RBI eases portfolio investment scheme for NRIs

The Reserve Bank of India eased the rules governing portfolio investments such as equity and debt by Non-Resident Indians (NRIs) to pull in foreign currency.
Under the Portfolio Investment Scheme (PIS) for NRIs, banks were given a unique code for each branch making it unwieldy for them to administer the scheme.
Now, RBI has allowed banks to do away with the unique code for branches making banks free to administer the PIS scheme for NRI.
As per the guidelines of the RBI:

• The designated branch of the bank will grant a one-time permission to the NRI applicant for the purchase and sale of shares or convertible debentures of an Indian company.
• Two distinct permission letters (for repatriation basis and non-repatriation basis) shall be issued as per the prescribed format.
• The designated branch will open a separate sub-account of NRE/NRO account (opened and maintained by an NRI in terms of the Foreign Exchange Management (Deposit) Regulations, 2000) for the exclusive purpose of routing the transactions under PIS on behalf of an NRI.
• If NRI is eligible to make investment in India his resident power of attorney holder can be permitted by AD bank to operate NRE (PIS)/NRO (PIS) account to facilitate investment under the scheme.
• Shares or debentures purchased will be held and registered in the name of the NRI and the shares or debentures acquired by the NRI under the scheme will not be pledged for giving loan to a third party without prior permission of the RBI.
• Banks must ensure that NRIs are not allowed to invest in any Indian company which is engaged or proposes to engage in the business of chit fund, nidhi company, agricultural or plantation activities.
• NRIs investments can’t be made in real estate business excluding development of townships, construction of residential or commercial premises, roads or bridges, educational institutions, recreational facilities, city and regional level infrastructure, townships.

Month: Current Affairs - August, 2013