Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Sixth Amendment) Regulations, 2012 - ఆర్బిఐ - Reserve Bank of India
Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Sixth Amendment) Regulations, 2012
Reserve Bank of India Notification No. FEMA. 242/2012- RB Dated October 19, 2012 Foreign Exchange Management (Transfer or Issue of Security by a Person In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India hereby makes the following amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 (Notification No. FEMA. 20 / 2000-RB dated 3rd May 2000) (hereinafter referred to as 'the principal Regulations'), namely:- 1. Short Title & Commencement:- (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Sixth Amendment) Regulations, 2012. (ii) Save as otherwise provided in these Regulations as to the coming into force of any particular provision, the provisions of these Regulations shall come into force from the date of publication of this notification. 2. Amendment to Regulation 2 In the principal Regulations, in Regulation 2, after clause (viii), the following new clause shall be inserted and shall be deemed to have been inserted with effect from the 9th day of August 2011, namely; “(viiia) ‘Qualified Foreign Investor’ (QFI) means (a) during the period from 9th day of August, 2011 to 15th day of July, 2012, a person who satisfied the following criteria at the relevant time,
Provided that such a person is not registered with SEBI as a Foreign Institutional Investor (FII) or Foreign Venture Capital Investor (FVCI). (b) With effect from 16th day of July, 2012, a person who satisfies the following criteria at the relevant time: (i) Resident in a country that is a member of FATF or a member of a group which is a member of FATF; and (ii) Resident in a country that is a signatory to IOSCO’s MMoU (and referred to as Appendix A Signatories therein) or a signatory of a bilateral MoU with SEBI Provided that the person is not resident in a country listed in the public statements issued by FATF from time to time on jurisdictions having strategic AML/CFT deficiencies to which counter measures apply or that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies; Provided that such person is not resident in India; Provided further that such person is not registered with SEBI as a FII or Sub-Account of an FII or FVCI. Explanation – For the purposes of this clause :
3. Amendment to Regulation 5 In the principal Regulations, in Regulation 5, (i) In sub-regulation (4), after the words “or a Foreign Central Bank”, the words ‘or a QFI or any other person resident outside India included in Schedule 5' shall be inserted and shall be deemed to have been inserted with effect from the 9th day of August 2011. (ii) after sub-regulation (7), the following shall be inserted and shall be deemed to have been inserted with effect from the 13th day of January, 2012, namely : “(7A) A QFI may purchase equity shares of an Indian company subject to the terms and conditions specified in Schedule 8.” (iii) after sub-regulation(7A), the following shall be inserted, namely: “Explanation : For the purposes of sub-regulations (1) to (7) above, no class of investor referred to in those sub-regulations shall make investment, directly or indirectly, in any security, issued by an Indian company which is engaged or proposes to engage in any of the activities in which foreign investment is prohibited under sub-regulation (b) of Regulation 4 of the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, as amended from time to time”. 4. Amendment to Regulation 10. In principal Regulation, in Regulation 10, (1) in the heading, for the opening words ‘Prior permission', the word “Permission” shall be substituted and shall be deemed to have been substituted, with effect from 4th day of November 2011. (2). in sub-regulation A, for clauses (b) and (c), the following shall be substituted and shall be deemed to have been substituted with effect from the 4th day of November, 2011, namely: “b) any shares or convertible debentures of an Indian company under the Foreign Direct Investment Scheme, whose activities fall under Annex B to Schedule 1, shall, subject to sectoral limits specified therein, transfer such shares or convertible debentures without prior approval of the Reserve Bank if the same is by way of sale, subject to the following: (i) that the parties concerned adhere to the pricing guidelines, documentation and reporting requirements for such transfers, stipulated by the Reserve Bank from time to time. (ii) where the transfer of shares or convertible debentures requires the prior approval of the Foreign Investment Promotion Board (FIPB) as per the extant Foreign Direct Investment (FDI) policy: (a) the requisite approval of the FIPB has been obtained; and (b) the transfer of shares or convertible debentures adheres with the pricing guidelines and documentation, reporting requirements as stipulated by the Reserve Bank from time to time. (iii) where SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 are attracted, the pricing guidelines and documentation, reporting requirements as stipulated by SEBI are complied with. Provided howsoever that in case the SEBI guidelines as aforesaid are not complied with, for the