Portfolio investments in shares/debentures by NRIs/OCBs are permitted only through designated branches of authorized dealers, preferably located at centers having stock exchanges. Authorized dealers should inform the names of such branches to Central Office of Reserve Bank and obtain approval. The Code number allotted by Reserve Bank should be quoted in all correspondence undertaken with Reserve Bank in this regard. Non-resident investors can also authorize Indian residents or stock exchange brokers as their agents in India to purchase/sell shares on their behalf under the schemes but all transactions should be routed through the designated branch of authorized dealer.

• NRIs/OCBs will be permitted to make portfolio investment in shares/debentures (convertible and non-convertible) of Indian companies, with or without repatriation benefits provided the purchase is made through a stock exchange and also through designated branch of an authorized dealer. NRIs/OCBs are required to designate only one branch authorized by Reserve Bank for this purpose.
• Investment in equity shares and convertible debentures will be permitted subject to an overall ceiling of (a) 10 per cent of the total paid-up equity capital of the company concerned; and (b) 10 per cent of the total paid-up value of each series of the convertible debentures issued by the company concerned for all NRIs/OCBs taken together both on repatriation and on non-repatriation basis.
• The purchase of shares and debentures under the scheme is required to be made at the ruling market price.
• NRIs / OCBs intending to invest on non-repatriation basis should submit their applications in Form NRI / NRC respectively, through a designated branch of an authorized dealer, to Reserve Bank (Central Office). Reserve Bank will grant general permission to the concerned authorized dealer to purchase shares/debentures of Indian companies, securities (other than bearer securities) of the Central or any State Government and Treasury Bills on behalf of the NRI/OCB subject to the condition that the payment for such investment is received through inward remittance or from the investor’s NRE/FCNR/NRO/NRSR account.
• The general permission granted by Reserve Bank would be initially valid for a period of five years. Authorized dealers may themselves renew the permission granted by Reserve Bank to individual NRIs as well as OCBs for a period of five years at a time.
• NRIs and OCBs intending to invest with repatriation benefits should submit their applications through a designated branch of an authorized dealer in Form RPI / RPC respectively.
• Reserve Bank will grant general permission to the designated branch for purchase of shares/debentures of Indian companies, securities (other than bearer securities) of the Central or any State Government and Treasury Bills,subject to the conditions that the payment is received through an inward remittance in foreign exchange or by debit to the investor’s NRE/FCNR account.
• Investment made by any single NRI/OCB investor in equity/preference shares and convertible debentures of any listed Indian company should not exceed 5% of its total paid-up equity or preference capital or 5% of the total paid-up value of each series of convertible debentures issued by it and NRIs/OCBs take delivery of the shares/convertible debentures purchased and give delivery of the shares/convertible debentures sold under the Scheme
• The general permission granted by Reserve Bank will be valid initially for a period of five years. Authorized dealers may themselves renew the permission granted by Reserve Bank to individual NRIs as well as OCBs for a further period of five years at a time. Authorized dealers may note to obtain the latest OAC/OAC 1 certificate from the OCB concerned before renewing the permission.

NRIs/OCBs intending to invest in the units of domestic mutual funds on non-repatriation/repatriation basis under the Portfolio Investment Scheme should apply to Reserve Bank (Central Office) in the above manner. However, approvals already granted for portfolio investment in shares/debentures of Indian companies will also be valid for purchase of units of domestic mutual funds.

Shares/debentures purchased by NRIs/OCBs should be held and registered in the names of either the investor himself or an authorized dealer or the latter’s nominee/s.

Shares/debentures can be purchased by NRIs in joint names with other NRIs with permission of Reserve Bank. In such cases, if the investment is with repatriation benefits, the first holder is to be treated as investor for the purpose of 5% ceiling. The second or third holder will be eligible to invest separately in the same company in his own name as the first holder in joint holdings up to the limit of 5%. Reserve Bank will also permit investment jointly with residents. However, if the resident joint holder inherits the shares/debentures, he/she will not be entitled to repatriation benefits.

The Reserve Bank has granted general exemptions sale/transfer of shares/bonds/ debentures through stock exchanges in India subject to fulfillment of certain conditions.

Applications for sale / transfer of shares / bonds /debentures held by NRIs/OCBs by private arrangement i.e. other than through stock exchange should be made to Reserve Bank in form TS 1 either by the transferor or the transferee, attaching therewith the letter of consent of the other party irrespective of whether the shares/bonds/ debentures are listed on a stock exchange or not. While conveying its approval, Reserve Bank will stipulate the conditions subject to which the sale/transfer should be effected. In cases of sale/transfer of shares/bonds/debentures acquired on repatriation basis, repatriation of such proceeds of bulk holdings (i.e. shares/bonds/debentures exceeding Rupees one lakh in face value or 5% of the company’s paid-up capital whichever is lower) will be permitted only on production of a certificate from a Chartered Accountant or the concerned company’s secretary stating that shares with necessary transfer forms duly signed have been received/lodged with the company for registration in favour of the transferee.

