Diaspora : Investment Opportunities in India 


Various schemes, policies and incentives have been announced by the Government of India, in coordination with its various laws, so as to provide ample investment opportunities to the Overseas Indians. They give vital information on the various facilities available to NRIs/ PIOs, such as, of Bank Accounts, investment rules and regulations, etc. 
There is the 'Foreign Direct Investment (FDI) Policy', which governs the various aspects of foreign investment in India. This policy aims to attract foreign direct investment (FDI) in all the permitted sectors of Indian economy as well as maximize its developmental impact and spin-offs. FDI is freely permitted in almost all sectors of Indian economy. It can be made through two routes, namely Automatic Route and Government Route. Under the former route, the foreign investor does not require any approval from the Reserve Bank of India (RBI) or Government of India for the investment. While, under the latter route, prior approval of Foreign Investment Promotion Board, Ministry of Finance, Government of India is required for investment. These conditions apply to the overseas Indians as well.

One of the important Scheme, being the 'Portfolio Investment Scheme (PIS)', under which NRIs/ PIOs are allowed to invest in shares of listed Indian companies in recognized stock exchange, that is, to purchase and sell shares and convertible debentures issued by Indian companies. For this, they can approach the designated branch of any Authorized Dealer (AD) bank, authorized by RBI to administer the Scheme, for permission to open a NRI/NRO account for routing investments under the Scheme.

“We are looking at sourcing as much as we can from India and are studying the possibility of setting up an engine facility at the second plant near Bangalore”
Hiroshi Nakagawa
Managing Director, Toyota Kirloskar Motor

NRIs/PIOs can invest on repatriation and non-repatriation basis under PIS route upto 5% of the paid up capital of the company/ paid up value of each series of debentures of listed Indian companies. The aggregate paid-up value of shares or debenture purchased by all NRIs/ PIOs cannot exceed 10% of the paid-up capital of the company. This limit, however, can be raised by the Indian company to 24% by passing a General Body resolution. 

Further, NRIs/PIOs are permitted to open bank accounts in India out of funds remitted from abroad, foreign exchange brought in from abroad or out of funds legitimately due to them in India. Such accounts can be opened with banks specially authorised by the Reserve Bank in this behalf, that is, Authorised Dealer (AD). There are schemes which deals with various types of bank accounts' facilities available to NRIs or PIOs, which are as follows:- 

“Ford sees India as a critical strategy for Asia-Pacific... The small car... marks our first, serious foray into a segment where a majority of Indians purchase their vehicle in the initial phase”
Michael Boneham
President and Managing Director, Ford India

Non-Resident (External) Rupee Account Scheme (NRE Account) 
Under this scheme, NRIs and PIOs are eligible to open NRE Accounts with authorized banks in India. These accounts are convertible foreign currency accounts designated in Indian rupees and can be maintained in the form of savings, current or term deposit accounts. For opening such accounts, funds are required to be remitted to India through any bank from the country of residence of the prospective account holder. Opening of joint accounts with other NRIs/ PIOs is also permissible. Non-residents can enjoy the following benefits by maintaining NRE Accounts:- (i) term deposit for one year and above made by non-residents carry interest at higher rates than those available to residents in India; (ii) interest on deposits and any other income accruing on the balances in the accounts are free of Indian income tax; (iii) balances in the accounts are free of wealth-tax; (iv) gifts out of NRE account to close relatives are exempt; (v) entire credit balance (inclusive of interest earned thereon) can be repatriated outside India at any time without reference to Reserve Bank; (vi) local disbursement from these accounts can be made freely; (vii) account holders can avail of loans/ overdrafts from banks against security of fixed deposits from out of their NRE accounts; etc.

Foreign Currency (Non-resident) Account (Banks) Scheme (FCNRB)
Under this scheme, NRIs are eligible to open and maintain FCNR accounts with authorised dealer. However, opening up of such accounts by individuals/ entities of Bangladesh/ Pakistan nationality/ ownership requires prior approval of Reserve Bank. Accounts can be opened with funds remitted from outside India through normal banking channels or funds received in rupees by debit to account of a non-resident bank maintained with authorised dealer in India or funds which are of repatriable nature in terms of regulations made by Reserve Bank. They can also be opened by transfer of funds from existing NRE/FCNR accounts. Further, FCNR(B) account can only be opened in the form of term deposits. The deposits are accepted for terms exceeding one year but less than three years. A non-resident can open a joint account with other NRIs/PIOs. Opening up of joint account by non-resident with a person resident in India is not permitted. 

Non-resident Ordinary Rupee (NRO) Account Scheme
Under this scheme, any person resident outside India may open NRO account with an authorised dealer or an authorised bank for the purpose of putting through bonafide transactions denominated in Rupees, not involving any violation of FEMA rules and regulations made thereunder. However, opening up of accounts by individuals/ entities of Bangladesh/ Pakistan nationality/ ownership requires prior approval of Reserve Bank. NRO Accounts may be opened and maintained in the form of current, savings, recurring or fixed deposit accounts. Rates of interest applicable to these accounts and guidelines for opening, operating and maintenance of such accounts shall be in accordance with directives/ instructions issued by Reserve Bank from time to time. The accounts may be held jointly with residents and/ or with non-residents. Besides, NRO Account (Current/ Savings) can be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. 

Other Schemes are:-
1. Overseas Citizenship of India (OCI) Scheme - This scheme became operational from 02.12.2005 to allow dual citizenship, that is, holding Indian citizenship and citizenship of a foreign country simultaneously. A foreign national, who was eligible to become citizen of India on 26.01.1950 or was a citizen of India on or at anytime after 26.01.1950 or belonged to a territory that became part of India after 15.08.1947 and his/her children and grand children, provided his/her country of citizenship allows dual citizenship in some form or other under the local laws, is eligible for registration as OCI. Minor children of such persons are also eligible. However, if the applicant had ever been a citizen of Pakistan or Bangladesh, he/she will not be eligible for OCI.

2. Person of Indian Origin Card (PIO Card) Scheme 2002 - This scheme has been launched, in the wake of revision of PIO Card Scheme of 1999, as a comprehensive scheme for PIOs. It aimed to make the journey of PIOs back to India simpler, easier, flexible and absolutely hassle free. It confers on PIO a set of privileges and permit them visa-free entry into the country. Under this Scheme, Persons of Indian Origin up to the fourth generation (great grand parents) settled throughout the world, including a spouse of a citizen of India except for a few specified countries, are eligible. The Card is to be issued to eligible applicants through the concerned Indian Embassies/High Commissions/Consulates and for those staying in India on a long term visa, from the concerned FRRO.

August 2009

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