purposes of this Regulation, compliance with pricing guidelines, reporting and documentation requirements as stipulated by RBI shall be sufficient. (iv) where the pricing guidelines under the Foreign Exchange Management Act, (FEMA) 1999 are not complied with - (a) The resultant FDI is in compliance with the requirements of Schedule 1, other than pricing guidelines; and (b) The pricing for the transaction is compliant with the applicable SEBI Regulations/guidelines; and (c) Chartered Accountants Certificate to the effect that compliance with the applicable SEBI regulations / guidelines as indicated above is attached to the form FC-TRS to be filed with the AD bank. (v) where the investee company is in the financial services sector (a) No Objection Certificates (NOCs) are obtained from the respective financial sector regulators/ regulators of the investee company as well as transferor and transferee entities and such NOCs are filed along with the form FC-TRS with the AD bank; and (b) The requirements of Schedule 1 are complied with. EXPLANATION : For the purpose of this Regulation, “financial services”, shall mean service rendered by banking and non-banking companies regulated by the Reserve Bank, insurance companies regulated by Insurance Regulatory and Development Authority (IRDA), pension funds regulated by the Pension Fund Regulatory and Development Authority, other companies regulated by any other financial regulator and such other services as may be directed by Reserve Bank from time to time, “(c) any shares or convertible debentures by way of sale, shall make an application to the Reserve Bank for its approval if (i) the transfer is to take place at a price which is not in conformity with the pricing guidelines stipulated by either the Reserve Bank or the SEBI , or (ii) it is not covered by clause (b) above.” (3) in sub-regulation A, after clause (c) the following shall be inserted and shall be deemed to have been inserted with effect from the 22nd day of April 2009, namely : “(d) any shares or convertible debentures by way of sale, shall make an application to the Reserve Bank for its approval if the non-resident acquirer proposes deferment of payment of the amount of consideration”. (4) in sub-regulation B, after clause (2), the following shall be inserted and shall be deemed to have been inserted with effect from 4th day of November 2011, namely: “(3) Where pricing guidelines under the Foreign Exchange Management Act (FEMA), 1999 are not complied with, a person resident outside India, may transfer shares or convertible debentures of an Indian Company, by way of sale, to a person resident in India, without the prior permission of the Reserve Bank , subject to the following (a) The original and resultant investment are in conformity with the requirements of Schedule 1, other than pricing guidelines; and (b) The pricing for the transaction is compliant with the applicable SEBI regulations / guidelines; and (c) Chartered Accountants Certificate to the effect that compliance with the applicable SEBI regulations / guidelines as indicated above is attached to the form FC-TRS to be filed with the AD bank.” 5. Amendment to Regulation 12 In the principal Regulations, in Regulation 12, after sub-regulation (ii), the following shall be inserted, and shall be deemed to have been inserted with effect from the 2nd day of May 2011, namely: “(iii) Any person being a non resident investor of a company registered in India (resident investee company) may pledge the shares or convertible debentures of that company to a bank in India to secure the credit facilities being extended to that company for bonafide purposes, subject to the AD bank satisfying itself of the compliance of the conditions stipulated by the Reserve Bank, from time to time, in this regard. (iv) Any person being a non resident investor of a company registered in India (resident investee company) may pledge the shares or convertible debentures of that company to an overseas bank to secure the credit facilities being extended to the non resident investor or non resident promoter of the resident investee company or its overseas group company subject to the AD bank satisfying itself of the compliance of the conditions stipulated by the Reserve Bank from time to time in this regard." 6. Amendment to Schedule 1 In the principal Regulations, in Schedule 1, (I) in paragraph 3, in clause (d) the words ‘including second-hand machinery’ shall be substituted by the words ‘excluding second-hand machinery’ and shall be deemed to have been substituted with effect from the 10th day of April 2012. (II) after paragraph 5, the following shall be inserted and shall be deemed to have been inserted with effect from 26th day of September 2012, namely: “ 5B. Notwithstanding anything contained in paragraph 5 above, where shares in an Indian company are issued to a person resident outside India in compliance with the provisions of the Companies Act, 1956, by way of subscription to Memorandum of Association, such investments may be made at face value subject to eligibility to invest under this Schedule.” (III) in paragraph 8, (a) after clause (ii), the following shall be inserted and shall be deemed to have been inserted with effect from