A non-resident individual can, except in prohibited sectors or activities, easily invest in India. These investments are carried out as per the regulations of the Foreign Exchange Management Act (FEMA) and the policy of FDI, including sectoral limits. FDI can be obtained by an Indian company through:
Automatic route: FDI is permitted in sectors defined in the FDI policy without prior approval by either the government or the RBI. These are, usually long-term strategic investments.
Government route: FDI activities not covered under the automatic route requires the prior approval of the government, which is considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs and Ministry of Finance.
The Portfolio Investment Scheme (PIS) permits the qualifying individuals, such as Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), Indian Origin Owners (PIOs) and Qualified Foreign Investors (QFIs), to invest in the Indian company shares as well as convertible debentures, as well as domestic mutual fund units, on any of the Indian Stock Exchanges.
FII: An FII is an institution founded abroad that wishes to invest in Indian securities. Under the PIS route, the RBI granted Sebi-registered FIIs permission to do so.
NRI, PIO: NRIs and PIOs are liable for the purchase and sale, through a licensed broker on a recognized stock exchange in India, of Indian companies’ convertible debentures. Also, NRIs can buy and sell units of mutual funds.
QFIs: QFIs include people, groups or associations resident in a country that is a member of the Task Force on Financial Action (FATF). Investment in mutual funds, equity shares and corporate and government bonds is possible for QFIs.
Investors in foreign venture capital
A Foreign Venture Capital Investor (FVCI) is a foreign venture capital investor that is incorporated or established outside India and can invest in either a national venture capital fund or a venture capital firm (domestic unlisted company).
SEBI: FVCIs are required to seek separate registration from Sebi and are required to invest at least 66.67% of the invest able funds in the Indian venture capital undertaking’s unlisted equity shares or equity-linked instruments.
NRIS and FIIs may, subject to certain restrictions laid down by the RBI, also invest in government securities, treasury bills, listed non-convertible debentures, bonds, commercial papers issued by Indian companies and units of domestic mutual funds.
An NRI or PIO holds the authority to purchase shares in rupees through an NRO savings bank account. In case of investment on a non-repatriation basis, the sale proceeds are credited to the NRO account. The amount invested under the scheme and the capital appreciation is not allowed to be repatriated abroad.
Are you an NRI interested in investing in your home country, or are you simply curious about how foreign institutional investors are routing their money for growth to India? We at FDI India can help you with everything that might help you scale your growth.