The Reserve Bank by its Notification No. FERA.149/93-RB dated 26th April 1993 has exempted the transfer of shares, bonds or debentures of Indian companies made by NRIs through stock exchange in India in case where :

• Such transfers are made in favour of an Indian citizen or person of Indian origin resident in India or in favour of a company or other body corporate incorporated in India and
• Sale proceeds of shares are credited to the NRO account of the transferor with no right of repatriation outside India.

In such cases, authorized dealers may credit the sale proceeds to the seller’s NRO account after verifying the contract notes issued by recognized stock exchange brokers through whom the sale was effected. This exemption is available in respect of shares, bonds or debentures acquired by NRIs under the Portfolio Investment Scheme as well as under any Direct Investment Scheme.

For sale/transfer of shares, bonds or debentures by OCBs acquired on non repatriation basis through a stock exchange in India, a consolidated application giving full particulars may be submitted to the concerned office of Reserve Bank. Permission will be granted by Reserve Bank for a specific period subject to renewal.

The Reserve Bank by its Notification No.FERA.150/93-RB dated 26th April 1993 has exempted transfer of shares, bonds or debentures of Indian companies registered in India previously acquired by NRIs/OCBs with repatriation benefits under the Portfolio Investment Scheme to persons resident in India or persons of Indian origin resident in India or in favour of companies or bodies corporate, incorporated under any law in force in India if the following conditions are satisfied:

• The transferor had purchased such shares, bonds or debentures from the stock market through a member of a recognized stock exchange in India and delivery of shares, bonds or debentures so purchased has been taken by him or on his behalf by the concerned authorized dealer or its nominee.
• The shares, bonds or debentures are sold in the stock market through a member of a recognized stock exchange in India and the sale transaction is effected at the ruling market price as determined on the floor of the stock exchange by normal bid and offer method and through the same designated branch of the authorized dealer through which the shares, bonds or debentures were earlier purchased.
• The sale proceeds are paid to the said designated branch.

Consequently, it is not necessary for NRIs/OCBs to obtain Reserve Bank’s permission for sale of shares/bonds/debentures effected in the above manner. As regards the repatriation of sale proceeds received by the designated branches, Reserve Bank will, while granting approval for purchase of shares/bonds/debentures also grant approval for repatriation of the sale proceeds if and when shares/bonds/debentures are sold in the above manner. The actual repatriation of the sale proceeds or credit thereof to the NRE/FCNR account of the beneficiary will be subject to payment of Indian taxes.

Sale/transfer of shares/bonds/debentures acquired by NRIs/OCBs with repatriation benefits under the Direct Investment Scheme and sold through the Stock Exchange in India will require permission of Reserve Bank. Applications for necessary permission should be made by NRIs/OCBs to the Central Office of Reserve Bank in form TS 4 through the designated bank branch of an authorized dealer. In such cases, permission for sale/transfer of shares / bonds/ debentures acquired with the right of repatriation will be granted by Reserve Bank to the bank branch designated by the seller or to the authorized dealer, as the case may be, who may sell the holdings at the ruling market price through a stock exchange at any time within the validity of the permission.

While granting permission for sale/transfer, Reserve Bank will also authorize the designated branch/authorized dealer to credit the sale proceeds to the NRE or FCNR account of the seller or to remit them abroad subject to payment of taxes on capital gains, if any. Where the amount of capital gains tax is not immediately determinable, the designated branch/authorized dealer may allow repatriation of sale proceeds or credit thereof to the seller’s NRE/FCNR account to the extent of the original cost of investment immediately on realization of the sale proceeds. The excess amount, if any, representing capital gain should be kept by the designated branch/authorized dealer in a separate NRO account of the seller or in a suspense account.

The designated branch/authorized dealer may allow withdrawal of this amount for credit to the NRE/FCNR account of the seller or remit it abroad, on production of necessary tax clearance certificate under Section 204 of the Income-tax Act 1961 and after deduction of income tax at source.

By its Notification No. FERA.151/93-RB dated 26th April 1993, Reserve Bank has also exempted transfer, by way of gift, of any share, bond or debenture of a company registered in India made by a non-resident Indian or person of Indian origin to a citizen of India or a person of Indian origin resident in India provided :-

such share, bond or debenture was held by the transferor with the permission of the Reserve Bank,

such transfer is between relatives as defined in Section 6 of the Companies Act, 1956.

Transfer of rupee shares/securities by residents to non-residents by way of gift requires prior approval of Reserve Bank. Applications for such transfers should be made to the concerned Office of Reserve Bank and should, inter alia, contain the following information:-

(a) Name, address and permanent place of residence of both the transferor and the transferee.

(b) Relationship between the transfer or and the transferee.

(c) Reason for making the gift.

The Reserve Bank, by its Notification No. FERA 122/92-RB dated 17th September 1992, has granted general permission to companies in India to enter the overseas address in such cases provided the company obtains an undertaking from the holder of any security that he will not seek repatriation of any income, dividend or sale proceeds of the security. The dividend/interest earned on such securities or sale proceeds thereof should, therefore, be credited only to the Ordinary Non-resident Rupee (NRO) Account of the holder with a bank in India.