the 2nd day of May 2011, namely: “(iii) by debit to a non-interest bearing Escrow account (in Indian Rupees) maintained in India with an AD bank in accordance with Foreign Exchange Management ( Deposit ) Regulations, 2000.” (b) in the Explanation, after the words “ as given else where in the Schedule”, the words“ import payables of capital goods by units in Special Economic Zones”. shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2003. (c) in the First Proviso, for the words “ debit to NRE/FCNR(B) account” the words “debit to NRE / FCNR (B) /Escrow account” shall be substituted and shall be deemed to have been substituted with effect from the 2nd day of May, 2011. (IV) In paragraph 9, (a) for sub-paragraph (1) the following shall be substituted and shall be deemed to have been substituted with effect from the 30th day of May 2008, namely: “Reporting of issuance of shares of Indian company: 9 (1) An Indian company issuing shares or convertible debentures in accordance with these Regulations shall submit through AD bank to the Regional Office concerned of the Reserve Bank under whose jurisdiction the Registered office of the company operates, (A) not later than 30 days from the date of receipt of the amount of consideration received by Indian company for issue of shares and convertible debentures, a report in form specified in Annex C to this Schedule along with a copy/ies of Foreign Inward Remittance Certificate/s (FIRC), Know Your Customer (KYC) report on the non resident investor and details of the Government approval, if any. (B) not later than 30 days from the date of issue of shares, a report in form FC-GPR together with, (i) a certificate from the Company Secretary of the company accepting investment from persons resident outside India certifying that
(ii) a certificate from SEBI registered Merchant Banker or Chartered Accountant indicating the manner of arriving at the price of the shares issued to the persons resident outside India. [Provided that, in addition to above, the company shall report the conversion of ECB into equity, in ECB-2 Return of the respective month in case of full conversion of ECB. In case of partial conversion of ECB, the converted portion shall be reported in form FC-GPR to the Regional Office concerned of Reserve Bank and non-converted portion in Form ECB-2]. (b) after sub-paragraph (1), the following shall be inserted and shall be deemed to have been inserted with effect from the 15th day of March 2011. “(2) All Indian companies which have received Foreign Direct Investment in the previous year(s) including the current year shall submit to the Reserve Bank of India, on or before the 15th day of July of each year, a report titled “Annual Return on Foreign Liabilities and Assets” in the form specified in Annex E to this Schedule. (3) Reserve Bank may, by notification, modify from time to time, the format of report titled “Annual Return on Foreign Liabilities and Assets” specified in Annex E to this Schedule. (V). after paragraph 9, the following shall be inserted and shall be deemed to have been inserted with effect from the 22nd day of April 2009, namely: "Reporting of transfer of shares of Indian company: 10.(i) In case of transfer of shares or convertible debentures of an Indian company by way of sale from a person resident in India to a person resident outside India or vice versa, the transferor/transferee, resident in India, shall submit to the AD bank a report in the form FC-TRS specified in Annex F to this Schedule, within 60 days from the date of receipt or payment of the amount of consideration.The onus of submission of the form FC-TRS within the specified time shall be on the transferor / transferee, resident in India. (ii) Reserve Bank may, by notification, modify from time to time the Form FC-TRS specified in Annex F to this Schedule. (iii) The IBD/FED/nodal branch of the AD bank shall submit a consolidated monthly statement in respect of all such transactions reported by its branches, to the Reserve Bank in the form and manner stipulated by Reserve Bank, Foreign Exchange Department, Central Office, from time to time. (iv) The sale consideration in respect of shares or convertible debentures remitted into India through normal banking channels, shall be subjected to a KYC check by the remittance receiving AD bank at the time of receipt of funds. In case, the remittance receiving AD bank is different from the AD bank handling the transfer transaction, the KYC check shall be carried out by the remittance receiving bank and the KYC report shall be submitted by the customer to the AD bank for carrying out the transaction along with the form FC-TRS. (v) In case prior approval of the Reserve Bank is granted for transfer of shares or convertible debentures, from a resident to the non-resident on deferred payment of consideration, the same shall be reported in form FC-TRS, duly certified by the AD bank, within 60 days from the date of receipt of the full and final amount of consideration.” (VI) The existing paragraph 10 shall be renumbered as paragraph 11. (VII) For the existing Annex A, “Annex A” hereto shall be substituted and shall be deemed to have been substituted with effect from the 20th day of September, 2012. (VIII) For the existing Annex B, “Annex B” hereto shall be substituted with effect from the date of this notification unless a different date is indicated for the coming into force of any item therein. (IX) For the existing Annex C, “Annex C” hereto shall be substituted. (X) For the existing Annex D , “Annex D” hereto shall be substituted and shall be deemed to have been substituted with effect from the 15th day of March 2011. (XI) After Annex D, “Annex E” hereto shall be inserted and shall be deemed to have been inserted with effect from the 15th day of March 2011. 