange or tender units of mutual funds to the issuer for repurchase or for payment of maturity proceeds or tender Government securities/treasury bills to the Reserve Bank for payment of maturity proceeds.
Remittance/credit of sale/maturity proceeds(Clause: 5)
In the case of a registered Foreign Institutional Investor who has sold securities in accordance with paragraph 4, the designated branch of an authorised dealer referred to in sub-paragraph (1) of paragraph 3 may allow remittance of net sale/ maturity proceeds (after payment of taxes) or credit the net amount of sale/ maturity proceeds of such securities to the foreign currency account or Non-resident Rupee Account of the FII investor maintained in accordance with the provisions of paragraph 2 of Schedule 2. In the case of a Non-resident Indian or an Overseas Corporate Body who has sold securities in accordance with paragraph 4, the net sale/ maturity proceeds (after payment of taxes) of such securities, may be
credited only to NRSR account of the NRI investor where the payment for purchase of securities sold was made out of funds held in NRSR account, or credited, at the NRI or OCB investor's option, to his/its NRO or NRSR account, where the payment for the purchase of the securities sold was made out of funds held in NRO account, or remitted abroad or at the NRI or OCB investor's option, credited to his/its NRE/FCNR /NRO/NRSR/NRNR account, where the securities were purchased on repatriation basis in accordance with sub-paragraph (1) of paragraph 2 and the payment for purchase of the securities sold was made by inward remittance through normal banking channels or out of funds held in NRE/FCNR account.
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