RBI/2013-14/232
A.P. (DIR Series) Circular No. 38
September 6, 2013
To
All Category - I Authorised Dealer Banks
Madam/ Sir,
Purchase of shares on the recognised stock exchanges in accordance with SEBI
(Substantial Acquisition of Shares and Takeover) Regulations
Attention of Authorised Dealer Category – I (AD Category-I) banks is invited to
Schedule 1 to Foreign Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) Regulations, 2000 notified by the Reserve Bank
vide
Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time
to time.
- At present, Foreign Institutional Investors, Qualified Foreign Investors and
Non Resident Indians are eligible to acquire shares on the recognised stock
exchanges in compliance with the conditions under Schedule 3, 4, 5 and 8 of FEMA
Notification No. 20. A non-resident is not permitted to acquire shares on stock
exchange under FDI scheme under Schedule 1 of FEMA Notification No. 20.
- The issue of acquisition of shares under the FDI Scheme by a non-resident on
a recognised stock exchange has been reviewed and as a further measure of
liberalization, it has been decided that a non resident including a Non Resident
Indian may acquire shares of a listed Indian company on the stock exchange
through a registered broker under FDI scheme provided that:
- The non-resident investor has already acquired and continues to hold the
control in accordance with SEBI (Substantial Acquisition of Shares and Takeover)
Regulations;
- The amount of consideration for transfer of shares to non-resident
consequent to purchase on the stock exchange may be paid as below:
- by way of inward remittance through normal banking channels, or
- by way of debit to the NRE/FCNR account of the person concerned maintained with
an authorised dealer/bank;
- by debit to non-interest bearing Escrow account (in Indian Rupees) maintained in
India with the AD bank in accordance with Foreign Exchange Management (Deposit)
Regulations, 2000;
- the consideration amount may also be paid out of the dividend payable by Indian
investee company, in which the said non-resident holds control as (i) above,
provided the right to receive dividend is established and the dividend amount
has been credited to specially designated non –interest bearing rupee account
for acquisition of shares on the floor of stock exchange.
- The pricing for subsequent transfer of shares to non-resident shareholder
shall be in accordance with the pricing guidelines under FEMA;
- The original and resultant investments are in line with the extant FDI
policy and FEMA regulations in respect of sectoral cap, entry route, reporting
requirement, documentation, etc;
- AD Category - I banks may bring the contents of the circular to the notice of
their customers/constituents concerned.
- Reserve Bank of India has since amended the relevant Regulations vide
Notification No.FEMA.279/2013-RB dated July 10, 2013 notified vide G.S.R.No.591
(E) dated September 4,2013 and
Notification No.FEMA.280/2013-RB dated July 10,
2013 notified vide G.S.R.No.531 (E) , dated August 5,2013.
- The directions contained in this circular have been issued under sections
10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999)
and are without prejudice to permissions / approvals, if any, required under any
other law.
Yours faithfully
(Rudra Narayan Kar)
Chief General Manager In-Charge