FDI POLICY AMENDED

The government of India has reviewed the extant FDI policy on various sectors and made the following amendments in the consolidated FDI Policy Circular of 2015, effective from May 12, 2015:

• Minimum Capitalisation: Wherever there is a requirement of minimum capitalisation, it shall include share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non- resident investor. Amount paid by the transferee during post issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalisation requirement.
•  Composite Limit: Sectoral Cap that is the minimum amount which can be invested by the foreign investors in an entity, unless provided otherwise, is composite and includes all types of foreign investments, direct and indirect, regardless of whether the said investments have been made under schedule I (FDI), 2 (FII), 2A (FPI), 3 (NRI), 6 (FVCI), 8(QFI), 8(LLP), 10 (DR) of FEMA (Transfer or Issue of Securities by persons resident outside India) Regulations.
• FCCBs and DRs: Foreign Currency Convertible Bonds (FCCBs) and Depository Reciepts (DRs) having underlying of instruments which can be issued under Schedule 5, being in the nature of debt, shall not be treated as foreign investment. However, any equity holding by a person resident. outside India resulting from conversion of any debt instrument under any arrangement shall be reckoned as foreign investment under the composite cap.

• Portfolio Investment upto 49% :Portfolio Investment, up to aggregate foreign investment level f 49% or sectoral/ statutory cap, whichever is lower, will not be subject to either government approval or compliance of sectoral conditions as the case may be, if such investment does not result in transfer of ownership and/or control of Indian equities form resident Indian citizens to non- resident entities.
• Sectoral Cap – Overall Limit :Total foreign investment, direct and indirect, in an entity will not exceed the sectoral/ statutory cap.
• Onus of FEMA compliance: The onus of compliance of above provisions will be on the investee company.

         Defence sector: In defence sector, portfolio investment by FPIs, FIIs, NRIs, QFIs and investments by FVCIs, together will not exceed 24% of the total equity of the investee/joint venture company. Portfolio investment will be under automatic route.