NRI Investments

NRI Investment in India is a constructive step taken by the government to stabilize the national economy. The Reserve Bank of India has allowed the NRIs, Overseas Corporate Bodies (OCBs) as well as the Person of Indian Origin (PIOs) to make direct investments in companies having Indian origin. This is in association with the Automatic Route purchase of shares under Portfolio Investment Scheme. In reality, this facility is extended to the companies that have partnership or proprietorship concerns as well.

Rules for NRIs to invest in India

According to the Section 2(V) of the Foreign Exchange Management Act 1999, following rules are applicable for NRIs eligible to invest in India:

• A person who resides outside India or has taken up employment outside India;
• Conducting the business activities outside India
• Staying outside India for an indefinite or uncertain period of time
• A person who has been in possession of Indian passport (provided he/she is not a citizen of Pakistan or Bangladesh)
• Either of his/her parents or grandparents were Indian citizens

Investment facilities available to NRIs

In addition to the facilities available to NRIs for opening bank accounts, they are also permitted to make investments in shares and securities. These kind of investments help NRIs to increase their wealth. Following are a few major investment opportunities that are available to NRIs:

Government securities:

NRIs are allowed to invest in government securities, Mutual fund units of UTI, and National Savings Certificates (NSCs). Such securities can also be freely sold to NRIs or through authorized dealers. If the original funding for purchase was done through the balances held in repatriable accounts, such as NRE or FCNR accounts, the authorized dealer may credit the proceeds of sale to such accounts or repatriate them. Otherwise, it can only be credited to the NRO account.

Other investments:

Other investments can be in the form of direct investment in sole proprietorship firms, partnership firms, and in shares of limited companies. These entities are subject to the following conditions-

• NRIs can freely invest in any proprietorship or any partnership firms on non-repatriable basis; subject to the condition that the firm in which investment takes place is not engaged in agriculture, plantation, or real estate business

• NRIs can invest in shares and convertible debentures by way of new, right, or bonus issues. Such companies are allowed to accept investment on non-repatriable basis, provided they are not engaged in agriculture, plantation, real estate business, Chit funds or Nidhis.

• The companies are required to submit a declaration to RBI mentioning the details of the investment

• Incase of investment in non-convertible debentures, the debenture issuing company should apply to RBI and obtain necessary permission. NRIs are also allowed to purchase the existing shares / debentures of a company by private arrangements, subject to the condition that they do not seek repatriation of their investments.

• NRIs can sell or transfer their shares and debentures held on non-repatriable basis to Indian residents. The proceeds of sale should be credited to the NRO account of the NRI.

• It is also possible for NRIs to make investments with repatriation benefits under several direct investment schemes announced by the government, such as 24 per cent, 40 per cent, or 100 per cent schemes. The type of activities permitted to be undertaken under various percentage schemes and investment options differ.

• Accounts Maintained by NRIs
• NRIs, PIOs and OCBs