7. Amendment to Schedule 2 In the principal Regulations, in Schedule 2, (i) in paragraph 1, in sub-paragraph 5, in the proviso, for clause (b), the following shall be substituted and shall be deemed to have been substituted with effect from the 21st day of April 2010, namely:- “(b) in case of issue by private placement, the price is not less than the price arrived in terms of SEBI guidelines or not less than the fair price worked out as per the Discounted Cash Flow method duly certified by a SEBI registered Merchant Banker or Chartered Accountant, as applicable.” (ii) in paragraph 2, after clause (iii), the following shall be inserted, namely: “(iv) The Foreign Currency Account and the Special Non-Resident Rupee account of the registered FII shall be a non-interest bearing account/s.” 8. Amendment to Schedule 5 In the principal Regulations, in Schedule 5, (i).In paragraph 1, the following shall be substituted , namely: “Permission to Foreign Institutional Investors for purchase of securities. (1) A registered Foreign Institutional Investor (FII) may purchase, on repatriation basis, either directly from the issuer of such securities or through a registered stock broker on a recognized Stock Exchange in India the following securities, subject to the terms and conditions as specified by the SEBI and the Reserve Bank from time to time: (a) dated Government securities/treasury bills; (b) listed non-convertible debentures/bonds issued by an Indian company; (c) commercial papers issued by an Indian company; (d) units of domestic mutual funds; (e) Security Receipts issued by Asset Reconstruction Companies provided that the total holding by a single FII in each tranche of scheme of Security Receipts shall not exceed 10 per cent of the issue and the total holdings of all FIIs put together shall not exceed 49 per cent of the paid up value of each tranche of scheme of Security Receipts issued by the Asset Reconstruction Companies; (f) Perpetual Debt instruments eligible for inclusion as Tier I capital and Debt capital instruments as upper Tier II capital issued by banks in India to augment their capital (Tier I capital and Tier II capital as defined by Reserve Bank, and modified from time to time) provided that the investment by all FIIs in Perpetual Debt instruments (Tier I) shall not exceed an aggregate ceiling of 49 per cent of each issue, and investment by individual FII shall not exceed the limit of 10 per cent of each issue. The investment by FIIs in Debt capital instruments (Tier II) shall be within the limits stipulated by SEBI for FII investment in corporate debt; (g) with effect from April 29, 2011 listed and unlisted non-convertible debentures/bonds issued by an Indian company in the infrastructure sector, where ‘infrastructure’ is defined in terms of the extant ECB guidelines, subject to residual maturity and lock-in period as stipulated by Reserve Bank from time to time. ; (h) with effect from November 3, 2011 non-convertible debentures/bonds issued by Non-Banking Finance Companies categorized as ‘Infrastructure Finance Companies’(IFCs) by the Reserve Bank, subject to residual maturity and lock-in period as stipulated by the SEBI and the Reserve Bank from time to time (i) with effect from November 22, 2011, Rupee denominated bonds/units issued by Infrastructure Debt Funds subject to lock-in period and residual maturity as stipulated by the Reserve Bank and SEBI from time to time, provided that the FIIs may trade such bonds/ units amongst the eligible non-resident investors for Infrastructure Debt Funds within the lock-in period; (j) with effect from March 1, 2012, primary issues of non-convertible debentures / bonds provided such non-convertible debentures / bonds are committed to be listed within 15 days of such investment. In the event of such non-convertible debentures / bonds issued not being listed within 15 days of issuance, for any reason, then the FII shall immediately dispose of those non-convertible debentures / bonds either by way of sale to a third party or to the issuer and the terms of offer to FIIs should contain a clause that the issuer of such debt securities shall immediately redeem / buyback those securities from the FIIs in such an eventuality. Provided that FIIs may offer such securities as permitted by the Reserve Bank from time to time as collateral to the recognized Stock Exchanges in India for their transactions in exchange traded derivative contracts as specified in sub-Regulation 6 of Regulation 5.” (ii) in paragraph 2, in sub-paragraph 1(A), after clause (iii), the following shall be inserted and shall be deemed to have been inserted with effect from the 22nd day of November 