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Investing in India - Part I

By T .Haridas Nair and S.N. Nair

As one of the largest emerging markets, India offers numerous opportunities for international ,investors.  Furthermore, India offers investors of Indian origin residing abroad several incentives to invest in this fast growing economy.  Through this column, we intend to serialise a variety of money matters which might be of some interest to Non-Resident Indians (NRIs) living in the UK.  In this first collection we look at sending money to India, either as a niche for future holiday trips, or -more seriously - as a large scale saving plan, or indeed as a source for major property purchase.  The often asked questions and their answers are summarised here.


Q: What is the approved method of sending remittances into India?
A: The approved method of sending remittances into India is through normal banking channels.

Q: Has Reserve bank authorised sending of remittances into India otherwise than through the medium of a bank in the country of residence of the remitter?
A: Yes.  Reserve Bank has permitted certain Exchange Houses in the Gulf countries to send remittances into India by means of DDs, MTs and TTs drawn on branches of banks in India.

Q: Can Exchange Houses draw drafts in Foreign currencies?
A: Yes.  Exchange Houses can draw drafts in US dollar or Pound sterling on a limited number of branches of the drawee bank in India, if they have entered into such an arrangement with the drawee bank.

Q: Can NRIs send remittances representing commercial transactions through Exchange Houses?
A: No.  NRIs can make only bonafide personal remittances through the medium of Exchange Houses.

Q: Can NRIs remit funds through Exchange Houses for investment in Government securities, National Savings Certificates and Units of Unit Trust of India?
A: Yes

Q: Can NRIs remit funds through Exchange House for investment in shares/debentures of Indian companies?
A: Yes, subject to general/specific permission of Reserve Bank for such investment.

Q: Can NRIs send drafts issued by Exchange Houses for acquisition of residential flats in India?
A: Yes. NRIs can send drafts issued by Exchange Houses in favour of Co-operative Housing Societies/estate developers for acquisition of residential flats in India in individual names.

Q: Can NRIs remit premia on policies issued by the Life Insurance Corporation of India by means of drafts issued by Exchange Houses in favour of the Corporation?
A: Yes.

Q: Can NRIs remit tuition/boarding/examination fees of their children studying in India by means of drafts issued by Exchange Houses in favour of schools, colleges, universities, technical and educational institutions in India?
A: Yes.

Q: Can NRIs take out of India precious stones or jewellery purchased by them during their visit to India?
A: Yes.  NRIs can take out India precious stones and jewellery (both gold and non-gold purchased by them in India without any limit, provided the purchase is made against payment in any convertible foreign currency.

Q: Can Non-Resident Indians (NRIs) invest their funds in Government securities or Units of Unit Trust of India?
A: Yes.  NRIs are freely permitted to invest their funds in Government securities or Units of UTI through authorised dealers.  Units can also be purchased directly from UTI.

Q: Can NRIs make investments in National Savings Certificates issued by Post Offices in India?
A: Yes.  Investments in National Savings Certificates can also be made by NRIs subject to the terms and conditions applicable to the sale/issue of such certificates.

Q: Can Government securities/units be freely transferred or sold?
A: Yes, provided the transfers/sales are arranged through an authorised dealer.  Units are repurchased directly by UTI.

Q: Are sale maturity proceeds of Securities/Units/National Savings Certificates allowed to be repatriated abroad?
A: If such securities were purchased out of funds remitted from abroad or out of NRE / FCNR accounts, sale/maturity proceeds can be repatriated.  Sale/maturity proceeds of securities purchased out of funds in NRO accounts can only be credited to NRO accounts and cannot be remitted abroad.

Q: Is permission of Reserve Bank required for NRIs to invest in proprietary / partnership concerns on non-repatriation basis?
A: No.  Reserve Rank has granted general permission to non-resident individuals of Indian nationality / origin to invest by way of capital contribution in any proprietary or partnership concern in India on non-repatriation basis provided the investee concern is not engaged in any agricultural / plantation activity or real estate business.  This facility is, however, not available to OCBs.

Q: Is permission of Reserve Bank required for making investments in new issues of Indian companies on non-repatriation basis?
A: No.  Indian companies have been granted general permission to accept investments on non- repatriation basis, in shares / convertible debentures by way of new / rights / bonus issues provided the investee company does not carry on agricultural / plantation activity and/or real estate business (excluding real estate development i.e. development of property and construction of houses).

Q: Are any formalities required to be completed by NRIs for getting the benefit of the above general permission?
A: No.  However, the firms / companies concerned are requited to file a declaration with Reserve Bank in a specified form giving particulars of the investment made within ninety days from the date of the investment.

Q: Can NRIs make investment in real estate business in India?
A. No.  However, as stated above, development i.e. development of construction of houses is permitted by having NRI investments.

Q: Can NRIs purchase existing shares / debentures of Indian companies by private arrangement?
A: Yes.  Reserve Bank permits NRIs on application in prescribed form, to purchase shares / debentures of existing Indian companies on non-repatriation basis.

The answers provided here for the questions are for information purposes only.  Government legislation in this field is updated on a regular basis.  The information given above does not constitute investment advice and The Palm Leaf accepts no responsibility for the accuracy of the information.  Investors should check with an appropriate body for up to date information before making any major decisions.

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