RBI reporting on FDI
FDI is the Foreign Direct Investments which is regulated by the FDI policy which is announced by the Government of India (GOI) and also the provisions of the Foreign Exchange Management Act (FEMA) 1999. The Reserve Bank of India (RBI) has issued a notification on this, which is Notification No. FEMA 20/2000-RB dated 3rd of May 2000, which contains the Regulations in this regard and this notification has been amended from time to time as per the changes which are required to be not only made but also complied with.
Prohibition for Investing in India
An investment made by a foreign company in any form is prohibited when the same is made in a company or a partnership firm or a proprietary concern or any other entity, whether incorporated or not like a Trust, engaged or proposes to engage in the following activities, namely:
(i) Business of chit fund, or
(ii) Nidhi Company, or
(iii) Agricultural or plantation activities, or
(iv) Real estate business, or
(v) construction of farmhouses
(vi) Trading in Transferable Development Rights (TDRs).
It is to be noted or specified particularly that the clarification has been provided that Real Estate Business does not include development of any townships, construction of residential or commercial premises, roads, or bridges. It has also been stated and also should be understand that entities which are proprietorship or partnership concerns having made investments complying with the FEMA regulations are not allowed to engage in the Print Media industry or sector.
In addition to the above-stipulated organizations, investment in the form of FDI is also prohibited in certain other sectors like:
(i) Retail Trading
(ii) Atomic Energy
(iii) Lottery Business
(iv) Gambling and Betting
(v) Agriculture activities, but not including any
Horticulture,Development of Seeds, Floriculture, Animal Husbandry, Pisciculture and Cultivation of vegetables,etc. under the conditions which are controlled and services related to the agro and allied sectors, and the plantations, other than the tea plantations alone.
Eligibility to Invest in India
A person who is residing outside India who is not a citizen of Pakistan or Bangladesh, or an entity incorporated outside India, not including an entity incorporated in Pakistan or Bangladesh can make the investment in India, subject to the FDI Policy of the Government of India.
OCBs, who have converted themselves into companies incorporated outside India are also held eligible to make fresh investments in India under the FDI Scheme provided they are not coming under the adverse notice of the Reserve Bank of India (RBI) or Securities Exchange Board of India (SEBI).
Reporting of FDI
Reporting of the inflow:
An Indian company that is in receipt of any investment from a foreign country or a country located outside India for issuing shares or also issuing convertible debentures or preference shares under the scheme of FDI, then this company should report the details of such inflow of investment to the Reserve Bank not later than 30 days from the date of receipt of such amount of foreign investments. Details to be reported are:
(i) Name and address of the foreign investor or investors,
(ii) The absolute date of receipt of funds in foreign currency and its rupee currency equivalent,
(iii) Name and address of the Authorized Dealer through whom the funds have been received by the company, and
(iv) Details of the necessary Government approval for the receipt of such foreign investment, if any.
Reporting of the Issue of Shares:
The following shall be done by the company for reporting the issue of shares:
– Once the shares are being issued or the issue is of convertible debentures or preference shares, company should file form namely, Form FC-GPR enclosed in Annex-6, in a maximum period of 30 days from the date of issue.
– The Form FC-GPR and the Part Aof the same has to be duly filled up and also got signed by the person who is the Authorised Signatory and is submitted to the Authorised Dealer of the company, who will then forward it to the Reserve Bank of India or the RBI.
– While the Form is being forwarded, the Authorised Dealer will enclose a Report pertaining to KYC on the foreign investor. It shall also be noted that along with the Part A, the following documents has to be attached by the company, namely:
(i) A certificate which is issued from the Company Secretary of the company certifying the following:
(a) all the requirements of the Companies Act, have been complied with along with,
(b) the compliance of terms and conditions of the Government approval, if any,
(c) the company is shall be made eligible to issue or provide shares under these Regulations, and
(d) the company is holding all the original certificates which was issued by authorized dealers in India. And this should be evidencing receipt of the amount of consideration with respect to the shares which are issued.
(ii) A certificate which has been provided by the Statutory Auditors or Chartered Accountant which is stating the manner of arriving at the price of the shares issued to the persons who are residing in a foreign country or a country outside India.
Both the above-stipulated reports should be submitted to the concerned Regional Officer of RBI under whose jurisdiction the registered office of the company is situated.
Now, Part-B of the Form FC-GPR should be filed on an annual basis with the Reserve Bank of India or RBI. This filing must be done during the month of June every year, for all outstanding investments by way of FDI as well as Portfolio or other investments and by way of re-invested earnings for the previous year starting on 1s of April and would be ending on 31st of March period.
It should also be noted that the above mentioned 3 stage reporting mechanism has to be followed wherever there is the inflow of funds in the form of foreign investment through any of the following channels:
– normal banking channels or
– debit to Non-Resident External (NRE) account or Foreign Currency Non-Resident (FCNR) account.
Moreover, the distribution of bonus or rights shares or stock options to individuals who are in a foreign country or residing outside India in a direct manner or on amalgamation or merger which is done with an existing Indian company, as well as an issue of shares on conversion of royalty or ECB or lump sum technical know-how fee received have to be furnished or reported in Form FC-GPR in detail.