2011, namely, “(iv) bonds/units issued by Infrastructure Debt Funds, subject to lock-in period and residual maturity as stipulated by the Reserve Bank and SEBI from time to time, provided that a Non Resident Indian may trade such bonds/ units amongst the eligible non-resident investors for Infrastructure Debt Funds within the lock-in period.” (iii) after paragraph 1, the following shall be inserted and shall be deemed to have been inserted with effect from the 9th day of August 2011, namely: “ Permission for Qualified Foreign Investors for purchase of securities 1A (i) A QFI may purchase on repatriation basis, subject to the terms and conditions stipulated by the SEBI and the Reserve Bank in this regard from time to time in the following rupee denominated units of : (a) equity schemes of SEBI registered domestic mutual funds, (b) debt scheme of SEBI registered domestic mutual funds which invest in infrastructure, (c) any scheme of SEBI registered domestic mutual funds that hold at least 25 per cent of their assets (either in debt or equity or both) in infrastructure. For the purpose of sub-clauses (b) and (c) above, ‘infrastructure’ shall mean infrastructure as defined in terms of the ECB guidelines. (ii) A QFI may purchase securities referred to in sub-clauses (a) to (c) above under the following routes, subject to the terms and conditions stipulated by SEBI and Reserve Bank in this regard, from time to time:
(iv) in Paragraph 1A, after clause (ii), the following shall be inserted and shall be deemed to have been inserted with effect from the 16th day of July 2012. “(iii) A QFI may: (a) purchase, on repatriation basis through SEBI registered Qualified Depository Participants (QDPs) (defined as per the extant SEBI regulations), listed non-convertible debentures, listed bonds of Indian companies and listed units of Mutual Fund Debt Schemes directly from the issuer or through a registered stock broker on a recognized stock exchange in India and sell through a registered stock broker on a recognized stock exchange in India or by way of buyback or redemption by the issuer; (b) invest in primary issues of non-convertible debentures / bonds provided such non-convertible debentures / bonds are committed to be listed within 15 days of such investment. In the event of such non-convertible debentures / bonds issued to the QFI not being listed within 15 days of issuance to the QFI for any reason, then the QFI shall immediately dispose of these non-convertible debentures / bonds either by way of sale to a third party or to the issuer and the terms of offer to QFI should contain a clause that the issuer of such debt securities shall immediately redeem / buyback the said securities from the QFIs in such an eventuality.” (v) in paragraph 1A, after clause (iii), the following shall be inserted and shall be deemed to have been inserted with effect from the 9th day of August 2011. “(iv) A QFI which purchases securities under this Regulation shall open a single demat account with a Qualified Depository Participant in India.” (vi) after paragraph 1A, the following shall be inserted and shall be deemed to have been inserted with effect from the 22nd day of November 2011” "Permission to Other Non Resident investors for purchase of securities 1B (i) Long term investors like Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and High Networth Individuals which are registered with SEBI as eligible non-resident investors in Infrastructure Debt Funds may purchase on repatriation basis Rupee denominated bonds/ units issued by Infrastructure Debt Funds subject to lock-in period and residual maturity as stipulated by the Reserve Bank and SEBI from time to time provided that aforementioned investors may trade such bonds/ units amongst the eligible non-resident investors for Infrastructure Debt Funds within the lock-in period”. (vii) in paragraph 1B, after clause (i), the following shall be inserted and shall be deemed to have been inserted with effect from the 25th day of June 2012. "(ii) Long term investors like Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds, Pension Funds and Foreign Central Banks registered with SEBI may purchase, on repatriation basis, dated Government securities, subject to the terms and conditions as stipulated by the SEBI and the Reserve Bank from time to time”. (viii) in paragraph 3, after sub-paragraph (4), the following shall be inserted and shall be deemed to have been inserted with effect from the 9th day of August 2011, namely: “(5) A QFIwho purchases securities under this Schedule (other than by way of Indirect Route) shall make payment out of funds held in a single non-interest bearing Rupee Account maintained with an AD bank in terms of the Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time”. 9. Amendment to Schedule 6 In the principal Regulations, in Schedule 6, in paragraph1, at the end of sub-paragraph (2), the following shall be added and shall be deemed to have been added with effect from the19th day of March 2012, namely: "The registered FVCI may invest in the eligible securities (equity, equity linked instruments, debt, debt instruments, debentures of an IVCU or VCF, units of schemes / funds set up by a VCF) by way of private arrangement / purchase from a third party, subject to the terms and conditions stipulated by the Reserve Bank from time to time. The registered FVCI may invest in securities on a recognized stock exchange subject to the provisions of the SEBI (FVCI) Regulations, 2000, as amended from time to time, as well as the terms and conditions stipulated therein.” 