Nri Investment Norms Relaxed

Simultaneously, the central bank has permitted NRIs to take part in venture capital activity on the same terms and conditions as foreign investment in this area. The present scheme for 100 per cent investment by NRIs in sick units will also be further liberalised.

These changes were announced by RBI yesterday with a view to further simplifying and liberalising norms for NRI investment. This is in keeping with the Sodhani Committee recommendations which were made to improve the working of the forex markets and presented to the RBI in May 1995.

Annexure-III of the industrial policy contains a list of 35 industries, where foreign investment up to 51 per cent of equity is automatically allowed by the RBI. But foreign investment in industries falling outside Annexure-III requires specific approvals from the government.

 

Yesterday's RBI decision implies a significant concession for NRI investments which will now be permitted as long as they are made on a repatriable basis and are in unlisted companies operating in non-Annexure-III industries. Consequent to this decision, the existing scheme as per which NRI investment in such companies was limited to 40 per cent stands abolished.

Simultaneously, the earlier condition regarding 60 per cent turnover from eligible activities for the investment to be made under the old 40 per cent stipulation and the new 51 per cent scheme will be waived.

In addition, the RBI has stated that it will grant general permission for interest-free non-repatriable loans from NRI relatives for personal purposes and business activities.

The RBI has, however, imposed a limit of $2.5 lakh for interest-free repatriable loans. These loans which must have a maturity period of seven years will, however, be cleared automatically by the RBI. Others will still have to be cleared on a case-to-case basis.

Transfer of funds from one NRE account to another for any purpose will now be permitted by the RBI. NRIs and OCBs will also be allowed to establish schools and colleges on the same terms and conditions as a resident individual/corporate body.

Housing Development Finance Corporation and other housing finance companies will also be permitted to lend funds to NRIs for the acquisition or improvement to the existing houses on the terms and conditions applicable to residents.

In implementing these recommendations the RBI is progressing steadily towards liberalising the markets and making it conducive for foreign investments, a banker stated. The RBI will also be putting out information regarding NRI\foreign investments on the Internet.

The RBI had announced in the September 1995 credit policy that it would implement four of the recommendations of the Sodhani Committee. These included the grant of permission for sale of shares acquired under the portfolio investment scheme, general permission for the sale of shares by NRIs/OBCs acquired on a repatriable basis under the Direct Investment Scheme and simplification of procedure for giving final permission for issue of shares to NRIs by Indian companies.

NEW NRI INVESTMENT NORMS

* Investments by NRIs/OCBs in non-listed companies outside Annexure III industries (industries outside the purview of automatic foreign investment clearance) allowed upto 51 per cent on repatriation basis.

* Existing 40 per cent scheme stands abolished.

* Stipulation of 60 per cent turnover coming from eligible activities for the investment to be eligible under the old 40 per cent scheme waived. Condition also waived for theproposed 51 per cent scheme (1 above).

* NRI participation in venture capital activity permitted on the same terms and conditions as foreign investment in the area.

* Present scheme of 100 per cent investment by NRIs in sick units will be further liberalised.

* General permission for interest free non-repatriable loans from NRI relatives for personal purposes and for business purposes.