| Date: |
22-07-2009
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| Notification No: |
RBI A P D (Series)Circular No 05/2009
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| Issuing Authority: |
RBI
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| Type: |
A.P.D.(Series) Circulars
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| File No: |
RBI/2009-10/106 |
| Subject: |
Issue of Indian Depository Receipts (IDRs)
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RBI/2009-10/106
A.P. (DIR Series) Circular No. 05
July 22, 2009
To
All Category – I Authorised Dealer banks
Madam / Sir,
Issue of Indian Depository Receipts (IDRs)
Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to
Companies (Issue of Indian Depository Receipts) Rules, 2004 (IDR Rules) notified
by the Ministry of Corporate Affairs and subsequent amendments made thereto and
Circular No. SEBI / CFD / DIL / DIP / 20 /2006 / 3 / 4 dated April 3, 2006
issued by the Securities and Exchange Board of India (SEBI) regarding issue of
Indian Depository Receipts by foreign companies in India and the SEBI
(Disclosure and Investor Protection) Guidelines, 2000.
- In order to facilitate the eligible companies resident outside India to issue
Indian Depository Receipts (IDRs) through a Domestic Depository and to permit
persons resident in India and outside India to purchase, possess, transfer and
redeem IDRs, it has been decided to operationalise the IDR Rules, notified by
the Government of India, as amended from time to time, with immediate effect.
- Accordingly, eligible companies resident outside India may issue Indian
Depository Receipts (IDRs) through a Domestic Depository. The permission has
been granted subject to compliance with the Companies (Issue of Depository
Receipts) Rules, 2004 and subsequent amendments made thereto and the SEBI (DIP)
Guidelines, 2000, as amended from time to time. In case of raising of funds
through issuance of IDRs by financial/banking companies having presence in
India, either through a branch or subsidiary, the approval of the sectoral
regulator(s) should be obtained before the issuance of IDRs.
Investment by Persons resident in India / FIIs / NRIs in IDRs
- The FEMA Regulations shall not be applicable to persons resident in India as
defined under section 2(v) of FEMA, 1999, for investing in IDRs and subsequent
transfer arising out of transaction on a recognized Stock Exchange in India.
Foreign Institutional Investors (FIIs) including SEBI approved sub-accounts of
the FIIs, registered with SEBI and Non-Resident Indians (NRIs) may also invest,
purchase, hold and transfer IDRs of eligible companies resident outside India
and issued in the Indian capital market, subject to the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2000 notified vide Notification No. FEMA 20 / 2000-RB dated May 3,
2000, as amended from time to time. Further, NRIs are allowed to invest in the
IDRs out of funds held in their NRE / FCNR(B) account, maintained with an Authorised Dealer / Authorised bank.
Fungibility
- Automatic fungibility of IDRs is not permitted.
Period of redemption
- IDRs shall not be redeemable into underlying equity shares before the expiry
of one year period from the date of issue of the IDRs.
Procedure for transfer and redemption of IDRs
- At the time of redemption / conversion of IDRs into underlying shares, the
Indian holders (persons resident in India) of IDRs shall comply with the
provisions of the Foreign Exchange Management (Transfer or Issue of Any Foreign
Security) Regulations, 2004 notified vide Notification No. FEMA 120 / RB-2004
dated July 7 2004, as amended from time to time. Accordingly, the following
guidelines shall be followed, on redemption of IDRs:
- Listed Indian companies may either sell or continue to hold the underlying
shares subject to the terms and conditions as per Regulations 6B and 7 of
Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to
time.
- Indian Mutual Funds, registered with SEBI may either sell or continue to hold
the underlying shares subject to the terms and conditions as per Regulation 6C
of Notification No. FEMA 120/RB-2004 dated July 7, 2004, as amended from time to
time.
- Other persons resident in India including resident individuals are allowed to
hold the underlying shares only for the purpose of sale within a period of 30
days from the date of conversion of the IDRs into underlying shares.
- The FEMA provisions shall not apply to the holding of the underlying shares,
on redemption of IDRs by the FIIs including SEBI approved sub-accounts of the
FIIs and NRIs.
Others
- The proceeds of the issue of IDRs shall be immediately repatriated outside
India by the eligible companies issuing such IDRs. The IDRs issued shall be
denominated in Indian Rupees.
- AD Category –I banks may bring the contents of this circular to the notice of
their constituents and customers.
- Necessary amendments to the Foreign Exchange Management (Transfer or Issue
of Security by a Person Resident Outside India) Regulations, 2000 and Foreign
Exchange Management (Transfer or Issue of Any Foreign Security) Regulations,
2004, are being issued separately.
- 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,
(Salim Gangadharan)
Chief General Manager-in-Charge
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