10. Amendment to Schedule 7 In the principal Regulations, in Schedule 7, in paragraph 2, for clause (b), the following shall be substituted and shall be deemed to have been substituted with effect from the 28th day of August, 2012. “(b) Limited two way fungibility of IDRs shall be permissible subject to the terms and conditions stipulated by Reserve Bank in this regard from time to time. (Rudra Narayan Kar) Foot Note: (ii) The Principal Regulations were published in the Official Gazette vide G.S.R.No. 406(E) dated May 8, 2000 in Part II, Section 3, sub-section (i) and subsequently amended as under:
Schedule 8 Scheme for Investment by Qualified Foreign Investors in equity shares 1. Eligible Investors: The Schedule shall be applicable to Qualified Foreign Investors (QFIs) as defined in these regulations. 2. Eligible instruments and eligible transactions – (a). Purchase: QFIs shall be permitted to invest through SEBI registered Qualified Depository Participants (QDPs)- (i) in equity shares of listed Indian companies through SEBI registered stock brokers on recognized stock exchanges in India. (ii) in equity shares of Indian companies which are offered to public in India in terms of the relevant and applicable SEBI guidelines/regulations. (iii) equity shares by way of rights shares, bonus shares or equity shares on account of stock split / consolidation or equity shares on account of amalgamation, demerger or such corporate actions. (b) Sale : QFIs shall be allowed to sell the equity shares so acquired by way of sale (i). Through recognized brokers on recognized stock exchanges in India; or (ii). In an open offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; or (iii). In an open offer in accordance with the SEBI (Delisting of Securities) Guidelines, 2009; or (iv). Through buyback of shares by a listed Indian company in accordance with the SEBI (Buyback) Regulations, 1998. 3. Pricing – The pricing of all eligible transactions and investment in all eligible instruments by QFIs under this scheme shall be in accordance with the relevant and applicable SEBI guidelines only. 4. Mode of payment / repatriation – For QFI investments under this scheme open a single non-interest bearing Rupee Account with an AD Category- I bank in India, for the limited purpose of routing the receipt and payment for transactions relating to purchase and sale of equity shares of listed Indian companies subject to the following conditions : (a). The account shall be funded by inward remittance through normal banking channel and by credit of the sale/redemption/buyback proceeds (net of taxes) and on account of interest payment / dividend on the eligible securities for QFIs. (b). The funds in this account shall be utilized for purchase of eligible securities for QFIs or for remittance (net of taxes) outside India. (c). The QDP will operate such non-interest bearing Rupee Accounts on behalf of the QFIs and at the instructions of the QFIs. 5. Demat accounts - QFIs would be allowed to open a dedicated demat account with a QDP in India for investment in equity shares under the scheme. It is clarified that each QFI shall maintain a single demat account with a QDP for all investments in eligible securities for QFIs in India. 6. Limits and its monitoring: The individual and aggregate investment limits for the QFIs shall be 5 per cent and 10 per cent respectively of the paid up capital of an Indian company. These limits shall be over and above the FII and NRI investment ceilings prescribed under the Portfolio Investment Scheme for foreign investment in India. Further, wherever there are composite sectoral caps under the extant FDI policy, these limits for QFI investment in equity shares shall also be within such overall FDI sectoral caps. The onus of monitoring and compliance of these limits shall remain jointly and severally with the respective QFIs, DPs and the respective Indian companies (receiving such investment) 7. Other conditions (i) Eligibility – QFI would have to meet eligibility criteria as prescribed by SEBI from time to time. (ii) Know Your Customer (KYC) - QDPs will ensure KYC of the QFIs as per the norms prescribed by SEBI. AD Category-I banks will also ensure KYC of the QFIs for opening and maintenance of the single non- interest bearing Rupee accounts as per the extant norms. (iii) Permissible currencies - QFIs will remit foreign inward remittance through normal banking channel in any permitted currency (freely convertible) directly into the single non-interest bearing Rupee account of the QFI maintained with an AD Category-I bank. 8. Reporting – In addition to the reporting to SEBI as may be prescribed by them, QDPs and AD Category-I banks (maintaining QFI accounts) will also ensure reporting to the Reserve Bank of India in a manner and format as prescribed by the Reserve Bank of India from time to time |
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