Notification No.FEMA. 94 /2003-RB
Dated 18th June 2003

Foreign Exchange Management (Transfer or Issue of Security
by a Person Resident outside India)
( Second Amendment) Regulations, 2003

In exercise of the powers conferred by clause (b) of sub-section (3) of Section 6 and Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and in partial modification of its Notification No.FEMA 20/2000-RB dated 3rd May 2000, the Reserve Bank of India makes the following amendments in the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, as amended from time to time, namely:-

Short Title & Commencement :-

1. (i) These Regulations may be called the Foreign Exchange Management ( Transfer or Issue of Security by a Person Resident outside India)(Second Amendment) Regulations, 2003.

   (ii) They shall come into force from the date of their publication in the Official Gazette.

Amendment of the Regulations :-

2. In the Foreign Exchange Management( Transfer or Issue of Security by a person Resident outside India) Regulations, 2000, In Regulation 2, after item (vii), the following item shall be inserted, namely:- (vii) (a) ‘ Non-resident Indian (NRI) shall have the meaning assigned to it in clause (iv) of Regulation 2 of the Foreign Exchange Management (Investment in Firm or Proprietary Concern in India) Regulations, 2000.' in item (viii), the words ‘ Non-resident Indian (NRI)’ shall be deleted;

B. After Regulation 6, the following Regulations shall be inserted, namely:-

' 6A. Acquisition of Bonus shares :-

An Indian company may issue bonus shares to its non-resident shareholders, subject to the following conditions:

the shares against which bonus shares are issued by the company ( hereinafter referred to as ‘the original shares’) were acquired or held by the non-resident shareholder in accordance with the Rules/ Regulations applicable to such acquisition;

1. the bonus shares acquired by the non-resident shareholder shall be subject to the same conditions including restrictions in regard to repatriability as are applicable to the original shares.

6 B. Report to RBI: -

A company issuing right shares or bonus shares in terms of Regulation 6 or Regulation 6A as the case may be, shall, within thirty days from the date of issue, report the transaction in Form FC-GPR to the Regional Office of the Reserve Bank of India under whose jurisdiction the Registered Office of the company is situated.'

C In Regulation 9, for sub-regulation (2), the following sub-regulation shall be substituted, namely: -

'(2) (i) A person resident outside India, not being a non- resident Indian or an overseas corporate body, may transfer by way of sale or gift, the shares or convertible debentures held by him or it to any person resident outside India;

(ii) A non-resident Indian or an overseas corporate body may transfer by way of sale or gift, the shares or convertible debentures held by him or it to another non-resident Indian or overseas corporate body only;

Provided that the person to whom the shares are being transferred, in terms of clause (i) and (ii), has obtained prior permission of Central Government to acquire the shares if he has previous venture or tie up in India through investment in shares or debentures or a technical collaboration or a trade mark agreement or investment by whatever name called in the same field or allied field in which the Indian company whose shares are being transferred is engaged.

Provided further that the restriction in clauses (i) and (ii) shall not apply to the transfer of shares to International financial institutions such as Asian Development Bank(ADB), International Finance Corporation(IFC), Commonwealth Development Corporation (CDC), Deutsche Entwicklungs Gescelscchaft (DEG) and transfer of shares of an Indian company engaged in Information Technology sector.

(iii) A person resident outside India holding the shares or convertible debentures of an Indian company in accordance with these Regulations,

1. may transfer the same to a person resident in India by way of gift;

2. may sell the same on a recognized Stock Exchange in India through a registered broker.'

D In Schedule 1

1. in paragraph 5, in clause (a), after the words ' SEBI guidelines', the words 'as applicable' shall be inserted;

2. after paragraph 5, the following new paragraph shall be inserted, namely;

5A. Issue price of ADRs/GDRs

Price of ADRs/GDRs to be issued to a person resident outside India may be decided by the Indian company