Purpose of NRI Investment- Repatriable Basis

Varun Hariharan

04 Jun, 2020

The Non-resident Indian (NRI) or the OCI is allowed to invest in the capital instruments of Indian companies on a repatriation basis. However, some certain terms and conditions have to be followed when it comes to the requirement of compliance and filing with the RBI. An investment is considered to be repatriable if the regulations which are present in both the domestic country and the foreign country do not block the transfer of money.

Who Regulates NRI Investment- Repatriable Basis

• The main regulatory authority is the Reserve Bank of India (RBI)
• The Foreign Exchange Management Act is the law related to this area
• Mainly speaking the law which regulates this is the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Amendment) Regulations, 2016
• Investments made on the non-repatriation basis are covered under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person resident Outside India) Regulations, 2016 (“TISPRO”). 

Eligibility criteria for NRI Investment- Repatriable Basis

• NRI/PIO
• Investment should directly be made through a vehicle
• The investments such as the purchase or selling of shares, convertible preference shares, convertible debentures and warrants of an Indian company or units of an investment vehicle, on repatriation basis, on a recognised stock exchange should be made under a Portfolio Investment Scheme (PIS). 

Process / Procedure for NRI Investment- Repatriable Basis

A Non-resident Indian (NRI) may purchase or sell shares, convertible preference shares, convertible debentures and warrants of an Indian company or units of an investment vehicle, on repatriation basis, on a recognised stock exchange, subject to the following conditions:

1. NRIs may purchase and sell shares /convertible preference shares/ convertible debentures /warrants and units under the Portfolio Investment Scheme (PIS) through a branch designated by an Authorised Dealer for the purpose
2. The paid-up value of shares of an Indian company purchased by any individual NRI should not exceed five per cent of the paid-up value of shares issued by the company concerned
3. the paid-up value of convertible preference shares or convertible debentures of any series purchased by any individual NRI on repatriation basis should not exceed five per cent of the paid-up value of convertible preference shares or convertible debentures of that series issued by the company concerned;
4. the paid-up value of warrants of any series purchased by any individual NRI on repatriation basis should not exceed five per cent of the paid-up value of warrants of that series issued by the company concerned
5. the aggregate paid-up value of shares of any company purchased by all NRIs on repatriation basis should not exceed ten per cent of the paid-up value of shares of the company and the aggregate paid-up value of each series of convertible preference shares or convertible debentures or warrants purchased by all NRIs should not exceed ten per cent of the paid-up value of that series of convertible preference shares or convertible debentures or warrants
6. Provided that the aggregate ceiling of ten per cent referred to in this clause may be raised to twenty-four per cent if a special resolution to that effect is passed by the General Body of the Indian company concerned
7. The NRI investor should take delivery of the shares/convertible preference shares/ convertible debentures /warrants and units purchased and give delivery of the same when sold.
8. The investment shall be subject to the provisions of the FDI policy and Schedule 1 of these Regulations in respect of sectoral caps wherever applicable.

Documents required

The documents required for the investment made on Repatriation Basis would be similar to the documentation required on a non-repatriable basis. The documents are as follows:

• Transfer of Security or Capital Instrument Documentation
• KYC details regarding the transfer
• Information regarding the Remittance or Transfer- Foreign Bank
• Form FC-TRS 

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