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Issue of Licence for Holding Foreign Securities
Under
Section 19 of the Foreign Exchange Regulation Act, 1973, persons resident in
India were required to obtain holding licence for acquisition of foreign
securities. However, under the Foreign Exchange Management Act, 1999, there is
no obligation on residents to obtain holding licence.
2.
It is, therefore, clarified that no holding licence for acquisition of
foreign securities by a person resident in India, is required to be obtained
from the Reserve Bank. Under Foreign Exchange Management Act (FEMA), 1999, in
terms of Regulation 4 of Notification No. FEMA 19/ 2000-RB, dated May 3, 2000, a
person resident in India has general permission for purchase and sale of foreign
securities, in certain cases, including acquisition of bonus shares. General
permission has also been granted; vide Regulation 19(1) of the above
Notification, for purchase/acquisition of foreign securities by a person
resident in India, in certain cases such as by way of gifts/ inheritance from a
person resident outside India as well as acquisition of foreign securities under
Cashless Employees Stock Option Scheme. However, in all other cases, which are
not covered by general or special permission, prior permission of the Reserve
Bank should be obtained before acquisition of foreign security. It is also
clarified that prior permission of the Reserve Bank is required in terms of
Regulation 21 of the said Notification for acquisition of foreign securities as
qualification shares, rights shares, etc.
3.
Authorised Dealers may bring the contents of this circular to the notice
of their constituents concerned.
4.
The directions contained in this circular have been issued under Section
10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of
1999).
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