Mumbai, Oct. 5, 2004
The Telegraph
Transfer of shares from a resident to a non-resident Indian (NRI)
has been made more simpler. The Reserve Bank (RBI) today said these
can be done without its permission or that of the government.
In a notification issued late on Monday, the central bank
said such a transfer of shares will be permitted only in sectors other
than financial services. This means banks, NBFCs and insurance will
be out of the relaxation.
Those who will enjoy the benefit of not having to take
the permission of the government the Foreign Investment Promotion
Board (FIPB) must transfer shares of firms that are on the automatic
FDI approval list.
The transfer should not run foul of the provisions of
Sebis Substantial Acquisition of Shares and Takeovers Regulations,
1997. Non-resident shareholding after the shuffle should be within the
sectoral limits under FDI policy.
In addition to these rules, the price at which the transfer
takes place should be in line with guidelines prescribed by the Securities
and Exchange Board of India and the Reserve Bank.
The onus of complying with the sectoral cap/limits
prescribed under FDI policy as well as other regulations will rest with
the buyer and seller, the RBI said.
At present, sale of shares/convertible debentures by a
person living in India to those abroad non-resident entity other
than OCBs, foreign nationals, NRIs, foreign institutional investors
require prior permission of the government. This is followed
by the Reserve Banks approval.
With a view to making the environment in India more attractive
to foreign investors and to simplify procedures, the government decided
to dispense with the requirement of obtaining its prior approval in
respect of transfer of shares/convertible debentures from residents
to non-residents (including transfer of subscribers shares) of
an Indian company.
The government also clarified that cases of increase in
foreign equity by fresh issue of shares as well as conversion of preference
shares into equity, is put under general permission. This is based on
the condition that the hike is within the sectoral ceiling for the sector
concerned and qualifies for automatic approvals