Sub-regulation 5(g) and (h) be inserted as under :

“5(g) Entire principal amount of the RIBs, on maturity, and the interest earned thereon in USD / GBP / DEM, as the case may be, incase of eligible holder who has become a resident in India before maturity of the RIBs”

“5(h) Entire principal amount of the IMDs, on maturity, and the interest earned thereon in USD / GBP / EUR as the case may be incase of eligible depositor who has become a resident in India before maturity of the IMDs,”

Regulation 9 Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000  deals with transfer of shares and convertible debentures of an Indian company by a person resident outside India.

Regulation 9(2)(ii) provides that  “A non-resident Indian or an overseas corporate body may transfer by way of sale, the shares or convertible debentures held by him or it to another non-resident Indian or an overseas corporate body only.”

Whereas Regulation 9 (2) (iii) provides that “ A person resident outside India may transfer any security held by him, to a person resident in India by way of gift.”

And Schedule I provides for purchase of shares and debentures under the Foreign Direct Investment Scheme.

Said Regulations grant general permission for transfer of shares and convertible debentures by a non resident Indian or OCB to another non resident Indian or OCB only. And that there is no general permission for transfer of shares / convertible debentures by way of shares to a person resident in India or in case of listed securities for transfer by way of sale on the floor of a recognized Stock Exchange :

This seems to be a mistake of omission as Reserve Bank of India in recent individual applications has informed that “specific / renewal permission from RBI or authorized dealer is not required to be obtained by NRI share holders for sale of shares through recognized Stock Exchange in India”.

A new clause to be inserted i.e. 9(2)(iv)

“A non resident Indian or overseas corporate body may transfer by way of sale, the shares or convertible debenture held by him or it on the floor of a recognized Stock Exchange in India at prevailing market price through a registered broker.”

1.

Regulation 11 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, provides for remittance of sale proceeds pf securities.  

2.

Para 3 of Schedule 3 of said Regulations provide the  rules for remittance / credit of sale / maturity proceeds of shares and / or debentures purchased under the portfolio investment scheme by an NRI / OCB.   

3.

Similar Paras are also included in Schedule 2, 4 and 5 pertaining  respectively, to FII  Portfolio Investment, NRI investment on non-repatriation basis and investment in Other Securities by person resident outside India.

Provisions regarding remittance / credit of sale proceeds of shares and debentures purchased by NRIs / OCBs under Schedule I of Foreign Direct Investment Scheme (schedule 1) are missing / not provided.

Following Para be inserted in schedule 1 of  Foreign Exchange Management (Transfer or Issue of 

Security by a Person Resident Outside India) Regulations, 2000,

“Remittance / credit of sale / maturity proceeds of shares and / or debentures.

The net sale/ maturity proceeds ( after payment of taxes) of shares and/or debentures of an Indian company purchased by NRI or OCB under this  scheme, may be allowed by the and authorized dealer,

(a)     

to be credited to NRSR account of the NRI of OCB investor where the payment for purchase of shares and / or debentures sold was made     out of funds held in NRSR account, or  

(b) 

at the NRI or OCB investor’s option to be credited to his/its NRO or NRSR  account, where the shares and/ or debentures were purchased on non-repatriation basis, or  

(c) 

at the NRI or OCB investor’s option, to be remitted abroad or credited to his/its NRE/FCNR/NRO/NRSR account, where shares and / or debentures were purchased on repatriation basis.”  

Regulation 3(b) of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000)   lays down as under :-    

3.

A person resident outside India who is a citizen of India may-

(b)

transfer any immovable property in India to a person resident  in India, and……  

Whereas Para-4  of the FAQ re ;Sale, Purchase, etc., of Immovable Property in India(As on September 1, 2001) issued by RBI- lays down as under :  

4. An Indian citizen resident outside India does not require any permission  to  transfer any immovable property, to a citizen of India who is resident in India.  

NOW, whereas the Regulation permits a transfer to “a person resident in India”, 

the Circular further restricts said transfer “to a citizen of India who is resident in India.”  

“As a circular cannot override  the provisions of an Act or Rules, clarification be made withdrawing this further restriction of citizen of India”

Suggestions:

Although the Reserve Bank of India has clarified vide Circular No GSR 381 (E), dtd 3^rd May, 2000 in para 8 of Annexure-I  has clearly stipulated that :

“The Reserve Bank will not prescribe the documentation which should be verified by the authorised dealers while permitting remittances for various transactions, particularly of current account.”

It is suggested that in view of multiplicity of transactions arising from innumerable NRIs dealing with various banks and so as to provide  uniformity, simplicity and clarity, standard  procedures  may be suggested by the Reserve Bank of India for the following matters :  

i)  

repatriation of current account income which was hitherto non repatriable and,

ii)   

repatriation of sale proceeds of shares and / or debentures acquired on repatriation basis and

iii) 

repatriation of sale proceeds  of  immovable property to the extent of foreign exchange equivalent cost of acquisition.