RBI/2011-12/453
A.P. (DIR Series) Circular No. 94
March 19, 2012
To
All Category – I Authorised Dealer banks
Madam / Sir,
Clarification - Prior intimation to the Reserve Bank
of India for raising the aggregate Foreign Institutional Investors /
Non-Resident Indian limits for investments under the Portfolio Investment
Scheme
Attention of Authorised Dealers Category – I (AD Category - I) banks is
invited to the provisions of Schedules 2 and 3 to the
Notification No. FEMA 20/2000-RB dated May 3, 2000, viz.,
Foreign Exchange Management (Transfer or issue of Security by a Person Resident
outside India) Regulations, 2000, as amended from time to time, in terms of
which registered Foreign Institutional Investors (FII) and Non-Resident Indians
(NRI) are allowed to purchase/sale shares and convertible debentures of an
Indian company (through registered brokers) on recognized stock exchanges in
India subject to, inter-alia, aggregate investment limit of 24 per cent and 10
per cent, respectively, of the paid up equity capital or value of each series of
convertible debentures of the Indian company.
2. It is hereby clarified that the Indian company raising the aggregate FII
investment limit of 24 per cent to the sectoral cap/ statutory limit, as
applicable to the respective Indian company or raising the aggregate NRI
investment limit of 10 per cent to 24 per cent, should necessarily intimate the
same to the Reserve Bank of India, immediately, as hitherto, along with a
Certificate from the Company Secretary stating that all the relevant provisions
of the extant Foreign Exchange Management Act, 1999 regulations and the Foreign
Direct Policy, as amended from time to time, have been complied with.
3. It may also be noted that the Reserve Bank of India monitors the ceilings
on FII/ NRI/ PIO investments in Indian companies on a daily basis. For effective
monitoring of foreign investment ceiling limits, the Reserve Bank has fixed
cut-off points that are two percentage points lower than the actual ceilings.
Once the aggregate net purchases of equity shares of the company by
FIIs/NRIs/PIOs reaches the cut-off point of 2 per cent below the overall limit,
the Reserve Bank cautions all the designated bank branches not to
purchase any more equity shares of the respective company on behalf of any FIIs/
NRIs/ PIOs without prior approval of the Reserve Bank. The link offices are then
required to intimate the Reserve Bank about the total number and value of equity
shares/ convertible debentures of the company proposed to be bought on behalf of
their FIIs /NRIs /PIOs clients. On receipt of such proposals, the Reserve Bank
gives clearances on a first-come-first served basis till such investments in
companies reaches the respective limits (such as, 10 / 24 / 30 / 40/ 49 per cent
limit or the sectoral caps/statutory ceilings), as applicable. On reaching the
aggregate ceiling limit, the Reserve Bank advises all designated bank branches
to stop purchases on behalf of their FIIs/ NRIs/ PIOs clients. The
Reserve Bank also informs the general public about the `caution’ and the `stop
purchase’ in these companies through a press release and an updated list
regarding the same is placed on the RBI website (www.rbi.org.in).
4. AD banks are advised to bring the above changes to the notice of their
customers and constituents immediately.
5. The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully,
(Meena Hemchandra)
Chief General Manager-in-Charge